<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convertible Subordinated Notes.. $97,750,000 100% $97,750,000 $29,622
- -----------------------------------------------------------------------------------------------
Common Stock, $.001 par value
(including preferred stock
purchase rights)............... (3) None None None
- -----------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes $12,750,000 principal amount of Notes to be offered upon exercise
of the Underwriters' over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee.
(3) The Common Stock (plus an indeterminate number of shares of Common Stock
issuable as a result of the antidilution provisions of the Notes) is
issuable upon conversion of the Notes. Pursuant to Rule 457(i) under the
Securities Act of 1933, no registration fee is required for the Common
Stock because it will be issued for no additional consideration.
----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 1, 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 (as defined herein) 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 October 31, 1996, the last reported sale price of the Common Stock on the
Nasdaq National Market (where it is traded under the symbol "PLAT") was $14.375
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>
- ----------------------------------------------------------------------
<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."
2
<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 assembled the competencies to create complete enterprise infrastructure
solutions. Since mid-1994 the Company has acquired 38 businesses and 15
technologies. The Company is now leveraging the breadth of its product lines
and its professional service capabilities, and is devoting substantial
resources to integrate its products and technologies, to provide complete,
customized solutions for enterprise infrastructure problems. These solutions
range from a single product to a set 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 manage, maintain
and deploy multiple, large 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 technology 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:
EBITDA(8)............... $ 2,273 $ 9,844(2) $ 14,294(3) $ 13,322(4) $(102,152)(5) $(41,098)(6) $(24,060)(7)
Ratio of earnings to
fixed charges(9)....... -- (10) 8.38(2) 13.40(3) 4.01(4) -- (5)(10) -- (6)(10) -- (7)(10)
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
ACTUAL AS ADJUSTED(11)
<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.
(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.
5
<PAGE>
(8) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented because the Company believes it allows for a more complete
analysis of its results of operations. This information should not be
considered as an alternative to any measure of performance or liquidity as
promulgated under generally accepted accounting principles (such as net
income or cash provided by or used in operating, investing and financing
activities) nor should it be considered as an indicator of the Company's
overall financial performance.
(9) 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).
(10) 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.
(11) 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
the results of any revisions to any such forward-looking statements that may
be made to 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 be dependent 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 could become impaired in its ability to pay interest
on, or ultimately repay the principal amount of, its indebtedness, including
the Notes and the Company's Senior Indebtedness. 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 for 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 is dependent 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, or to develop and introduce new products in a timely fashion,
could materially adversely affect the Company's business and operating
results. 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 to 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 and operating results, 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 of the Company 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 systems 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 operating results of the Company.
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 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 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 associated with 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 the 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 liabilities
of the 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 charges 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 currently supports; the level of demonstrable economic benefits
for users relative to cost; relative quality of customer support and user
documentation and 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 demand for the Company's products or services, leading to a
reduction in the Company's revenues. Most of 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 such 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 revenues
have 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 offered by the Company or its competitors, 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 "--Highly Competitive Markets," "--
Rapid Technological Change; Dependence on New Products and Markets" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RISKS OF INTERNATIONAL SALES
Approximately 24% and 23%, respectively, 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 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 reputation with existing customers,
volatility of workload and
11
<PAGE>
dependence on 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 the 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 recent
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 or
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, stock 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 or
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
Holders 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 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. See
"Description of Capital Stock."
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 October 31, 1996..................... 14 3/4 12 3/8
</TABLE>
On October 31, 1996, the reported last sale price for the Common Stock was
$14 3/8, and the Common Stock was held by 1,156 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
Foreign currency translation adjustment................ (390) (390)
Notes receivable....................................... (315) (315)
Accumulated deficit.................................... (182,605) (182,605)
-------- --------
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 for 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 historical 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:
EBITDA(8)............... $ 2,273 $ 9,844(2) $ 14,294(3) $ 13,322(4) $(102,152)(5) $(41,098)(6) $(24,060)(7)
Ratio of earnings to
fixed charges(9)....... -- (10) 8.38(2) 13.40(3) 4.01(4) -- (5)(10) -- (6)(10) -- (7)(10)
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
----------------------------------------- -------------
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
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
$25,594,000 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
$24,453,000 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) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented because the Company believes it allows for a more complete
analysis of its results of operations. This information should not be
considered as an alternative to any measure of performance or liquidity as
promulgated under generally accepted accounting principles (such as net
income or cash provided by or used in operating, investing and financing
activities) nor should it be considered as an indicator of the Company's
overall financial performance.
(9) 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).
(10) 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 consulting services and educational
programs, 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 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 24%, compared to 1993 total
expenses of $163,309,000. 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 relating 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 third 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, was
$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, were 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 few 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 two years 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 at
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 the
bank's prime rate to LIBOR plus 1%. 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 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, including the net
proceeds to the Company from the Offering, 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 remote.
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 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 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 assembled the competencies to create complete enterprise
infrastructure solutions. Since mid-1994 the Company has acquired 38
businesses and 15 technologies. The Company is now leveraging the breadth of
its product lines and its professional service capabilities, and is devoting
substantial resources to integrate its products and technologies, to provide
complete, customized solutions for enterprise infrastructure problems. These
solutions range from a single product to a set 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 manage, maintain and deploy multiple,
large 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, 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 available on the Internet and 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 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 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. The Company will continue to develop, upgrade and support
products which operate on a stand-alone basis or as part of integrated
product suites and which also can be integrated into other vendors'
frameworks and environments.
. 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 with
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 the general or
industry specific needs. The Company is positioning itself as a vendor
that can solve all of a business' enterprise infrastructure problems.
26
<PAGE>
. 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, telecommunications and pharmaceuticals industries, to
provide the Company's software developers with an understanding of how IT
systems function within such industries. The Company can then develop
suites of products tailored to meet such systems specific needs, with
industry appropriate user interfaces. 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 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, userID 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
system.
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 transfering 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
designated 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 22,
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 20 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 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 heterogenous 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
31
<PAGE>
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 235 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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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 22, 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 copy 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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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 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 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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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 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 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 purchase 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; and (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.
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, 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.
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 15 days after it is or would have been
required to file such with 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 no 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 NYSE, 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, 55,966,105 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). 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 such disposition. In addition,
absent
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<PAGE>
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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<PAGE>
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 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 (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............................
-----------
$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 executive officers and directors of the Company, who collectively are
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 in any other manner transfer
all or a portion of the economic consequences associated with
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<PAGE>
the ownership of any 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.
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.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Securities
and Exchange Commission (the "Commission") under the Securities and Exchange
Act of 1934, as amended (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>
- ---------------------
* The consolidated balance sheet as of December 31, 1995 has been restated
to give retroactive effect for mergers accounted for using the pooling-
of-interests method.
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>
- ---------------------
* Results for the nine months ended September 30, 1995 are restated for
mergers accounted for using the pooling-of-interests method of
accounting.
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 financing of future revenues and 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>
- ---------------------
*Cash flows for the nine months ended September 30, 1995 are restated for
mergers accounted for using the pooling-of-interests method of accounting.
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.
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-
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 Computation of Ratios of Earnings to Fixed Charges
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>
- ---------------------
* To be filed by amendment.
(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 REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS, ON NOVEMBER 1, 1996.
PLATINUM technology, inc.
/s/ Andrew J. Filipowski
By: _________________________________
Andrew J. Filipowski
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Andrew J. Filipowski, Michael P. Cullinane, Michael Wyatt and Matthew S.
Brown, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution, to sign on his behalf, individually and in
each capacity stated below, all amendments and post-effective amendments to
this Registration Statement on Form S-3 (including registration statements
filed pursuant to Rule 462(b) under the Securities Act of 1933, and all
amendments thereto) and to file the same, with all exhibits thereto and any
other documents in connection therewith, with the Securities and Exchange
Commission under the Securities Act of 1933, granting unto said attorneys-in-
fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully and to all intents and purposes as each might or could do in person,
hereby ratifying and confirming each act that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
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 1, 1996
____________________________________ Officer (Principal
Andrew J. Filipowski Executive Officer) and
Chairman of the Board of
Directors
/s/ Paul L. Humenansky Executive Vice President, November 1, 1996
____________________________________ Chief Operations Officer
Paul L. Humenansky and a Director
/s/ Michael P. Cullinane Executive Vice President, November 1, 1996
____________________________________ Chief Financial Officer
Michael P. Cullinane (Principal Financial and
Accounting Officer),
Treasurer and a Director
/s/ Casey G. Cowell Director November 1, 1996
____________________________________
Casey G. Cowell
/s/ James E. Cowie Director November 1, 1996
____________________________________
James E. Cowie
/s/ Steven D. Devick Director November 1, 1996
____________________________________
Steven D. Devick
/s/ Gian M. Fulgoni Director November 1, 1996
____________________________________
Gian M. Fulgoni
</TABLE>
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>
4.1 Form of Indenture between the Company and American Na-
tional Bank and Trust Company of Chicago, as Trustee
4.2 Form of Note (included in Exhibit 4.1)
12 Computation of Ratios of Earnings to Fixed Charges
15 Acknowledgment of KPMG Peat Marwick LLP regarding indepen-
dent 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 fi-
nancial statements
23.4 Consent of Coopers & Lybrand L.L.P. with respect to An-
swer's financial statements
23.5 Consent of Arthur Andersen LLP with respect to Locus' fi-
nancial 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
27 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 4.1
________________________________________________________________________________
PLATINUM technology, inc.,
ISSUER,
AND
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
AS TRUSTEE,
INDENTURE
Dated as of [ ], 1996
$85,000,000
___% Convertible Subordinated Notes due 2001
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS AND INCORPORATION BY REFERENCE............................... 1
1.1. DEFINITIONS........................................................ 1
1.2. INCORPORATION BY REFERENCE OF TIA.................................. 8
1.3. RULES OF CONSTRUCTION.............................................. 9
2. THE SECURITIES...........................................................10
2.1. FORM AND DATING....................................................10
2.2. EXECUTION AND AUTHENTICATION.......................................10
2.3. REGISTRAR, PAYING AGENT AND DEPOSITARY.............................11
2.4. PAYING AGENT TO HOLD ASSETS IN TRUST...............................12
2.5. SECURITY HOLDER LISTS..............................................12
2.6. TRANSFER AND EXCHANGE..............................................12
DEFINITIVE SECURITIES..........................................15
2.7. REPLACEMENT SECURITIES.............................................15
2.8. OUTSTANDING SECURITIES.............................................16
2.9. TREASURY SECURITIES................................................16
2.10. TEMPORARY SECURITIES...............................................16
2.11. CANCELLATION.......................................................17
2.12. DEFAULTED INTEREST.................................................17
3. REDEMPTION...............................................................18
3.1. RIGHT OF REDEMPTION................................................18
3.2. NOTICES TO TRUSTEE.................................................18
3.3 SELECTION OF SECURITIES TO BE REDEEMED.............................19
3.4. NOTICE OF REDEMPTION...............................................19
3.5. EFFECT OF NOTICE OF REDEMPTION.....................................20
3.6. DEPOSIT OF REDEMPTION PRICE........................................20
3.7. SECURITIES REDEEMED IN PART........................................21
4. COVENANTS................................................................21
4.1. PAYMENT OF SECURITIES..............................................21
4.2 MAINTENANCE OF OFFICE OR AGENCY....................................21
4.3. CORPORATE EXISTENCE................................................22
4.4. PAYMENT OF TAXES AND OTHER CLAIMS..................................22
4.5. MAINTENANCE OF PROPERTIES AND INSURANCE............................23
4.6. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT..........................23
4.7. REPORTS............................................................24
4.8. LIMITATION ON STATUS AS INVESTMENT COMPANY.........................24
4.9. WAIVER OF STAY, EXTENSION OR USURY LAWS............................24
i
<PAGE>
TABLE OF CONTENTS
Page
5. SUCCESSOR CORPORATION....................................................25
5.1. LIMITATION ON MERGER, SALE OR CONSOLIDATION........................25
5.2. SUCCESSOR CORPORATION SUBSTITUTED..................................25
6. EVENTS OF DEFAULT AND REMEDIES...........................................26
6.1. EVENTS OF DEFAULT..................................................26
6.2. ACCELERATION OF MATURITY DATE; RESCISSION AND ANNULMENT............28
6.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE...........................................................29
6.4. TRUSTEE MAY FILE PROOFS OF CLAIM...................................29
6.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES........30
6.6. PRIORITIES.........................................................30
6.7. LIMITATION ON SUITS................................................31
6.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL
PREMIUM AND INTEREST..............................................32
6.9. RIGHTS AND REMEDIES CUMULATIVE.....................................32
6.10. DELAY OR OMISSION NOT WAIVER.......................................32
6.11. CONTROL BY HOLDERS.................................................32
6.12. WAIVER OF PAST DEFAULT.............................................33
6.13. UNDERTAKING FOR COSTS..............................................33
6.14. RESTORATION OF RIGHTS AND REMEDIES.................................33
7. TRUSTEE..................................................................34
7.1. DUTIES OF TRUSTEE..................................................34
7.2. RIGHTS OF TRUSTEE..................................................35
7.3. INDIVIDUAL RIGHTS OF TRUSTEE.......................................36
7.4. TRUSTEE'S DISCLAIMER...............................................36
7.5. NOTICE OF DEFAULT..................................................36
7.6. REPORTS BY TRUSTEE TO HOLDERS......................................36
7.7. COMPENSATION AND INDEMNITY.........................................37
7.8. REPLACEMENT OF TRUSTEE.............................................38
7.9. SUCCESSOR TRUSTEE BY MERGER, ETC...................................39
7.10. ELIGIBILITY; DISQUALIFICATION......................................39
7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..................39
ii
<PAGE>
TABLE OF CONTENTS
Page
8. SATISFACTION AND DISCHARGE...............................................39
8.1. SATISFACTION AND DISCHARGE OF INDENTURE............................39
8.2. PREPAYMENT TO THE COMPANY..........................................40
9. AMENDMENTS, SUPPLEMENTS AND WAIVERS......................................40
9.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.................40
9.2. AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH CONSENT
OF HOLDERS........................................................41
9.3. COMPLIANCE WITH TIA................................................42
9.4. REVOCATION AND EFFECT OF CONSENTS..................................42
9.5. NOTATION ON OR EXCHANGE OF SECURITIES..............................42
9.6. TRUSTEE TO SIGN AMENDMENTS, ETC....................................43
10. RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL.....................43
10.1. REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON A
CHANGE OF CONTROL.................................................43
11. SUBORDINATION............................................................46
11.1. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.....................46
11.2. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES..................46
11.3. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR
INDEBTEDNESS ON DISSOLUTION, LIQUIDATION OR
REORGANIZATION....................................................47
11.4. SECURITYHOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF
SENIOR INDEBTEDNESS...............................................48
11.5. OBLIGATIONS OF THE COMPANY UNCONDITIONAL...........................49
11.6. TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.................................................49
11.7. APPLICATION BY TRUSTEE OF ASSETS DEPOSITED WITH IT.................49
11.8. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS..................50
11.9. SECURITY HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF SECURITIES.......................................49
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TABLE OF CONTENTS
Page
11.10. RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS......................51
11.11. ARTICLE 11 NOT TO PREVENT EVENTS OF DEFAULT.......................51
11.12. NO FIDUCIARY DUTY OF TRUSTEE TO HOLDERS OF SENIOR
INDEBTEDNESS.....................................................51
12. CONVERSION OF SECURITIES.................................................51
12.1. CONVERSION PRIVILEGE..............................................51
12.2. EXERCISE OF CONVERSION PRIVILEGE..................................52
12.3. FRACTIONAL INTERESTS..............................................53
12.4. CONVERSION PRICE..................................................53
12.5. ADJUSTMENT OF CONVERSION PRICE....................................53
12.6. CONTINUATION OF CONVERSION PRIVILEGE IN CASE OF
RECLASSIFICATION, CHANGE, MERGER, CONSOLIDATION OR
SALE OF ASSETS...................................................58
12.7. NOTICE OF CERTAIN EVENTS..........................................59
12.8. TAXES ON CONVERSION...............................................60
12.9. COMPANY TO PROVIDE STOCK..........................................60
12.10. DISCLAIMER OF RESPONSIBILITY FOR CERTAIN MATTERS..................61
12.11. RETURN OF FUNDS DEPOSITED FOR REDEMPTION OF CONVERTED
SECURITIES.......................................................61
13. MISCELLANEOUS............................................................61
13.1. TIA CONTROLS......................................................61
13.2. NOTICES...........................................................62
13.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS......................62
13.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT................63
13.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.....................63
13.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.........................63
13.7. LEGAL HOLIDAYS....................................................63
13.8. GOVERNING LAW.....................................................64
13.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.....................64
13.10. NO RECOURSE AGAINST OTHERS........................................64
13.11. SUCCESSORS........................................................64
13.12. DUPLICATE ORIGINALS...............................................65
13.13. SEVERABILITY......................................................65
13.14. TABLE OF CONTENTS, HEADINGS, ETC..................................65
13.15. QUALIFICATION OF INDENTURE........................................65
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CROSS-REFERENCE TABLE
TIA INDENTURE
SECTION SECTION
310(a)(1) ........................................................... 7.10
(a)(2) ........................................................... 7.10
(a)(3) ........................................................... N.A.
(a)(4) ........................................................... N.A.
(a)(5) ........................................................... 7.10
(b)............................................................... 7.8;
7.10;
13.2
(c) .............................................................. N.A.
311(a) .............................................................. 7.11
(b) .............................................................. 7.11
(c) .............................................................. N.A.
312(a) .............................................................. 2.5
(b) .............................................................. 13.3
(c) .............................................................. 13.3
313(a) .............................................................. 7.6
(b)(1) ........................................................... N.A.
(b)(2) ........................................................... 7.6
(c) .............................................................. 7.6;
13.2
(d) .............................................................. 7.6
314(a) .............................................................. 4.7;
13.2
(b) .............................................................. N.A.
(c)(1) ........................................................... 2.2;
7.2;
13.4
(c)(2) ........................................................... 7.2;
13.4
(c)(33) .......................................................... N.A.
(d) .............................................................. N.A.
(e) .............................................................. 13.5
(f) .............................................................. N.A.
315(a) .............................................................. 7.1(b)
(b) .............................................................. 7.5;
13.2
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(c) ........................................................... 7.1(a)
(d) ........................................................... 6.11;
7.1(b)&(c);
7.2(c)
(e) ............................................................ 6.13
316(a)(last sentence) ............................................ 2.9
(a)(1)(A) ...................................................... 6.11
(a)(1)(B) ..................................................... 6.12
(a)(2) ........................................................ N.A.
(b) ............................................................ 6.12;
6.7
317(a)(1) ......................................................... 6.3
(a)(2) ......................................................... 6.4
(b) ............................................................ 2.4
318(a) ............................................................ 13.1
N.A. Means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be a part of the Indenture.
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INDENTURE, dated as of [________], 1996, between PLATINUM technology, inc.,
a Delaware corporation (the "Company"), and American National Bank and Trust
Company of Chicago, a national banking association, as trustee (The "Trustee").
Each party hereto agrees as follows for the benefit of each other party and
for the equal and ratable benefit of the Holders of the Company's _% Convertible
Subordinated Notes due 2001:
ARTICLE
1
DEFINITIONS AND INCORPORATION BY REFERENCE
1.1 DEFINITIONS.
"ACCELERATION NOTICE" shall have the meaning specified in Section 6.2.
"AFFILIATE" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, (ii)
any spouse, immediate family member, or other relative who has the same
principal residence of any person described in clause (i) above, and (iii) any
trust in which any person described in clause (i) or (ii) above has a beneficial
interest. For purposes of this definition, the term "control" means the power to
direct the management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar Federal, state
or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
"BOARD RESOLUTION" means, with respect to any person, a duly adopted
resolution of the Board of Directors of such Person.
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"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.
"CAPITALIZED LEASE OBLIGATIONS" means rental obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"CAPITAL STOCK" means, with respect to any corporation, any and all shares,
interest, 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.
"CASH" means such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts.
"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 shareholders 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 of the Exchange Act
as in effect on the Issue Date, whether or not applicable; and (ii) the term
"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.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the Company's common stock, par value $.001 per share,
or as such stock may be reconstituted from time to time.
"COMPANY" means PLATINUM technology, inc. until a successor replaces it
pursuant to the Indenture, and thereafter means such successor.
"CONVERSION PRICE" shall have the meaning specified in Section 12.4.
"CONVERSION SHARES" shall have the meaning specified in Section 12.1.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"DATE OF CONVERSION" shall have the meaning specified in Section 12.2.
"DEFAULT" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"DEFAULTED INTEREST" shall have the meaning specified in Section 2.12.
"DEFINITIVE SECURITIES" means Securities that are in the form of Security
attached hereto as Exhibit A that do not include the information called for by
footnotes 1 and 2 thereof.
"DEPOSITARY" means the sole holder of the Global Security, as specified in
Section 2.3 until a successor shall have been appointed and become such pursuant
to the applicable provision of this Indenture, and, thereafter, "Depositary"
shall mean or include such successor.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with
respect to any Person, Capital Stock of such Person that, by its terms or by the
terms of any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its Subsidiaries, in whole or in part, on or prior to the
Stated Maturity of the Securities and (b) with respect to any Subsidiary of such
Person (including with respect to any Subsidiary of the Company), any Capital
Stock other than any common stock with no preference, privileges, or redemption
or repayment provisions.
"DISTRIBUTION DATE" shall have the meaning specified in Section 12.5.
"DTC" shall have the meaning specified in Section 2.3.
"EVENT OF DEFAULT" shall have the meaning specified in Section 6.1.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"EXPIRATION TIME" shall have the meaning specified in Section 12.5.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board ("FASB") or in such
other statements by such other entity as approved by a significant segment of
the accounting profession which are in effect in the United States; PROVIDED,
HOWEVER, that for purposes of determining compliance with covenants in the
Indenture, "GAAP" means such generally accepted accounting principles which are
in effect as of the Issue Date.
"GLOBAL SECURITY" means a Security held by the Depositary for the benefit
of beneficial owners, and which contains the paragraph referred to in footnote 1
and the schedule referred to in footnote 2 of the form of Security attached
hereto as Exhibit A.
"HOLDER" or "SECURITY HOLDER" means the Person in whose name a Security is
registered on the Registrar's books.
"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 that are not more than ninety (90) days past their
original due date, (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 clause (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, extension, refinancings,
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.
"INDENTURE" means this indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"INTEREST PAYMENT DATE" means the stated due date of an installment of
interest on the Securities.
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"INTEREST SWAP AND HEDGING OBLIGATIONS" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payment made by such Person calculated by applying a fixed
or floating rate of interest on the same notional amount.
"ISSUE DATE" means the date of first issuance of the Securities under this
Indenture.
"JUNIOR SECURITY" of any Person means any Qualified Capital Stock and any
Indebtedness of such Person that is subordinated in right of payment to the
Securities and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Securities.
"LAST SALE PRICE" shall have the meaning specified in Section 12.3.
"LEGAL HOLIDAY" shall have the meaning specified in Section 13.7.
"LIEN" means any mortgage, lien, pledge, charge, security interest or other
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement and any lease deemed to constitute a security interest and any option
or other agreement to give any security interest).
"NON-ELECTING SHARE" shall have the meaning specified in Section 12.6.
"NOTICE OF DEFAULT" shall have the meaning specified in Section 6.1(3).
"OFFER" shall have the meaning specified in Section 12.5(e).
"OFFICER" means, with respect to the Company, the Chief Executive Officer,
the President, any Vice President, the Chief Financial Officer, the Treasurer,
the Controller, or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means, with respect to the Company, a certificate
signed by two Officers or by an Officer and an Assistant Secretary of the
Company and otherwise complying with the requirements of Sections 13.4 and 13.5.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee and which complies with the requirements of
Sections 13.4 and 13.5.
5
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"PAYING AGENT" shall have the meaning specified in Section 2.3.
"PAYMENT BLOCKAGE PERIOD" shall have the meaning specified in Section
11.2(b).
"PAYMENT DEFAULT" shall have the meaning specified in Section 11.2(a).
"PAYMENT NOTICE" shall have the meaning specified in Section 11.2(b).
"PERSON" means any corporation, individual, limited liability company,
joint stock company, joint venture, partnership, unincorporated association,
governmental regulatory entity, country, state or political subdivision thereof,
trust, municipality or other entity.
"PRINCIPAL" of any Indebtedness means the principal of such Indebtedness
plus, without duplication, any applicable premium, if any, on such Indebtedness.
"PROPERTY" means any right or interest in or to property or assets of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PURCHASED SHARES" shall have the meaning specified in Section 12.5(e).
"QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that is
not Disqualified Capital Stock.
"RECORD DATE" means a Record Date specified in the Securities whether or
not such Record Date is a Business Day.
"REDEMPTION DATE," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to Article 3 of this Indenture
and Paragraph 5 in the form of Security attached hereto as Exhibit A.
"REDEMPTION PRICE," when used with respect to any Security to be redeemed,
means the redemption price for such redemption pursuant to Paragraph 5 in the
form of Security attached hereto as Exhibit A, which shall include, without
duplication, in each case, accrued and unpaid interest, if any, to and including
the Redemption Date.
"REGISTRAR" shall have the meaning specified in Section 2.3.
"REPURCHASE DATE" shall have the meaning specified in Section 10.1.
"REPURCHASE OFFER" shall have the meaning specified in Section 10.1.
"REPURCHASE PRICE" shall have the meaning specified in Section 10.1.
"REPURCHASE PUT DATE" shall have the meaning specified in Section 10.1
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"SEC" means the Securities and Exchange Commission.
"SECURITIES" means, collectively, the unsecured [ ]% convertible
subordinated notes due 2001 issued by the Company under this Indenture, as
supplemented from time to time in accordance with the terms hereof, limited in
aggregate principal amount to $85,000,000 ($97,750,000 if the Underwriters'
over-allotment option is exercised in full).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"SECURITIES CUSTODIAN" means the Trustee, as custodian with respect to the
Global Security, or any successor entity thereto.
"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 Securities
or to other Indebtedness which is PARI PASSU with, or subordinated to, the
Securities; 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.
"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 SEC as in effect on the date of this Indenture.
"SPECIAL RECORD DATE" for payment of any Defaulted Interest means a date
fixed by the Trustee pursuant to Section 2.12.
"STATED MATURITY," when used with respect to any Security, means [ ],
2001.
"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 the Company a majority of the partnership interests, or (iii) any
other Person (other than a corporation or partnership) 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 majority ownership interest.
7
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"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-
77bbbb) as in effect on the date of the execution of this Indenture.
"TRADING DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are not traded on the Nasdaq National
Market.
"TRUSTEE" means American National Bank and Trust Company of Chicago, as
trustee, until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"TRUST OFFICER" means any officer within the corporate trust division (or
any successor group) of the Trustee or any other officer of the Trustee
customarily performing functions similar to those performed by the Persons who
at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer of the Trustee to whom such
trust matter is referred because of his or her knowledge of and familiarity with
the particular subject.
"UNDERWRITERS" means Donaldson, Lufkin & Jenrette Securities Corporation,
Hambrecht & Quist LLC and Robertson, Stephens & Company.
"UNDERWRITING AGREEMENT" means that certain Underwriting Agreement, dated
[ ], 1996, by and between the Company and the Underwriters, as such
agreement may be amended, modified or supplemented from time to time in
accordance with the terms thereof.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
1.2 INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITY HOLDER" means a Holder or a Security Holder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
8
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"OBLIGOR" on the Securities means the Company and any other obligor on the
Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
1.3 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(7) references to Sections or Articles means reference to such Sections or
Articles in this Indenture, unless stated otherwise.
9
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ARTICLE
2
THE SECURITIES
2.1 FORM AND DATING.
The Securities and the Trustee's certificate of authentication, in respect
thereof, shall be substantially in the form of Exhibit A hereto, which Exhibit
is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the form of
Security attached as Exhibit A hereto shall be delivered in writing to the
Trustee. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
2.2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one Officer shall
attest to, the Security for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the time
of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Security but such
signature shall be conclusive evidence that the Security has been authenticated
pursuant to the terms of this Indenture. Notwithstanding anything herein to the
contrary, if any Security shall have been authenticated and delivered hereunder
but never issued or sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee shall authenticate the Securities for original issue in the
aggregate principal amount of up to $97,750,000 upon a written order of the
Company in the form of an Officers' Certificate. The Officers' Certificate shall
specify the amount of Securities to be authenticated and the date the Securities
are to be authenticated. The aggregate principal amount
10
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of Securities outstanding at any time may not exceed $97,750,000, except as
provided in Section 2.7; PROVIDED, that Securities in excess of $85,000,000
shall not be issued other than pursuant to the over-allotment option granted by
the Company to the Underwriters as provided in the Underwriting Agreement, or
pursuant to Section 2.7. Upon the written order of the Company in the form of an
Officers' Certificate, the Trustee shall authenticate Securities in substitution
of Securities originally issued to reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof.
2.3 REGISTRAR, PAYING AGENT AND DEPOSITARY.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
where Securities may be presented for payment ("Paying Agent") and where notices
and demands to or upon the Company in respect of the Securities may be served.
The Company may act as Registrar or Paying Agent, except that, for the purposes
of Articles 3, 8 and 10 and as otherwise specified in the Indenture, neither the
Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-Registrars and one or more
additional Paying Agents. The term "Paying Agent" includes any additional Paying
Agent. The Company hereby initially appoints First Chicago Trust Company of New
York ("First Chicago of New York") as Registrar and Paying Agent, and First
Chicago of New York hereby agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent which is not an Affiliate, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such.
The Company initially appoints the Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
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2.4 PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, premium, if any, and interest on the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall notify the Trustee in writing of any Default in making
any such payment. If either of the Company or a Subsidiary of the Company acts
as Paying Agent, it shall segregate such assets and hold them as a separate
trust for the benefit of the Holders or the Trustee. The Company at any time may
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets distributed and the Trustee may at any time during the
continuance of any Payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent, the
Paying Agent (if other than the Company or an Affiliate of the Company) shall
have no further liability for such assets.
2.5 SECURITY HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before the third Business Day preceding each Interest Payment Date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee reasonably may require of the names and
addresses of Holders.
2.6 TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES. When Definitive
Securities are presented to the Registrar or a co-Registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations;
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in a form reasonably satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
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(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with written
instructions directing the Trustee to make, or to direct the Securities
Custodian to make, an endorsement on the Global Security to reflect an increase
in the aggregate principal amount of the Securities represented by the Global
Security, then the Trustee shall cancel such Definitive Security and cause, or
direct the Securities Custodian to cause, in accordance with the standing
instructions and procedures existing between the Depositary and the Securities
Custodian, the aggregate principal amount of Securities represented by the
Global Security to be increased accordingly. If no Global Securities are then
outstanding, the Company shall issue and the Trustee shall authenticate a new
Global Security in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
DEFINITIVE SECURITY.
(i) Upon receipt by the Trustee of written instructions or such
other form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Security (all of which may be submitted by facsimile),
and if such beneficial interest is being transferred to the Person
designated by the Depositary as being the beneficial owner, a certification
from such Person to that effect (in substantially the form set forth on the
reverse of the Security), then the Trustee or the Securities Custodian, at
the direction of the Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Securities Custodian, the aggregate principal amount of the Global Security
to be reduced and, following such reduction, the Company will execute and,
upon receipt of an authentication order in the form of an Officers'
Certificate, the Trustee will authenticate and deliver to the transferee a
Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Definitive Securities to the Persons in whose names such
Securities are so registered.
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(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITY.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Security
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE OF DEPOSITARY.
If at any time:
(i) The Depositary for the Securities notifies the Company and
the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to continue as Depositary for the Global Security
and a successor Depositary for the Global Security is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) The Company, in its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Securities under
this Indenture;
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will authenticate and deliver Definitive Securities to each person that the
Depositary identified as the beneficial owner of the Global Security, in an
aggregate principal amount equal to the principal amount of the Global Security,
in exchange for such Global Security.
(g) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITY. At such time as all
beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to or retained and canceled by the Trustee. At any time prior
to such cancellation, if any beneficial interest in a Global Security is
exchanged for Definitive Securities, redeemed, repurchased or canceled, the
principal amount of Securities represented by such Global Security shall be
reduced and an endorsement shall be made on such Global Security, by the Trustee
or the Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
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(h) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF DEFINITIVE
SECURITIES.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive
Securities and the Global Security at the Registrar's or co-Registrar's
request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer taxes, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments, or similar governmental charge payable upon
exchanges or transfers pursuant to Section 2.2 (fourth paragraph), 2.10,
3.7, 9.5, or 10.1 (final paragraph)).
(iii) The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of (a) any Definitive Security
selected for redemption in whole or in part pursuant to Article 3, except
the unredeemed portion of any Definitive Security being redeemed in part,
or (b) in the event that the Trustee has been notified of an offer to
repurchase Securities pursuant to Article 10 hereof or of a redemption of
Securities pursuant to Article 3 hereof, any Security for a period
beginning 15 days before the mailing of a notice of an offer to repurchase
or the mailing of a notice of redemption and ending at the close of
business on the day of such mailing.
2.7 REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security. In
case any such mutilated, destroyed, lost or stolen Security has become or is
about to become due, the Company, in its discretion, may instead of issuing a
new Security, pay such Security.
Every replacement Security is an additional obligation of the Company.
The provisions of this Section 2.7 are exclusive and, to the extent
lawful, preclude other rights and remedies with respect to replacement or
payment of mutilated, destroyed, lost or stolen Securities.
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2.8 OUTSTANDING SECURITIES.
Securities outstanding at any time are all of the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date the Paying Agent (other than the Company or an
Affiliate of the Company) holds Cash or U.S. Government Obligations sufficient
to pay all of the principal and interest due on the Securities payable on that
date in accordance with Section 3.6 hereof and payment of the Securities called
for redemption is not otherwise prohibited pursuant to Article 11 hereof or
otherwise, then on and after that date such Securities cease to be outstanding
and interest on them ceases to accrue.
2.9 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or an Affiliate of the Company shall
be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, amendment,
supplement, waiver or consent, only Securities that the Trustee knows are so
owned shall be disregarded.
2.10 TEMPORARY SECURITIES.
Until the Securities are ready for delivery in their definitive form,
the Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Company reasonably and in good faith considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Securities in their definitive
form in exchange for temporary Securities. Until so exchanged, the temporary
Securities shall in all respects be entitled to the same benefits under this
Indenture as Securities in their definitive form authenticated and delivered
hereunder.
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2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange, payment or
cancellation. The Trustee, or at the direction of the Trustee, the Registrar
or the Paying Agent (other than the Company or an Affiliate of the Company),
and no one else, shall cancel and, at the written direction of the Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.7, the Company may not issue new Securities
to replace Securities that have been paid or delivered to the Trustee for
cancellation. No Securities shall be authenticated in lieu of or in exchange
for any Securities canceled as provided in this Section 2.11, except as
expressly permitted in the form of Securities and as permitted by this
Indenture.
2.12 DEFAULTED INTEREST.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name the Security (or one or more predecessor Securities) is registered at
the close of business on the Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which shall
be fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of Cash equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest
or shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such Cash when deposited to be
held in trust for the benefit of the persons entitled to such Defaulted
Interest as provided in this clause (1). Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address Security
register not less than 10 days prior to such Special Record Date. Notice of
the proposed
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payment of such Defaulted Interest and the Special Record Date therefor
having been mailed as aforesaid, such Defaulted Interest shall be paid to
the persons in whose names the Securities (or their respective predecessor
Securities) are registered on such Special Record Date and shall no longer
be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange or market on which the Securities may be listed, and
upon such notice as may be required by such exchange or market, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu
of any other Security shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Security.
ARTICLE
3
REDEMPTION
3.1. RIGHT OF REDEMPTION.
Redemption of Securities, as permitted by any provision of this
Indenture, shall be made in accordance with Paragraph 5 of the form of
Securities attached as Exhibit A and this Article 3. The Company will not have
the right to redeem any Securities prior to [ ], 1999. At any time on or after
______________, 1999, upon not less than 30 nor more than 60 days notice to each
Holder of Securities, the Company will have the right to redeem all or any part
of the Securities at the Redemption Prices specified in Paragraph 5 therein
under the caption "Redemption," in each case including accrued and unpaid
interest to the Redemption Date.
3.2 NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the form of Securities attached as Exhibit A, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed and whether it wants the Trustee to give notice of redemption to the
Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the form of Securities attached as
Exhibit A by crediting against any such redemption Securities in its possession,
which it has not previously delivered to the Trustee for cancellation, it shall
so notify the Trustee of the amount of the reduction and deliver such Securities
with such notice.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 45 days before the Redemption Date (unless a shorter
notice shall be satisfactory to the
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Trustee). Any such notice may be canceled at any time prior to notice of such
redemption being mailed to any Holder and shall thereby be void and of no
effect.
3.3 SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 of the form of Securities attached hereto as Exhibit A, the Trustee
shall promptly redeem the Securities to be redeemed on a pro rata basis, in such
manner as the Trustee shall determine to be fair and appropriate and in such
manner as complies with any applicable Depositary, legal and stock exchange
requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $1,000 may be redeemed only in whole.
The Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. If any
Security selected for partial redemption is thereafter converted in part before
termination of the conversion right as provided by Section 12.1 hereof, the
portion of the Security so converted shall be deemed to have been a part of the
portion selected for redemption such that only the excess, if any, of the amount
selected for partial redemption over the amount so converted, shall be redeemed.
3.4 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail, postage
prepaid, to the Trustee and each Holder whose Securities are to be redeemed. At
the Company's request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense. Each notice for redemption shall
identify the Securities to be redeemed and shall state:
(1) the Redemption Date, and that the Securities called for redemption
may not be converted after the fifth Business Day prior to the Redemption Date;
(2) the Redemption Price, including the amount of accrued and unpaid
interest, if any, to be paid upon such redemption;
(3) the name, address and telephone number of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect the Redemption
Price;
(5) that, unless (a) the Company defaults in its obligation to deposit
Cash with the Paying Agent in accordance with Section 3.6 hereof or (b) such
redemption is prohibited pursuant to Article 11 hereof or otherwise, interest on
the Securities called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such Securities
is to receive payment of the Redemption Price, including accrued and unpaid
interest, if any, to the Redemption Date, upon surrender to the Paying Agent of
the Securities called for redemption and to be redeemed;
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(6) if any Security is being redeemed in part, the portion of the
principal amount, equal to $1,000 or any integral multiple thereof, of such
Security to be redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section 3.4 and
pursuant to the redemption provisions of Paragraph 5 of the form of
Securities attached as Exhibit A.
3.5 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including accrued and unpaid interest, if any, to
the Redemption Date. Upon surrender to the Trustee or Paying Agent, such
Securities called for redemption shall be paid at the Redemption Price,
including accrued and unpaid interest, if any, to the Redemption Date; PROVIDED
that if the Redemption Date is after a regular Record Date and on or prior to
the corresponding Interest Payment Date, the accrued interest, if any, shall be
payable to the Holder of the redeemed Securities registered on the relevant
Record Date; and PROVIDED, FURTHER, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
3.6 DEPOSIT OF REDEMPTION PRICE.
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) Cash
sufficient to pay the Redemption Price of, including accrued and unpaid interest
on, all Securities to be redeemed on such Redemption Date (other than Securities
or portions thereof called for redemption on that date that have been delivered
by the Company to the Trustee for cancellation). The Paying Agent shall promptly
return to the Company any Cash so deposited which is not required for that
purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article 3 and payment of the Securities called for redemption
is not prohibited under Article 11 or otherwise, interest on the Securities to
be redeemed will cease to accrue on the applicable Redemption Date, whether or
not such Securities are presented for payment. Notwithstanding
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anything herein to the contrary, if any Security surrendered for redemption in
the manner provided in the Securities shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall continue to accrue and be paid from the Redemption
Date until such payment is made on the unpaid principal, and, to the extent
lawful, on any interest not paid on such unpaid principal, in each case at the
rate and in the manner provided in Section 4.1 hereof and the Security.
3.7 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE
4
COVENANTS
4.1 PAYMENT OF SECURITIES.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities and this Indenture. An
installment of principal of or interest on the Securities shall be considered
paid on the date it is due if the Trustee or Paying Agent (other than the
Company or an Affiliate of the Company) holds for the benefit of the Holders, on
or before 10:00 a.m. New York City time on that date, Cash deposited and
designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, to the extent lawful.
4.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange and for conversion and where notices and demands to or upon the Company
in respect of the Securities and this Indenture may be served. The Company shall
give prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 13.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and
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may from time to time rescind such designations; PROVIDED, HOWEVER, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York, for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency. The Company hereby initially
designates the corporate trust office of First Chicago of New York as such
office.
4.3 CORPORATE EXISTENCE.
Subject to Article 5, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and the corporate or other existence of each of its Subsidiaries in accordance
with the respective organizational documents of each of them and the rights
(charter and statutory) and corporate franchises of the Company and each of its
Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to
preserve, with respect to itself, any right or franchise, and with respect to
any of its Subsidiaries, any such existence, right or franchise, if (a) the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of such entity and (b) the loss thereof is not
disadvantageous in any material respect to the Holders.
4.4 PAYMENT OF TAXES AND OTHER CLAIMS.
Except with respect to immaterial items, the Company shall, and shall cause
each of its Subsidiaries to, pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company or any of its
Subsidiaries or any of their respective properties and assets and (ii) all
lawful claims, whether for labor, materials, supplies, services or anything
else, which have become due and payable and which by law have or may become a
Lien upon the property and assets of the Company or any of its Subsidiaries;
PROVIDED, HOWEVER, that neither the Company nor any Subsidiary shall be required
to pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which disputed amounts adequate
reserves have been established in accordance with GAAP.
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4.5 MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company shall cause all material properties used or useful to the
conduct of its business and the business of each of its Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in their reasonable judgment may be necessary, so
that the business carried on in connection therewith may be properly conducted
at all times; PROVIDED, HOWEVER, that nothing in this Section 4.5 shall prevent
the Company or any Subsidiary from discontinuing any operation or maintenance of
any of such properties, or disposing of any of them, if such discontinuance or
disposal is (a) , in the judgment of the Company, desirable in the conduct of
the business of such entity and (b) not disadvantageous in any material respect
to the Holders.
The Company shall provide, or cause to be provided, for itself and each of
its Subsidiaries, insurance (including appropriate self-insurance) against loss
or damage of the kinds that, in the reasonable, good faith opinion of the
Company is adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with (except for self-
insurance) reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the reasonable, good
faith opinion of the Company and adequate and appropriate for the conduct of the
business of the Company and such Subsidiaries in a prudent manner for entities
similarly situated in the industry, unless failure to provide such insurance
(together with all other such failures) would not have a material adverse effect
on the financial condition or results of operations of the Company or such
Subsidiary.
4.6 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee within 120 days after the end
of its fiscal year an Officers' Certificate complying with Section 314(a)(4) of
the TIA and stating that a review of its activities and the activities of its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
whether or not the signer knows of any failure by the Company or any Subsidiary
of the Company to comply with any conditions or covenants in this Indenture and,
if such signor does know of such a failure to comply, the certificate shall
describe such failure with particularity. The Officers' Certificate shall also
notify the Trustee should the relevant fiscal year end on any date other than
the current fiscal year end date.
(b) The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, promptly upon becoming aware of any Default, Event of
Default or fact which would prohibit the making of any payment to or by the
Trustee in respect of the Securities, an Officers' Certificate specifying such
Default, Event of Default or fact and what action the Company is taking or
proposes to take with respect thereto. The Trustee shall not be deemed to
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have knowledge of any Default, any Event of Default or any such fact unless one
of its Trust Officers receives notice thereof from the Company or any of the
Holders.
4.7 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 SEC, annual and quarterly consolidated financial
statements substantially equivalent to financial statements that would have been
included in reports filed with the SEC 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
SEC and, in each case, together with a management's discussion and analysis of
financial condition and results of operations which would be so required.
4.8 LIMITATION ON STATUS AS INVESTMENT COMPANY.
Neither the Company nor any of its Subsidiaries shall become an "investment
company" (as that term is defined in the Investment Company Act of 1940, as
amended).
4.9 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law which would prohibit or forgive the Company from paying all or any
portion of the principal of, premium of, or interest on, the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
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ARTICLE
5
SUCCESSOR CORPORATION
5.1 LIMITATION ON MERGER, SALE OR CONSOLIDATION.
(a) The Company shall 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 Securities 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; and (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.
(b) For purposes of clause (a) of this Section 5.1, the sale, lease,
conveyance, assignment, transfer, or other disposition of all or substantially
all of the properties and assets of one or more Subsidiaries of the Company,
which properties and assets, if held by the Company instead of such
Subsidiaries, would constitute all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
5.2 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger or any sale, lease, conveyance or
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 sale, lease, conveyance or
transfer is made, 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 when
a successor corporation duly assumes all of the obligations of the Company
pursuant hereto and pursuant to the Securities, the predecessor shall be
released from such obligations (except with respect to any obligations that
arise from or as a result of such transaction).
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ARTICLE
6
EVENTS OF DEFAULT AND REMEDIES
6.1 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) failure to pay any installment of interest on the Securities as and
when the same becomes due and payable, or to perform any conversion of the
Securities required under this Indenture, and the continuance of such default
for a period of 30 days, whether or not such payment is prohibited by Article
11;
(2) failure to pay all or any part of the principal of, or premium, if any
on the Securities when and as the same become due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation,
default in the payment of the Repurchase Price on the Repurchase Date in
accordance with Article 10, whether or not such payment is prohibited by
Article 11;
(3) failure by the Company to observe or perform any covenant, agreement or
warranty contained in the Securities or this Indenture (other than a default
in the performance of any covenant, agreement or warranty which is
specifically dealt with elsewhere in this Section 6.1), and continuance of
such failure for a period of 60 days after there has been given, by registered
or certified mail, to the Company by the Trustee, or to the Company and the
Trustee by Holders of at least 25% in aggregate principal amount of the then
outstanding Securities, a written notice specifying such default or breach,
requesting it to be remedied and stating that such notice is a "Notice of
Default" hereunder;
(4) a default under Indebtedness of the Company or any of its Subsidiaries
with an aggregate principal amount in excess of $5,000,000 (a) resulting from
the failure to pay principal at maturity or (b) as a result of which the
maturity of such Indebtedness has been accelerated prior to its stated
maturity;
(5) a decree, judgment, or order by a court of competent jurisdiction shall
have been entered adjudging the Company or any of its Significant Subsidiaries
as bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization of the Company or any of its Significant Subsidiaries under any
bankruptcy or similar law, and such decree or order shall have continued
undischarged and unstayed for a period of
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75 days; or a decree or order of a court of competent jurisdiction over the
appointment of a receiver, liquidator, trustee, or assignee in bankruptcy or
insolvency of the Company, any of its Significant Subsidiaries, or of the
property of any such Person, or for the winding up or liquidation of the
affairs of any such Person, shall have been entered, and such decree,
judgment, or order shall have remained in force undischarged and unstayed for
a period of 75 days;
(6) the Company or any of its Significant Subsidiaries shall institute
proceedings to be adjudicated a voluntary bankrupt, or shall consent to the
filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any bankruptcy or similar law
or similar statute, or shall consent to the filing of any such petition, or
shall consent to the appointment of a Custodian, receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency of it or any of its assets or
property, or shall make a general assignment for the benefit of its creditors,
or shall admit in writing its inability to pay its debts generally as they
become due, or shall, within the meaning of any Bankruptcy Law, become
insolvent, fail generally to pay its debts as they become due, or take any
corporate action in furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing; or
(7) final unsatisfied judgments not covered by insurance aggregating in
excess of $5,000,000 at any one time shall have been rendered against the
Company or any of its Subsidiaries and have not been stayed, bonded or
discharged for a period (during which execution shall not be effectively
stayed) of 30 days (or, in the case of any such final judgment which provides
for payment over time, which shall so remain unstayed, unbonded or
undischarged 30 days beyond any applicable payment date provided therein).
Notwithstanding the 60-day period and notice requirement contained in
Section 6.1(3) above, with respect to a default under Article 10 the 60-day
period referred to in Section 6.1(3) shall be deemed to have begun as of the
date the Change of Control notice is required to be sent in the event that the
Company has not complied with the provisions of Section 10.1 and the Trustee or
Holders of at least 25% in principal amount of the outstanding Securities
thereafter give the Notice of Default referred to in Section 6.1(3) to the
Company and, if applicable, the Trustee; PROVIDED, HOWEVER, that if the breach
or default is a result of a default in the payment when due of the Repurchase
Price on the Repurchase Date, such Event of Default shall be deemed, for
purposes of this Section 6.1, to arise no later than on the Repurchase Date.
If a Default occurs and is continuing, the Trustee shall, within 90 days
after the occurrence of such default, give to the Holders notice of such
default.
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6.2 ACCELERATION OF MATURITY DATE; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 6.1(5) or (6) relating to the Company or any of its significant
Subsidiaries) occurs and is continuing, then, and in every such case, unless the
principal of all of the Securities shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of then outstanding Securities, by a notice in writing to the Company
(and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare
all of the principal of the Securities (or the Repurchase Price if the Event of
Default includes failure to pay the Repurchase Price, determined as set forth
below), including in each case accrued interest thereon, to be due and payable
immediately. If an Event of Default specified in Section 6.1(5) or (6) relating
to the Company or any Significant Subsidiary occurs, all principal and accrued
interest thereon will be immediately due and payable on all outstanding
Securities without any declaration or other act on the part of Trustee or the
Holders.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article 6, the Holders of no less
than a majority in aggregate principal amount of then outstanding Securities,
by written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee Cash
sufficient to pay
(i) all overdue interest on all Securities,
(ii) the principal of (and premium, if any, applicable to) any
Securities which would then be due otherwise than by such declaration
of acceleration, and interest thereon at the rate borne by the
Securities,
(iii) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
(iv) all sums paid or advanced by the Trustee hereunder and the
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities that have become
due solely by such declaration of acceleration, have been cured or waived
as provided in Section 6.12, including, if applicable, any Event of Default
relating to the covenants contained in Section 10.1.
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Notwithstanding the previous sentence of this Section 6.2, no waiver
shall be effective against any Holder for any Event of Default or event
which with notice or lapse of time or both would be an Event of Default
with respect to any covenant or provision which cannot be modified or
amended without the consent of the Holder of each outstanding Security
affected thereby, unless all such affected Holders agree, in writing, to
waive any subsequent Default or Event or Default or impair any right
consequent thereon.
6.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE
The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in clause (1) or (2) of Section 6.1
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal, premium (if any), interest and, to
the extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest, at
the rate borne by the Securities, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
compensation to, and expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as Trustee of an express trust in favor of the
Holders, may institute a judicial proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
6.4 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including:
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(1) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel) and of the Holders allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.7.
Nothing herein contain shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
6.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought it its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of reasonable compensation to,
and reasonable expenses, disbursement and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the Securities in
respect of which such judgment has been recovered.
6.6 PRIORITIES.
Any money collected by the Trustee pursuant to this Article 6 shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal, premium (if
any) or interest, upon presentation of the Securities and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.7;
SECOND: To the holders of the Senior Indebtedness of the Company to
the extent provided in Article 11;
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THIRD: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any), and interest on, the Securities in respect
or for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for principal, premium (if any) and interest, respectively; and
FOURTH: To whomsoever may be lawfully entitled thereto, the
remainder, if any.
6.7 LIMITATION ON SUITS.
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of then
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities to
be incurred or reasonably probable to be incurred in compliance with such
request;
(D) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(E) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of then outstanding Securities;
it being understood and intended that no one or more Holders may have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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6.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any) and interest on, such
Security when due (including, in the case of redemption, the Redemption Price on
the applicable Redemption Date, and in the case of the Repurchase Price, on the
applicable Repurchase Date) and to institute suit for the enforcement of any
such payment after such respective dates, and such rights shall not be impaired
without the consent of such Holder.
6.9 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
6.10 DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such right or remedy or constitute a waiver of any such
Event of Default. Every right and remedy given by this Article 6, or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
6.11 CONTROL BY HOLDERS.
The Holder or Holders of no less than a majority in aggregate
principal amount of then outstanding Securities shall 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 upon the Trustee,
PROVIDED, that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such direction,
and
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(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
6.12 WAIVER OF PAST DEFAULT.
Subject to Section 6.8, the Holder or Holders of not less than a
majority in aggregate principal amount of then outstanding Securities may, on
behalf of all Holders, prior to the declaration of acceleration of the maturity
of the Securities, waive any past Default hereunder and its consequences, except
a Default
(A) in the payment of the principal of, premium, if any, or
interest on, any Security not yet cured as specified in clauses (1) and (2) of
Section 6.1, or
(B) in respect of a covenant or provision hereof, which, under
Article 9, cannot be modified or amended without the consent of the Holder of
each outstanding Security affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising from such a Default shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair the exercise of any right arresting
therefrom.
6.13 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 6.13 shall not apply to any suit instituted
by the Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of then outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, premium
(if any), or interest on, any Security on or after the respective Stated
Maturity of such Security (including, in the case of redemption, on or after the
Redemption Date).
6.14 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
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shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the Trustee and the Holders shall
continue as though no such proceeding had been instituted.
ARTICLE
7
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
7.1 DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent Person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are adverse to
the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.11.
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(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust need not be segregated from other assets except to the
extent required by law.
7.2 RIGHTS OF TRUSTEE.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate on or Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
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(g) Unless otherwise specifically provided for in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(h) The Trustee shall have no duty to inquire as to the
performance of the Company's covenants in Article 4 hereof. In addition, the
Trustee shall not be deemed to have knowledge of any Default or Event of Default
except (i) any Event of Default occurring pursuant to Sections 6.1(1), 6.1(2) or
5.1, or (ii) any Default or Event of Default of which the Trustee shall have
received written notification or obtained actual knowledge.
7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any of
its Subsidiaries, or their respective affiliates with the same rights it would
have it if were not Trustee. Any Agent may do the same with like rights.
However, the Trustee must comply with Section 7.10 and 7.11.
7.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities and it shall not be accountable for the
Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities, other than the Trustee's
certificate of authentication, or the use or application of any funds received
by a Paying Agent other than the Trustee.
7.5 NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Security Holder notice
of the uncured Default or Event of Default within 90 days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal (or premium, if any), or interest on, any Security
(including the payment of the Repurchase Price on the Repurchase Date and the
payment of the Redemption Price on the Redemption Date), the Trustee may
withhold the notice if and so long as a Trust Officer in good faith determines
that withholding the notice is in the interest of the Security Holders.
7.6 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each [ ] beginning with the [ ] following the
date of this Indenture, the Trustee shall, if required by law, mail to each
Security Holder a brief report dated as of such [ ] that complies with the TIA
Section 313(a). The Trustee also shall comply with TIA Sections 313(b) and
313(c).
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The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange, market or automatic quotation
system.
A copy of each report at the time of its mailing to Security Holders
shall be mailed to the Company and filed with the SEC and each stock exchange or
market, if any, on which the Securities are listed.
7.7 COMPENSATION AND INDEMNITY.
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents,
accountants, experts and counsel.
The Company agrees to indemnify the Trustee (in its capacity as
Trustee) and each of its officers, directors, attorneys-in-fact and agents for,
and hold it harmless against, any claim, demand, expense (including but not
limited to reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel), loss or liability incurred by it without negligence, bad
faith or willful misconduct on its part, arising out of or in connection with
the administration of this trust and its rights or duties hereunder including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. The Company shall
defend the claim and the Trustee shall provide reasonable cooperation at the
Company's expense in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel; PROVIDED,
that the Company will not be required to pay such fees and expenses if it
assumes the Trustee's defense and there is no conflict of interest between the
Company and the Trustee in connection with such defense. The Company need not
pay for any settlement made without its written consent. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal of, and premium, if any, or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's
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obligations pursuant to Article 8 of this Indenture and any rejection or
termination of this Indenture under any Bankruptcy Law.
7.8 REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in principal amount of then outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing and may appoint a successor trustee with the Company's consent. The
Company may remove the Trustee if
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian or other public officer takes charge
of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of then outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the retiring Trustee provided for in Section
7.7 have been paid, the retiring Trustee shall transfer all property held by it
as trustee to the successor Trustee, subject to the lien provided in Section
7.7, the resignation or removal of the retiring Trustee shall become effective,
and the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holder or Holders of at least 10% in principal amount of then outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Security Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
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7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
7.10 ELIGIBILITY; DISQUALIFICATION
The Trustee shall at all times satisfy the requirements of TIA Section
310(a)(1), (2) and (5). The Trustee shall have a combined capital and surplus
of at least $100,000,000 as set forth in its most recent published annual
report of condition. The Trustee shall comply with TIA Section 310(b).
7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE
8
SATISFACTION AND DISCHARGE
8.1 SATISFACTION AND DISCHARGE OF INDENTURE.
The Company may terminate its obligations under this Indenture
(subject to the provisions of this Article 8) when it shall have delivered to
the Trustee for cancellation all Securities theretofore authenticated (other
than any Securities which shall have been destroyed, lost or stolen and which
shall have been replaced or paid as provided in Article 2 hereof) and the
following conditions shall be satisfied:
(1) The Company has paid all sums payable under the Indenture; and
(2) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent have been complied with as contemplated by this Section 8.1.
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8.2 PAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, for the payment of the principal of, premium, if any, or
interest on any Security and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on its request; and the Holder of such Security shall thereafter
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money shall thereupon cease.
ARTICLE
9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holder, the Company, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or to make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, PROVIDED, that such action pursuant to this clause (1) does not
adversely affect the interests of any Holder in any respect;
(2) to create additional covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon the
Company or to make any other change that does not adversely affect the
rights of any Holder, PROVIDED, that the Company has delivered to the
Trustee an Opinion of Counsel stating that such change pursuant to this
clause (2) does not adversely affect the rights of any Holder;
(3) to provide for collateral for, or guarantors of, the Securities;
(4) to evidence the succession of another Person to the Company and
the assumption by any such successor of the obligations of the Company
herein and in the Securities in accordance with Article 5: or
(5) to comply with the TIA.
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9.2 AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH CONSENT OF
HOLDERS.
Subject to Section 6.8 and the last sentence of this paragraph, with
the consent of the Holders of not less than a majority in aggregate principal
amount of then outstanding Securities, by written act of said Holders delivered
to the Company and the Trustee, the Company, when authorized by Board
Resolutions, and the Trustee may amend or supplement this Indenture or the
Securities or enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or the Securities or of modifying in any
manner the rights of the Holders under this Indenture or the Securities. Subject
to Section 6.8 and the last sentence of this paragraph, the Holder or Holders of
not less than a majority in aggregate principal amount of then outstanding
Securities may, in writing, waive compliance by the Company with any provision
of this Indenture or the Securities. Notwithstanding any of the above, however,
no such amendment, supplemental indenture or waiver shall, without the consent
of the Holder of each outstanding Security affected thereby:
(1) change the Stated Maturity of any Security or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or
change the place of payment where, or the coin or currency in which, any
Security 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 Security 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 Repurchase Offer or redemption provisions in
a manner adverse to the Holders;
(2) reduce the percentage in principal amount of the outstanding
Securities, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture;
(3) adversely affect the right of such Holder to convert Securities;
or
(4) 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 Security affected thereby.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
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After an amendment, supplement or waiver under this Section 9.2
becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article 9, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or (at the option of the
Company) to all Holders, consideration for consent to such amendment, supplement
or waiver.
9.3 COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company or the Person designated by the Company as the Person to whom consents
should be sent if such revocation is received by the Company or such Person
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective pursuant to
this Section 9.4, it shall bind every Security Holder, unless it makes a change
described in any of clauses (1) through (4) of Section 9.2, in which case, the
amendment, supplement or waiver shall bind only each Holder of a Security who
has consented to it and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
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9.5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article 9; PROVIDED, that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver which
affects the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article 9 is authorized or
permitted by this Indenture.
ARTICLE
10
RIGHT TO REQUIRE REPURCHASE UPON A CHANGE OF CONTROL
10.1 REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL.
(a) In the event that a Change of Control occurs, each Holder shall
have the right, at such Holder's option, subject to the terms and conditions of
this Indenture, to require the Company to repurchase all or any part of such
Holder's Securities (PROVIDED, that the principal amount of such Securities must
be $1,000 or an integral multiple thereof) on the date (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.
(b) In the event that, pursuant to this Section 10.1, the Company
shall be required to commence an irrevocable and unconditional offer to purchase
Securities (a "Repurchase Offer"), the Company shall follow the procedures set
forth in this Section 10.1 as follows:
(1) the Repurchase Offer shall commence within 30 Business Days
following a Change of Control;
(2) the Repurchase Offer shall remain open for 15 Business Days
following its commencement, except to the extent that a longer period is
required by applicable law,
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but in any case not more than 45 Business Days following the Change of
Control (the "Repurchase Offer Period");
(3) upon the expiration of a Repurchase Offer, the Company shall
purchase all Securities tendered in response to the Repurchase Offer;
(4) if the Repurchase Date is on or after an interest payment record
date and on or before the related Interest Payment Date, any accrued
interest will be paid to the Person in whose name a Security is registered
at the close of business on such record date, and no additional interest
will be payable to Security Holders who tender Securities pursuant to the
Repurchase Offer;
(5) the Company shall provide the Trustee with notice of the
Repurchase Offer, at least 5 Business Days before the commencement of any
Repurchase Offer; and
(6) on or before the commencement of any Repurchase Offer, the Company
or the Trustee (upon the request and at the expense of the Company) shall
send, by first-class mail, a notice to each of the Security Holders, which
(to the extent consistent with this Indenture) shall govern the terms of
the Repurchase Offer and shall state:
(i) that the Repurchase Offer is being made pursuant to such
notice and this Section 10.1 and that all Securities, or portions
thereof, tendered will be accepted for payment;
(ii) the Repurchase Price (including the amount of accrued and
unpaid interest, if any), the Repurchase Date and the Repurchase Put
Date;
(iii) that any Security, or portion thereof, not tendered or
accepted for payment will continue to accrue interest, if any;
(iv) that, unless the Company defaults in depositing Cash with
the Paying Agent in accordance with the last paragraph of this clause
(b) or such payment is prevented pursuant to Article 11, any Security,
or portion thereof, accepted for payment pursuant to the Repurchase
Offer shall cease to accrue interest after the Repurchase Date;
(v) that Holders electing to have a Security, or portion thereof,
purchased pursuant to a Repurchase Offer will be required to surrender
the Security, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Security completed, to the Paying
Agent (which may not for purposes of this Section 10.1,
notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company) at the address specified in
the notice prior to the close of business on the earlier of (a) the
third Business Day prior to the Repurchase Date and (b) the third
Business Day
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following the expiration of the Repurchase Offer (such earlier date
being the "Repurchase Put Date");
(vi) that Holders will be entitled to withdraw their election, in
whole or in part, if the Paying Agent (which may not for purposes of
this Section 10.1, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) receives, up
to the close of business on the Repurchase Put Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Securities the Holder is
withdrawing and a statement that such Holder is withdrawing his
election to have such principal amount of Securities purchased; and
(vii) a brief description of the events resulting in such Change
of Control.
Any such Repurchase Offer shall comply with all applicable provisions
of Federal and state laws, including those regulating tender offers, if
applicable, and any provisions of this Indenture which conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
On or before the Repurchase Date, the Company shall (i) accept for
payment Securities or portions thereof properly tendered pursuant to the
Repurchase Offer on or before the Repurchase Put Date, (ii) deposit with the
Paying Agent Cash sufficient to pay the Repurchase Price (together with accrued
and unpaid interest, if any) of all Securities or portions thereof so tendered
and (iii) deliver to the Trustee Securities so accepted together with an
Officers' Certificate listing the Securities or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail to Holders of Securities so
accepted payment in an amount equal to the Repurchase Price (together with
accrued and unpaid interest, if any), and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security or Securities
equal in principal amount to any unpurchased portion of the Securities
surrendered. Any Securities not so accepted shall 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.
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ARTICLE
11
SUBORDINATION
11.1 SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
The Company and each Holder, by its acceptance of Securities, agree
that (a) the payment of the principal of, premium, if any, and interest on the
Securities and (b) any other payment in respect of the Securities, including on
account of the acquisition or redemption of the Securities by the Company
(including, without limitation, pursuant to Article 10) is subordinated, to the
extent and in the manner provided in this Article 11, to the prior payment in
full of all Senior Indebtedness of the Company, whether outstanding at the date
of this Indenture or thereafter created, incurred, assumed or guaranteed, and
that these subordination provisions are for the benefit of the holders of Senior
Indebtedness.
This Article 11 shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the holders
of Senior Indebtedness, and such holders are made obligees hereunder and any one
or more of them may enforce such provisions.
11.2 NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) No payment may be made by the Company on account of the principal
of, premium, if any, or interest on, the Securities, or to acquire any of the
Securities (including repurchases of Securities at the option of the Holder) for
cash or property (other than Junior Securities), or on account of the redemption
provisions of the Securities, (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
acceleration or otherwise (a "Payment Default"), unless and until such Payment
Default has been cured or waived or otherwise has ceased to exist.
(b) 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 set-off 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
Securities, or to acquire or repurchase any of the Securities for cash or
property, or on account of the redemption provisions of the Securities, in any
such case other than payments made with Junior Securities of the Company.
Notwithstanding the
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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 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 Securities during the Payment Blockage Period due
to the foregoing prohibitions and to resume all other payments as and when due
on the Securities. 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.
(c) In furtherance of the provisions of Section 11.1, in the event
that, notwithstanding the foregoing provisions of this Section 11.2, 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 provisions of this Section 11.2, then such
payment or distribution (subject to the provisions of Section 11.7) shall be
received and held in trust by the Trustee or such Holder or Paying Agent for the
benefit of the holders of Senior Indebtedness of the Company, and shall be paid
or delivered by the Trustee or such Holders or such Paying Agent, as the case
may be, to the holders of 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 in full after giving effect to any
concurrent payment and distribution to the holders of such Senior Indebtedness.
11.3 SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR INDEBTEDNESS ON
DISSOLUTION, LIQUIDATION OR REORGANIZATION.
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
marshalling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company shall first
be entitled to receive payments 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, and interest on, the Securities (other than
payment in Junior Securities);
(b) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities (other than payment in
Junior Securities) to
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which the Holders or the Trustee on behalf of the Holders would be entitled (by
setoff or otherwise), except for the provisions of this Article 11, shall 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 representatives ratably according to the respective amounts of such Senior
Indebtedness held or represented by each, 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; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than Junior Securities), shall be received by the
Trustee or the Holders or any Paying Agent (or, if the Company or any Affiliate
of the Company is acting as its own Paying Agent, money for any such payment or
distribution shall be segregated or held in trust) on account of the principal
of or interest on the Securities before all Senior Indebtedness of the Company
is paid in full, such payment or distribution (subject to the provisions of
Section 11.7) shall be received and held in trust by the Trustee or such Holder
or Paying Agent for the benefit of the holders of such Senior Indebtedness, or
their respective representatives, ratably according to the respective amounts of
such Senior Indebtedness held or represented by each, to the extent necessary to
make payment as provided herein of all such Senior Indebtedness remaining unpaid
after giving effect to all concurrent payments and distributions and all
provisions therefor to or for the holders of such Senior Indebtedness, but only
to the extent that as to any holder of such Senior Indebtedness, as promptly as
practical following notice from the Trustee to the holders of such Senior
Indebtedness that such prohibited payment has been received by the Trustee,
Holder(s) or Paying Agent (or has been segregated as provided above), such
holder (or a representative therefor) notifies the Trustee of the amounts then
due and owing on such Senior Indebtedness, if any, held by such holder and only
the amounts specified in such notices to the Trustee shall be paid to the
holders of such Senior Indebtedness.
11.4 SECURITYHOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR
INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness of the
Company as provided herein, the Holders of Securities shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
such Senior Indebtedness by the Company, or by or on behalf of the Holders by
virtue of this Article 11, which otherwise would have been made to the Holders
shall, as between the Company and the Holders, be deemed to be payment by the
Company or on account of such Senior Indebtedness, it being understood that the
provisions of this Article 11 are and are intended solely for the purpose of
defining the relative rights of the Holders, on the one hand, and the holders of
such Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 11 shall have been
applied, pursuant to the
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provisions of this Article 11, to the payment of payable under Senior
Indebtedness of the Company, then the Holders be entitled to receive from the
holders of such Senior Indebtedness any payments or distributions received by
such holders of Senior Indebtedness in excess of the amount sufficient to pay
all amounts payable under or in respect of such Senior Indebtedness in full.
11.5 OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article 11 or elsewhere in this Indenture or
in the Securities is intended to or shall impair as between the Company and the
Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on, the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article 11, of the holders of Senior Indebtedness in respect of cash, property
or securities of the Company received upon the exercise of any such remedy.
Notwithstanding anything to the contrary in this Article 11 or elsewhere in this
Indenture or in the Securities, upon any distribution of assets of the Company
referred to in this Article 11, the Trustee, subject to the provisions of
Sections 7.1 and 7.2, and the Holders shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other Person making any
distribution to the Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 11 so long as such court has been
apprised of the provisions of, or the order, decree or certificate makes
reference to, the provisions of this Article 11. Nothing in this Section 11.5
shall apply to the claims of, or payments to, the Trustee under or pursuant to
Section 7.7.
11.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN ABSENCE OF
NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until a Trust Officer of the Trustee or any Paying Agent
shall have received, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any representative therefor and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections 7.1
and 7.2, shall be entitled in all respects conclusively to assume that no such
fact exists.
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11.7 APPLICATION BY TRUSTEE OF ASSETS DEPOSITED WITH IT.
Amounts deposited in trust with the Trustee pursuant to and in accordance
with Section 8.2 shall be for the sole benefit of Security Holders and, to the
extent allocated for the payment of Securities, shall not be subject to the
subordination provisions of this Article 11. Otherwise, any deposit of assets
with the Trustee or the Agent (whether or not in trust) for the payment of
principal of or interest on any Securities shall be subject to the provisions of
Sections 11.1, 11.2, 11.3 and 11.4; PROVIDED THAT, if prior to one Business Day
preceding the date on which by the terms of this Indenture any such assets may
become distributable for any purpose (including, without limitation, the payment
of either principal of or interest on any Security) the Trustee or such Paying
Agent shall not have received with respect to such assets the written notice
provided for in Section 11.6, then the Trustee or such Paying Agent shall have
full power and authority to receive such assets and to apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such date.
11.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE
COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness
to enforce subordination provisions contained in this Article 11 shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms of the Senior Indebtedness or any security therefor
and release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties to
the Indenture or the Holders.
11.9 SECURITY HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION
OF SECURITIES.
Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article 11 and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors of the Company),
the immediate filing of a claim for the unpaid balance of his Securities in the
form required in said proceedings and cause said claim to be approved. If the
Trustee does not file a proper claim or proof of debt in the form required in
such proceeding prior to 30 days before the expiration of the time to file such
claim or claims, then the holders of the Senior Indebtedness or their
representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Securities. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
representative to authorize or consent to or accept or adopt on behalf of any
Security Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the
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Trustee or the holders of Senior Indebtedness or their representative to vote in
respect of the claim of any Security Holder in any such proceeding.
11.10 RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.
The Trustee shall be entitled to all of the rights set forth in this
Article 11 in respect of any Senior Indebtedness at any extent as any other
holder of Senior Indebtedness, and nothing in this Indenture shall be construed
to deprive the Trustee of any of its rights as such holder.
11.11 ARTICLE 11 NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of, premium, if
any, or interest on, the Securities by reason of any provision of this Article
11 shall not be construed as preventing the occurrence of a Default or an Event
of Default under Section 6.1 or in any way prevent the Holders from exercising
any right hereunder other than the right to receive payment on the Securities.
11.12 NO FIDUCIARY DUTY OF TRUSTEE TO HOLDERS OF SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Securities or the Company or
any other Person, cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article 11 or otherwise.
Nothing in this Section 11.12 shall affect the obligation of any other such
Person to hold such payment for the benefit of, and to pay such payment over to,
the holders of Senior Indebtedness or their representatives.
ARTICLE
12
CONVERSION OF SECURITIES
12.1 CONVERSION PRIVILEGE.
Subject to and upon compliance with the provisions of this Article 12,
at the option of the Holder thereof, any Security may at any time be converted,
in whole, or in part in multiples of $1,000 principal amount, into fully paid
and non-assessable shares of Common Stock issuable upon conversion of the
Securities (the "Conversion Shares"), at the conversion price in effect at the
Date of Conversion, until and including, but not after the close of business on
the Stated Maturity, or unless such Security or some portion thereof shall have
been called for redemption or delivered for repurchase prior to such date and no
Default is made in making due provision for the payment of the redemption price
in accordance with the terms of this Indenture, in which case, with respect to
such Security or portion thereof as has been so called for redemption or
delivered
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for repurchase, such Security or portion thereof may be so converted until and
including, but not after the close of business on the Business Day prior to the
Redemption Date or Repurchase Date, as applicable for such Security, unless the
Company subsequently fails to pay the applicable Redemption Price or Repurchase
Price, as the case may be.
12.2 EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security to the Company at any
time during usual business hours at its office or agency maintained for the
purpose as provided in this Indenture, accompanied by a fully executed written
notice, in substantially the form set forth on the reverse of the Security, that
the Holder elects to convert such Security or a stated portion thereof
constituting a multiple of a $1,000 principal amount, and, if such Security is
surrendered for conversion during the period between the close of business of
any Record Date and the opening of business on the next following Interest
Payment Date and has not been called for redemption on a Redemption Date which
occurs within such period, accompanied also by payment of an amount equal to the
interest payable on such Interest Payment Date on the principal amount of the
Security being surrendered for conversion, notwithstanding such conversion. The
Holder of any Security at the close of business on a Record Date will be
entitled to receive the interest payable on such Security on the corresponding
Interest Payment Date notwithstanding the conversion thereof after such Record
Date. Holders will receive the interest payment due on ________________, 1999
whether or not they surrender Securities for conversion as a result of the
Company's exercise of its right to redeem Securities on or after
________________, 1999. Such notice of conversion shall also state the name or
names (with address) in which the certificate or certificates for shares of
Common issued. Securities surrendered for conversion shall (if reasonably
required by the Company or the Trustee) be duly endorsed by, or be accompanied
by a written instrument or instruments of transfer in form satisfactory to the
Company, duly executed by the Holder or his attorney duly authorized in writing.
As promptly as practicable after the receipt of such notice and the surrender of
such Security as aforesaid, the Company shall, subject to the provisions of
Section 12.8 hereof, issue and deliver at such office or agency to such Holder,
or on his written order, a certificate or certificates for the number of full
shares of Common Stock issuable on such conversion of Securities in accordance
with the provisions of this Article 12 and Cash, as provided in Section 12.3
hereof, in respect of any fraction of a share of Common Stock otherwise issuable
upon such conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the date (herein called the "Date
of Conversion") on which such Security shall have been surrendered as aforesaid,
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become on the Date of Conversion the holder or holders of record of the
shares represented thereby; PROVIDED, HOWEVER, that any such surrender on any
date when the stock transfer books of the Company shall be closed shall cause
the person or persons in whose name or names the certificate or certificates for
such shares are to be issued to be deemed to have become the recordholder or
holders thereof for all purposes at the opening of business on the next
succeeding day on which such stock transfer books are open but such conversion
shall nevertheless be at the conversion price in effect at the close of business
on the date when such Security shall have been
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so surrendered with the conversion notice. In the case of conversion of a
portion, but less than all, of a Security, the Company shall as promptly as
practicable execute, and the Trustee shall authenticate and deliver to the
Holder thereof, at the expense of the Company, a Security or Securities in the
aggregate principal amount of the unconverted portion of the Security
surrendered. Except as otherwise expressly provided in this Indenture, no
payment or adjustment shall be made for interest accrued on any Security (or
portion thereof) converted or for dividends or distributions on any Common Stock
issued upon conversion of any Security.
12.3 FRACTIONAL INTERESTS.
No fractions of shares or scrip representing fractions of shares shall
be issued upon conversion of Securities. If more than one Security shall be
surrendered for conversion at one time by the same Holder, the number of full
shares which shall be issuable upon conversion thereof shall be basis of the
aggregate principal amount of the Securities so surrendered. If any fraction of
a share of Common Stock would, except for the foregoing provisions of this
Section 12.3, be issuable on the conversion of any Security or Securities, the
Company shall make payment in lieu thereof in an amount of Cash equal to the
value of such fraction computed on the basis of the last sale price of the
Common Stock as reported on the Nasdaq National Market (or if not listed for
trading thereon, then on the principal national securities exchange on which the
Common Stock is listed or admitted to trading) at the close of business on the
Date of Conversion or if no such sale takes place on such day, the last sale
price for such day shall be the average of the closing bid and asked prices
regular way on the Nasdaq National Market (or if not listed for trading thereon,
on the principal national securities exchange or market on which the Common
Stock last sale price being hereinafter referred to as the "Last Sale Price").
If on such Trading Day the Common Stock is not quoted by any such organization,
the fair value of such Common Stock on such day, as reasonably determined in
good faith by the Board of Directors of the Company, shall be used.
12.4 CONVERSION PRICE.
The conversion price per share of Common Stock issuable upon
conversion of the Securities (the "Conversion Price") shall initially be $[ ]
(or $[ ] in principal amount of Securities for each such share of Common Stock).
12.5 ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be subject to adjustment from time to time
as follows:
(a) In case the Company shall (i) make or pay a dividend (or
other distribution) in shares of Common Stock on any class of Capital Stock of
the Company, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares or (iii) combine or reclassify its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the Holder of any
Security thereafter surrendered for conversion shall be entitled to receive the
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number of shares of Common Stock that he would have owned immediately following
such action had such Security been converted immediately prior thereto. An
adjustment made pursuant to this subsection (a) shall become effective
immediately, except as provided in subsection (h) below, after the record date
in the case of a dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or combination.
(b) In case the Company shall issue rights, options or warrants
to all holders of Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the then current market
price per share of the Common Stock (as determined pursuant to subsection (f)
below) on the record date mentioned below, the Conversion Price shall be
adjusted to a price, computed to the nearest cent, so that the same shall equal
the price determined by multiplying:
(i) the Conversion Price in effect immediately prior to
the date of issuance of such rights or warrants by a fraction, of which
(ii) the numerator shall be (A) the number of shares of
Common Stock outstanding on the date of issuance of such rights, options or
warrants, immediately prior to such issuance, plus (B) the number of shares
which the aggregate offering price of the total number of shares so offered for
subscription or purchase would purchase at such current market price (determined
by multiplying such total number of shares by the exercise price of such rights,
options or warrants and dividing the product so obtained by such current market
price), and of which
(iii) the denominator shall be (A) the number of shares of
Common Stock outstanding on the date of issuance of such rights, options or
warrants, immediately prior to such issuance, plus (B) the number of additional
shares of Common Stock which are so offered for subscription or purchase.
Such adjustment shall become effective immediately, except as provided
in subsection (h) below, after the record date for the determination of holders
entitled to receive such rights, options or warrants; PROVIDED, HOWEVER, that if
any such rights, options or warrants issued by the Company as described in this
subsection (b) are only exercisable upon the occurrence of certain triggering
events relating to control and provided for in shareholder rights plans, then
the Conversion Price will not be adjusted as provided in this subsection (b)
until such triggering events occur.
(c) In case the Company or any subsidiary of the Company shall
distribute to all holders of Common Stock, any of its assets, evidences of
indebtedness, cash or other assets or shares of Capital Stock other than Common
Stock (including securities, but other than (x) dividends or distributions
exclusively in cash or (y) any dividend or distribution for which an adjustment
is required to be made in accordance with subsection (a) or (b) above) then in
each such case the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction of which the
numerator shall be the then current market price per share
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of the Common Stock (determined as provided in subsection (f) below) on the
record date mentioned below less the then fair market value (as reasonably
determined in good faith by the Board of Directors of the Company) of the
portion of the assets so distributed applicable to one share of Common Stock,
and of which the denominator shall be such current market price per share of the
Common Stock. Such adjustment shall become effective immediately, except as
provided in subsection (h) below, after the record date for the determination of
stockholders entitled to receive such distribution.
(d) In case the Company or any subsidiary of the Company shall
make any distribution consisting exclusively of cash (excluding any cash
portion of distributions for which an adjustment is required to be made in
accordance with (c) above, or cash distributed upon a merger or consolidation
to which Section 12.6 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 (determined as provided in subsection (f) below)
times the number of shares of Common Stock then outstanding) on the record date
of such distribution, in each such case the Conversion Price shall be adjusted
so that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date of such distribution by a
fraction of which the numerator shall be the then current market price per
share of the Common Stock on such record date less the amount of the cash so
distributed applicable to one share of Common Stock, and of which the
denominator shall be such current market price per share of the Common Stock.
Such adjustment shall become effective immediately, except as provided in
subsection (h) below, after the record date for the determination of
stockholders entitled to receive such distribution.
(e) In case there shall be completed a tender or exchange offer
made by the Company or any Subsidiary of the Company for all or any portion of
the Common Stock (any such tender or exchange offer being referred to as an
"Offer") that involves an aggregate consideration having a fair market value as
of the expiration of such Offer (the "Expiration Time") that, together with (i)
any cash and the fair market value of any other consideration payable in
respect of any other Offer, as of the expiration of such other Offer, expiring
within the 12 months preceding the expiration of such Offer and in respect for
which no Conversion Price adjustment pursuant to this subsection (e) has been
made and (ii) the aggregate amount of any
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all-cash distributions referred to in subsection (d) of this Section 12.5 to all
holders of Common Stock within the 12 months preceding the expiration of such
Offer for which no Conversion Price adjustment, pursuant to such subsection (d),
has been made, exceeds 10% of the product of the then current market price per
share (determined as provided in subsection (f) below) of the Common Stock on
the Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time, the Conversion Price
shall be reduced by multiplying such Conversion Price in effect immediately
prior to the Expiration Time by a fraction of which the numerator shall be (i)
the product of the then current market price per share (determined as provided
in subsection (f) below) on the Expiration Time times the number of shares of
Common Stock outstanding (including any tendered shares) on the Expiration Time
minus (ii) the fair market value of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the Offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted being referred to as the
"Purchased Shares") and the denominator shall be the product of (i) such current
market price per share on the Expiration Times times (ii) such number of
outstanding shares on the Expiration Time less the number of Purchased Shares,
such reduction to become effective immediately prior to the opening of business
on the day following the Expiration Time.
For purposes of this subsection (e), the fair market value of any
consideration with respect to an Offer shall be reasonably determined in good
faith by the Board of Directors of the Company and described in a Board
Resolution.
(f) For the purpose of any computation under subsections (b),
(c), (d) and (e)above, the current market price per share of Common Stock on
any date shall be deemed to be the average of the Last Sale Prices of a share
of Common Stock for the five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than, the
earlier of the date in question and the date before the "ex date," with respect
to the issuance, distribution or Offer requiring such computation. If on any
such Trading Day the Common Stock is not quoted by any organization referred to
in the definition of Last Sale Price in Section 12.3 hereof, the fair value of
the Common Stock on such day, as reasonably determined in good faith by the
Board of Directors of the Company, shall be used. For purposes of this
paragraph, the term "ex date," when used with respect to any issuance,
distribution or payments with respect to an Offer, means the first date on
which the Common Stock trades regular way on the Nasdaq National Market (or if
not listed or admitted to trading thereof, then on the principal market or
exchange on which the Common Stock is listed or admitted to trading) without
the right to receive such issuance, distribution or Offer.
(g) In addition to the foregoing adjustments in subsections (a),
(b), (c), (d) and (e) above, the Company will be permitted to make such
reductions in the Conversion Price 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 of the Exchange Act and any
other Federal and state laws and regulations thereunder if and to the extent
that such laws and regulations are applicable in connection with the reduction
of the price
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of the Notes; PROVIDED that any provisions of this Indenture which conflict with
such laws shall be deemed superseded by the provisions of such laws.
(h) In any case in which this Section 12.5 shall require that an
adjustment (including by reason of the last sentence of subsection (a) or (c)
above) be made immediately following a record date, the Company may elect to
defer the effectiveness of such adjustment (but in no event until a date later
than the effective time of the event giving rise to such adjustment), in which
case the Company shall, with respect to any Security converted after such record
date and on and before such adjustment shall have become effective (i) defer
paying any Cash payment pursuant to Section 12.3 hereof or issuing to the Holder
of such Security the number of shares of Common Stock and other Capital Stock of
the Company (or other assets or securities) issuable upon such conversion in
excess of the number of shares of Common Stock and other Capital Stock of the
Company issuable thereupon only on the basis of the Conversion Price prior to
adjustment, and (ii) not later than five Business Days after such adjustment
shall become effective, pay to such Holder the appropriate Cash payment pursuant
to Section 12.3 hereof and issue to such Holder the additional shares of Common
Stock and other Capital Stock of the Company issuable on such Conversion.
(i) No adjustment in the Conversion price shall be required
unless such adjustment would require an increase or decrease of at least 1.0% of
the Conversion Price; PROVIDED, that any adjustments which by reason of this
subsection (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Article
12 shall be made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
(j) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly (i) file with the Trustee and each
conversion agent an Officers' Certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment, and (ii) mail or cause to be mailed a notice of
such adjustment to each Security Holder at his address as the same appears
on the registry books of the Registrar.
(k) In the event that the Company distributes rights or warrants
(other than those referred to in subsection (b) 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 Company shall make proper provision so that the
Holder of any Security surrendered for conversion will be entitled to receive
upon such conversion, in addition to the Conversion Shares, a number of rights
and warrants to be determined as follows: (i) if such conversion occurs 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 at
the time of such conversion in accordance with the terms and provisions of and
applicable to the rights or warrants, and (ii) if such conversion occurs after
such Distribution Date, the same number of
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rights or warrants to which a holder of the number of shares of Common Stock
into which the principal amount of such Security so converted 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.
12.6 CONTINUATION OF CONVERSION PRIVILEGE IN CASE OF RECLASSIFICATION,
CHANGE, MERGER, CONSOLIDATION OR SALE OF ASSETS.
If any of the following shall occur, namely: (a) any reclassification or
change of outstanding shares of Common Stock issuable upon conversion of the
Securities (other than a change in par value, or from par value to no par
value, or from no par value, to par value, or as a result of a subdivision or
combination), (b) any consolidation or merger of the Company with or into any
other Person, or the merger of any other Person with or into the Company (other
than a merger which does not result in any reclassification, change,
conversion, exchange or cancellation of outstanding shares of Common Stock) or
(c) any sale, transfer or conveyance of all or substantially all of the assets
of the Company (computed on a consolidated basis), then the Company, or such
successor or purchasing entity, as the case may be, shall, as a condition
precedent to such reclassification, change, consolidation, merger, sale or
conveyance, execute and deliver to the Trustee a supplemental indenture
providing that the Holder of each Security then outstanding shall have the
right to convert such Security only into the kind and amount of shares of stock
and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance
by a holder of the number of shares of Common Stock issuable upon conversion of
such Security immediately prior to such reclassification, change,
consolidation, merger, sale, transfer or conveyance assuming such holder of
Common Stock of the Company failed to exercise his rights of an election, if
any, as to the kind or amount of cash and other property receivable upon such
reclassification, change, consolidation, merger, sale, transfer or conveyance
(PROVIDED that if the kind or amount of securities, cash and other property
receivable upon such reclassification, change, consolidation, merger, sale,
transfer or conveyance is not the same for each share of Common Stock of the
Company held immediately prior to such reclassification, change, consolidation,
merger, sale, transfer or conveyance in respect of which such rights of
election shall not have been exercised ("Non-Electing Shares"), then for the
purpose of this Section 12.6, the kind and amount of securities, cash and other
property receivable upon such reclassification, change, consolidation, merger,
sale, transfer or conveyance by each Non-Electing Share shall be deemed to be
the kind and amount so receivable per share by a plurality of the Non-Electing
Shares). Such supplemental indenture shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Article 12. If, in the case of any such consolidation, merger, sale or
conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of shares of Common Stock includes shares of
stock or other securities and property (including cash) of a corporation other
than the successor or purchasing corporation, as the case may be, in such
consolidation, merger, sale or conveyance, then such supplemental indenture
shall also be executed by such other corporation and shall contain such
additional provisions to protect the interests of the Holders of the Securities
as the Board of Directors of the Company shall reasonably consider necessary by
reason of the
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foregoing. The provisions of this Section 12.6 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
Notice of the execution of each such supplemental indenture shall be
mailed to each Holder of Securities at his address as the same appears on the
registry books of the Company.
Neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or securities or property (including cash) receivable by Holders of
Securities upon the conversion of their Securities after any such
reclassification, change, consolidation, merger, sale or conveyance or to any
adjustment to be made with respect thereto, but, subject to the provisions of
Article 7.1 and 7.2 hereof, may accept as conclusive evidence of the correctness
of any such provisions, and shall be protected in relying upon, the Officers'
Certificate (which the Company shall be obligated to file with the Trustee prior
to the execution of any such supplemental indenture) with respect thereto.
12.7 NOTICE OF CERTAIN EVENTS.
In case:
(a) the Company shall declare a dividend (or any other distribution)
payable to the holders of Common Stock (other than cash dividends);
(b) the Company shall authorize the granting to all holders of
Common Stock of rights, warrants or options to subscribe for or purchase any
shares of stock of any class or of any other rights;
(c) the Company shall authorize any reclassification or change of the
Common Stock (including a subdivision or combination of its outstanding shares
of Common Stock), or any consolidation or merger to which the Company is a party
and for which approval of any stockholders of the Company is required, or the
sale or conveyance of all or substantially all the property or business of the
Company;
(d) there shall be proposed any voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(e) the Company or any of its Subsidiaries shall complete an Offer;
then, the Company shall cause to be filed at the office or agency maintained
for the purpose of conversion of the Securities as provided in Section 4.2
hereof, and shall cause to be mailed to each Holder of Securities, at its
address as it shall appear on the registry books of the Company, at least 20
days before the date hereinafter specified (or the earlier of the dates
hereinafter specified, in the event that more than one date is specified), a
notice stating the date on which (1) a record is expected to be taken for the
purpose of such dividend, distribution, rights, warrants or options or Offer,
or if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to
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such dividend, distribution, rights, warrants or options or to participate in
such Offer are to be determined, or (2) such reclassification, change,
consolidation, merger, sale, conveyance, dissolution, liquidation or winding-up
is expected to become effective and the date, if any is to be fixed, as of which
it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, change, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding-up. Neither the failure to give
notice nor any defect therein shall affect the legality or validity of the
events described in clauses (a) through (e) of this Section 12.7.
12.8 TAXES ON CONVERSION.
The Company will pay any and all documentary, stamp or similar taxes
payable to the United States of America or any political subdivision or taxing
authority thereof or therein in respect of the issue or delivery of shares of
Common Stock on conversion of Securities pursuant thereto; PROVIDED, HOWEVER,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the Holder of the Securities to be converted
and no such issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the Company the amount of any such
tax or has established, to the satisfaction of the Company, that such tax has
been paid. The Company extends no protection with respect to any other taxes
imposed in connection with conversion of Securities.
12.9 COMPANY TO PROVIDE STOCK.
The Company shall reserve, free from preemptive rights, out of its
authorized but unissued shares, sufficient shares to provide for the conversion
of the Securities from time to time as such Securities are presented for
conversion, PROVIDED, that nothing contained herein shall be construed to
preclude the Company from satisfying its obligations in respect of the
conversion of Securities by delivery of repurchased shares of Common Stock
which are held in the treasury of the Company.
If any shares of Common Stock to be reserved for the purpose of
conversion of Securities hereunder require registration with or approval of any
governmental authority under any Federal or state law before such shares may be
validly issued or delivered upon conversion, then the Company covenants that it
will in good faith and as expeditiously as possible use its best efforts to
secure such registration or approval, as the case may be, PROVIDED, HOWEVER,
that nothing in this Section 12.9 shall be deemed to limit in any way the
obligations of the Company provided in this Article 12.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the Common Stock, the
Company will take all corporate action which may, in the Opinion of Counsel, be
necessary in order that the Company may validly and legally issue fully paid
and non-assessable shares of Common Stock at such adjusted Conversion Price.
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The Company covenants that all shares of Common Stock which may be
issued upon conversion of Securities will upon issue be fully paid and non-
assessable by the Company and free of preemptive rights.
12.10 DISCLAIMER OF RESPONSIBILITY FOR CERTAIN MATTERS.
Neither the Trustee nor any agent of the Trustee shall at any time be
under any duty or responsibility to any Holder of Securities to determine
whether any facts exist which may require any adjustment of the Conversion
Price, or with respect to the Officers' Certificate referred to in Section
12.5(j) hereof, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or herein or in any
supplemental indenture provided to be employed, in making the same. Neither the
Trustee nor any agent of the Trustee shall be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common Stock, or of
any securities or property (including cash), which may at any time be issued or
delivered upon the conversion of any Security; and neither the Trustee nor any
conversion agent makes any representation with respect thereto. Neither the
Trustee nor any agent of the Trustee shall be responsible for any failure of the
Company to issue, register the transfer of or deliver any shares of Common Stock
or stock certificates or other securities or property (including cash) upon the
surrender of any Security for the purpose of conversion or, subject to Article 7
hereof, to comply with any of the covenants of the Company contained in this
Article 12.
12.11 RETURN OF FUNDS DEPOSITED FOR REDEMPTION OF CONVERTED SECURITIES.
Any funds which at any time shall have been deposited by the Company
or on its behalf with the Trustee or any other Paying Agent for the purpose of
paying the principal of and interest on any of the Securities and which shall
not be required for such purposes because of the conversion of such Securities,
as provided in this Article 12, shall after such conversion be repaid to the
Company by the Trustee or such other Paying Agent. All Securities delivered for
conversion to the Trustee will be cancelled by or at the direction of the
Trustee.
ARTICLE
13
MISCELLANEOUS
13.1 TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
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13.2 NOTICES.
Any notices or other communications to the Company or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by overnight courier, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company:
PLATINUM technology, inc.
1815 South Meyers Road
Oakbrook Terrace, Illinois 60181
Attention: Chief Financial Officer
Telecopy: (630) 691-0710
with a copy to General Counsel at (630) 691-0454
if to the Trustee:
American National Bank and Trust Company of Chicago
33 North LaSalle Street, 13th Floor
Chicago, IL 60690
Attention: Corporate Trust Division
Telecopy: (312) 661-6491
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; the next Business Day, if by
overnight courier; when receipt is acknowledged, if telecopied; and five
Business Days after mailing if sent by registered or certified mail, postage
prepaid (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee).
Any notice or communication mailed to a Security Holder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Security Holder or any
defect in it shall not affect its sufficiency with respect to other Security
Holders. If a notice or communication is mailed in the manner provided above, it
is duly given, whether or not the addressee receives it.
13.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Security Holders may communicate pursuant to TIA Section 312(b) with
other Security Holders with respect to their rights under this Indenture or the
Securities. The
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Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
13.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
13.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) A statement that, in opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with; PROVIDED,
HOWEVER, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
13.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Security Holders. The Paying Agent or Registrar may make reasonable rules for
its functions.
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13.7 LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in New York, New York are authorized or obligated by law or
executive order to close. If a payment date is a Legal Holiday at such place,
payment may be made at such place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
13.8 GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
SECURITY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
13.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
13.10 NO RECOURSE AGAINST OTHERS.
No direct or indirect partner, employee, stockholder, director or
officer, 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 Securities or this Indenture by reason of his, her or its
status as such partner, stockholder, employee, director or officer. Each
Securityholder by a Security waives and releases all such liability. Such waiver
and release are part of the consideration for the issuance of the Securities.
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13.11 SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
13.12 DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
13.13 SEVERABILITY.
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
13.14 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
13.15 QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA and shall pay
all costs and expenses (including attorneys' fees for the Company and the
Trustee) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of the Indenture and the Securities and printing
this Indenture and the Securities. The Trustee shall be entitled to receive from
the Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
PLATINUM technology, inc.,
a Delaware Corporation
By:__________________________________
Name:________________________________
Title:_______________________________
Attest:_____________________
Secretary
American National Bank and Trust
Company of Chicago,
a national banking association
as Trustee
By:
Name:___________________________________
Title:__________________________________
The undersigned hereby acknowledges its appointment as Registrar and
Paying Agent as set forth in Section 2.3.
First Chicago Trust Company of New York
By: __________________________________
Name:__________________________________
Title:_________________________________
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EXHIBIT A
[FORM OF SECURITY]
PLATINUM technology, inc.
__% CONVERTIBLE SUBORDINATED NOTE DUE 2001
No. CUSIP No.__________
$_____
PLATINUM technology, inc.., a Delaware corporation (hereinafter called the
"Company," which term includes any successors under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _____________, or
registered assigns, the principal sum of ____ Dollars, on _________ [ ],
2001.
Interest Payment Dates:[ ] and [ ]; commencing [ ], 1996.
Record Dates:
Reference is made to the further provisions of this Security on the reverse
side, which will, for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated:[ ], 1996
PLATINUM technology, inc.,
a Delaware Corporation
By:_______________________________
Name:_____________________________
Title:____________________________
Attest:_______________________
Secretary
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FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-mentioned Indenture.
________________________________________,
as Trustee
By:______________________________________
Authorized Signatory
Dated:
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<PAGE>
PLATINUM technology, inc.
__% CONVERTIBLE SUBORDINATED NOTE DUE 2001
This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Depositary or a
nominee thereof. Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the Company or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein./1/
1. INTEREST.
PLATINUM technology, inc., a Delaware corporation (hereinafter called
the "Company," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Security at the rate of [ ]% per annum. To the extent it is lawful, the
Company promises to pay interest on any interest payment due but unpaid on such
principal amount at a rate of [ ]% per annum compounded semi-annually.
The Company will pay interest semi-annually on [ ] and [ ] of each
year (each, an "Interest Payment Date"), commencing [ ], 1996. Interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid on the Securities, from [ ], 1996. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months.
2. METHOD OF PAYMENT.
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. Any such
interest not so punctually paid, and defaulted interest relating thereto, may be
paid to the Persons who are registered Holders at the close of business on a
Special Record Date for the payment of such defaulted interest, as more fully
provided in the Indenture referred to below. Except as provided below, the
Company shall pay principal and
- ---------------------
/1/ This paragraph should only be added if the Security is issued in global
form.
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interest in such coin or currency of the Untied States of America as at the time
of payment shall be legal tender for payment of public and private debts ("U.S.
Legal Tender"). The Securities will be payable as to principal, premium and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or at the option of the
Company, payment of principal, premium and interest may be made by check mailed
to the Holders at their addresses set forth in the registry of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of, premium and interest on Global Securities
and all other Securities the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent.
3. PAYING AGENT AND REGISTRAR.
Initially, First Chicago Trust Company of New York will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or Co-
Registrar without notice to the Holders. The Company or any of its Subsidiaries
may, subject to certain exceptions, act as Paying Agent, Registrar or Co-
Registrar.
4. INDENTURE.
The Company issued the Securities under an Indenture, dated as of
[__________] 1996 (the "Indenture"), between the Company and American National
Bank and Trust Company of Chicago, a national banking association (the
"Trustee"). Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are general
unsecured obligations of the Company limited in aggregate principal amount to
$85,000,000 ($97,750,000 if the Underwriters exercise their over-allotment
option in full).
5. REDEMPTION.
The Securities will not be subject to redemption prior to 1999. On or
after , 1999 the Securities will be redeemable at the option of the Company, in
whole or in part, at the following Redemption Prices (expressed as a percentage
of principal amount) set forth below with respect to the indicated Redemption
Date, in each case, plus any accrued but unpaid interest to the Redemption Date.
The Securities may not be so redeemed prior to [ ], 1999.
IF REDEEMED DURING
THE 12-MONTH PERIOD
BEGINNING REDEMPTION PRICE
____ [ ]
____ [ ]
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Any such redemption will comply with Article 3 of the Indenture.
The Securities will not be subject to any sinking fund.
6. NOTICE OF REDEMPTION.
Notice of Redemption will be sent by first class mail, at least 30
days and not more than 60 days prior to the Redemption Date to the Holder of
each Security to be redeemed at such Holder's last address as then shown upon
the registry books of the Registrar. Securities may be redeemed in part in
multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent on such Redemption Date and payment of
the Securities called for redemption is not prohibited under Article 11 of the
Indenture, the Securities called for redemption will cease to bear interest and
the only right of the Holders of such Securities will be to receive payment of
the Redemption Price, plus any accrued and unpaid interest to the Redemption
Date.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiplies of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar 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 Registrar need not register the transfer
of or exchange any Securities selected for redemption.
8. PERSONS DEEMED OWNERS.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company at its written request. After that, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
10. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented, and any existing Default or Event of Default or
compliance with any provision may be waived, with the written consent of the
Holders of a majority in aggregate principal amount of the Securities then
outstanding. Without notice to or consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Securities to, among other things,
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cure any ambiguity, defect or inconsistency, or make any other change that does
not adversely affect the rights of any Holder of a Security.
11. CONVERSION RIGHTS.
Subject to the provisions of the Indenture, the Holders have the right
to convert the principal amount of the Securities into fully paid and
nonassessable shares of Common Stock of the Company at the initial conversion
price per share of Common Stock of $[ ] (or $[ ] in principal amount of
Securities for each such share of Common Stock), or at the adjusted conversion
price then in effect, if adjustment has been made as provided in the Indenture,
upon surrender of the Securities to the Company, together with a fully executed
notice in substantially the form attached hereto and, if required by the
Indenture, an amount equal to accrued interest payable on such Security.
12. RANKING.
Payment of principal, premium, if any, and interest on the Securities
is subordinated, in the manner and to the extent set forth in the Indenture, to
the prior payment in full of all Senior Indebtedness.
13. REPURCHASE AT OPTION OF HOLDER UPON A CHANGE OF CONTROL.
If there is a Change of Control, the Company shall be required to
offer to purchase on the Repurchase Date all outstanding Securities at a
purchase price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the Repurchase Date. Holders of Securities will
receive a Repurchase Offer from the Company prior to any related Repurchase Date
and may elect to have such Securities purchased by completing the form entitled
"Option of Holder to Elect Purchase" appearing below.
14. SUCCESSORS.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
15. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing (other than an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization),
then in every such case, unless the principal of all of the securities shall
have already become due and payable, either the Trustee or the Holders of 25% in
aggregate principal amount of Securities then outstanding may declare all the
Securities to be due and payable immediately in the manner and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the Securities then outstanding may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Securities
notice of
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any continuing Default or Event of Default (except a Default in payment of
principal or interest), if it determines that withholding notice is in their
interest.
16. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS.
No stockholder, director, officer or employee, 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 Securities or
the Indenture by reason of his, her or its status as such stockholder, director,
officer or employee. Each Holder of a Security by accepting a Security waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
18. AUTHENTICATION.
The Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
19. ABBREVIATIONS AND DEFINED TERMS.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
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<PAGE>
FORM OF ASSIGNMENT
I or we assign this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee__________
and irrevocably appoint _________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Date: Signature:
--------------------- --------------------------------------
(Sign exactly as name appears on the
other side of this Security)
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Article 10 of the Indenture, check the box: [_]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Article 10 of the Indenture, state the amount you want
to be purchased: $________
Date: Signature:
-------------------- ----------------------------------
(Sign exactly as your name appears
on the other side of this
Security)
A-9
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES (2)
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
=============================================================================================================
Amount of Amount of Principal Amount
decrease in Increase in of this Global
Principal Amount Principal Security following Signature of authorized
Date of of this Global Amount of this such decrease (or of Trustee or Securities
Exchange Security Global Security increase) Custodian
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
=============================================================================================================
</TABLE>
- --------------
(2) This schedule should only be added if the Security is issued in global
form.
A-10
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER OF SECURITIES
RE: _____% CONVERTIBLE SUBORDINATED NOTES DUE 2001 OF PLATINUM technology,
inc.
This Certificate relates to $______, principal amount of Securities held in
*______ book-entry or _____ definitive form by ____________________ (the
"Transferor").
The Transferor:*
[ ] (a) has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depositary a Security
or Securities in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Security (or the portion thereof indicated above); or
[ ] (b) has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
-----------------------------------------
[insert name of transferor]
By:
-------------------------------------
Date:
--------------------------
*Check applicable box or blank.
2. Affiliation with the Company [check if applicable]
[ ] (a) The undersigned represents and warrants that it is, or at some time
during which it held this Security was, an Affiliate of the Company
(b) If 2(a) above is checked AND if the undersigned was not an Affiliate
of the Company at all times during which it held this Security,
indicate the periods during which the undersigned was an affiliate of
the Company:
______________________________________________________________________
A-11
<PAGE>
(c) If 2(a) above is checked AND if the Transferee will not pay the full
purchase price for the transfer of this Security on or prior to the
date of transfer indicate when such purchase price will be paid:
______________________________________________________________________
If any of the above representations required to be made by the Transferor is
not made, the Registrar shall not be obligated to register this Security in the
name of any person other than the Holder hereof.
DATED: ____________________________ _________________________________________
NOTICE: The signature of the Holder to
this assignment must correspond with the
name as written upon the face of this
particular Security without alteration or
enlargement or any change whatsoever.
A-12
<PAGE>
EXHIBIT B
FORM OF CONVERSION NOTICE
To: PLATINUM technology, inc.
The undersigned owner of this Security hereby: (i) irrevocably exercises
the option to convert this Security, or the portion hereof below designated,
for shares of Common Stock of PLATINUM technology, inc. in accordance with the
terms of this Indenture referred to in this Security and (ii) directs that such
shares of Common Stock deliverable upon the conversion, together with any check
in payment for fractional shares and any Security(ies) representing any
unconverted principal amount hereof, be issued and delivered to the registered
holder hereof unless a different name has been indicated below. If shares are
to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto. Any
amount required to be paid by the undersigned on account of interest
accompanies this Security.
Dated: _______________________
_________________________________________
(Signature)
Provide information below for registration of shares of Common Stock if to
be issued, and of Securities if to be issued other than in the name of the
registered holder.
______________________________________________
(Name)
______________________________________________
(Street Address)
______________________________________________
City, State and Zip Code)
(Please print name and address)
______________________________________________
(Social Security or other Taxpayer Identifying
Number)
Principal Amount to be converted: (in an
integral multiple of $1000, if less than
all)
$________________________________________
A-13
<PAGE>
EXHIBIT 12
PLATINUM technology, inc.
Ratio of Earnings to Fixed Charges
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
---------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
- ---------
Earnings (loss) before income taxes $(3,158) $2,870 $5,393 $ 829 $(123,881) $(56,065) $(50,516)
Add:
Interest on Debt 366 389 435 275 745 559 657
------- ------ ------ ------ --------- -------- --------
Earnings $(2,792) $3,259 $5,828 $1,104 $(123,136) $(55,506) $(49,859)
------- ------ ------ ------ --------- -------- --------
Fixed Charges:
- --------------
Interest on Debt $ 366 $ 389 $ 435 $ 275 $ 745 $ 559 $ 657
Fixed Charges $ 366 $ 389 $ 435 $ 275 $ 745 $ 559 $ 657
------- ------ ------ ------ --------- -------- --------
Ratio of Earnings to Fixed Charges (7.63)(1) 8.38 13.40 4.01 (165.28)(1) (99.30)(1) (75.89)(1)
======= ====== ====== ====== ========= ======== ========
</TABLE>
(1) 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.
<PAGE>
EXHIBIT 15
ACKNOWLEDGMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
REGARDING INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors
PLATINUM technology, inc.:
With respect to the registration statement on Form S-3 of PLATINUM technology,
inc., we acknowledge our awareness of the incorporation by reference of our
reports dated May 14, 1996, August 13, 1996, and October 30, 1996 related to our
reviews of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such reports are not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
KPMG Peat Marwick LLP
Chicago, Illinois
October 30, 1996
<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 23.2
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the use in this Registration Statement of PLATINUM technology,
inc. on Form S-3 of our report dated April 28, 1995 (relating to the
consolidated financial statements of Trinzic Corporation not separately
presented herein) and to the incorporation by reference in this Registration
Statement of our report dated April 28, 1995 (relating to the consolidated
financial statements of Trinzic Corporation) appearing in the Annual Report on
Form 10-K of PLATINUM technology, inc. for the year ended December 31, 1995.
We also consent to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
San Jose, California
October 30, 1996
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333- ) and related Prospectus of
PLATINUM technology, inc. for the registration of $85,000,000 of Convertible
Subordinated Notes due 2001 and to the use of our report dated September 2,
1994, included in PLATINUM technology, inc.'s Annual Report on Form 10-K for the
year ended December 31, 1995, with respect to the consolidated statements of
income, stockholders' equity, and cash flows of Altai, Inc. for the years ended
July 31, 1994, and 1993, which financial statements are not separately presented
in PLATINUM technology, inc.'s Annual Report on Form 10-K.
/s/ Ernst & Young LLP
Fort Worth, Texas
October 30, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
PLATINUM technology, inc. on Form S-3 of our report dated August 26, 1994, on
our audit of the financial statements of Answer Systems, Inc. for the year ended
June 30, 1994, appearing in the 1995 Annual Report on Form 10K. We also consent
to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
San Jose, California
October 30, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports for Locus Computing
Corporation dated March 20, 1995 included in PLATINUM technology, inc.'s Form
10-K for the year ended December 31, 1995.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
October 30, 1996
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports for Softool Corporation
dated September 29, 1995 included in PLATINUM technology, inc.'s Form 10-K for
the year ended December 31, 1995.
/s/ ARTHUR ANDERSEN LLP
Los Angeles, California
October 30, 1996
<PAGE>
Exhibit 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 (No. 33-_______)
of our report dated March 20, 1995 relating to the financial statements of
RELTECH Group Inc., which appear in the Current Report on Form 8-K, and
amendments thereto, dated March 31, 1995 of PLATINUM technology, inc. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Washington, D.C.
October 31, 1996
<PAGE>
EXHIBIT 23.8
INDEPENDENT AUDITOR'S CONSENT
We consent to incorporation by reference in the registration statement on
Form S-3 of PLATINUM technology, inc. of our report dated January 12, 1996, with
respect to the balance sheets of ProtoSoft, Inc. as of December 31, 1994 and
1993, and the related statements of operations, stockholders' equity, and cash
flow for the year ended December 31, 1994, the ten months ended December 31,
1993, and the year ended February 28, 1993, which report appears in Form 8-K of
PLATINUM technology, inc. dated November 17, 1995, as amended, and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
October 30, 1996
<PAGE>
EXHIBIT 23.9
INDEPENDENT AUDITOR'S CONSENT
We consent to incorporation by reference in the registration statement on
Form S-3 of PLATINUM technology, inc. of our report dated March 20, 1996, with
respect to the balance sheets of Prodea Software Corporation as of December 31,
1995 and 1994, and the related statements of operations, stockholders' equity,
and cash flows for the years then ended which report appears in the Form 8-K of
PLATINUM technology, inc. dated February 8, 1996, as amended, and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Minneapolis, Minnesota
October 30, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 SEP-30-1996
<CASH> 111,847 50,542
<SECURITIES> 20,928 5,966
<RECEIVABLES> 118,571 120,875
<ALLOWANCES> 2,695 2,245
<INVENTORY> 0 0
<CURRENT-ASSETS> 252,483 189,181
<PP&E> 79,291 105,479
<DEPRECIATION> 28,287 38,953
<TOTAL-ASSETS> 438,188 414,584
<CURRENT-LIABILITIES> 125,804 107,123
<BONDS> 0 0
<COMMON> 53 56
0 0
0 0
<OTHER-SE> 288,399 262,955
<TOTAL-LIABILITY-AND-EQUITY> 438,188 414,584
<SALES> 0 0
<TOTAL-REVENUES> 304,676 296,386
<CGS> 0 0
<TOTAL-COSTS> 432,838 349,468
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 745 657
<INCOME-PRETAX> (123,881) (50,516)
<INCOME-TAX> (11,948) (12,528)
<INCOME-CONTINUING> (111,933) (37,988)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (111,933) (37,988)
<EPS-PRIMARY> (2.59) (0.69)
<EPS-DILUTED> (2.59) (0.69)
</TABLE>
