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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
COMMISSION FILE NUMBER 0-19058
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PLATINUM TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3509662
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1815 SOUTH MEYERS ROAD, OAKBROOK TERRACE, ILLINOIS 60181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
Registrant's telephone number, including area code: (630) 620-5000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
6 3/4% Convertible Subordinated Notes due 2001
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 25, 1997, the aggregate market value of the registrant's voting
stock held by non-affiliates of the registrant (based upon the per share
closing sale price of $11 7/8 on March 25, 1997, and for the purpose of this
calculation only, the assumption that the registrant's directors and executive
officers are affiliates) was approximately $702,724,096.
The number of shares outstanding of the registrant's Common Stock, par value
$.001, as of March 25, 1997 was 61,351,286.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement in connection with its
1997 Annual Meetingof Stockholders are incorporated by reference into Part III
hereof.
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PART I
ITEM 1. BUSINESS
The discussion below contains certain forward-looking statements (as such
term is defined in the rules promulgated pursuant to the Securities Exchange
Act of 1934) that are based on the beliefs of the management of PLATINUM
technology, inc. and its subsidiaries (collectively, the "Company" or
"PLATINUM"), as well as assumptions made by, and information currently
available to, the Company's management. The Company's actual growth, results,
performance and business prospects and opportunities in 1997 and beyond could
differ materially from those expressed in, or implied by, any such forward-
looking statements. See "Safe Harbor Provision" on page 23 for a discussion of
risks and uncertainties that could cause or contribute to such material
differences.
The Company develops, markets and supports software products, and provides
related professional services, that help chief information officers ("CIOs")
better manage their software infrastructures. The Company's products and
services increase the performance and interoperability of computing systems
and databases and provide users, primarily in large and data intensive
organizations, with more reliable and productive access to and use of critical
information. The Company's products typically perform fundamental functions
and mission-critical automation, such as maintenance of data integrity,
systems security, systems scheduling, project and process management, and end-
user specific analysis and reporting. The Company develops software products
under six business units: database management, systems management, application
lifecycle, data warehouse, business intelligence and applications solutions.
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 software infrastructure
solutions by offering a comprehensive set of "best of breed" point products,
product bundles and integrated product suites. The Company also offers a wide
array of professional services, including consulting, systems integration and
educational programs, often in conjunction with software product sales.
To achieve its goal, the Company identified key technologies and skill sets
to better manage corporate software infrastructure. Through a combination of
an aggressive acquisition program and vigorous internal product development
efforts, the Company has assembled the competencies to create complete
infrastructure management solutions. Since mid-1994, the Company has acquired
37 businesses and 24 technologies. The Company is now leveraging the breadth
of its product lines and its professional service capabilities, and is
devoting substantial resources to integrating its products and technologies,
to provide complete, customized solutions for software infrastructure
problems. These solutions include single products; product suites, which are
sets of closely integrated products from multiple business units; and product
bundles, which are sets of software applications that are packaged together
but do not necessarily have the level of integration that defines a suite; as
well as 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 from the Company's customers for
comprehensive solutions, the Company executed 47 transactions of over $1
million during 1996, as compared to only two such transactions during 1995.
Since the beginning of 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 lines. The Company also is 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 internally developed
integration tool set and method 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, during 1996, the Company released PLATINUM RiskAdvisor, a data
warehouse decision support application developed specifically for the
insurance industry. The Company has also released its "Necessities" product
suite for building, testing and deploying intranet applications, and has
developed a comprehensive solution for the Year 2000 problem. In
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addition, the Company intends to use a number of its current products and
technologies as the foundation for a new, integrated product offering designed
to enable companies to simultaneously manage, maintain and deploy multiple Web
sites.
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 systems environments. These modern
computing environments frequently service multiple end-users spread across
numerous locations. These environments are heterogeneous and consist of
various computing applications, platforms (including mainframes,
minicomputers, workstations and desktop PCs/LANs), relational database
management systems ("RDBMS"), operating systems (including UNIX, Windows,
Windows NT, OS/400, OS/2, MVS and VMS) and media, including intranets, the
Internet and/or the Web. These open environments are also dynamic; users, as
well as hardware and software resources, are frequently added, removed or
changed and new, mission-critical applications are continually being developed
and deployed.
The Internet, a global web linking thousands of computer networks, has
emerged as an important medium for communications in these complex IT
environments. Much of the recent growth in the use of the Internet is
attributable to the rapid expansion of the network of graphical servers and
information known as the Web. As organizations become familiar with the Web,
they are increasingly using Internet data formats and communications
protocols, Web client and server software and, in some cases, the Internet's
communication facilities as the backbone for private networks ("intranets")
that connect these organizations' various local area networks.
While open computing environments can provide greater functionality than
host-based systems as well as price-performance advantages, organizations have
found that administration tools and utilities of traditional mainframe systems
are unable to address the complex requirements of these environments. As a
result, a market need has arisen for comprehensive, user-friendly, high-
performance and cost-effective infrastructure solutions that offer the
functionality traditionally associated with mainframe solutions, but are
designed for open systems environments. The Company believes that, due to the
complexities of these new computing environments, CIOs 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.
PRODUCTS
The Company provides software tools and technologies that help organizations
efficiently operate and manage their complex software infrastructure and
related environments, 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.
The Company now offers over 140 robust and adaptable point products through
six business units:
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 application 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, auditing of
internal structures, as well as a DB2 page editor.
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. 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.
. TS Reorg--a powerful tablespace reorganization tool for Oracle, Informix
and Sybase databases of any size. TS Reorg delivers fast reorganizations
of entire tablespaces, individual tables and indexes. It also provides
efficient fragmentation of used and free space and automatic data
partitioning. TS Reorg can run on UNIX, VMS or Windows NT-based server
systems.
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 enterprise-wide applications
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 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 which 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 scalable, 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.
. AutoSecure--a tool that provides mainframe-caliber security for UNIX
hosts, which makes administration consistent across UNIX platforms. It
protects LOGINs to the system, password quality, execution of privileged
programs, file access, user ID substitutions and network connections.
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
strategies 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.
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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:
. 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.
. 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.
Business Intelligence Products--The Company offers an integrated tool set
that enables organizations to better leverage their corporate data
investments. These products allow 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.
Applications Solutions Products--The Company also provides decision support
warehouses to suit the needs of specific industries. These prepackaged
solutions contain a data warehouse structure designed for optimal query
performance, combined with a decision support system that provides users with
timely access to value-added information. Applications are available now for
the insurance industry as well as sales and marketing support functions. The
Company expects to offer additional applications in 1997. The following is a
description of the Company's insurance industry applications solution:
. RiskAdvisor--this product suite, which provides a comprehensive strategic
solution for analyzing large amounts of stored business data, was
designed specifically for the insurance industry. It provides multiple
analytical facilities, all keyed to insurance business indicators. This
allows companies to proactively manage their businesses by identifying
loss activity trends, reducing operating costs in policy issuance and
claims control and understanding claim caseload activity.
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In the past, businesses licensed products on a stand-alone basis to address
each of their 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' software 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 software infrastructure problems that
are shared by businesses from various industries, as well as product suites
that target software 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.
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 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 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
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
internally developing new software products and product enhancements,
acquiring products, technologies and businesses complementary to the Company's
existing product lines 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 1996, 1995 and 1994, product development and support expenses of
the Company were $160,379,000, $94,027,000 and $51,781,000, respectively. As
of March 25, 1997, the Company employed approximately 1,665 persons in product
development and support.
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Internal Development--The Company will continue to rely on the internal
development of products for expansion of 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 34 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
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 products. In addition to providing the Company
with new products and technologies, these acquisitions have provided the
Company with experienced teams of product developers who now staff the
Company's independent development laboratories. The Company plans to continue
to pursue acquisition opportunities because it believes that acquisitions are
an essential part of the Company's strategy to compete effectively in its
rapidly evolving marketplace.
Technology Relationships--To reinforce its commitment to providing solutions
for CIOs' software infrastructures, the Company has implemented its PLATINUM
Partner Program, whereby the Company has established strategic and technology
relationships with several hardware, software and database vendors. The Company
believes that in order to provide solutions for heterogeneous computing
environments, it will need to continue to establish and maintain key
relationships with leading technology companies, such as IBM/Tivoli, Hewlett-
Packard, Oracle, Sybase, Informix and Microsoft. These technical and marketing
alliances provide the Company early access to product information and pre-
release software.
PROFESSIONAL SERVICES
As part of its strategy to provide complete solutions for CIOs, the Company
offers a range of professional services, including consulting services and
educational programs. These services help businesses 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. As of March 25, 1997, the Company employed approximately 750
persons in professional services.
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
systems 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.
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These courses cover several key technology areas of software infrastructure
management 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.
Domestic (U.S.) Software Sales--Since January 1, 1997, the Company has
organized its domestic direct sales force by regions throughout the United
States. The Company formerly combined the domestic and Canadian sales forces
to represent the North American sales force. The Canadian sales team is now
part of the Company's international sales force. To support the rapid
expansion of its product line, the Company, during 1996 and 1995, accelerated
its sales force hiring and training process. The Company currently has
approximately 350 individuals in its domestic direct sales force.
Generally, for domestic 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
its telemarketing organization and shipment of such products under shrink-wrap
or other license. The Company employs sophisticated call center technology for
the Company's telemarketers and 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 domestically,
utilizing an international direct sales force of approximately 200
individuals. As of March 25, 1997, 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 now designates certain 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.
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TECHNICAL SUPPORT AND MAINTENANCE
The Company's in-house technical support group, located at various sites
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, and will continue to be, a
substantial factor in customer satisfaction.
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 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. Maintenance
revenue implicit in new product sales and recurring maintenance charges are
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 as
it has moved from the relational database tool market to the much larger
software infrastructure products market and as it has entered the consulting
services business. The Company has also experienced many new competitors,
including 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. 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 and acquiring software infrastructure products and
technologies and 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 in the professional services business 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 are becoming increasingly important to the software
industry. Consequently, the Company is taking actions to further protect its
proprietary rights through software patents. The Company's
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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 March 25, 1997, the Company employed approximately 4,070 persons,
including 1,345 in sales, marketing and related activities, 1,665 in product
development and support, 750 in professional services and 310 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.
ITEM 2. PROPERTIES
The Company's principal administrative, marketing, training, and product
development and support facilities are located in Oakbrook Terrace, Illinois,
where the Company leases approximately 322,000 square feet under leases
terminating in December 2002, with plans to lease additional space in the near
future. The Company has recently leased an additional approximately 164,000
square feet of administrative, marketing, sales and product development space
in Lisle, Illinois, near the Company's headquarters, under leases terminating
in January and October 2003. In addition, the Company leases space for
approximately 100 sales offices and product development laboratories throughout
the United States and Canada, ranging in size from approximately 1,000 to
45,000 square feet. The Company plans to expand certain of these facilities and
believes that its existing space and planned expansions will be adequate to
meet its needs during 1997. The Company anticipates seeking additional space in
the future to accommodate its growth.
ITEM 3. LEGAL PROCEEDINGS
Computer Associates' International, Inc., and L'Agence pour la Protection des
Programmes v. La Societe Faster, S.A.R.L. (Commercial Court of Bobigny, Paris,
France).
Altai, Inc., a wholly-owned subsidiary of the Company ("Altai"), is involved
in a suit in France which concerns copyright infringement claims identical to
those on which Altai previously prevailed against Computer Associates
International, Inc. ("CA") in the U.S. The French appellate court granted
Altai's request that the U.S. appellate courts copyright ruling should bind the
Commercial Court of Bobigny as a matter of law. In January 1995, the French
appellate court issued a decision rejecting CA's claim of copyright
infringement. CA's subsequent appeal is still pending as well as motions from
Altai that the U.S. court decisions are binding with respect to the French
case.
10
<PAGE>
BeaconWare v. Reltech Group, Inc., PLATINUM technology, inc. and Software
Interfaces, Inc.
BeaconWare, a Maine software developer, sued in the Maine Superior Court the
Company, Reltech Group, Inc. ("Reltech") and Software Interfaces, Inc.
("SII"), two wholly-owned subsidiaries, seeking compensatory and punitive
damages and equitable relief, on tort and contract theories, with respect to
Reltech's alleged failure to market SQLPro, a BeaconWare query tool. On
November 6, 1996, BeaconWare and the defendants settled the action and
dismissed the proceeding. The defendants paid to BeaconWare an amount which
the Company considers immaterial.
The Company is also subject to certain other legal proceedings and claims
which have arisen in the ordinary course of business and which have not been
fully adjudicated. Management currently believes the ultimate outcome of such
matters and those described above will not have a material adverse effect on
the Company's results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.001 par value (the "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, 1995:
First Quarter.......................................... $25 $19
Second Quarter......................................... 20 1/4 15
Third Quarter.......................................... 25 1/4 18 1/8
Fourth Quarter......................................... 20 5/8 14 1/2
Year Ended December 31, 1996:
First Quarter.......................................... $18 3/8 $11 7/8
Second Quarter......................................... 18 3/16 12 7/8
Third Quarter.......................................... 15 1/4 9 3/4
Fourth Quarter......................................... 14 3/4 11
</TABLE>
As of March 25, 1997, the Company's stock was held by approximately 1,138
holders of record.
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.
On December 13, 1996, the Company acquired all of the outstanding capital
stock of VREAM, Inc. ("VREAM") from the shareholders of VREAM, in exchange for
760,383 shares of Common Stock. The shares of Common Stock were issued in
reliance upon the exemption from registration provided by Section 4(2) of the
Securities Act of 1933. There were no underwriters or other distributors.
The Company did not sell any other unregistered securities during the fourth
quarter of 1996.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected consolidated financial data set forth below have been derived
from the historical financial statements of the Company. The selected
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes thereto contained
elsewhere herein.
<TABLE>
<CAPTION>
1996 1995(1) 1994(1) 1993(1) 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Total revenues........ $439,190 $304,676 $225,439 $175,380 $141,964
Operating income
(loss)............... (82,493)(2) (128,162)(3) (2,223)(4) 3,336(5) 3,012 (6)
Net income (loss)..... (67,962)(2) (111,933)(3) (2,644)(4) 625(5) (2,433)(6)
Net income (loss) per
share................ (1.22)(2) (2.59)(3) (0.07)(4) 0.02(5) (0.06)(6)
Shares used in per
share calculation.... 55,564 43,267 39,890 37,971 35,507
BALANCE SHEET DATA
Cash, cash equivalents
and investments...... $181,822 $132,775 $124,563 $ 69,554 $ 60,054
Working capital....... 209,621 126,679 89,651 43,607 40,530
Total assets.......... 609,512 438,188 262,760 169,882 136,307
Long-term obligations
and acquisition-
related payables,
less current portion. 118,302 11,342 9,075 3,416 181
Total stockholders'
equity............... 291,201 288,452 158,837 92,944 82,963
</TABLE>
- --------
(1) The selected consolidated financial data give 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 under the pooling-of-interests method 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.
(2) Reflects a pre-tax charge for acquired in-process technology of
$48,456,000 relating to the Company's acquisitions of the outstanding
capital stock of Advanced Systems Technologies, Inc. ("AST"), Software
Alternatives, Inc. (d/b/a System Software Alternatives) ("Software
Alternatives"), Grateful Data, Inc. (d/b/a TransCentury Data Systems)
("Grateful Data") and VREAM, Inc. ("VREAM"); substantially all of the
assets of the Access Manager business unit of the High Performance Systems
division of International Computers Limited ("Access Manager"); and
certain product technologies. Also reflects a pre-tax charge for merger
costs of $5,782,000 relating primarily to the Company's acquisitions of
Prodea, Paradigm and Axis.
(3) Reflects a pre-tax charge for acquired in-process technology of
$88,493,000 relating to the Company's acquisitions of the outstanding
capital stock of SQL Software Corporation ("SQL"), Reltech, Advanced
Software Concepts, Inc. ("ASC"), AIB Software Corporation ("AIB"),
Protellicess Software, Inc. ("Protellicess") and BMS Computer, Inc.
("BMS"); the net assets of ViaTech Development, Inc. ("ViaTech"),
BrownStone Solutions, Inc. ("BrownStone") and ProtoSoft, Inc.
("ProtoSoft"); and certain product technologies. Also reflects a pre-tax
charge for merger costs of $30,819,000 relating to the Company's
acquisitions of SII, Answer Systems, Inc. ("Answer"), Locus Computing
Corporation ("Locus"), Altai, Trinzic Corporation ("Trinzic") and Softool
Corporation ("Softool").
(4) Reflects a pre-tax charge for acquired in-process technology of
$24,594,000 relating to the Company's acquisitions of the outstanding
capital stock of Dimeric Development, Inc. ("Dimeric") and the net assets
of Aston Brooke Corporation ("Aston Brooke") and AutoSystems Corporation
("AutoSystems").
(5) Reflects a pre-tax charge for acquired in-process technology of $8,735,000
relating to the Company's acquisition of the outstanding capital stock of
Datura Corporation ("Datura") and a pre-tax charge of $4,659,000 relating
to Trinzic and Locus restructuring costs.
(6) Reflects a pre-tax charge of $7,873,000 relating to Trinzic restructuring
costs.
13
<PAGE>
ITEM 7. 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 Exchange
Act of 1934) 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 growth, results, performance and
business prospects and opportunities in 1997 and beyond could differ
materially from those expressed in, or implied by, any such forward-looking
statements. See "Safe Harbor Provision" on page 23 for a discussion of risks
and uncertainties that could cause or contribute to such material differences.
GENERAL
The Company develops, markets and supports software products, and provides
related professional services, that help CIOs better manage their software
infrastructures. The Company's products and services increase the performance
and interoperability of computing systems and databases and provide users,
primarily in large and data intensive organizations, with more reliable 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 combinations, including acquisitions of SII, Answer, Locus, Altai,
Trinzic, Softool, 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.
Information regarding the Company in this Management's Discussion and Analysis
of Financial Condition and Results of Operations gives retroactive effect to
these acquisitions. See note 2 of the notes to the Company's consolidated
financial statements, included in this Form 10-K, for a more detailed
discussion of these acquisitions.
RESULTS OF OPERATIONS
The following table sets forth for the years indicated (1) each line item
from the statement of operations expressed as a percentage of revenues, and
(2) the percentage change in each line item from the prior year.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL REVENUES
YEARS ENDED YEAR-TO-YEAR
DECEMBER 31, PERCENTAGE CHANGE
------------------ ---------------------------
1996 COMPARED 1996 COMPARED
1996 1995 1994 TO 1995 TO 1995
---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software products.............. 56% 52% 51% 54% 39%
Maintenance.................... 23 25 26 34 30
Professional services.......... 21 23 23 34 32
--- --- ---
Total revenues............... 100 100 100 44 35
--- --- ---
Costs and expenses:
Professional services.......... 19 19 19 37 41
Product development and
support....................... 37 31 23 71 82
Sales and marketing............ 42 39 34 57 55
General and administrative..... 9 14 14 (5) 27
Merger costs................... 1 10 -- (81) *
Acquired in-process technology. 11 29 11 (45) 260
--- --- ---
Total costs and expenses..... 119 142 101 21 90
--- --- ---
Operating loss................... (19) (42) (1) * *
Other income..................... 1 1 1 20 40
--- --- ---
Income (loss) before income
taxes........................... (18) (41) -- * *
Income taxes..................... (3) (4) 1 * *
--- --- ---
Net loss......................... (15)% (37)% (1)% * *
=== === ===
</TABLE>
- --------
*Not meaningful.
14
<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 educational programs. Total
revenues from all sources for 1996 were $439,190,000, an increase of
$134,514,000, or 44%, over 1995 total revenues of $304,676,000. Total revenues
for fiscal 1995 increased $79,237,000, or 35%, over 1994 total revenues of
$225,439,000.
Revenues from customers in North America (U.S. and Canada) represented 76%,
76% and 82% of the Company's total revenues in 1996, 1995 and 1994,
respectively. Revenues from international customers (non-North American)
represented 24%, 24% and 18% of the Company's total revenues in 1996, 1995 and
1994, respectively. The increased proportion of international revenues to
total revenues in 1996 and 1995 as compared to 1994 was the result of the
significant investment in the global marketplace. The Company's North American
and international revenues both grew 44% in 1996 as compared to 1995. As a
result, the proportion of international to worldwide revenues remained
constant between years. The Company anticipates that its international
business will continue to experience solid growth as the international sales
force gains tenure. International revenues are now generated almost entirely
by the Company's international subsidiaries. For 1996, approximately 4% of the
Company's international revenues were provided by the Company's international
affiliates, which are independent distributorships through which the Company
previously generated a substantial portion of its international product
revenues.
Software Products. Software products revenues represented 56%, 52% and 51%
of total revenues in 1996, 1995 and 1994, respectively. In 1996, software
products revenues increased 54% to $243,938,000 over 1995 as a result of
increases of 64%, 50%, 66%, 20% and 63%, respectively, experienced by the
Company's database management, systems management, application lifecycle, data
warehouse and business intelligence business units. From 1994 to 1995,
software products revenues increased 39% from $113,749,000 to $158,597,000.
The Company believes the growth in software products revenues over the past
three years has resulted from the continued marketplace acceptance of the
Company's products across all business units and the Company's aggressive
expansion of its sales and marketing efforts, as well as new product
offerings. During 1996, the Company expanded its customer base, increased
sales of integrated product suites and executed larger sales transactions. The
Company's database management, systems management, application lifecycle, data
warehouse and business intelligence business units represented 40%, 29%, 11%,
10% and 10%, respectively, of total software products revenues in 1996; 38%,
29%, 11%, 13% and 9%, respectively, of total software products revenues in
1995; and 47%, 24%, 12%, 6% and 11%, respectively, of total software products
revenues in 1994.
Near the end of 1996, the Company established a new business unit,
applications solutions, which provides data warehouse structures tailored to
fulfill the decision support requirements of specific industries. Revenues
derived from this business unit during 1996 were minimal. The Company
anticipates this new business unit will incur substantial growth during 1997
as its products are launched into the marketplace.
Maintenance. Maintenance revenues in 1996 increased 34% over 1995 to
$102,364,000, and 1995 maintenance revenues of $76,498,000 represented an
increase of 30% over 1994 maintenance revenues of $58,837,000. Maintenance
revenues are derived from recurring fees charged to perpetual license
customers and the implicit first year maintenance fees bundled in certain
software product sales. The Company provides maintenance customers with
technical support and product enhancements. Maintenance revenues are deferred
and recognized ratably over the term of the agreement. The increases during
1996 and 1995 were primarily attributable to the expansion of the Company's
installed customer base, from which maintenance fees are derived. Maintenance
fees implicit in certain new software product sales also contributed to the
increase. Management believes that maintenance revenues should continue to
increase as the installed base of the Company's software products increases
and matures.
Professional Services. Professional services revenues are associated with
the Company's consulting services business and educational programs. In 1996,
professional services revenues increased 34% over 1995 to
15
<PAGE>
$92,888,000. From 1994 to 1995, professional services revenues increased 32%
from $52,853,000 to $69,581,000. The increases in professional services
revenues during 1996 and 1995 were primarily due to the addition of
established consulting practices through various acquisitions during these
years, as well as the growth experienced within these acquired businesses. The
Company expects its professional services business to continue to grow as it
focuses on offering consulting, systems integration and educational programs
as part of, and in conjunction with, its comprehensive software infrastructure
management solutions.
COSTS AND EXPENSES
Total expenses for 1996 were $521,683,000, an increase of 21% over 1995
expenses of $432,838,000, which increased 90% over 1994 expenses of
$227,662,000. Total expenses for 1996, excluding merger costs and acquired in-
process technology charges, were $467,445,000, an increase of $153,919,000, or
49%, compared to $313,526,000 for 1995. Total expenses for 1995, excluding
merger costs and acquired in-process technology charges, increased 54% as
compared to 1994 total expenses, excluding acquired in-process technology
charges, of $203,068,000. During 1996 and 1995, 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 expansion of the inside and outside sales forces; hiring of product
developers and support technicians plus key management personnel; training all
personnel in software infrastructure systems issues and new products;
providing additional financial and technical support to the international
subsidiaries established in recent years; translating product materials into
numerous foreign languages; 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. Costs of professional services increased to
$82,657,000 in 1996 from $60,341,000 in 1995 and $42,858,000 in 1994. Costs of
professional services as a percentage of professional services revenue were
89%, 87% and 81% in 1996, 1995 and 1994, respectively. The increases in these
expenses during 1996 and 1995 were related to salaries and other direct
employment expenses as a result of the Company's continued hiring to support
this business, the increased use of external consultants and the addition of
established consulting practices through various acquisitions. The Company
anticipates professional services expenses will decrease as a percentage of
professional services revenue as the productivity of the professional services
workforce increases.
Product Development and Support. Product development and support expenses
increased to $160,379,000 in 1996, from $94,027,000 in 1995 and $51,781,000 in
1994. Product development and support expenses as a percentage of total
revenues were 37%, 31% and 23% in 1996, 1995 and 1994, respectively. The
increases in these expenses in 1996 and 1995 were primarily attributable to
the hiring of additional product developers, in-house as well as field
technical support personnel and technical writers; increased allocated charges
for office space and overhead; and increased hardware and software costs
related to the product development effort. In addition, the Company's
expansion of its product line, growing customer base and focus on the global
marketplace resulted in higher travel expenses and increased product
documentation costs during 1996 and 1995. Higher bonus and royalty expenses
associated with increased software product revenues in 1996 and 1995 also
contributed to the increase in product development and support expenses.
The Company has devoted substantial resources to the development and
integration of its products and technologies to provide complete, customized
management solutions for software infrastructure problems. As a result,
through the second quarter of 1996, the Company hired a significant number of
product development and support personnel. The Company believes that these
actions were required in order to strengthen its competitive position in the
software infrastructure marketplace, enhance existing products and
satisfactorily support the Company's growing customer base. However, as the
Company tempered hiring of product developers and support personnel in the
second half of 1996 and continued to focus on cost containment efforts,
product development and support expenses as a percentage of total revenues
decreased to 34% for the last six months of 1996. Although product development
and support expenses will remain a significant component of annual operating
expenses, the Company anticipates that these expenses will continue to
decrease as a percentage of total revenues.
16
<PAGE>
In 1996, 1995 and 1994, the Company capitalized $27,246,000, $13,591,000 and
$5,987,000, 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 expenses plus capitalized internal software development costs, net of
related amortization expense, were $187,625,000 in 1996, $107,618,000 in 1995
and $57,768,000 in 1994, which amounted to 54%, 46% and 33%, respectively, of
software product and maintenance revenues during those periods.
Sales and Marketing. Sales and marketing expenses increased to $185,185,000
in 1996 from $117,906,000 in 1995 and $75,885,000 in 1994. Sales and marketing
expenses as a percentage of total revenues were 42%, 39% and 34% in 1996, 1995
and 1994, respectively. The continuous increase in these expenses as a
percentage of total revenues from 1994 to 1996 was primarily attributable to
costs associated with the significant expansion of the domestic and
international outside and inside sales forces and telemarketing organization.
The Company also incurred higher commission expense associated with the
increase in software products revenues during 1996 and 1995. Also contributing
to the increase in sales and marketing expenses were greater marketing costs
associated with the Company's expanded product line. The Company believes the
large investment in sales and marketing made during 1996 and 1995 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. General and administrative expenses decreased to
$39,224,000 in 1996 from $41,252,000 in 1995, which was an increase from
$32,544,000 in 1994. General and administrative expenses as a percentage of
total revenues were 9%, 14% and 14%, in 1996, 1995 and 1994, respectively. The
increase in these expenses from 1994 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 excess of cost over net assets acquired related to the
Company's acquisitions accounted for as purchases and increased professional
fees. During 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 revenues.
Merger Costs. Merger costs were $5,782,000 and $30,819,000 in 1996 and 1995,
respectively. The Company incurred no merger costs in 1994. 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 merger costs 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.
Acquired In-Process Technology. Acquired in-process technology charges were
$48,456,000, $88,493,000 and $24,594,000 in 1996, 1995 and 1994, respectively.
Acquired in-process technology charges relate to acquisitions of software
companies and product technologies. These acquisitions were accounted for
under the purchase method, and portions of the purchase prices were allocated
to acquired in-process technology. The 1996 acquisition volume decreased from
the level of activity in 1995. See note 2 of the notes to the Company's
consolidated financial statements for a more detailed discussion of these
acquisitions.
Prior to completing these acquisitions, the Company conducted reviews in
order to determine the fair market value of the organizations and technologies
to be acquired. These reviews consisted of an evaluation of existing products,
research and development in process (projects that had not reached
technological feasibility and had no alternative future use), customers,
financial position and other matters. The acquired in-process research and
development represent unique and emerging technologies, the application of
which is limited to the Company's software 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 to
eighteen months from the dates of acquisition. The Company
17
<PAGE>
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. The Company plans to
continue to pursue merger and acquisition opportunities, because it believes
that acquisitions are an essential part of the Company's strategy to compete
effectively in its rapidly evolving marketplace.
OTHER INCOME
Other income was $5,156,000 in 1996 as compared to $4,281,000 in 1995 and
$3,052,000 in 1994. The increase in other income during 1996 as compared to
1995 was primarily attributable to realized gains on the sale of investments
securities classified as available-for-sale and unrealized holding gains on
trading securities. This increase was partially offset by interest expense on
the Company's convertible subordinated notes issued in November 1996 (see
"Liquidity and Capital Resources") and lower interest income earned on smaller
cash and investment balances in the first ten months of 1996 as compared to the
prior-year period. The increase in other income in 1995 over 1994 was primarily
attributable to interest earned on higher cash and investment balances
maintained during 1995 as compared to 1994.
INCOME TAXES
The Company recognized an income tax benefit of $9,375,000 in 1996 and
$11,948,000 in 1995 and an income tax expense of $3,473,000 in 1994.
The Company has available approximately $234,891,000 of net operating loss
carryforwards and $10,682,000 of tax credit carryforwards for Federal income
tax purposes, expiring through the year 2011. Some of the Company's tax
carryforwards are subject to limitations as to the amounts which may be used in
future years.
RECENT DEVELOPMENTS
On January 31, 1997, the Company acquired all of the outstanding capital
stock of Australian Technology Resources Pty Limited ("ATR"), a leading
provider of information technology consulting services, in exchange for 313,784
shares of Common Stock, which had a market value, based upon the trading price
of the Common Stock on the Nasdaq National Market ("Market Value"), of
approximately $5,000,000 at the time of the acquisition.
On February 18, 1997, the Company acquired all of the outstanding capital
stock of GEJAC, Inc. ("GEJAC"), a leading provider of UNIX and NT charge-back
software, in exchange for 412,801 shares of Common Stock, which had a Market
Value of approximately $6,800,000 at the time of the acquisition. 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 1997.
On February 28, 1997, the Company acquired all of the outstanding capital
stock of I&S Informationstechnik and Services GmbH ("I&S"), a leading provider
of information technology consulting services, in exchange for 1,089,867 shares
of Common Stock, which had a Market Value of approximately $17,200,000 at the
time of the acquisition.
The acquisitions of ATR and I&S will be accounted for as poolings of
interest. Costs incurred in connection with these transactions will be expensed
in the first quarter of 1997.
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 $181,822,000 as of
December 31, 1996 as compared to $132,775,000 as of December 31, 1995 and
$124,563,000 as of December 31, 1994. See "Cash Flows" below.
18
<PAGE>
The Company had trade and installment accounts receivable, net of allowances,
of $195,740,000 and $122,461,000 as of December 31, 1996 and 1995,
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's sources of liquidity have traditionally been cash generated
from operations and funds from capital markets, including bank facilities.
During 1996, the sale of receivables became a significant source of liquidity.
The Company believes the funding available to it from these sources will be
sufficient to satisfy its working capital requirements for the foreseeable
future. The Company's capital requirements are primarily 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 receivables to
third parties. Proceeds from the sale of receivables for 1996 were
$129,328,000, as compared to $2,903,000 for 1995. The Company did not sell
installment receivables prior to 1995. In 1996 and 1995, a portion of the
receivables were sold with recourse provisions. As of December 31, 1996, the
Company's maximum exposure under recourse provisions was approximately
$26,100,000. The Company has assessed the exposure related to these recourse
provisions and determined the potential liability to be minimal.
The Company's installment receivables are recorded net of unamortized
discounts and deferred maintenance fees. When these receivables are sold, the
Company reduces the gross installment receivable balance. Additionally, the
Company reclassifies the deferred maintenance to an obligation, which was
previously reflected as a reduction of the related installment receivable
balance. The deferred maintenance is recognized into income ratably over the
term of the maintenance agreement.
The Company had long-term acquisition-related payables of $2,502,000 and
$9,756,000 and other long-term obligations of $115,800,000 and $1,586,000 as of
December 31, 1996 and 1995, respectively. The significant increase in long-term
obligations at December 31, 1996 as compared to December 31, 1995 was
attributable to the $115,000,000 of convertible subordinated notes (the
"Notes") issued by the Company in November 1996. The Notes bear interest at
6.75% annually and mature on November 15, 2001. The holders of the Notes have
the option to convert them into shares of Common Stock, at any time prior to
maturity, at a conversion price of $13.95 per share. The Company received
proceeds, net of issuance costs, of $110,783,000 from the offering of these
Notes.
The Company currently has an unsecured bank line of credit of $25,000,000,
under which borrowings bear interest at rates ranging from approximately LIBOR
plus 1% to the bank's prime rate. As of March 25, 1997, the Company had no
outstanding borrowings under this line of credit. The Company currently has
aggregate letters of credit outstanding for approximately $1,300,000, with
expiration dates ranging from March 1997 through March 1998. These letters of
credit reduce the available line of credit balance.
CASH FLOWS
Cash used in operating activities was $139,467,000 in 1996 and $28,267,000 in
1995. Cash provided from operating activities was $33,021,000 in 1994. During
1996, the Company incurred a net loss of $67,962,000 after the deferred tax
benefit of $9,375,000. This net loss was offset by non-cash charges, including
depreciation and amortization of $38,321,000 and acquired in-process technology
of $48,456,000. A high concentration of sales in the fourth quarter of 1996 was
largely responsible for an increase of trade and installment receivables,
before sales to third parties, of $201,485,000. This increase in receivables
was partially offset by an increase in deferred
19
<PAGE>
maintenance of $60,754,000 and proceeds from the sale of installment
receivables of $129,328,000 (see the discussion of financing activities below).
Deferred maintenance increased primarily because of the high sales volume near
the end of 1996, the emergence of multi-year maintenance contracts, as well as
heightened activity of installment receivable sales. See note 6 of the notes to
the Company's consolidated financial statements for a more detailed discussion
of installment receivables.
The utilization of cash from operating activities in 1995 was primarily due
to a significant increase in trade and installment receivables (before sales to
third parties) of $55,425,000, partially offset by an increase in deferred
maintenance of $18,342,000. This increase in receivables was attributable to
the high concentration of sales near the end of 1995, plus a slowdown in
collections due to the transition process associated with the numerous
acquisitions consummated in the second half of 1995. In 1995, the Company
incurred a net loss of $111,933,000, after a deferred tax benefit of
$11,948,000, which was substantially offset by non-cash charges of $23,522,000
for depreciation and amortization as well as $88,493,000 for acquired in-
process technology. A net increase of $4,958,000 in working capital accounts
and a decrease of $16,074,000 in other non-current assets resulted in sources
of cash from operations during 1995.
Cash provided by operating activities in 1994 was attributable to the net
effect of the following factors: a net loss of $2,644,000, after the effects of
depreciation and amortization of $12,908,000 and acquired in-process technology
of $24,594,000; an increase in trade and installment receivables of
$18,718,000, partially offset by an increase in deferred maintenance of
$9,492,000, which were both due to high year-end sales volume; a net increase
in working capital accounts of $590,000; and a decrease in other non-current
assets of $6,458,000.
Cash used in investing activities was $80,652,000 in 1996 compared to
$138,301,000 in 1995 and $51,766,000 in 1994. Beginning in 1994, the Company
executed an aggressive acquisition program in order to assemble the core
competencies to create complete software infrastructure solutions. This
acquisition plan resulted in the investment of substantial resources during
1996, 1995 and 1994, including cash payments of $17,853,000, $103,085,000 and
$22,756,000, respectively. See note 2 of the notes to the Company's
consolidated financial statements for a more detailed discussion of the
acquisitions consummated in these years. The Company also invested resources
for property and equipment of $35,055,000, $38,780,000 and $13,492,000 in 1996,
1995 and 1994, respectively. The substantial increase in capital expenditures
in 1996 and 1995 as compared to 1994 related to the building of the
infrastructure to support the significantly larger combined company that is the
result of these acquisitions. In 1996, 1995 and 1994, the Company invested
$41,267,000, $20,742,000 and $10,898,000, respectively, for purchased and
developed software costs. During 1996, the Company invested heavily in the
development and integration of its product technologies, including
approximately $3,513,000 in payments for purchased software. The Company
expects to continue to actively invest in internally developed point products,
product bundles and integrated product suites, as well as strategic business
and technology acquisitions. Proceeds from the sales and maturities of
investment securities, net of purchases, were $17,272,000 and $24,788,000
during 1996 and 1995, respectively. Cash expended during 1994 for purchases of
investment securities, net of maturities, was $6,169,000.
Cash flows from financing activities were $245,204,000 in 1996, $202,160,000
in 1995 and $67,506,000 in 1994. Sales of installment receivables became a
significant source of liquidity for the Company during 1996, providing funds of
$129,328,000. The Company also completed the offering of the Notes in November
1996 and received aggregate proceeds, net of issuance costs, of $110,783,000.
The proceeds from these two sources were used, and will continue to be used,
primarily for the operating and investing activities discussed above. In
October 1995, the Company completed a public offering of Common Stock, which
provided $194,420,000 in proceeds, net of issuance costs. The Company also
executed a public offering of Common Stock in December 1994, which provided
cash of $65,909,000, net of issuance costs.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." Implementation of SFAS No. 125 is
20
<PAGE>
required in the fiscal year commencing January 1, 1997. SFAS No. 125 provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers of secured borrowings. SFAS No. 125 is not expected to
have a significant impact on the Company's consolidated financial statements.
QUARTERLY COMPARISONS
The following tables set forth an unaudited summary of 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, 33% and 32% of the Company's total revenues in 1996 and
1995, respectively, were generated in the fourth quarter. Further, 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 revenues 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 product revenues 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
product revenues in each quarter result from sales made in that quarter.
21
<PAGE>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND COMMON STOCK PRICES)
(UNAUDITED)
<TABLE>
<CAPTION>
1996
-----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues............. $ 82,471 $100,485 $113,430 $142,804
Operating loss............. (32,374)(1) (10,072) (10,636)(2) (29,411)(3)
Net loss................... (24,504)(1) (5,791) (7,693)(2) (29,974)(3)
Net loss per share......... $ (0.45)(1) $ (0.10) $ (0.14)(2) $ (0.53)(3)
Shares used in computing
net loss per share........ 54,915 55,214 55,678 56,419
<CAPTION>
1995
-----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues, as
previously reported....... $ 55,481 $ 64,573 $ 64,641 $ 91,226
Adjustments(4)............. 7,579 7,223 7,146 6,807
Total revenues............. 63,060 71,796 71,787 98,033
Operating loss, as
previously reported....... (17,688)(5) (4,002)(6) (38,401)(7) (68,865)(8)
Adjustments(4)............. 370 398 267 (241)
Operating loss............. (17,318)(5) (3,604)(6) (38,134)(7) (69,106)(8)
Net loss, as previously
reported.................. (14,438)(5) (2,559)(6) (28,900)(7) (66,577)(8)
Adjustments(4)............. 432 248 156 (295)
Net loss................... (14,006)(5) (2,311)(6) (28,744)(7) (66,872)(8)
Net loss per share, as
previously reported....... $ (0.38)(5) $ (0.07)(6) $ (0.76)(7) $ (1.40)(8)
Net loss per share......... (0.34)(5) (0.06)(6) (0.69)(7) (1.31)(8)
Shares used in computing
net loss per share, as
previously reported....... 37,520 37,902 38,117 47,697
Shares used in computing
net loss per share........ 40,738 41,283 41,460 51,032
</TABLE>
- --------
(1) Reflects a pre-tax charge for acquired in-process technology of $7,005,000
relating to the Company's acquisition of the outstanding capital stock of
AST and the purchase of certain product technologies. Also reflects a pre-
tax charge for merger costs of $5,782,000 relating primarily to the
Company's acquisitions of Prodea, Paradigm and Axis.
(2) Reflects a pre-tax charge for acquired in-process technology of $4,090,000
relating to the Company's acquisition of the outstanding capital stock of
Software Alternatives and Grateful Data.
(3) Reflects a pre-tax charge for acquired in-process technology of $37,361,000
relating to the Company's acquisition of the outstanding capital stock of
VREAM and substantially all of the assets of Access Manager.
(4) Adjustments reflect the effects of the acquisitions of Prodea, Paradigm and
Axis, each of which has been accounted for using the pooling-of-interests
method, on the amounts previously reported under "Quarterly Comparisons" in
the Company's Annual Report on Form 10-K for the year ended December 31,
1995. See note 2 of the notes to the Company's consolidated financial
statements for a more detailed discussion of these transactions.
(5) Reflects a pre-tax charge for acquired in-process technology of $18,799,000
relating primarily to the Company's acquisition of the outstanding capital
stock of SQL and Reltech, and the net assets of Viatech and Brownstone.
(6) 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 the Company's
acquisition of SII.
22
<PAGE>
(7) Reflects a pre-tax charge for acquired in-process technology of $5,300,000
relating to the acquisition of the outstanding capital stock of ASC. Also
reflects a pre-tax charge for merger costs of $22,612,000 relating to the
Company's acquisitions of Answer, Locus, Altai and Trinzic.
(8) Reflects a pre-tax charge for acquired in-process technology of
$63,040,000 relating primarily to the acquisitions of the outstanding
capital stock of AIB, Protellicess and BMS, and the net assets of
ProtoSoft. Also reflects a pre-tax charge for merger costs of $6,055,000
relating to the Company's acquisition of Softool.
SAFE HARBOR PROVISION
This Form 10-K contains certain statements which reflect the Company's
expectations regarding its future growth, results of operations, performance
and business prospects and opportunities. Wherever possible, words such as
"anticipate," "believe," "plan," "expect" and similar expressions have been
used to identify these "forward-looking" statements. These statements reflect
the Company's current beliefs and are based on information currently available
to the Company. Accordingly, these statements are subject to risks and
uncertainties which could cause the Company's actual growth, results,
performance and business prospects and opportunities to differ from those
expressed in, or implied by, these statements. These risks and uncertainties
include the maturation and success of the Company's software infrastructure
system strategy, risks inherent in conducting international business, risks
associated with conducting a professional services business, general economic
and business conditions, charges and costs related to acquisitions, and the
Company's ability to: develop and market existing and acquired products for
the software infrastructure market; successfully integrate its acquired
products, services and businesses and continue its acquisition strategy;
adjust to changes in technology, customer preferences, enhanced competition
and new competitors in the software infrastructure and professional services
markets; protect its proprietary software rights from infringement or
misappropriation; maintain or enhance its relationships with relational
database vendors; and attract and retain key employees. The Company is not
obligated to update or revise these forward-looking statements to reflect new
events or circumstances.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information in response to this item is included in the Company's
consolidated financial statements, together with the report thereon of KPMG
Peat Marwick LLP, appearing on pages F-1 through F-23 of this Form 10-K, and
in Item 7 under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Quarterly Comparisons."
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
23
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information in response to this item is incorporated by reference from
the sections captioned "PROPOSAL NO. 1--ELECTION OF DIRECTORS" and "EXECUTIVE
OFFICERS" of the definitive Proxy Statement to be filed in connection with the
Company's 1997 Annual Meeting of Stockholders (the "1997 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information in response to this item is incorporated by reference from
the section of the 1997 Proxy Statement captioned "EXECUTIVE COMPENSATION."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in response to this item is incorporated by reference from
the section of the 1997 Proxy Statement captioned "SECURITY OWNERSHIP OF
MANAGEMENT AND PRINCIPAL STOCKHOLDERS."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information in response to this item is incorporated by reference from
the section of the 1997 Proxy Statement captioned "CERTAIN TRANSACTIONS."
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The following consolidated financial statements and notes thereto
and the related independent auditors' report are included on pages F-1
through F-23 of this Form 10-K:
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. The following financial statement schedule of the Company and the
related report of independent auditors are included on pages S-1 and S-
2 of this Form 10-K:
Report of Independent Auditors
Schedule II--Valuation and Qualifying Accounts
All other financial statement schedules are omitted because such
schedules are not required or the information required has been
presented in the aforementioned financial statements.
3. The following exhibits are filed with this Form 10-K or incorporated
by reference as set forth below:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization dated as of January 16, 1996, as amended by
Amendment No. 1 thereto dated as of January 31, 1996, by and among the Company, PS
Acquisition Corporation and Prodea Software Corporation, and the related Agreement
of Merger, incorporated by reference to Exhibits 2.1 and 2.2, respectively, to the
Company's Current Report on Form 8-K dated February 8, 1996.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.1 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 No. 333-07783.
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, Registration No. 33-39233 (the "IPO S-1
Registration Statement").
4.1 Specimen stock certificate representing Common Stock, incorporated by reference to
Exhibit 4.1 to the IPO S-1 Registration Statement.
4.2 Rights Agreement dated as of December 21, 1995 between the Company and Harris
Trust and Savings Bank, incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A, filed December 26, 1995 (the "1995 8-A").
4.3 Certificate of Designations of the Class II Series A Junior Participating
Preferred Stock, incorporated by reference to Exhibit 4.3 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (the "1995 10-K").
4.4 Form of Indenture between the Company and American National Bank and Trust
Company, as Trustee, incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-3, Registration No. 333-15421 (the "1996 S-3").
4.5 Form of Note for the Company's convertible subordinated notes due 2001,
incorporated by reference to Exhibit 4.2 to the 1996 S-3.
10.1 1989 Stock Option Plan, incorporated by reference to Exhibit 10.1 to the IPO S-1
Registration Statement.*
10.2 Forms of Stock Option Agreements, incorporated by reference to Exhibit 10.2 to the
IPO S-1 Registration Statement.*
10.3 Chief Executive Stock Option Plan, incorporated by reference to Exhibit 10.3 to
the IPO S-1 Registration Statement.*
10.4 Chief Executive Stock Option Agreement, incorporated by reference to Exhibit 10.4
to the IPO S-1 Registration Statement.*
10.5 1991 Stock Option Plan, incorporated by reference to Exhibit 10.5 to the IPO S-1
Registration Statement.*
10.6 Employment Agreement between Andrew J. Filipowski and the Company, incorporated by
reference to Exhibit 10.6 to the IPO S-1 Registration Statement.*
10.7 Employment Agreement between Paul L. Humenansky and the Company, as amended,
incorporated by reference to Exhibit 10.7 to the Company's Registration Statement
on Form S-1, Registration No. 33-43345 (the "Additional S-1 Registration
Statement").*
10.8 Employment Agreement between Michael P. Cullinane and the Company, incorporated by
reference to Exhibit 10.8 to the IPO S-1 Registration Statement.*
10.9 Form of Indemnification Agreement between the Company and each of Andrew J.
Filipowski, Michael P. Cullinane, Paul L. Humenansky, Casey G. Cowell, James E.
Cowie, Steven D. Devick and Gian Fulgoni, incorporated by reference to Exhibit
10.10 to the IPO S-1 Registration Statement.*
10.10 Forms of Affiliate Agreements, incorporated by reference to Exhibit 10.11 to the
IPO S-1 Registration Statement.
10.11 Form of Master Product License Agreement, incorporated by reference to Exhibit
10.11 to the 1995 10-K.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.12 Office Lease, dated May 6, 1992, between the Company and LaSalle National Trust
N.A. as Trustee (the "Oakbrook Terrace Lease"), incorporated by reference to
Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10.13 PLATINUM technology, inc. 1993 Directors' Stock Option Plan, incorporated by
reference to Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 (the "June 1994 10-Q").*
10.14 PLATINUM technology, inc. 1994 Stock Incentive Plan, incorporated by reference to
Exhibit 10.19 to the June 1994 10-Q.*
10.15 Amendments to the PLATINUM technology, inc. 1994 Stock Incentive Plan,
incorporated by reference to Exhibit 4.3 to the Company's Registration Statement
on Form S-8, Registration No. 33-85798 (the "1994 S-8").*
10.16 Form of Option Agreement under the PLATINUM technology, inc. 1993 Director's Stock
Option Plan, incorporated by reference to Exhibit 4.4 to the 1994 S-8.*
10.17 Form of Option Agreement under the PLATINUM technology, inc, 1994 Stock Incentive
Plan, incorporated by reference to Exhibit 4.5 to the 1994 S-8.*
10.18 Amendment Number One, dated as of May 3, 1993, to the Oakbrook Terrace Lease,
incorporated by reference to Exhibit 10.19 to the 1994 10-K.
10.19 Amendment Number Two, dated as of October 26, 1993, to the Oakbrook Terrace Lease,
incorporated by reference to Exhibit 10.20 to the 1994 10-K.
10.20 Amendment Number Three, dated as of December 22, 1994, to the Oakbrook Terrace
Lease, incorporated by reference to Exhibit 10.21 to the 1994 10-K.
10.21 Office Lease, dated August 8, 1994, between the Company and L.J. Sheridan & Co. as
court appointed receiver, incorporated by reference to Exhibit 10.22 to the 1994
10-K.
10.22 PLATINUM technology, inc. Employee Incentive Compensation Plan, incorporated by
reference to Exhibit 10.23 to the 1995 S-4.*
10.23 Lease Agreement, dated as of March 30, 1995, between the Company and Lisle
Property Venture, Inc, (the "March 1995 Lisle Lease"), incorporated by reference
to Exhibit 10.24 to the 1995 S-4.
10.24 First Amendment, dated as of September 15, 1995, to the March 1995 Lisle Lease,
incorporated by reference to Exhibit 10.25 to the 1995 10-K.
10.25 Second Amendment, dated as of September 15, 1995, to the March 1995 Lisle Lease,
incorporated by reference to Exhibit 10.26 to the 1995 10-K.
10.26 Third Amendment, dated as of January 3, 1996, to the March 1995 Lisle Lease,
incorporated by reference to Exhibit 10.27 to the 1995 10-K.
10.27 Lease Agreement, dated as of October 31, 1995, between Lisle Property Venture,
Inc. and the Company (the "October 1995 Lisle Lease"), incorporated by reference
to Exhibit 10.28 to the 1995 10-K.
10.28 Amendment Number Four, dated as of March 9, 1995, to the Oakbrook Terrace Lease,
incorporated by reference to Exhibit 10.29 to the 1995 10-K.
10.29 Loan Agreement, dated as of December 31, 1995, between the Company and American
National Bank and Trust Company of Chicago (the "Loan Agreement"), incorporated by
reference to Exhibit 10.30 to the 1995 10-K.
10.30 First Amendment, dated as of December 31, 1996, to the Loan Agreement.
10.31 First Amendment, dated as of May 23, 1996, to the October 31, 1995 Lisle Lease.
10.32 Second Amendment, dated as of May 24, 1996, to the October 31, 1995 Lisle Lease.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.33 Lease Agreement, dated as of July 17, 1996, between the Company and Oakbrook Tower
Limited Partnership.
10.34 PLATINUM technology, inc. 1996 Stock Purchase Plan, incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-8, Registration No.
333-03284 (the "April 1996 S-8").*
10.35 PLATINUM technology, inc. Amended and Restated 1993 Directors' Stock Option Plan,
incorporated by reference to Exhibit 4.2 to the April 1996 S-8.*
10.36 Amendment to the PLATINUM technology, inc. 1994 Stock Incentive Plan, incorporated
by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 (the "June 1996 10-Q").*
10.37 Amendment to the PLATINUM technology, inc. Employee Incentive Compensation Plan,
incorporated by reference to the June 1996 10-Q.*
21 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP with respect to the Company's financial
statements and financial statement schedule.
23.2 Consent of Deloitte & Touche LLP with respect to Trinzic's financial statements.
23.3 Consent of Arthur Andersen LLP with respect to Locus' financial statements.
23.4 Consent of Arthur Andersen LLP with respect to Softool's financial statements.
27 Financial Data Schedule.
99.1 Report of Deloitte & Touche LLP on Trinzic's financial statements.
99.2 Report of Arthur Andersen LLP on Locus' financial statements.
99.3 Report of Arthur Andersen LLP on Softool's financial statements.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement required to be
included as an exhibit to this Annual Report on Form 10-K.
(b)Reports on Form 8-K:
The Company did not file any Reports on Form 8-K during the fourth
quarter of 1996.
27
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1996 1995
--------- ---------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................. $ 136,932 $ 111,847
Short-term investment securities....................... 42,755 7,802
Trade accounts receivable, net of allowances of $2,503
and $2,695............................................ 160,472 115,876
Installment accounts receivable, net of allowances of
$395 and $103......................................... 13,603 6,058
Accrued interest and other current assets.............. 11,702 10,545
Refundable income taxes................................ 629 355
--------- ---------
Total current assets................................. 366,093 252,483
--------- ---------
Non-current investment securities........................ 2,135 13,126
Property and equipment, net.............................. 72,343 51,004
Purchased and developed software, net.................... 82,423 52,268
Excess of cost over net assets acquired, net of
accumulated amortization of $9,458 and $5,100........... 37,352 35,494
Non-current installment receivables, net of allowances of
$816 and $11............................................ 21,665 527
Other assets............................................. 27,501 33,286
--------- ---------
Total assets......................................... $ 609,512 $ 438,188
========= =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Acquisition-related payables........................... $ 7,872 $ 12,518
Income taxes payable................................... 2,420 1,068
Accounts payable....................................... 14,680 16,001
Accrued commissions and bonuses........................ 10,622 8,598
Accrued royalties...................................... 3,913 1,637
Other accrued liabilities.............................. 30,174 27,700
Current maturities of long-term obligations............ 3,075 1,313
Deferred maintenance................................... 83,716 56,969
--------- ---------
Total current liabilities............................ 156,472 125,804
--------- ---------
Acquisition-related payables............................. 2,502 9,756
Deferred maintenance..................................... 38,674 3,795
Deferred rent............................................ 4,863 8,795
Long-term obligations, net of current maturities......... 115,800 1,586
--------- ---------
Total liabilities.................................... 318,311 149,736
--------- ---------
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 59,173 and 53,194.............. 59 53
Paid-in capital........................................ 486,664 433,103
Notes receivable....................................... -- (515)
Accumulated deficit.................................... (212,579) (144,662)
Unrealized holding gains on marketable securities...... 17,805 --
Foreign currency translation adjustment................ (748) 473
--------- ---------
Total stockholders' equity........................... 291,201 288,452
--------- ---------
Total liabilities and stockholders' equity........... $ 609,512 $ 438,188
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-1
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Revenues:
Software products............................. $243,938 $ 158,597 $113,749
Maintenance................................... 102,364 76,498 58,837
Professional services......................... 92,888 69,581 52,853
-------- --------- --------
Total revenues.............................. 439,190 304,676 225,439
Costs and expenses:
Professional services......................... 82,657 60,341 42,858
Product development and support............... 160,379 94,027 51,781
Sales and marketing........................... 185,185 117,906 75,885
General and administrative.................... 39,224 41,252 32,544
Merger costs.................................. 5,782 30,819 --
Acquired in-process technology................ 48,456 88,493 24,594
-------- --------- --------
Total costs and expenses.................... 521,683 432,838 227,662
-------- --------- --------
Operating loss.................................. (82,493) (128,162) (2,223)
Other income.................................... 5,156 4,281 3,052
-------- --------- --------
Income (loss) before income taxes............... (77,337) (123,881) 829
Income taxes.................................... (9,375) (11,948) 3,473
-------- --------- --------
Net loss........................................ $(67,962) $(111,933) $ (2,644)
======== ========= ========
Net loss per share.............................. $ (1.22) $ (2.59) $ (0.07)
======== ========= ========
Shares used in computing per share amounts...... 55,564 43,267 39,890
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ --------- ------ --------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Common stock:
Balance at beginning of
year................... 53,194 $ 53 38,266 $ 38 33,552 $ 33
Exercise of stock
options................ 517 1 803 1 1,186 1
Issuance of common stock
under Stock Purchase
Plan................... 197 -- -- -- -- --
Issuance of common
stock.................. 5,265 5 14,125 14 3,629 4
Repurchase of common
stock.................. -- -- -- -- (100) --
Adjustment to conform
fiscal years of pooled
businesses............. -- -- -- -- (1) --
------ --------- ------ --------- ------ --------
Balance at end of year.. 59,173 59 53,194 53 38,266 38
====== ========= ====== ========= ====== ========
Paid in capital:
Balance at beginning of
year................... 433,103 190,441 121,729
Exercise of stock
options................ 2,380 4,754 5,083
Income tax benefit
related to stock
options................ -- -- 108
Issuance of common stock
under Stock Purchase
Plan................... 1,801 -- --
Issuance of common
stock.................. 49,515 237,907 64,923
Repurchase of common
stock.................. -- -- (1,400)
Amortization of shelf
registration costs..... (135) -- --
Adjustment to conform
fiscal years of pooled
businesses............. 1 (2)
--------- --------- --------
Balance at end of year.. 486,664 433,103 190,441
========= ========= ========
Notes receivable:
Balance at beginning of
year................... (515) (333) (247)
Exercise of stock
options................ -- -- (7)
Issuance of notes
receivable............. -- (200) (79)
Repayment of note
receivable............. -- 18 --
Reclassification to non-
current asset.......... 515 -- --
--------- --------- --------
Balance at end of year.. -- (515) (333)
========= ========= ========
Accumulated deficit:
Balance at beginning of
year................... (144,662) (31,523) (28,255)
Net loss................ (67,962) (111,933) (2,644)
Other................... -- 18 1
Adjustment for
immaterial pooled
business............... 45 -- --
Adjustment to conform
fiscal years of pooled
businesses............. -- (1,224) (625)
--------- --------- --------
Balance at end of year.. (212,579) (144,662) (31,523)
========= ========= ========
Unrealized appreciation
in marketable
securities:
Balance at beginning of
year................... -- -- --
Net unrealized holding
gains, net of income
taxes.................. 17,805 -- --
--------- --------- --------
Balance at end of year . 17,805 -- --
========= ========= ========
Foreign currency
translation adjustment:
Balance at beginning of
year................... 473 214 (316)
Translation adjustment.. (1,221) 259 507
Adjustment to conform
fiscal years of pooled
businesses............. -- -- 23
--------- --------- --------
Balance at end of year.. (748) 473 214
--------- --------- --------
Total stockholders'
equity.................. $ 291,201 $ 288,452 $158,837
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss..................................... $ (67,962) $(111,933) $ (2,644)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.............. 38,321 23,522 12,908
Acquired in-process technology............. 48,456 88,493 24,594
Unrealized holding gains on marketable
equity securities......................... (920) -- --
Realized net gain on sale of investment
securities................................ (1,032) (332) --
Write-off of capitalized software in
connection with product stabilization and
mergers................................... 654 942 --
Noncash compensation....................... -- 78 186
Changes in assets and liabilities, net of
acquisitions:
Trade and installment receivables........ (201,485) (55,425) (18,718)
Deferred income taxes.................... (16,337) (12,986) 1,335
Income taxes refundable (payable)........ 993 2,615 (2,234)
Accrued interest and other current
assets.................................. (1,166) (3,313) (1,641)
Accounts payable and accrued liabilities. (3,035) 5,656 3,285
Deferred maintenance..................... 60,754 18,342 9,492
Other.................................... 3,292 16,074 6,458
--------- --------- --------
Net cash provided by (used in) operating
activities.................................... (139,467) (28,267) 33,021
--------- --------- --------
Cash flows from investing activities:
Purchases of investment securities........... (18,797) (61,484) (25,079)
Sales of investment securities............... 30,223 75,519 --
Maturities of investment securities.......... 5,846 10,753 18,910
Purchases of property and equipment.......... (35,055) (38,780) (13,492)
Purchased and developed software costs....... (41,267) (20,742) (10,898)
Payments for acquisitions.................... (17,853) (103,085) (22,756)
Other assets................................. (3,749) (482) 1,549
--------- --------- --------
Net cash used in investing activities.......... (80,652) (138,301) (51,766)
--------- --------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock, net
of issuance costs........................... -- 194,420 65,909
Proceeds from issuance of convertible notes,
net of issuance costs....................... 110,783 -- --
Repurchase of common stock................... -- (2) (1,400)
Proceeds from exercise of stock options and
Stock Purchase Plan......................... 4,182 4,144 3,826
Income tax benefit from stock option
exercises................................... -- -- 108
Proceeds from the sale of receivables........ 129,328 2,903 --
Short-term borrowings........................ 1,115 8,205 1,675
Payments on borrowings....................... (204) (7,296) (1,675)
Other........................................ -- (214) (937)
--------- --------- --------
Net cash provided by financing activities...... 245,204 202,160 67,506
--------- --------- --------
Adjustment to conform fiscal years of pooled
businesses.................................... -- (2,203) 276
--------- --------- --------
Net increase in cash and cash equivalents...... 25,085 33,389 49,037
Cash and cash equivalents at beginning of year. 111,847 78,458 29,421
--------- --------- --------
Cash and cash equivalents at end of year....... $ 136,932 $ 111,847 $ 78,458
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<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 provide
related professional services, that help chief information officers ("CIOs")
better manage their software infrastructures. The Company's products and
services increase the performance and interoperability of computing systems
and databases and provide users, primarily in large and data intensive
organizations, with more reliable and productive access to and use of critical
information. The Company's products typically perform fundamental functions
and mission-critical automation, such as maintenance of data integrity,
systems security, systems scheduling, project and process management, and end-
user specific analysis and reporting. The Company develops software products
under six business units: database management, systems management, application
lifecycle, data warehouse, business intelligence and applications solutions.
The Company markets and supports its products and services principally through
its own sales organization, including an international network of wholly-owned
subsidiaries.
Use of Estimates
In preparing the consolidated financial statements in conformity with
generally accepted accounting principles, 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 periods. 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
Revenues from software product sales of perpetual and fixed-term license
agreements are recognized upon product delivery, customer acceptance, and when
all significant contractual obligations have been satisfied and the collection
of the resulting receivables are reasonably assured. Software product sales
under extended payment terms are discounted to present value. Revenues from
maintenance fees implicit in software product sales or separately priced
maintenance agreements are 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
contract revenues are recognized as services are performed. Fixed-price
contract revenues are 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 three months or less. Investment securities consist
primarily of state and municipal bonds with original maturities generally
ranging from two to ten years, corporate bonds with original maturities
generally ranging from six months to one year and equity securities. 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 either available-for-sale or trading and reports
them at fair value.
F-5
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Available-for-sale securities represent those securities that do not meet
the classification of held-to-maturity and are not actively traded. For
available-for-sale securities, unrealized holding gains and losses, net of
income taxes, are reported as a separate component of stockholders' equity.
For trading securities, unrealized holding gains and losses are reflected in
pre-tax earnings.
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
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, 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 years, using the straight-line method. This method generally results in
greater amortization expense per year 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 of cost 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 earnings in the period of enactment.
Fair Value of Financial Instruments and Long-Lived Assets
Under SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
the Company has reviewed the following financial instruments and determined
that their fair values approximated their carrying values as of December 31,
1996: cash and cash equivalents; trade and installment receivables; accrued
interest and other current assets; refundable income taxes; acquisition-
related payables; accounts payable and other accrued
F-6
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
liabilities; and long-term obligations, excluding convertible subordinated
notes. Investment securities are discussed in note 3, and convertible
subordinated notes are discussed in note 11.
On January 1, 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
under which the Company has reviewed long-lived assets and certain intangible
assets and determined that their carrying values as of December 31, 1996 are
recoverable in future periods.
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.
Foreign Currency Translation and Transactions
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. Gains and losses resulting from
foreign currency transactions are included in the consolidated statements of
operations.
Stock-Based Compensation
On January 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-
Based Compensation," which permits entities to recognize the compensation
expense associated with the fair value of all stock-based awards on the date
of grant. Alternatively, SFAS No. 123 allows entities to continue to apply the
provisions of Accounting Principles Board (APB) Opinion 25, "Accounting for
Stock Issued to Employees," and provide pro forma net income and earnings per
share disclosures as if the fair value method defined in SFAS No. 123 had been
applied. The Company has elected to apply the provisions of APB Opinion 25 and
provide the pro forma disclosures of SFAS No. 123.
Supplemental Cash Flow Disclosure
Net income tax refunds received by the Company amounted to $307,000,
$933,000 and $72,000 in 1996, 1995 and 1994, respectively. Cash paid for
income taxes in 1996, 1995 and 1994 was $1,799,000, $615,000 and $3,914,000,
respectively. Cash paid for interest in 1996, 1995 and 1994 was $769,000,
$784,000 and $272,000, respectively.
Reclassifications
Certain prior year balance sheet items have been reclassified to conform to
the 1996 presentation. In addition, certain prior years' costs and expenses
have been reclassified to conform to the 1996 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, in exchange for 1,085,450 shares of the Company's
Common Stock, $.001 par
F-7
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
value, (the "Common Stock"), which had a market value, based upon the trading
price of the Common Stock on the Nasdaq National Market ("Market Value"), of
approximately $20,000,000 at the time of the acquisition. 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, which
had a Market Value of approximately $38,000,000 at the time of the acquisition.
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, which had a Market Value of approximately
$33,000,000 at the time of the acquisition. In addition, the Company assumed
stock options which converted into options to purchase 231,905 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, which had
a Market Value of approximately $23,000,000 at the time of the acquisition. 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, which had a Market Value of approximately $150,000,000 at the time of
the acquisition. 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, which had a Market Value of approximately $25,000,000 at the time
of the acquisition.
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, which had a Market Value of approximately $36,000,000 at the
time of the acquisition. In addition, the Company assumed stock options which
converted into options to purchase 212,427 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 information
technology consulting services, in exchange for 762,503 shares of Common Stock,
which had a Market Value of approximately $12,800,000 at the time of the
acquisition. In addition, the Company assumed stock options which converted
into options to purchase 87,912 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 information
technology consulting services, in exchange for 319,926 shares of Common Stock,
which had a Market Value of approximately $6,300,000 at the time of the
acquisition. In addition, the Company assumed stock options which converted
into options to purchase 59,986 shares of Common Stock.
F-8
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 1996 and
1995 amounted to $5,782,000 and $30,819,000, respectively, of which $353,000
and $1,942,000, respectively, were included in other accrued liabilities at
December 31, 1996 and 1995. These costs included investment banking and other
professional fees, write downs of certain assets, employee severance payments,
costs of closing excess office facilities and various other expenses.
The following information reconciles total revenues and net income (loss) of
PLATINUM technology, inc. as previously reported in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 with the amounts
presented in the accompanying consolidated statements of operations for the
years ended December 31, 1995 and 1994, as well as separate results of
operations for 1996 of Prodea, Paradigm and Axis during the periods preceding
their acquisition. The 1996 results presented for Prodea represent the one
month ended January 31, 1996. The 1996 results for Paradigm and Axis are for
the three months ended March 31, 1996.
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS) ------------------- ------------------- -------------------
NET INCOME NET INCOME NET INCOME
REVENUES (LOSS) REVENUES (LOSS) REVENUES (LOSS)
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
PLATINUM (1)....... $275,921 $(112,474) $202,497 $ 615
Prodea............. $ 40 $(264) 5,804 159 2,868 (3,657)
Paradigm........... 3,837 261 15,218 1 13,224 93
Axis............... 1,844 112 7,733 381 6,850 305
-------- --------- -------- -------
Total.......... $304,676 $(111,933) $225,439 $(2,644)
======== ========= ======== =======
</TABLE>
- --------
(1) Represents the historical results of PLATINUM technology, inc. without
considering the effect of the poolings of interests consummated during
1996. All merger costs and acquired in-process technology charges are
reflected in the historical results of PLATINUM.
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 included more than once
were $2,514,000 and $441,100, respectively. The revenue 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 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>
F-9
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1996, the Company consummated an immaterial acquisition accounted for
as a pooling of interest. The Company did not restate the consolidated
financial statements to reflect the results of this entity for the periods
preceding the acquisition. As a result, the retained earnings of this entity
were recorded as of the acquisition date, causing a $45,000 adjustment to the
Company's accumulated deficit in 1996. This adjustment is reflected in the
consolidated statement of stockholders' equity.
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. 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
consolidated statements of operations reflect the results of operations of the
purchased 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 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 charges for the use of contributory assets. The future net
revenue stream is discounted to present value based upon the specific level of
risk associated with 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.
The Company determined that the acquired in-process technologies had not
reached technological feasibility based on the status of design and
development activities which required further refinement and testing. The
development activities required to complete the acquired in-process
technologies included additional coding, cross-platform porting and
validation, quality assurance procedures and customer beta testing.
The acquired technologies represent unique and emerging technologies, the
application of which is limited to the Company's software infrastructure
strategy. Accordingly, these acquired technologies have no alternative future
use.
Effective August 1994, the Company acquired all of the outstanding capital
stock of Dimeric Development, Inc. ("Dimeric"), a developer of database tools,
for approximately $7,600,000.
Effective September 1994, the Company acquired the net assets of Aston
Brooke Corporation ("Aston Brooke"), a developer of performance management
tools, for approximately $6,500,000.
Effective December 1994, the Company acquired the net assets of AutoSystems
Corporation ("AutoSystems"), a leading provider of job management tools for
commercial UNIX workstations and open systems, for approximately $10,000,000.
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.
F-10
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Effective March 1995, the Company acquired all of the outstanding capital
stock of SQL Software Corporation ("SQL"), a provider of Windows-based
development tools for managing multiple relational databases, for
approximately $2,000,000; the assets of Viatech Development, Inc. ("Viatech"),
a provider of electronic distribution tools, for approximately $5,300,000; and
the assets of BrownStone Solutions, Inc. ("BrownStone"), a vendor of
repository technology, for approximately $6,300,000. Also effective March
1995, the Company acquired all of the outstanding capital stock of Reltech
Group, Inc. ("Reltech"), a vendor of repository technology, for approximately
$9,800,000 in cash plus 318,453 shares of Common Stock, which had a Market
Value of approximately $7,500,000 at the time of the acquisition.
Effective July 1995, the Company acquired all of the outstanding capital
stock of Advanced Software Concepts, Inc. ("ASC"), a leading provider of
distributed storage network management solutions for heterogeneous
environments, for approximately $7,000,000.
Effective November 1995, the Company acquired substantially all of the
assets of ProtoSoft, Inc. ("ProtoSoft"), a pioneer in portable, object-
oriented analysis and design software for building enterprise-wide
applications and the developer of Paradigm Plus, for approximately $30,000,000
in cash plus 582,121 shares of Common Stock, which had a Market Value of
approximately $10,000,000 at the time of the acquisition.
Effective December 1995, the Company purchased all of the outstanding
capital stock of AIB Software Corporation ("AIB"), a leader in multi-platform
application development and testing tools, for approximately $2,200,000 in
cash plus 478,045 shares of Common Stock, which had a Market Value of
approximately $9,000,000 at the time of the acquisition; Protellicess
Software, Inc. ("Protellicess"), a leader in enterprise project and process
management software, in exchange for 822,077 shares of Common Stock, which had
a Market Value of approximately $15,000,000 at the time of the acquisition;
and BMS Computer, Inc. ("BMS"), a leader in integrated chargeback systems that
provide job accounting, chargeback, cost analysis and resource reporting for
heterogeneous environments, for approximately $6,900,000. In conjunction with
the acquisitions of AIB and Protellicess, the Company assumed stock options
which converted into options to purchase 116,144 and 128,320 shares of Common
Stock, respectively.
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.
Effective January 1996, the Company acquired all of the outstanding capital
stock of Advanced Systems Technologies, Inc. ("AST"), a leading developer of
performance management tools, in exchange for approximately $445,000 in cash
plus 344,640 shares of Common Stock, which had a Market Value of approximately
$5,800,000 at the time of the acquisition.
Effective July 1996, the Company acquired all of the outstanding capital
stock of Software Alternatives, Inc. (d/b/a System Software Alternatives)
("Software Alternatives"), a leading provider of production scheduling
software, for approximately $1,900,000. Also effective July 1996, the Company
acquired all of the outstanding capital stock of Grateful Data, Inc. (d/b/a
TransCentury Data Systems) ("Grateful Data"), a Year 2000 solution provider,
for $100,000 in cash plus 333,333 shares of Common Stock, which had a Market
Value of approximately $4,000,000 at the time of the acquisition.
F-11
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Effective December 1996, the Company acquired all of the outstanding capital
stock of VREAM, Inc. ("VREAM"), a leading provider of virtual reality software
for the World Wide Web and other interactive environments, in exchange for
760,383 shares of Common Stock, which had a Market Value of approximately
$10,300,000 at the time of the acquisition. In addition, the Company assumed
stock options which converted into options to purchase 70,257 shares of Common
Stock.
During 1996, the Company also acquired certain software technologies for an
aggregate purchase price of approximately $3,513,000.
Internationally, effective December 1996, the Company acquired substantially
all of the assets of the Access Manager business unit of the High Performance
Systems division of International Computers Limited ("Access Manager"), a
leading provider of single-sign-on security computer software for enterprise
computing technology, in exchange for 2,286,222 shares of Common Stock, which
had a Market Value of approximately $30,000,000 at the time of the
acquisition.
In conjunction with 1996 acquisitions accounted for as purchases, the
Company assumed liabilities of approximately $7,300,000. These liabilities
were primarily composed of costs for involuntary termination of employees,
legal expenses and other professional services expenses. The plan of
termination includes severance and related costs of employees of the acquired
companies and is planned to be completed in 1997. Any significant adjustments
to amounts provided for under the plan will be treated as adjustments to
excess of cost over net assets acquired.
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 informational
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>
1996 1995
-------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Revenues......................................... $443,907 $ 333,257
Net loss......................................... (75,116) (113,781)
Net loss per share............................... (1.35) (2.63)
</TABLE>
The Company estimates aggregate payments for acquisition-related payables,
in connection with the acquisitions described above, to be $7,872,000,
$1,892,000 and $610,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
The Company may be required to make payments in future years to various
former owners of acquired businesses based upon the attainment of certain
operating results by such businesses. The amounts of these payments cannot be
estimated. These additional payments will be charged to compensation expense
or recorded as an adjustment to the respective purchase price in the periods
in which such payments are made.
3. INVESTMENT SECURITIES
At December 31, 1996, the Company classified its marketable debt and equity
securities as either available-for-sale or trading. Available-for-sale
securities represent those securities that do not meet the classification of
held-to-maturity and are not actively traded. For investment securities
classified as available-for-sale, net unrealized holding gains of
approximately $29,936,000, reduced by income taxes of approximately
$12,131,000, are recorded as a separate component of stockholders' equity. For
trading securities, unrealized holding gains of approximately $920,000 are
reflected in pre-tax earnings for the year ended December 31, 1996.
F-12
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1996, certain cost-basis equity investments became marketable equity
securities and were reclassified as either available-for-sale or trading. The
Company owns equity interests in certain technology companies which executed
initial public offerings during 1996. As a result, the Company reclassified
these investments based upon future trading intentions. The cost and
unrealized gain, net of income taxes, on the investment transferred to the
available-for-sale classification were approximately $8,383,000 and
$17,800,000, respectively. The cost and unrealized gain on the investment
transferred to the trading classification were approximately $1,125,000 and
$920,000, respectively.
At December 31, 1995, all marketable securities were classified as
available-for-sale and were carried at amortized cost, which approximated the
fair market value.
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and aggregate fair value of investment securities at December 31, 1996
were as follows:
<TABLE>
<CAPTION>
1996
---------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Available-for-sale:
State and municipal bonds........... $ 402 $ 1 $ -- $ 403
Corporate bonds..................... 2,002 -- (1) 2,001
Marketable equity securities........ 8,383 29,923 -- 38,306
------- ------- ----- -------
10,787 29,924 (1) 40,710
------- ------- ----- -------
Trading securities:
Marketable equity securities........ 1,125 920 -- 2,045
------- ------- ----- -------
$11,912 $30,844 $ (1) $42,755
======= ======= ===== =======
Non-current:
Available-for-sale:
State and municipal bonds........... $ 2,122 $ 51 $ (38) $ 2,135
======= ======= ===== =======
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and aggregate fair value of investments at December 31, 1995 were as
follows:
<CAPTION>
1995
---------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Available-for-sale:
U.S. Government bonds............... $ 2,015 $ -- $ (4) $ 2,011
State and municipal bonds........... 5,276 6 (16) 5,266
Other............................... 511 -- -- 511
------- ------- ----- -------
$ 7,802 $ 6 $ (20) $ 7,788
======= ======= ===== =======
Non-current:
Available-for-sale:
U.S. Government bonds............... $ 116 $ -- $ -- $ 116
State and municipal bonds........... 7,110 65 (22) 7,153
Other............................... 5,900 21 -- 5,921
------- ------- ----- -------
$13,126 $ 86 $ (22) $13,190
======= ======= ===== =======
</TABLE>
F-13
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The contractual maturities of debt securities at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
FAIR VALUE
--------------
(IN THOUSANDS)
<S> <C>
Due within one year........................................ $2,404
Due after one year through five years...................... 1,466
Due after five years....................................... 669
------
$4,539
======
</TABLE>
Under the specific identification method, the gross realized gains and gross
realized losses on the sale
of available-for-sale securities were approximately $1,032,000 and $0,
respectively, for the year ended
December 31, 1996 and $467,000 and $(135,000), respectively, for the year
ended December 31, 1995.
4. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Furniture and fixtures................................. $ 26,328 $ 19,861
Computers and software................................. 60,736 37,497
Transportation......................................... 8,031 8,034
Leasehold improvements................................. 20,771 13,899
-------- --------
115,866 79,291
Less accumulated depreciation and amortization......... 43,523 28,287
-------- --------
$ 72,343 $ 51,004
======== ========
5. PURCHASED AND DEVELOPED SOFTWARE
Purchased and developed software consists of the following:
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Purchased software..................................... $ 34,603 $ 24,809
Software development costs............................. 89,400 51,499
-------- --------
124,003 76,308
Less accumulated amortization.......................... 41,580 24,040
-------- --------
$ 82,423 $ 52,268
======== ========
</TABLE>
During the years ended December 31, 1996, 1995 and 1994, $38,555,000,
$19,867,000 and $10,898,000, respectively, of software development costs were
capitalized. The Company recognized amortization expense applicable to
internally developed capitalized software of $11,309,000, $6,276,000 and
$4,911,000, during 1996, 1995 and 1994, respectively. The Company recognized
amortization expense applicable to purchased software of $6,231,000,
$3,081,000 and $859,000 during 1996, 1995 and 1994, respectively. During 1996,
the Company wrote-off $654,000 of capitalized software costs related to
certain AIB, SII and other product technologies. 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 1996 as compared to 1995 is
primarily attributable to the Company's acquisitions and purchases of certain
product technologies.
F-14
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6.INSTALLMENT ACCOUNTS RECEIVABLE
Installment accounts receivable consist of the following:
<TABLE>
<CAPTION>
1996 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Current installment receivables........................ $ 19,763 $ 8,682
Allowance for uncollectible amounts.................... (395) (103)
Unamortized discount and maintenance fees.............. (5,765) (2,521)
-------- -------
$ 13,603 $ 6,058
======== =======
Non-current installment receivables.................... $ 40,827 $ 1,777
Allowance for uncollectible amounts.................... (816) (11)
Unamortized discount and maintenance fees.............. (18,346) (1,239)
-------- -------
$ 21,665 $ 527
======== =======
</TABLE>
The Company offers long-term license agreements, bundling perpetual license,
upgrade and maintenance fees, with financing terms typically ranging from
three to five years. The resulting installment receivables are recorded net of
unamortized discounts and deferred maintenance fees.
The Company sells a significant portion of its installment receivables to
third parties. When these receivables are sold, the Company reduces the gross
installment receivable balance. Additionally, the Company reclassifies the
deferred maintenance to an obligation, which was previously reflected as a
reduction of the related installment receivable balance. The deferred
maintenance is recognized ratably into income over the term of the maintenance
agreement.
Proceeds from the sale of installment receivables for 1996 and 1995 were
approximately $129,328,000
and $2,903,000, respectively. A portion of the receivables were sold with
recourse in 1996 and 1995. As of December 31, 1996, the Company's maximum
exposure under recourse provisions was approximately $26,100,000. The Company
assessed the exposure related to these recourse provisions and determined the
potential liability to be minimal. The fair market value of the recourse
obligation at December 31, 1996 was not determinable.
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 $1,071,000, $406,000 and $241,000, in 1996, 1995 and 1994,
respectively.
8. LINE OF CREDIT
At December 31, 1996, the Company had an unsecured bank line of credit for
$25,000,000, under which borrowings bear interest ranging from LIBOR plus 1%
to the bank's prime rate. This line of credit is subject to limitations based
upon certain financial covenants. At December 31, 1996, there were no
borrowings outstanding under this line of credit.
At December 31, 1996, the Company had aggregate letters of credit
outstanding for approximately $1,300,000, with expiration dates ranging from
March 1997 to March 1998. These letters of credit reduce the available line of
credit balance.
F-15
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN
As of December 31, 1996, the Company had six stock option plans, which are
described below, as well as several plans that have been assumed pursuant to
acquisitions. The Company applies APB Opinion 25, "Accounting for Stock Issued
to Employees," in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans and its employee stock
purchase plan (the "Stock Purchase Plan"). Had compensation cost for the
Company's stock option plans and the Stock Purchase Plan been determined
consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's net loss and net loss per share would have been the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
------------------ -------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<C> <S> <C> <C>
Net loss As reported.. $(67,962) $(111,933)
Pro forma.... (74,062) (115,388)
Net loss per share As reported.. $ (1.22) $ (2.59)
Pro forma.... (1.33) (2.67)
</TABLE>
Under SFAS No. 123, the pro forma compensation expense related to the
Company's stock option and Stock Purchase Plan, before effects for income
taxes, was approximately $10,200,000 and $5,809,000 in 1996 and 1995,
respectively.
Excluding stock option plans assumed pursuant to acquisitions, the Company
has six stock option plans ("Company Plans"). The 1995 Employee Incentive
Plan, 1994 Stock Incentive Plan, 1991 Option Plan and 1989 Option Plan provide
for the granting of options to employees and non-employee directors for up to
an aggregate of 12,560,000 shares. Under the Chief Executive Option Plan, the
Company has authority to grant options for up to 1,600,000 shares to its Chief
Executive Officer and President. Under the Directors' Option Plan, the Company
may grant options for up to 500,000 shares to non-employee directors.
In general, the options granted under the Company Plans during 1996 and
1995, excluding the Directors' Option Plan, have similar provisions. Under
these plans, the Company has granted both non-qualified and incentive stock
options. These options have an exercise price equal to the closing market
price of the Company's stock on the date of grant, have a legal life of ten
years, and typically vest in equal annual installments over a four-year period
beginning one year from the date of grant. Certain options granted prior to
1995 have a legal life of fifteen years. The specific provisions of any grant
are determined by the Compensation Committee of the Board of Directors or
another designated committee.
Under the Directors' Option Plan, only non-qualified options have been
granted. These options have an exercise price equal to the closing market
price of the Company's stock on the date of grant and have a legal life of ten
years. The options granted in 1995 under this plan vested immediately, while
those granted in 1996 vest annually over a three-year period beginning one
year from the date of grant.
As discussed in note 2, the Company has assumed various option grants
related to certain acquisitions in 1996 and 1995. The assumption of these
option grants resulted in the deemed issuance by the Company of options
totaling 430,582 and 1,206,566 shares in 1996 and 1995, respectively. The
options assumed reflect outstanding options at the time of acquisition. The
provisions of the assumed options are generally the same as those provided for
in the original option agreements.
In 1996, the Company began offering the Stock Purchase Plan to its employees
who work a minimum of 20 hours per week. Under this plan, the Company is
authorized to issue up to 5,000,000 shares of Common Stock. Under terms of the
Stock Purchase Plan and current policies of the administrative committee,
employees may elect to withhold 1 to 20 percent of their cash compensation
through regular payroll deductions to purchase
F-16
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common Stock each year. The purchase price of the stock is 85 percent of the
lower of the price at the grant date, which is the beginning of the plan year
(March 1st) or the exercise date, which is the end of each plan quarter
(February 28, May 31, August 31 and November 30). Approximately 41% of
eligible employees have participated in the Stock Purchase Plan since
inception. Under the Stock Purchase Plan, the Company sold 197,165 shares to
employees in 1996.
The fair value of the stock option grants is estimated using the Black-
Scholes option-pricing model with the following weighted-average assumptions
used for stock option grants in 1996 and 1995, respectively: option price,
which equals the fair market value at date of grant, of $12.39 and $18.97;
expected dividend yields of 0% for both years; expected volatility of 55% for
both years; risk-free interest rates of 6.37% and 6.12%; and expected life of
4.5 years for both years. The fair value of the employees' purchase rights
pursuant to the Stock Purchase Plan are estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
purchase rights granted in 1996: fair market value of $10.75; option price of
$9.14; expected dividend yield of 0%; expected volatility of 51%; risk-free
interest rate of 5.42%; and expected life of three months.
Stock option plan activity during the years ended December 31, 1996, 1995
and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
FIXED OPTIONS SHARES PRICE SHARES PRICE SHARES PRICE
- ------------- ---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 8,026,949 $ 12.09 6,853,673 $ 9.45 6,165,392 $ 7.55
Granted................. 2,606,687 12.39 2,493,753 18.97 2,055,334 12.83
Exercised............... (516,874) 4.60 (742,482) 6.29 (1,084,377) 4.21
Canceled................ (265,407) 14.61 (577,995) 7.60 (282,676) 12.59
---------- ---------- ----------
Outstanding at end of
year................... 9,851,355 $ 12.41 8,026,949 $ 12.09 6,853,673 $ 9.45
========== ========== ==========
Options exercisable at
year-end............... 4,777,941 3,915,068 3,719,479
========== ========== ==========
Weighted-average fair
value of options
granted during the
year................... $ 6.41 $ 9.76
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- -----------------------
WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG.
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OF SHARES CONTRACTUAL LIFE PRICE OF SHARES PRICE
- --------------- --------- ---------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
$.0025-
9.75 1,689,672 5.71 $ 3.10 1,516,126 $ 3.04
10.13-
12.00 1,875,341 9.78 10.57 954,951 10.40
12.38-
14.00 2,597,393 9.39 12.68 951,890 12.83
14.13-
18.19 1,708,715 10.48 15.25 735,913 15.29
$18.25-
57.30 1,980,234 8.56 19.28 619,061 19.58
--------- --------- ---
9,851,355 8.86 $12.41 4,777,941 $10.49
========= =========
</TABLE>
F-17
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1996, 1995 and
1994 consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal....................................... $ -- $ 315 $1,084
State......................................... 175 133 190
Foreign....................................... 1,905 472 836
Deferred:
Federal....................................... (7,838) (7,899) 985
State......................................... (3,617) (4,969) 378
------- -------- ------
$(9,375) $(11,948) $3,473
======= ======== ======
</TABLE>
The reconciliation of income taxes computed using the Federal statutory rate
of 35% to the income tax provision is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory tax........... $(27,068) $(43,358) $ 290
State income tax, net of
federal tax benefit.... (3,442) (4,836) 568
Research and
experimentation
credits................ (1,491) (1,213) (1)
Foreign tax credit...... (59) (239) (60)
Foreign taxes........... 751 240 1,423
Foreign sales
corporation............ (1,036) (294) (401)
Municipal interest...... (289) (554) (431)
Utilization of net
operating losses....... -- -- (302)
Stock acquisitions...... 6,281 11,450 2,626
Change in valuation
allowance.............. 12,608 22,856 (2,293)
Change in tax accounting
method................. -- 176 1,596
Nondeductible merger
costs.................. 1,440 4,625 --
Other................... 2,930 (801) 458
-------- -------- ------
Effective tax........... $ (9,375) $(11,948) $3,473
======== ======== ======
</TABLE>
F-18
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences and carryforwards which give rise
to deferred tax assets and liabilities at December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Deferred revenue.................................... $ 1,152 $ 5,804
Allowance for doubtful accounts..................... 749 964
Net operating loss carryforwards.................... 95,190 53,685
Foreign net operating losses........................ -- 3,006
General business, AMT and state tax credits......... 9,544 6,365
Foreign tax credits................................. 1,138 1,270
Accrued expenses and reserves....................... 157 856
Rent abatement...................................... 1,957 2,143
Other............................................... 5,084 1,153
-------- --------
Total gross deferred tax assets................... 114,971 75,246
Less valuation allowance.............................. (59,936) (47,328)
-------- --------
Net deferred tax assets........................... 55,035 27,918
-------- --------
Deferred tax liabilities:
Capitalized software, net........................... 23,908 12,566
Installment sales................................... 826 1,175
Acquired technology................................. 3,124 2,952
Unrealized gain on marketable equity securities..... 12,499 --
Other............................................... -- 766
-------- --------
Total gross deferred liabilities.................. 40,357 17,459
-------- --------
Net deferred tax asset................................ $ 14,678 $ 10,459
======== ========
</TABLE>
The net change in the total valuation allowance during 1996, 1995 and 1994
was an increase of $12,608,000, an increase of $22,856,000 and a decrease of
$2,293,000, respectively. The Company has reduced the deferred 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, 1996 reflects management's estimate of the amount which will be
realized as a result of future profitability. The amount of the deferred tax
asset considered realizable could be reduced if estimates of future taxable
income are reduced.
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 1996, 1995 and 1994, $0, $0 and
$108,000, respectively, were credited to paid-in capital.
At December 31, 1996, the Company had approximately $234,891,000 of net
operating loss carryforwards and $10,682,000 of tax credit carryforwards,
which are available to reduce future Federal income taxes, if any, through the
year 2011. The Company's ability to utilize the net operating loss
carryforwards and available tax credits may be limited due to changes in
ownership as a result of business combinations.
11. CONVERTIBLE SUBORDINATED NOTES
As of December 31, 1996, the Company had $115,000,000 in convertible
subordinated notes (the "Notes") outstanding, bearing interest at 6.75%
annually. The Notes mature on November 15, 2001. Interest is payable
F-19
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
semi-annually on May 15 and November 15, commencing May 15, 1997. The holders
of the Notes have the option to convert them into shares of Common Stock, at
any time prior to maturity, at a conversion price of $13.95 per share. The
Notes are redeemable at the option of the Company, in whole or in part, at any
time during the twelve-month period commencing November 15, 1999 at 102.7% of
their principal amount and during the twelve-month period commencing November
15, 2000 at 101.35% of their principal amount.
The Company estimated the fair value of the Notes as of December 31, 1996 at
approximately $140,013,000, based upon their trading price on the Nasdaq
SmallCap Market on that date.
12. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office space, computer and telecommunications equipment
under long-term lease agreements expiring through the year 2007. Total future
minimum lease payments under noncancelable leases are as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
1997....................................................... $ 33,196
1998....................................................... 28,810
1999....................................................... 22,931
2000....................................................... 18,323
2001 and thereafter........................................ 41,270
--------
$144,530
========
</TABLE>
Total rent expense under all operating leases amounted to $21,386,000,
$14,869,000 and $11,875,000 in 1996, 1995 and 1994, respectively.
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.
13. OTHER INCOME (EXPENSE)
Other income (expense) for the years ended December 31, 1996, 1995 and 1994
is comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income......... $ 4,978 $4,624 $2,843
Interest expense........ (1,737) (745) (275)
Foreign exchange gain
(loss)................. (35) 66 282
Net realized gain on
sale of investments.... 1,032 332 --
Unrealized gain on
marketable equity
securities............. 920 -- --
Other................... (2) 4 202
------- ------ ------
$ 5,156 $4,281 $3,052
======= ====== ======
</TABLE>
F-20
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
1996
Revenues....................... $ 335,528 $ 77,965 $ 25,697 $ 439,190
Operating loss................. (77,054) (4,856) (583) (82,493)
Identifiable assets............ 513,918 77,518 18,076 609,512
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
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
</TABLE>
The revenues and operating income (loss) amounts above exclude the effect of
intercompany royalties. The North America operating losses in 1996, 1995 and
1994 include all merger costs, restructuring costs and acquired in-process
technology charges.
No single customer accounted for 10% or more of total revenues in 1996, 1995
or 1994.
15. SUBSEQUENT EVENTS
On January 31, 1997, the Company acquired all of the outstanding capital
stock of Australian Technology Resources Pty Limited ("ATR"), a leading
provider of information technology consulting services, in exchange for 313,784
shares of Common Stock, which had a Market Value of approximately $5,000,000 at
the time of the acquisition.
On February 18, 1997, the Company acquired all of the outstanding capital
stock of GEJAC, Inc. ("GEJAC"), a leading provider of UNIX and NT charge-back
software, in exchange for 412,801 shares of Common Stock, which had a Market
Value of approximately $6,800,000 at the time of the acquisition. 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 1997.
On February 28, 1997, the Company acquired all of the outstanding capital
stock of I&S Informationstechnik and Services GmbH ("I&S"), a leading provider
of information technology consulting services, in exchange for 1,089,867 shares
of Common Stock, which had a Market Value of approximately $17,200,000 at the
time of the acquisition.
The acquisitions of ATR and I&S will be accounted for as poolings of
interest. Costs incurred in connection with these transactions will be expensed
in the first quarter of 1997.
F-21
<PAGE>
PLATINUM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The following unaudited pro-forma information shows total revenues and net
income (loss) of PLATINUM, ATR and I&S during the three years ended December
31, 1996, 1995 and 1994, as if the transactions had been consummated on
December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT 1996 1995 1994
PER SHARE DATA) ------------------- ------------------- -------------------
NET INCOME NET INCOME NET INCOME
REVENUES (LOSS) REVENUES (LOSS) REVENUES (LOSS)
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
PLATINUM................ $439,190 $(67,962) $304,676 $(111,933) $225,439 $(2,644)
ATR..................... 9,132 142 9,492 301 10,634 1,016
I&S..................... 19,743 2,898 12,243 65 7,534 66
-------- -------- -------- --------- -------- -------
Total................... $468,065 $(64,922) $326,411 $(111,567) $243,607 $(1,562)
======== ======== ======== ========= ======== =======
Net loss per share...... $ (1.14) $ (2.50) $ (0.04)
======== ========= =======
</TABLE>
F-22
<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, 1995 and 1996, 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, 1996.
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, Locus Computing Corporation, and
Softool Corporation, wholly-owned subsidiaries, which statements reflect total
revenues constituting 36 percent in 1994 of the related consolidated total.
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, 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 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, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 19, 1997, except for Note 15,
which is as of February 28, 1997
F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors of
PLATINUM technology, inc.:
Under date of February 19, 1997 (except as to Note 15, which is as of
February 28, 1997), we reported on the consolidated balance sheets of PLATINUM
technology, inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholder's equity and cash
flows for each of the years in the three-year period ended December 31, 1996,
as contained in the 1996 annual report to stockholders. Our report is based in
part on the reports of other auditors. These consolidated financial statements
and our report thereon are included in the annual report on Form 10-K for the
year ended December 31, 1996. 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.
KPMG Peat Marwick LLP
Chicago, Illinois
February 19, 1997, except for Note 15,
which is as of February 28, 1997
S-1
<PAGE>
SCHEDULE II
PLATINUM TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL ACCOUNTS BEGINNING BAD DEBT ENDING
FOR TRADE AND INSTALLMENT RECEIVABLES BALANCE EXPENSE BALANCE
-------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Year ended December 31, 1996................... $2,809,000 $ 905,000 $3,714,000
Year ended December 31, 1995................... 1,522,000 1,287,000 2,809,000
Year ended December 31, 1994................... 1,290,000 232,000 1,522,000
</TABLE>
S-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THERE UNTO DULY AUTHORIZED, ON THE 28TH DAY
OF MARCH, 1997.
Platinum technology, inc.
/s/ Andrew J. Filipowski
By___________________________________
Andrew J. Filipowski
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Andrew J. Filipowski President, Chief Executive March 28, 1997
____________________________________ Officer (principal executive
Andrew J. Filipowski officer) and Chairman of the
Board of Directors
/s/ Paul L. Humenansky Executive Vice President, March 28, 1997
____________________________________ Chief Operations Officer and
Paul L. Humenansky a Director
/s/ Micahel P. Cullinane Executive Vice President, March 28, 1997
___________________________________ Chief Financial Officer
Michael P. Cullinane (principal financial and
accounting officer),
Treasurer and a Director
/s/ James E. Cowie Director March 28, 1997
____________________________________
James E. Cowie
/s/ Steven D. Devick Director March 28, 1997
____________________________________
Steven D. Devick
/s/ Gian M. Fulgoni Director March 28, 1997
____________________________________
Gian M. Fulgoni
/s/ Arthur P. Frigo Director March 28, 1997
____________________________________
Arthur P. Frigo
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.30 First Amendment, dated as of December 31, 1996, to the Loan
Agreement.
10.31 First Amendment, dated as of May 23, 1996, to the October 31,
1995 Lisle Lease.
10.32 Second Amendment, dated as of May 24, 1996, to the October 31,
1995 Lisle Lease.
10.33 Lease Agreement, dated as of July 17, 1996, between the Com-
pany and Oakbrook Tower Limited Partnership.
21 Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP with respect to the Company's
financial statements and financial statement schedule.
23.2 Consent of Deloitte & Touche LLP with respect to Trinzic's fi-
nancial statements.
23.3 Consent of Arthur Andersen LLP with respect to Locus' finan-
cial statements.
23.4 Consent of Arthur Andersen LLP with respect to Softool's fi-
nancial statements.
27 Financial Data Schedule.
99.1 Report of Deloitte & Touche LLP on Trinzic's financial state-
ments.
99.2 Report of Arthur Andersen LLP on Locus' financial statements.
99.3 Report of Arthur Andersen LLP on Softool's financial state-
ments.
</TABLE>
<PAGE>
EXHIBIT 10.30
FIRST AMENDMENT TO LOAN AGREEMENT
---------------------------------
(REVOLVING LOAN)
----------------
This First Amendment to Loan Agreement ("FIRST AMENDMENT") is made as of
December 31, 1996 (the "AMENDMENT DATE") between American National Bank and
Trust Company of Chicago, a national banking association (together with its
successors and assigns referred to collectively as "LENDER") and Platinum
Technology, Inc., a Delaware corporation ("BORROWER").
RECITALS
--------
A. Borrower and Lender previously entered into that certain Loan
Agreement dated December 31, 1995 (the "AGREEMENT") pursuant to which Lender
established a Twenty-Five Million Dollar ($25,000,000) revolving credit facility
for Borrower (the "LOAN"). All capitalized terms not specifically defined in
this First Amendment will have the meanings ascribed to such terms in the
Agreement. An executed copy of the Agreement (without schedules or exhibits) is
set forth on attached and incorporated EXHIBIT "A" to this First Amendment.
-----------
B. The scheduled Maturity Date for the Loan under the Agreement was
December 31, 1996. The parties, however, have agreed to extend the Maturity
Date until December 31, 1997. In addition, based on the general operations of
Borrower, Lender and Borrower have agreed to modify certain financial covenants
previously set forth in the Agreement.
CLAUSES
-------
In consideration of the preceding, the premises, covenants and obligations
set forth below, and any loans, advances or extensions of credit which Lender
previously, currently or subsequently makes for the benefit of Borrower, the
parties amend the Agreement as follows:
1. Delete existing Section 1.33 of the Agreement in its entirety, and
substitute the following in its place:
"1.33 MATURITY DATE. The term "MATURITY DATE" shall
-------------
mean December 31, 1997. However, the parties may extend
the Maturity Date as provided in Section 2.9 below."
2. Delete existing Section 5.2 of the Agreement in its entirety, and
substitute the following in its place:
1
<PAGE>
5.2 FINANCIAL COVENANTS. At all times, Borrower shall
-------------------
maintain:
(i) a ratio of Indebtedness to Tangible Net Worth of not
more than 1:1; (ii) a constant, minimum Tangible Net
Worth of One Hundred Fifty Million Dollars
($150,000,000); and (iii) a ratio of more than 1:1 of a
fraction determined as follows (A) the numerator of
such fraction will be the sum of Borrower's cash,
current and non-current marketable securities and
accounts receivable, and (B) the denominator of such
fraction will be Borrower's Current Liabilities,
provided however that (C) at all times at least ten
percent (10%) of the total Dollar amount of the
numerator of such fraction must be comprised of cash
and marketable securities. In determining the ratios
described in this Section 5.2, any deferred revenues
reflected by Borrower on its financial statements as
liabilities will be excluded from the definitions of
Indebtedness and Current Liabilities"
3. The parties agree that the Maturity Date as defined in the Note is,
though this instrument, extended until December 31, 1997. Borrower shall
execute a new Note and deliver the same to Lender, immediately on the Amendment
Date, which Note shall be modified solely to account for the change in Maturity
Date stated previously in this Section 3 of this First Amendment. Except as
specifically provided in this Section 3 of this First Amendment, all terms and
provisions of the Note shall remain the same, without change, modification or
deletion.
4. Borrower reaffirms and remakes to Lender all representations and
warranties set forth in Article 4 of the Agreement, and further represents and
warrants to Lender that as of the Amendment Date, no Default Event exists under
the Agreement, Note or any other Loan Document, and Borrower is in full
compliance with all of Borrower's obligations under the Agreement and all other
Loan Documents, including but not limited to Borrower's affirmative and negative
covenants set forth in Articles 5 and 6 of the Agreement.
5. Except as this First Amendment specifically provides otherwise, all
terms and provisions of the Agreement, Note and other Loan Documents shall
remain in full force and effect without change, modification or deletion.
6. The laws of the State of Illinois (other than those which pertain to
conflicts of law) shall govern all terms of this First Amendment, irrespective
of the fact that one or more of the parties now is or may become a resident of a
different state.
7. Lender, by entering into this First Amendment, is not waiving any
rights it may have under the Agreement concerning any breach (whether or not
currently
2
<PAGE>
matured) of Borrower under the Agreement, Note or any other Loan Documents, or
of any matured or unmatured Default Event, whether or not Lender has notice of
the same.
The parties have caused their duly authorized representatives to
execute and deliver this First Amendment as of the Amendment Date.
PLATINUM TECHNOLOGY, INC., A AMERICAN NATIONAL BANK AND TRUST
Delaware Corporation COMPANY OF CHICAGO, A national banking
association
By: /s/ Michael C. Wyett By: ________________________________
-------------------------
Its: S.V.P - General Counsel Its: _______________________________
------------------------
<PAGE>
REVOLVING PROMISSORY NOTE (UNSECURED)
$25,000,000.00 Chicago, Illinois
Due December 31, 1997 December 31, 1996
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay to the
order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO ("Bank"), at its
principal place of business in Chicago, Illinois or such other place as Bank may
designate from time to time hereafter, the principal sum of Twenty Five Million
Dollars ($25,000,000) or such lesser principal sum as may be advanced and owed
by Borrower to Bank pursuant to a certain Loan Agreement dated December 31, 1995
as amended from time to time by and between Borrower and Bank (the "Agreement"),
the terms of which are incorporated by reference and made a part of this Note as
if fully set out.
Borrower's obligations and liabilities to Bank under this Note, and all
other obligations and liabilities of Borrower to Bank (including without
limitation all debts, claims and indebtedness) whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and/or from time to
time hereafter owing, due or payable, however evidenced, created, incurred,
acquired or owing and however arising, whether under this Note, the Agreement,
any agreement, instrument or document heretofore, now or from time to time
hereafter executed and delivered to Bank by or on behalf of Borrower, or by oral
agreement or operation of law or otherwise ("Borrower's Liabilities") shall be
due and payable on December 31, 1997.
Borrower's Liabilities unpaid from time to time shall bear interest from
the date hereof until paid, computed at the "Loan Rate," as such term is defined
in the Agreement; provided, however, that in the event that any of Borrower's
Liabilities are not paid when due, the unpaid amount of Borrower's Liabilities
shall bear interest after the due date until paid at a rate equal to the sum of
(a) the rate in effect prior to the due date and (b) 2%. The Loan Rate shall be
based upon the "Prime Rate" (as defined in the Agreement) or the "Libor Rate"
(as defined in the Agreement).
If accrued interest is based upon Prime Rate, such accrued interest shall
be payable by Borrower to Bank on the first Business Day of each Fiscal Quarter
(as defined in the Agreement), and at maturity. If accrued interest is based
upon Libor Rate, such accrued interest shall be payable by Borrower to Bank on
or before the final day of the Libor Rate Period (as defined in the Agreement)
on which the Libor Rate was based, and at maturity. All interest payments shall
be paid at Bank's principal place of business, or at such other place as Bank
may designate from time to time. "Business Day" means any day of the year on
which Bank is open for business in Chicago, Illinois. Default interest and
accrued interest on all of Borrower's Liabilities after maturity shall be
payable on demand.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes, and
consistently with all applicable laws and statutes.
1
<PAGE>
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any of Borrower's Liabilities when due and payable, and such
default continues uncured for five days; (b) if Borrower fails to perform, keep
or observe any term, provision, condition, covenant, warranty or representation
contained in this Note which is required to be performed, kept, or observed by
Borrower; (c) occurrence of a default or an event of default under the Agreement
or any other agreement, instrument or document heretofore, now or at any time
hereafter delivered by or on behalf of Borrower to Bank which default remains
uncured within the time periods specified in the Agreement or other applicable
agreements.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower, in addition to all other
remedies available to Bank at law, in equity or otherwise: (i) all of Borrower's
Liabilities shall be immediately due and payable; and (ii) Bank may exercise any
one or more of the rights and remedies accruing to an unsecured party under the
Uniform Commercial Code of the relevant jurisdiction and any other applicable
law upon default by a debtor.
All of Bank's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Bank of any partial payment made hereunder
after the time when any of Borrower's Liabilities become due and payable will
not establish a custom, or waive any rights of Bank to enforce prompt payment
thereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver of
an Event of Default hereunder shall not suspend, waive or affect any other Event
of Default hereunder. Borrower and every endorser waive presentment, demand and
protest and notice of presentment, protest, default, non-payment, maturity,
release, compromise, settlement, extension or renewal of this Note, and hereby
ratify and confirm whatever Bank may do in this regard. Borrower further waives
any and all notice or demand to which Borrower might be entitled with respect to
this Note by virtue of any applicable statute or law (to the extent permitted by
law).
Borrower agrees to pay, upon Bank's demand therefor, any and all costs,
fees and expenses (including but not limited to attorneys' fees, costs and
expenses) incurred by Bank: (i) in enforcing any of Bank's rights hereunder, and
(ii) in representing Bank in any litigation, contest, suit or dispute, or to
commence, defend or intervene or to take any action with respect to any
litigation, contest, suit or dispute (whether instituted by Bank, Borrower or
any other person) in any way relating to this Note or Borrower's Liabilities,
and to the extent not paid, the same shall become part of Borrower's Liabilities
hereunder.
This Note shall be deemed to have been submitted by Borrower to Bank at
Bank's principal place of business and shall be deemed to have been made at such
place of business. This Note shall be governed and controlled by the laws of the
State of Illinois as to interpretation, enforcement, validity, construction,
effect, choice of law and in all other respects.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER, IRREVOCABLY, AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS
2
<PAGE>
OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED
TO THIS NOTE SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF
CHICAGO, STATE OF ILLINOIS, BORROWER HEREBY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND
STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS
PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS
NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH IN
THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM ANY
DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY SUCH
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
BORROWER:
PLATINUM TECHNOLOGY, INC., a
Delaware corporation
By: /s/ Michael C. Wyatt
------------------------------------
Signature
Senior Vice President & General Counsel
---------------------------------------
Title
3
<PAGE>
EXHIBIT 10.31
FIRST AMENDMENT AGREEMENT
-------------------------
THIS FIRST AMENDMENT AGREEMENT (the "Amendment") is made as of the 23rd day
of May, 1996, by and between LISLE PROPERTY VENTURE, INC., a Delaware
corporation ("LANDLORD") and PLATINUM TECHNOLOGY, INC., a Delaware corporation
("TENANT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, LANDLORD and TENANT have heretofore made and entered into a lease
dated October 31, 1995 (the "Lease"); and
WHEREAS, LANDLORD and TENANT wish to add Space 1 (hereinafter described) to
the PREMISES subject to the terms hereof; and
WHEREAS, the parties wish to modify the Lease.
NOW, THEREFORE, in consideration of the premises, the Lease is amended as
follows:
MODIFICATION TO EXISTING TERMS OF LEASE
---------------------------------------
For the balance of the Term after August 1, 1996, the following changes are
made to the Lease:
(a) On August 1, 1996, the PREMISES is changed to add and include
"Space 1" outlined on Appendix "A", which is located on the second floor of
550 Warrenville Road.
(b) Beginning August 1, 1996, the rentable square feet of the
PREMISES is increased by 2,769 square feet.
(c) Section 4B, for periods beginning October 1, 1996, the TENANT'S
PROPORTIONATE SHARE is increased by 1.60%.
(d) Section 5, the Annual Base Rent and Monthly Base Rent for the
Period after October 1, 1996 (Annual Base Rent and Monthly Base Rent for
partial years or months shall be prorated) shall be increased by the
amounts in the following schedule:
<PAGE>
<TABLE>
<CAPTION>
Increase to Increase to Net
Annual Base Monthly Rent
Dates Rent Base Rent PSF for
----- ----------- ---------
Space 1
-------
<S> <C> <C> <C>
10/96-9/97 $48,236.04 $4,019.67 $17.42
10/97 $48,557.52 $4,046.46 $17.54
11/97-9/98 $49,066.68 $4,088.89 $17.72
10/98 $49,398.96 $4,116.58 $17.84
11/98-9/99 $49,925.04 $4,160.42 $18.03
10/99 $50,268.00 $4,189.00 $18.15
11/99-9/00 $50,811.12 $4,234.26 $18.35
10/00 $51,164.88 $4,263.74 $18.48
11/00-9/01 $51,724.92 $4,310.41 $18.68
10/01 $52,089.36 $4,340.78 $18.81
11/01-9/02 $52,666.44 $4,388.87 $19.02
10/02 $53,041.56 $4,420.13 $19.16
11/02-9/03 $53,635.56 $4,469.63 $19.37
10/1/03-10/19/03 $2,739.45*
</TABLE>
*Prorated for partial month.
ADDITIONAL TERMS
----------------
1. Space 1 shall be delivered on or prior to August 1, 1996 (subject to
Additional Term 2 below) "as is." LANDLORD shall perform no demolition or base
building work for Space 1.
2. The date August 1, 1996 above may be extended for any period of delay
in delivery of possession of Space 1 caused by any of the causes described in
Section 27 of the Lease or failure of the present tenant of Space 1 to vacate
Space 1 prior to August 1, 1996, in which case the dates set forth in clauses a,
b, c and d herein above shall be delayed for a period of time equal to such
period of delay.
3. LANDLORD shall provide TENANT with an allowance of $30 per rentable
square foot of Space 1 (title "Allowance") to be applied for the improvements to
be installed in Space 1 (the "TENANT'S Work"), including all required demolition
and the cost of
-2-
<PAGE>
acquiring and installing telephone equipment and cabling, MEP engineering fees,
signage and security system. No portion thereof shall be used for space planning
or for furniture or moving costs. Such Allowance shall be disbursed in
accordance with and be subject to all the terms and conditions of Section 5 of
the Appendix C to the Lease as if it were the Allowance specified therein and
TENANT's Work specified therein. TENANT's Work and the plans therefor shall be
subject to all of the terms of the Lease applicable to the original TENANT's
Work described therein and the plans therefor.
4. TENANT understands that LANDLORD will not sign this Amendment until
the present tenant of Space 1 agrees to terminate its lease as to Space 1 upon
terms and conditions satisfactory to LANDLORD. TENANT agrees that this Amendment
is signed by TENANT and that it may be executed by LANDLORD at any time on or
prior to June 30, 1996. TENANT agrees not to revoke its execution hereof prior
to July 1, 1996.
5. TENANT represents that TENANT has default directly with and only with
Corporetum Development Company and Stein and Company Corporate Service, Inc. as
broker in connection with this Amendment and agrees to indemnify and hold
LANDLORD harmless from all claims or demands of any other broker or brokers for
any commission alleged to be due such broker or brokers as a result of any
agreement or alleged agreement with TENANT regarding this Amendment, LANDLORD
shall indemnify and hold TENANT harmless from all claims or demands of
Corporetum Development Company and Stein and Company Corporate Service, Inc. or
any other broker alleging a commission due to such broker as a result of any
agreement with LANDLORD regarding this Amendment. LANDLORD will pay brokerage
fees to Stein and Company Corporate Service, Inc. pursuant to a separate
agreement.
6. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Lease.
7. Except as herby specifically amended, the Lease remains in full force
and effect.
8. Redress for any claims against LANDLORD under the Lease shall only be
made against LANDLORD to the extent of LANDLORD's interest in the PROPERTY of
which the PREMISES are a part. The obligations of LANDLORD under the Lease shall
not be personally binding on LANDLORD, nor shall any resort be had to the
private properties of
-3-
<PAGE>
LANDLORD or the investment manager or to any of their respective trustees,
boards of directors or officers, as the case may be, or to the general partners
or any beneficiaries, stockholders, employees or agents thereof.
LISLE PROPERTY VENTURE, INC.
By Robert M. Chapman
------------------------------
Its V.P.
----------------------------
PLATINUM TECHNOLOGY, INC.
By /s/ M. Cullinane
------------------------------
Its CHIEF FINANCIAL OFFICER
----------------------------
-4-
<PAGE>
APPENDIX "A"
DIAGRAM SHOWING
(A)
(B)
[FLOOR PLAN APPEARS HERE]
(A) BUILDING VI - SECOND FLOOR PLAN (B) CORPORETUM OFFICE CAMPUS
------------------------------- ------------------------
BUILDING NUMBER SIX
550 WARRENVILLE ROAD
LISLE, ILLINOIS
SECOND FLOOR
SPACE #1 -- 2,769 SQUARE FEET
<PAGE>
EXHIBIT 10.32
SECOND AMENDMENT AGREEMENT
--------------------------
THIS SECOND AMENDMENT AGREEMENT (the "Amendment") is made as of the 24th
day of May, 1996, by and between Lisle Property Venture, Inc., a Delaware
corporation ("LANDLORD") and Platinum Technology, Inc., a Delaware corporation
("TENANT").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, LANDLORD and TENANT have heretofore made and entered into a lease
dated October 31, 1995 and if executed by LANDLORD, amended by a First Amendment
Agreement (the "First Amendment") dated May 23, 1996 (the "Lease"); and
WHEREAS, LANDLORD and TENANT wish to add Space 2 (hereinafter described) to
the PREMISES subject to the terms hereof; and
WHEREAS, the parties wish to modify the Lease.
NOW, THEREFORE, in consideration of the premises, the Lease is amended as
follows:
MODIFICATION TO EXISTING TERMS OF LEASE
---------------------------------------
For the balance of the Term after August 1, 1996, the following changes are
made to the Lease:
(a) on August 1, 1996, the PREMISES is changed to add and include
"Space 2" outlined on Appendix "A," which is located on the first of 650
Warrenville Road.
(b) Beginning August 1, 1996, the rentable square feet of the
PREMISES is increased by 7,758 square feet.
(c) Section 4B, for periods beginning November 11, 1996, the TENANT'S
PROPORTIONATE SHARE is increased by 4.49%.
(d) Section 5, the Annual Base Rent and Monthly Base Rent for the
Period after November 11, 1996 (Annual Base Rent and Monthly Base Rent for
partial years or months shall be prorated) shall be increased by the amounts in
the following schedule:
<PAGE>
<TABLE>
<CAPTION>
Increase to Increase to Net
Annual Base Monthly Rent
Dates Rent Base Rent PSF for
----- -------- ---------
Space
-----
<S> <C> <C> <C>
11/11/96-11/30/96 $ 8,913.08*
12/96-9/97 $160,435.44 $13,369.62 $20.68
10/97 $161,606.64 $13,467.22 $20.83
11/97-9/98 $163,461.12 $13,621.76 $21.07
10/98 $164,662.32 $13,721.86 $21.22
11/98-9/99 $166,564.32 $13,880.36 $21.47
10/99 $167,795.52 $13,982.96 $21,63
11/99-9/00 $169,745.04 $14,145.42 $21.88
10/00 $171,036.36 $14,253.03 $22.05
11/00-9/01 $173,081.04 $14,423.42 $22.31
10/01 $174,402.36 $14,533.53 $22,48
11/01-9/02 $176,494.56 $14,707.88 $22.75
10/02 $177,845.88 $14,820.49 $22.92
11/02-9/03 $179,985.60 $14,998.80 $23.20
10/1/03-10/19/03 $ 9,192.81*
</TABLE>
* Prorated for partial month.
ADDITIONAL TERMS
----------------
1. Space 2 shall be delivered on or prior to August 1, 1996 (subject to
Additional Term 2 below) "as is. "LANDLORD shall perform no demolition or base
building work for Space 2.
2. The date August 1, 1996 above may be executed for any period of delay
in delivery of possession of Space 2 caused by any of the causes described in
Section 27 of the Lease or failure of the present tenant of Space 2 to vacate
Space 2 prior to August 1, 1996, IN WHICH CASE THE DATES SET FORTH IN CLAUSES A,
B, C, & D HEREIN ABOVE SHALL BE DELAYED FOR A PERIOD OF TIME EQUAL TO SUCH
PERIOD OF DELAY.
3. LANDLORD shall provide TENANT with an allowance of $30 per rentable
square foot of Space 2 (the "Allowance") to be applied for the improvements to
be installed in Space 2 (the "TENANT'S Work"), including all required demolition
and the cost of
-2-
<PAGE>
acquiring and installing telephone equipment and cabling, MEP engineering fees,
signage and security system. No portion thereof shall be used for space
planning or for furniture or moving costs. Such Allowance shall be disbursed in
accordance with and be subject to all the terms and conditions of Section 5 of
Appendix C to the Lease as if it were the Allowance specified therein and
TENANT's Work described in this Amendment was the TENANT's Work specified
therein. TENANT's Work and the plans therefor shall be subject to all of the
terms of the Lease applicable to the original TENANT's Work described therein
and the plans therefor.
4. TENANT understands that LANDLORD will not sign this Amendment until
the present tenant of Space 2 agrees to terminate its lease as to Space 2 upon
terms and conditions satisfactory to LANDLORD. TENANT agrees that this
Amendment is signed by TENANT and that it may be executed by LANDLORD at any
time on or prior to June 30, 1996. TENANT agrees not to revoke its execution
hereof prior to July 1, 1996. TENANT agrees that LANDLORD may sign this
Amendment whether or not LANDLORD signs the First Amendment.
5. TENANT represents that TENANT has dealt directly with and only with
Corporetum Development Company and Stein and Company Corporate Service, Inc. as
broker in connection with this Amendment and agrees to indemnify and hold
LANDLORD harmless from all claims or demands of any other broker or brokers for
any commission alleged to be due such broker or brokers as a result of any
agreement or alleged agreement with TENANT regarding this Amendment. LANDLORD
shall indemnify and hold TENANT harmless from all claims or demands of
Corporetum Development Company and Stein and Company Corporate Service, Inc. or
any other broker alleging a commission due to such broker as a result of any
agreement with LANDLORD regarding this Amendment. LANDLORD will pay brokerage
fees to Stein and Company Corporate Service, Inc. pursuant to a separate
agreement.
6. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Lease.
7. Except as hereby specifically amended, the Lease remains in full force
and effect.
8. Redress for any claims against LANDLORD under the Lease shall only be
made against LANDLORD to the extent of LANDLORD's interest in the PROPERTY of
which the PREMISES are a part. The obligations of LANDLORD under the Lease
shall not be personally binding on LANDLORD, nor shall any resort be had to the
private properties of
-3-
<PAGE>
LANDLORD or the investment manager or to any of their respective trustees,
boards of directors or officers, as the case may be, or to the general partners
of any beneficiaries, stockholders, employees or agents thereof.
LISLE PROPERTY VENTURE, INC.
By Robert M. Chapman
-------------------------
Its V.P.
-----------------------
PLATINUM TECHNOLOGY, INC.
By M. Cullinane
-------------------------
Its CHIEF FINANCIAL OFFICER
-----------------------
-4-
<PAGE>
APPENDIX "A"
DIAGRAM SHOWING
(A)
(B)
[FLOOR PLAN APPEARS HERE]
(A) BUILDING V -- FIRST FLOOR PLAN (B) CORPORETUM OFFICE CAMPUS
------------------------------ ------------------------
BUILDING NUMBER SIX
650 WARRENVILLE ROAD
LISLE, ILLINOIS
FIRST FLOOR
SPACE NO. 2 -- 7,758 SQUARE FEET
<PAGE>
EXHIBIT 10.33
- --------------------------------------------------------------------------------
LOGO OF OAKBROOK TERRACE TOWER APPEARS HERE
LEASE WITH
PLATINUM TECHNOLOGY, INC
- --------------------------------------------------------------------------------
TENANT
LEASING AGENTS
MIGLIN-BEITLER MANAGEMENT CORPORATION
181 West Madison Street
Suite 3900
Chicago, Illinois 60602
<PAGE>
LEASE
FOR
OAKBROOK TERRACE TOWER
This Lease is made and entered into at Oakbrook Terrace, Illinois, as of
the seventeenth (17th day of July_ _, 1996 by and between OAKBROOK TOWER LIMITED
PARTNERSHIP not individually, but solely and only as Trustee under a certain
Trust Agreement dated the 1st day of September, 1984, and known as Trust Number
1087600 (the "Landlord") and Platinum Technology Inc., a Delaware Corporation
(the "Tenant"), as follows
1. Lease of Premises. The Landlord hereby leases to the Tenant and the
Tenant hereby accepts the lease of the premises consisting of that certain
storage/warehouse space shown outlined in red or a heavy line on the plan
attached hereto as Exhibit A and incorporated herein by reference (the
"Premises") located on the Upper Level in the storage area of the office
building (the "Building") located on the real estate commonly known as Oakbrook
Terrace Tower, Oakbrook Terrace, Illinois (the "Real Estate"). The Building and
the Real Estate together with the vehicular drives, the above and below ground
parking facilities, and all other structures and improvements now or hereinafter
located upon the Real Estate are hereinafter sometimes collectively referred to
as the "Property." It is mutually agreed that the Premises contain 40,000
rentable square feet.
2. Term. The said lease of the Premises is for the term of six (6) years
and six (6) months commencing on that date (the "Commencement Date") which is
the earlier of (i) October 15, 1996, (ii) substantial completion of the Premises
with "Tenant's Work" (as defined in Section 14 of the Rider), or (iii) the date
upon which the Tenant utilizes any portion of the Premises for business purposes
(as opposed to occupancy and use of the Premises to make alterations therein),
and ending on the last day of the 78th month subsequent to the Commencement Date
(the "Term"), unless sooner terminated as hereinafter provided.
3. Rent. Tenant will pay to Landord's rental agents, MIGLIN- BEITLER
MANAGEMENT CORPORATION (the "Rental Agents"), at 181 West Madison Street, Suite
3900, Chicago, Illinois, 60602, or to such other persons or at such other places
as the Landlord may direct from time to time by written notice to the Tenant, in
coin or currency which at the time of payment is legal tender for the payment
of public and private debts in the United States of America, the aggregate of
the following, all of which are hereby declared to be "Rent."
A. The sum of SEE SECTION 2 OF THE LEASE RIDER
------------------------------------------------------
________________________________________________________________________________
____________________________________________DOLLARS($ __________________________
for each twelve-month period during the Term of this Lease, payable in advance
in equal monthly installments of _______________________________________________
SEE SECTION 2 OF THE LEASE RIDER
________________________________________________________________________________
____________________________________________DOLLARS($ __________________________
each promptly on the first day of each and every calendar month during the Term
of this Lease (the "Base Rent").
C. Interest at the "Default Rate" from the due date of each payment
of Rent until paid. The phrase "Default Rate" means the lower of: (i) the
highest lawful rate, or (ii) a rate of interest equal to the sum of three
percent (3%) plus the "Prime Rate." The phrase "Prime Rate" means that rate of
interest most recently announced by the First National Bank of Chicago ("First")
as its prime rate or basic rate, changing
<PAGE>
simultaneously and automatically with each announced change by First in its
prime rate or its base rate, such change to be effective as of and on the date
announced by First as the effective date for the change in its said prime rate
or base rate. A certificate made by an officer of First stating its prime rate
or its base rate in effect on a certain day or prime rates or base rates in
effect during a certain period shall, for the purposes hereof, be conclusive
evidence of First's prime rate or rates or base rate or rates on said day or
such period, as may be stated in any such certificate. In the event First ceases
to use the term Prime Rate in setting a base rate of interest for commercial
loans, then the Prime Rate herein shall be determined by reference to the rate
used by First as a base rate of interest for commercial loans as the same shall
be designated by First to the Landlord.
In the event the Term of this Lease commences on a day other than the
first day of a calendar month or ends on a day other than the last day of a
calendar month, the Rent for such month shall be prorated Tenant's covenant to
pay Base Rent, independent of every other covenant set forth in this Lease.
2
<PAGE>
5. Security Deposit. As additional security for faithful and prompt
performance of its obligations hereunder Tenant has concurrently with the
execution of this Lease paid to Landlord's said Rental Agent the sum of $ NONE.
----
Said security deposit need not be segregated and may be applied by Landlord for
the purpose of curing any default or defaults of Tenant hereunder, in which
event, Tenant shall replenish said deposit in full by promptly paying to
Landlord on demand the amount so applied. Landlord shall not pay any interest on
said deposit, except as required by law. If Tenant has not defaulted hereunder
and Landlord has not applied said deposit to cure a default, or Landlord has
applied said deposit to cure a default and Tenant has replenished the same, then
said deposit, or such remaining portion thereof, shall be paid to Tenant after
the termination of this Lease. Said deposit shall not be deemed an advance
payment of Rent or a measure of Landlord's damages for any default hereunder by
Tenant.
6. Use. Tenant shall occupy and use the Premises for general storage and
warehouse purposes only. See Section 16 of the Lease Rider.
3
<PAGE>
8. Tenant's Obligations.
A. Repairs. Except for ordinary wear and as otherwise provided in
this Lease, Tenant shall, at all times during the Term hereof, at its sole
expense, keep all Tenant's movable and removable fixtures located in or
appurtenant to the Premises in good order, repair and condition, and Tenant
shall promptly arrange with Landlord to have Landlord (or Landlord's agent) make
repairs of all other damages to the Premises and the replacement or repair of
all damaged or broken glass (including signs thereon), fixtures and
appurtenances (including hardware and heating, cooling, ventilating, electrical,
plumbing and other mechanical facilities in the Premises), with materials equal
in quality and class to the original materials damaged or broken, within any
reasonable period of time specified by Landlord. Landlord may, but shall not be
required to do so, enter the Premises at all reasonable times to make any
repairs, alterations, improvements or additions, including, but not limited to,
ducts and all other facilities for heating and air conditioning service, as
Landlord shall desire or deem necessary for the safety, preservation or
improvement of the Building, or as Landlord may be required to do by the
municipality in which the Building is located or by the order or degree of any
court or by any other proper authority. The cost of all repairs made by Landlord
to the Property which are made necessary as a result of misuse or neglect by
Tenant or Tenant's employees, invitees or agents or resulting from the Tenant's
failure to maintain and repair systems (including but not limited to HVAC,
plumbing and electrical systems), servicing the Premises in accordance with the
provisions contained in the Lease Rider,) shall be paid as additional Rent by
Tenant to Landlord within ten (10) business days of being billed for same. The
cost of all other repairs and replacements (except those caused by Tenant's
misuse or negligence and those relating to Tenant's movable fixtures) shall be
paid for by the Landlord. SEE SECTION 3 OF THE LEASE RIDER.
C. Doors to be Locked. Before leaving the Premises unattended,
Tenant shall close and securely lock all doors and shut off all utilities in the
Premises.
4
<PAGE>
D. Holding Over. Tenant shall pay to the Landlord for each day Tenant
retains possession of the Premises or any part thereof after termination hereof,
by lapse of time or otherwise, 150% the amount of the daily rental then required
by the terms hereof for the last monthly period prior to the date of such
termination and in addition if Tenant shall hold over in the Premises in excess
of thirty (30) days pay all damages sustained by Landlord by reason of such
retention, but acceptance by Landlord of rent after such termination shall not
constitute a renewal nor waive Landlord's right of reentry or any other right.
E. Laws and Regulations. Tenant shall comply with all reasonable rules and
regulations Landlord may adopt from time to time for the protection and welfare
of the Building, the Property and its tenants and occupants, and comply with all
laws, ordinances, orders and regulations and with the directions of any public
officers authorized by law with respect to the Premises and the use and
occupancy thereof. SEE SECTION 24 OF THE LEASE RIDER
F. Signs. Tenant shall not paint, display, inscribe or affix any sign,
trademark, picture, advertising, notice, lettering or direction on any part of
the outside or inside of the Building, except on the public hallways of the
Premises, and then only such name or names or matter and of such color, size,
style, character and material as shall be first approved by Landlord in writing.
Landlord reserves the right to remove any other matter, without notice to Tenant
and at the cost and expense of Tenant. SEE SECTION 5 OF THE LEASE RIDER
G. Advertising. Tenant shall not use the name of the Building for any
purpose other than that of the business address of tenant, or use any picture or
likeness of the Building or "Oakbrook Terrace Tower" or any other name by which
the Building may from time to time be known, on any letterhead, envelope,
circular, notice, advertisement, container or wrapping material, without the
prior written consent of Landlord.
H. Articles Sold. Tenant shall not exhibit, sell or offer for sale, rent or
exchange in the Premises or on the Property any article, thing or service except
those ordinarily embraced within the use of the Premises specified in Section 6
without the prior written consent of Landlord.
I. Hazardous Materials. Tenant shall not use or permit to be brought into
or kept in the Premises or on the Property any inflammable oils or fluids, or
any explosive or other articles deemed hazardous to person or property. SEE
SECTION 25 OF THE LEASE RIDER
J. Various Prohibited Uses. Tenant shall not carry on any mechanical
business without the prior written consent of Landlord; use the Premises for
housing, lodging or sleeping purposes; permit food to be brought into the
Premises for consumption therein, by anyone other than Tenant's employees,
business invitees and agents without the prior written consent of Landlord.
Landlord may in its sole discretion refuse such permission or impose any
conditions in granting it, and revoke it at will. Tenant shall not occupy or use
the Premises or permit the Premises to be occupied or used for any purpose, act
or thing which is in violation of any public law, ordinance or governmental
regulation or which may be dangerous to persons or property, or which may
invalidate or increase the amount of premiums for any policy of insurance
carried on the Building or covering its operation or violate the terms thereof;
provided, however, that if any additional amounts of insurance premiums are
caused by Tenant's occupancy or use of the Premises. Tenant shall pay to
Landlord said additional amounts. Tenant, at its sole expense, shall comply with
all rules, regulations and requirements of the Illinois Inspection and Rating
Bureau. Tenant shall not do or permit anything to be done upon the Premises, or
bring or keep anything thereon by its employees, agents and business invitees
which is in violation of rules, regulations or requirements of the City of
Oakbrook Terrace Fire Department, Illinois Inspection and Rating Bureau, Fire
Insurance Rating Organization, or any other similar authority having
jurisdiction over the Building. Tenant shall not use the Premises for housing
accommodations, for lodging or sleeping purposes or for any illegal purposes.
Tenant shall not at any time engage in the manufacture, sale, purchase, use or
gift of any spirituous, fermented, intoxicating or alcoholic liquors from the
Premises or property.
K. Sound Devices. Tenant shall not place any radio or television
antenna aerial wires or other equipment on the roof or on or in any part of the
inside or outside of the Building other than the inside of the Premises; operate
or permit to be operated any musical or sound producing instrument or device
inside or outside the Premises which may be heard outside the Premises, and
which interferes with other tenants of the Building, operate any electrical
device which interferes with or impair radio or television broadcasting or
reception from or in the Building or elsewhere.
5
<PAGE>
L. Nuisances. Tenant shall not bring or permit to be in the Building
any bicycle or other vehicle, or dog (except in the company of a blind person)
or other animal: make or permit any noxious noise, vibration or odor to emanate
from the Premises: do anything therein tending to create, or maintain, a
nuisance: disturb, solicit or canvass any occupant of the Building.
M. Cleanliness and Obstruction of Public Areas. Tenant shall take or
permit to be taken in or out of other entrances of the Building, or take or
permit on other elevators, any item normally taken in or out through the
trucking concourse or service doors or in or on freight elevators or, whether
temporarily, accidentally or otherwise, allow anything to remain in place or
store anything in, or obstruct in any way, any common area, passageway, exit,
stairway, elevator, shipping platform, or truck concourse. Tenant shall lend its
full cooperation to keep such areas free from all obstruction and move all
supplies, furniture and equipment as soon as received directly to the Premises
and move all such items and waste, other than waste customarily removed by
employees of the Building, being taken from the Premises, directly to the
shipping platform at or about the time arranged for removal therefrom.
N. Overload Any Floor. Tenant shall not overload any floors.
O. Defacing Premises. Tenant shall not do any or mark, paint, cut or
drill into, drive nails or screws into, or commits waste in any part of the
Premises or the Building, outside or inside, without the prior written consent
of Landlord. (If Tenant desires signal, communication, alarm or other utility or
service connections installed or changed, the same shall be made by and at the
expense of Tenant, with the approval and under direction of Landlord.)
P. Alterations. *Tenant shall not make installations, alterations or
additions in or to the Premises without submitting plans and specifications to
Landlord and securing the prior written consent of Landlord in each instance.
Such work shall be done at the sole cost and expense of Tenant by employees of
or contractors employed by Landlord, or with Landlord's consent in writing given
prior to letting of contract, by contractors employed by Tenant, but in each
case, only under written contract previously approved in writing by Landlord,
and subject to all reasonable conditions Landlord may impose. All installations,
alterations and additions shall be constructed in a good and workmanlike manner
and only good grades of material shall be used, and shall comply with all
reasonable insurance requirements, and with all ordinances and regulations of
the City of Oakbrook Terrace or any department or agency thereof, and with the
requirements of all statutes and regulations of the State of Illinois or any
department or agency thereof. Tenant shall permit Landlord to supervise all
construction operations within the Premises. If alterations are made by Tenant's
contractors, Tenant shall furnish to Landlord prior to commencement thereof,
building permits and certificates of appropriate insurance, and upon completion
of any installation, alteration or addition. Contractor's Affidavits and full
and Final Waivers of Lien covering all labor and material expended and used.
Tenant shall hold Landlord harmless from all claims, costs, damages, liens and
expenses which may arise out of or be connected in any way with said
installations, alterations or additions.
9. Rights Reserved to Landlord. Landlord shall have the following rights
exercisable without notice and ** without liability to Tenant for damage or
injury to property, person or business (all claims for damage being hereby
released), and without effecting an eviction or disturbance or Tenant's use or
possession or giving rise to an claim for scroffs, or abatement of rent:
A. To change the name or street address of the Building.
B. To install and maintain signs on the exterior and interior of the
building (excluding the interior of the Premises) or anywhere on the Property.
C. To have passkeys to the Premises. SEE SECTION 4 OF THE LEASE RIDER
D. To decorate, remodel, repair, alter or otherwise prepare the
Premises for reoccupancy
* other than the initial improvements contemplated by Section 14 of the Lease
Rider
** except as specifically provided in the Lease Rider
6
<PAGE>
during the last six months of the Term hereof, if during or prior to such time
Tenant vacates the Premises, or any time after Tenant abandons the Premises.
F. To enter the Premises at reasonable hours to make inspections, or
to exhibit the Premises to prospective tenants, purchasers or others, or for
other reasonable purposes.
G. To have access to all mail chutes according to the rules of the
United States Post Office.
H. To require all persons entering or leaving the main entrance of
the Building during such hours as Landlord may from time to time reasonably
determine to identify themselves to a watchman by registration or otherwise and
to establish their right to leave or enter, and to exclude or expel any peddler,
solicitor or beggar at any time from the Premises or the Property.
I. To approve the location of heavy items in and about the Premises
and the Building and to require all such items and other office furniture and
equipment to be moved in and out of the Property and Premises only through the
loading dock and in all events at Tenant's sole risk and responsibility.
J. At any time or times, to decorate but not within the Premises and
to make, at its own expense, repairs, alterations, additions and improvements,
structural or otherwise, in or to the Premises, the Property or part thereof,
and to perform any acts related to the safety, protection or preservation
thereof, and during such operations to take into and through the Premises or any
part of the Property all material and equipment required and to close or
temporarily suspend operation of entrances, doors, corridors, elevators or other
facilities, provided that Landlord shall cause as little inconvenience or
annoyance to Tenant as is reasonably necessary in the circumstances, and shall
not do any act which permanently reduces the size of the Premises. Landlord may
do any such work during ordinary business hours and Tenant shall pay Landlord
for overtime and for any other expenses incurred if such work is done during
other hours at Tenant's request.
K. To do or permit to be done any work in or about the Premises or
the Property or any adjacent nearby building, land, street or alley.
L. To grant to anyone the exclusive right to conduct any business or
render any service on the Property, provided such exclusive right shall not
operate to exclude Tenant from the use expressly permitted by Section 6 of this
Lease.
M. To close the Building at 8:00 p.m. or at such reasonable time as
Landlord may determine, subject, however, to Tenant's right to admittance under
such regulations as shall be prescribed from time to time by Landlord.
10. TELEPHONE, ELECTRIC AND OTHER SERVICES.
A. Tenant shall make arrangements directly with the telephone
companies servicing the Building for such telephone service in the Premises as
may be desired by Tenant. Tenant shall pay the entire cost of all telephone
charges, electricity consumed within the Premises, the installation of
electrical meters, maintenance of light fixtures and replacement of lamps,
bulbs, tubes, ballasts and starters.
B. If Tenant desires telegraphic, telephonic, burglar alarm, computer
installations or signal service (which service shall be at Tenant's sole
expense), Landlord shall, upon request, direct where and how all connections
and wiring for such service shall be introduced and run. In the absence of such
directions, Tenant shall make no borings, cutting or install any wires or cables
in or about the Premises.
C. Tenant covenants and agrees that Landlord shall in no event be
liable or responsible to Tenant for any loss, damage or expense which Tenant may
sustain or incur if either the quality or character of electrical service is
changed or is no longer suitable for Tenant's requirements. Tenant covenants and
agrees that at all times its use of electric current shall never exceed 5.5
watts per rentable square foot in the office portion of the Premises and 2.0
watts per rentable square foot in the warehouse portion of the Premises, and
also that it shall make no alterations or additions to the electric equipment
and/or appliances without the prior written consent of Landlord in each
instance.
11. Landlord's Title. Landlord's title is and always shall be paramount to
the title of Tenant. Nothing herein contained shall empower Tenant to do any act
which can, shall or may encumber the title of Landlord.
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12. Quiet Enjoyment. Subject to the provisions of this Lease, Landlord
covenants that Tenant, on paying the Rent and performing the covenants of this
Lease on its parts to be performed, shall and may peaceably and quietly have,
hold and enjoy the Premises for the Term of this Lease.
SEE LEASE RIDER SECTION 19.
14. Condition of Premises*. Tenant's taking possession shall be conclusive
evidence that the Premises were then in good order, repair and satisfactory
condition. Except as may be set forth in the Lease Rider attached hereto, no
promise to Landlord to alter, remodel, improve, repair, decorate or clean the
Premises or any part thereof, and no representation respecting the condition of
the Premises or the Property has been made to Tenant by Landlord except as made
herein.
15. Termination. At the termination of this Lease, by lapse of time or
otherwise:
A. Surrender of Keys. Tenant shall surrender all keys of the
Premises to Landlord and make known to Landlord the explanation of all
combination locks remaining on Premises.
B. Return of Premises. Tenant shall return to Landlord the Premises
and all equipment and fixtures of Landlord in as good a condition and state of
repair as when Tenant originally took possession subject, however, to (a) the
provisions of Paragraphs C and D of this Section 15; (b) ordinary wear and loss
or damage by fire; or (c) other casualty covered in Section 17 hereof, failing
which Landlord may restore the Premises, equipment and fixtures to such
condition and state of repair and Tenant shall, within ten (10) business days of
demand, pay to Landlord the reasonable cost thereof.
C. Removal of Additions. All installations, additions, hardware,
nontrade fixtures and improvements temporary or permanent, except movable
furniture and equipment belonging to Tenant, in or upon the Premises, whether
placed there by Tenant or Landlord, shall be Landlord's property and shall
remain upon the Premises, all without compensation, allowance or credit to
Tenant; provided, however, that if prior to such termination or within ten
business days thereafter Landlord so directs by notice, Tenant shall promptly
remove the installations, additions, hardware, non-trade fixtures and
improvements, placed in or upon the Premises by Tenant and designated in the
notice, failing which Landlord may remove the same and Tenant shall, upon
demand, pay to Landlord the reasonable cost of such removal and of any necessary
restoration of the Premises. SEE LEASE RIDER SECTION 18.
D. Floor Covering. Tenant may remove any floor covering entirely
paid for and laid by Tenant, provided Tenant (a) removes all fastenings, paper,
glue, bases and other vestiges thereof and restores the floor surface to its
previous condition, or (b) pays to Landlord, upon demand, the cost of
* Except for landlord's obligation to complete Landlord's Work (as defined in
Section 11 of the Lease Rider),
** SEE LEASE RIDER SECTION 18
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restoring the floor surface condition.
E. Property Presumed Abandoned. All fixtures, installations, and
personal property belonging to Tenant not removed from the Premises upon
termination of this Lease and not required by Landlord to have been removed as
provided in Paragraph C of this Section 15, shall be conclusively presumed to
have been abandoned by Tenant and title thereto shall pass to Landlord under
this Lease as by a Bill of Sale. See Section 20 of the Lease Rider.
16. Assignment and Subletting. Tenant shall not, without the prior written
consent of Landlord in each instance: (i) assign, transfer, mortgage, pledge,
hypothecate or encumber, or subject to or permit to exist upon or be subjected
to any lien or charge, this Lease or any interest under it; (ii) allow to exist
or occur any transfer of or lien upon this Lease or the Tenant's interest herein
by operation of law; (iii) sublet the Premises or any part thereof; or (iv)
permit the use or occupancy of the Premises or any part thereof for any purpose
not provided for under Section 6 of this Lease or by anyone other than the
Tenant and Tenant's employees. In no event shall this Lease be assigned or
assignable by voluntary or involuntary bankruptcy proceedings or otherwise, and
in no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency or reorganization proceedings.
Tenant shall, by notice in writing, advise Landlord of its intention
from, on and after a stated date (which shall not be less than sixty (60) days
after date of Tenant's notice) to assign or transfer its interest as Tenant in
this Lease, or sublet any part or all of the Premises for the balance or any
part of the Term, and in such event, Landlord shall have the right to be
exercised by giving written notice to Tenant thirty (30) days after receipt of
Tenant's notice, to recapture the space described in Tenant's notice and such
recapture notice shall, if given, cancel and terminate this Lease with respect
to the space therein described as of the date stated in Tenant's notice,
Tenant's said notice shall state the name and address of the proposed subtenant
and a true and complete copy of the proposed sublease shall be delivered to
Landlord with said notice. If Tenant's notice shall cover all of the Premises,
and Landlord shall give the aforesaid recapture notice with respect thereto, the
Term of this Lease shall expire and end on the date stated in Tenant's notice as
fully and completely as if that date had been herein definitely fixed for the
expiration of the Term. If, however, this Lease be canceled pursuant to the
foregoing with respect to less than the entire Premises, the Rent and Rent
Adjustments herein reserved shall be adjusted on the basis of the number of
square feet retained by Tenant in proportion to the number of square feet
contained in the Premises, as described in this Lease, and this Lease, as so
amended, shall continue thereafter in full force and effect. If Landlord, upon
receiving Tenant's said notice with respect to any such space, shall not
exercise its right to cancel as aforesaid, Landlord will not unreasonably
withhold its consent to Tenant's assignment as aforesaid or subletting the space
covered by its notice.
Any subletting or assignment hereunder shall not release or discharge
Tenant of or from any liability, whether past, present or future, under this
Lease, and Tenant shall continue fully liable thereunder. The subtenant or
subtenants or assignee shall agree to comply with and be bound by all of the
terms, covenants, conditions, provisions and agreements of this Lease to the
extent of the space sublet or assigned, and Tenant shall deliver to Landlord
promptly after execution, an executed copy of each such sublease or assignment
and an agreement of compliance by each such subtenant or assignee.
If Tenant shall assign or transfer its interest in this Lease or
sublet the Premises having first obtained Landlord's consent at a rental in
excess of the rent due and payable by Tenant under the provisions of Sections 3
and 4 of this Lease 50% of said excess rent after deducting therefrom Tenant's
actual and reasonable costs incurred in relation to such assignment or transfer
shall be paid to the Landlord.
Any sale, assignment, mortgage, transfer or subletting of this Lease
which is not in compliance with the provisions of this paragraph shall be of no
effect and void.
The Landlord may assign this Lease and thereafter shall not be liable
hereunder; provided, that the Landlord's assignee shall assume the Landlord's
obligations hereunder. No assignee, sublettee or licensee of Tenant shall be
entitled to exercise or receive the benefits of any option or right contained in
this Lease or any rider or future amendment hereto granting the Tenant the
right:
(1) to extend or renew the Term;
(2) to lease any additional space in the Building;
(3) to utilize any reserved or underground parking space; or
(4) to utilize any health club memberships.
17. Untenantability. In the event (a) Premises are made untenantable by
fire or other casualty and Landlord shall decide not to restore or repair same,
or (b) the Building is so damaged by fire or other casualty that Landlord shall
decide to demolish or not rebuild the same, then, in any of such events,
Landlord shall have the right to terminate this Lease by notice to Tenant within
ninety (90) days after the
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date of such fire or other casualty and the Rent shall be apportioned on a per
diem basis and paid to the date of such fire or other casualty. In the event the
Premises are made untenantable by fire or other casualty and Landlord shall
decide to rebuild and restore the same, this Lease shall not terminate and
Landlord shall repair and restore the Premises at Landlord's expense and with
due diligence, subject, however, to (i) reasonable delays for insurance
adjustments and (ii) delays caused by forces beyond Landlord's control, and the
Rent shall abate on a per diem basis the period or reconstruction and repair.
In the event the Premises are partially damaged by fire or other
casualty but are not made wholly untenantable, then Landlord shall, except
during the last year of the term hereof proceed with all due diligence to repair
and restore the Premises, subject, however, to (i) reasonable delays for
insurance adjustments, and (ii) delays caused by forces beyond Landlord's
control. In such event, the Rent shall abate in proportion to the nonusability
of the Premises during the period while repairs are in progress. If the Premises
are made partially untenantable as aforesaid during the last year of the Term
hereof, as said Term may have been extended or renewed either Tenant or Landlord
shall have the right to terminate this Lease as of the date of fire or other
casualty, in which event, the Rent shall be apportioned on a per diem basis and
paid to the date of such fire or other casualty.
18. Rights and Remedies of Landlord. All rights and remedies of Landlord
herein enumerated shall be cumulative and none shall exclude any other right or
remedy allowed by law.
A. If any voluntary or involuntary petition or similar pleading
under any section or sections of any bankruptcy act shall be filed by or against
Tenant, or any voluntary or involuntary proceeding in any court or tribunal
shall be instituted to declare Tenant insolvent or unable to pay Tenant's debts,
or Tenant makes an assignment for the benefit of its creditors, or a trustee or
receiver is appointed for Tenant or for the major part of Tenant's property,
then and in any such event, Landlord may, if Landlord so elects, but not
otherwise, and with or without notice of such election, and with or without
entry or other action by Landlord, forthwith terminate this Lease, and,
notwithstanding any other provisions of this Lease, Landlord shall forthwith
upon such termination be entitled to recover damages in an amount equal to the
then present value of the Rent specified in Section 3 and 4 of this Lease for
the residue of the stated term hereof, less the fair rental value of the
Premises for the residue of the stated term.
B. If Tenant defaults in the prompt payment of Rent and such default
shall continue for five or more days after the Tenant's receipt of written
notice that the same be due and payable or in the performance or observance of
any other provision of this Lease and such other default shall continue for ten
or more business days after notice thereof shall have been given to Tenant, or
if the leasehold interest or Tenant be levied upon under execution or attached
by process of law, or if Tenant abandons the Premises, then and in any such
event, Landlord, if it so elects, with or without notice or demand, forthwith,
or at any time thereafter while such default continues, either may terminate
Tenant's right to possession, without terminating this Lease, or may terminate
this Lease. If the term of any lease, other than this Lease, made by Tenant for
any premises in the Building shall be terminated or terminable after the making
of this Lease because of any default by Tenant under such other lease, such fact
shall empower Landlord, at Landlord's sole option, to terminate this Lease by
notice to Tenant SEE SECTION 29 OF THE LEASE RIDER.
C. Upon termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of Tenant's right to possession without
termination of this Lease, Tenant shall surrender possession and vacate the
Premises immediately, and deliver possession thereof to Landlord and hereby
grants to Landlord full and free license to enter into and upon the Premises in
such event with or if and only if Tenant has abandoned the Premises without
process of law and to repossess Landlord of the Premises as of Landlord's former
estate and to expel or remove Tenant and any others who may be occupying or
within the Premises and to remove any and all property therefrom, using such
force as may be necessary, without being deemed in any manner guilty of
trespass, eviction, forcible entry or detainer, or conversion of property, and
without relinquishing Landlord's rights to Rent or any other right given to
Landlord hereunder or by operation of law, Tenant expressly waives the service
of any demand for payment of Rent or for possession and the service of any
notice of Landlord's election to terminate this Lease or to reenter the
Premises, including any and every form of demand and notice prescribed by any
statute or other law, and agrees that the simple breach of any convenant or
provision of this Lease by Tenant shall, (after the expiration of any, if any
applicable notice and cure period provided herein) of itself, without the
service of any notice or demand whatsoever, constitute a forcible detainer by
Tenant of the Premises within the meaning of the statutes of the State of
Illinois.
D. If Tenant abandons the Premises or otherwise entitles Landlord so
to elect, and if Landlord elects to terminate Tenant's right to possession only,
without terminating this Lease, Landlord
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may, at Landlord's option, enter upon the Premises, remove Tenant's signs and
other evidences of tenancy, and take and hold possession thereof as provided in
Paragraph C of this Section 18, without such entry and possession terminating
this Lease, or releasing Tenant, in whole or in part, from Tenant's obligation
to pay the Rent hereunder for the full term, and in any such case, Tenant shall
pay to Landlord within ten (10) days after receipt of a notice from Landlord
advising the Tenant that Landlord has elected to accelerate the Rent, a sum
equal to the present value of entire amount of the Rent specified in Section 3
of this Lease for the residue of the stated term plus any other sums then due
hereunder. Upon and after entry into possession without termination of this
Lease, Landlord shall use reasonable efforts to mitigate its damages by
attempting to relet the Premises or any part thereof for the account of Tenant
to any person, firm or corporation other than Tenant for such rent, for such
time and upon such terms as Landlord in Landlord's sole discretion shall
determine, and Landlord shall not be required to accept any tenant offered by
Tenant or to observe any instructions given by Tenant about such reletting. In
any such case, Landlord may make repairs, alterations and additions in or to the
Premises, and redecorate the same to the extent deemed by Landlord reasonably
necessary or desirable, and Tenant shall, upon demand, pay the cost thereof,
together with Landlord's expenses of the reletting. If the consideration
collected by Landlord upon any such reletting for Tenant's account is not
sufficient to pay the full amount of unpaid Rent reserved in this Lease,
together with the reasonable cost of repairs, alterations, redecorating and
Landlord's reasonable expenses, Tenant shall pay to Landlord the amount of any
deficiency, upon demand. If the consideration so collected from any such
reletting together with the present value of Rent payment, if any made by Tenant
is more than sufficient to pay the full amount of the rent reserved herein,
together with the reasonable costs and expenses of Landlord, Landlord, at the
end of the stated term of this Lease, shall account for and pay over the surplus
to Tenant.
E. Any and all property, which may be removed from the Premises by
Landlord pursuant to the authority of this Lease or of law, to which Tenant is
or may be entitled, may be handled, removed or stored in a commercial warehouse
or otherwise by Landlord at the risk, cost and expense of Tenant, and Landlord
shall in no event be responsible for the value, preservation and safekeeping
thereof. Tenant shall pay to Landlord, upon demand, any and all expenses
incurred in such removal and all storage charges against such property so long
as the same shall be in Landlord's possession or under Landlord's control. Any
such property of Tenant not removed from the Premises or retaken from storage by
Tenant within thirty (30) days after the end of the term, however terminated,
shall be conclusively deemed to have forever abandoned by Tenant.
F. Tenant shall pay all Landlord's costs, charges and expenses,
including the fees of counsel, agents and others retained by Landlord, incurred
in enforcing Tenant's obligations hereunder or incurred by Landlord in any
litigation, negotiation or transaction in which Tenant causes Landlord, without
Landlord's fault, to become involved or concerned. SEE SECTION 30 OF THE LEASE
RIDER
G. If Tenant violates any of the terms and provisions of this Lease,
or defaults in any of its obligations hereunder, other than the payment of Rent
or other sums payable hereunder, such violations may be restrained or such
obligation enforced by injunction.
19. Eminent Domain. If the Property, or any portion thereof which includes
a substantial part of the Premises, shall be taken or condemned by any competent
authority for any public use or purpose, the term of this Lease shall end upon,
and not before, the date when the possession of the part so taken shall be
required for such use or purpose, and without apportionment of the award. Rent
shall be apportioned as of the date of such termination. If any condemnation
proceeding shall be instituted in which it is sought to take or damage any part
of the Property, or if the grade of any street or alley adjacent to the Property
is changed by any competent authority and such change of grade makes it
necessary or desirable to remodel
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the Property to conform to the changed grade, Landlord shall have the right to
cancel this Lease upon not less than ninety (90) days notice prior to the date
of cancellation designated in the notice. No money or other consideration shall
be payable by Landlord to Tenant for said cancellation, and the Tenant shall
have no right to share in the condemnation award or in any judgment for damages
caused by said eminent domain proceeding.
20. Subordination or Superiority of This Lease. The rights and interest of
Tenant under this Lease shall be subject and subordinate to any mortgage or
trust deed that exists now or may hereafter be placed upon the Building or Real
Estate or Property and to any and all advances to be made thereunder, and to the
interest thereon, and all renewals, replacements and extensions thereof. Any
mortgagee or trustee may elect to give the rights and interest of Tenant under
this Lease priority over the lien of its mortgage or trust deed. In the event of
such election and upon notification by such mortgagee or trustee to Tenant to
that effect, the right and interest of Tenant under this Lease shall be deemed
to have priority over, the lien of said mortgage or trust deed, whether this
Lease is dated prior to or subsequent to the date of said mortgage or trust
deed. Tenant shall promptly execute and promptly deliver whatever instruments
may be required for such purposes, and in the event Tenant fails so to do within
ten (10) days after demand in writing, Tenant shall be deemed in default
hereunder SEE SECTION 31 OF THE LEASE RIDER.
21. Sprinklers. If the "sprinkler system" installed with in the Premises
or any of its appliances shall be damaged or injured or not in proper working
order by reason of any act or omission of Tenant, Tenant's agents, servants,
employees, licensees or visitors. Tenant shall forthwith restore the same to
good working condition at its own expense; and if the Board of Fire Underwriters
or Fire Insurance Exchange or any bureau, department or official of the state or
city government, requires or recommends that any changes, modifications,
alterations or additional sprinkler heads or other equipment be made or supplied
by reason of a change in Tenant's business or the location of partitions, trade
fixtures, or other contents of the Premises, or if any such changes,
modifications, alterations, additional sprinkler heads or other equipment,
become necessary to prevent the imposition of a penalty or charge against the
full allowance for a sprinkler system in the fire insurance rate as fixed by
said Exchange, or by any fire insurance company. Tenant shall, at Tenant's
expense, promptly make and supply such changes, modifications, alterations,
additional sprinkler heads or other equipment.
22. Notice. In every instance where it shall be necessary or desirable for
Tenant to serve any notice or demand upon Landlord, such notice or demand shall
be sent by United States Registered or Certified Mail, postage prepaid,
addressed to Landlord at the place where rental under this Lease is then being
paid. Any notice or demand to be given by Landlord to Tenant shall be effective
if mailed or delivered to the Premises and to Tenant at 1815 S. Meyers Road,
Oakbrook Terrace, Illinois 60181, Attn.: Legal Department, or to such other
address as may appear on the records of Landlord. Notice mailed as aforesaid
shall be conclusively deemed to have been served at the close of the second
business date following the date said notice was mailed.
23. Successors and Assigns. Each provision hereof shall extend to and
shall, as the case may require, bind and inure to the benefit of Landlord and
Tenant and their respective heirs, legal representatives, successors and
assigns, provided that this Lease shall not inure to the benefit of any
assignee, heir, legal representative, transferee or successor of Tenant except
upon the prior written consent or election of Landlord or as provided in Section
16 of the Lease Rider.
The term "Landlord," as used in this Lease, means only the owner, or the
mortgagee in possession, for the time being, of the Property (or the owner of a
lease of the Building or of the Real Estate and the Building) of which the
Premises form a part, so that in the event of any sale or sales of said Real
Estate and the Building or of said Lease, or in the event of a lease of the
Building, or of the Real Estate and the Building, landlord shall be and hereby
is entirely free and relieved of all covenants and obligations of Landlord
hereunder, and it shall be deemed and construed without further agreement
between the
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parties of their successors in interest, or between the parties and the
purchaser at any such sale, or the said lessee of the Building, or of the
Real Estate and the Building, that the purchaser or the lessee of the Building
has assumed and agreed to carry out any and all covenants and obligations of
Landlord hereunder whether past, present or future.
25. Insurance. SEE SECTION 22 OF THE LEASE RIDER
(a) Landlord and Tenant agree to have all property insurance policies
which may be carried by either of them endorsed with a clause providing that any
release from liability of or waiver of claim for recovery from the other party
entered into in writing by the insured thereunder prior to any loss or damage
shall not affect the validity of said policy or the right of the insured to
recover thereunder. Without limiting any release or waiver of liability or
recovery contained in any other paragraph of this Lease but rather in
confirmation and furtherance thereof, Landlord and Tenant each hereby waive any
and every claim for recovery from the other for any and all loss of or damage to
the Property or to the contents thereof, which loss or damage is covered by
valid and collectible fire and extended coverage insurance policies, to the
extent that such loss or damage is recoverable under said insurance policies.
Inasmuch as this mutual waiver will preclude the assignment of any such claim by
subrogation (or otherwise) to an insurance company (or any other person),
Landlord and Tenant each agree to give to each insurance company which has
issued, or in the future may issue, to its policies of fire and extended
coverage insurance, written notice of the terms of this mutual waiver, and to
have said insurance policies properly endorsed, if necessary to prevent the
invalidation of said insurance coverage by reason of said waiver.
(b) At all times during the Term of this Lease, Tenant shall at its
sole cost and expense maintain in full force and effect insurance protecting
Tenant and Landlord and Landlord's beneficiaries and their respective agents and
any other parties designated by Landlord from time to time, with terms,
coverages and in companies at all times reasonably satisfactory to Landlord and
with such increases in limits as Landlord may, from time to time, reasonably
request and require of all other similarly situated tenants. Initially, such
coverage shall be in the following amounts:
(i) Comprehensive General Liability Insurance, including
Contractual Liability insuring the indemnification provisions contained in
this Lease, with limits of not less than Two Million Dollars
($2,000,000.00) combined single limit per occurrence for Bodily Injury,
Death and Property Damage. The Comprehensive General Liability policy shall
include as additional insureds the Landlord, its beneficiaries and their
respective agents, with a severability of interest endorsement.
(ii) Insurance against (A) "All Risks" of physical loss coverage,
movable fixtures, office equipment, furniture, trade fixtures, merchandise
and all other items of Tenant's property on the Premises, and (B) loss of
use of the Premises.
Tenant shall, prior to the commencement of the Term hereof and prior
to the expiration of any policy, furnish Landlord certificates evidencing that
all required insurance is in force and providing that such insurance may not be
cancelled or changed without at least thirty (30) days' prior written notice to
Landlord and Tenant (unless such cancellation is due to nonpayment of premiums,
in which event ten (10) days' prior written notice shall be provided).
26. Miscellaneous.
A. Force Majeure. Wherever there is provided in this Lease a time
limitation for performance by the Landlord or Tenant of any construction,
repair, maintenance or service, the time provided for shall be extended for as
long as and to the extent that delay in compliance with such limitation is due
to an act of God, strikes, governmental control or other factors beyond the
reasonable control of the Landlord or Tenant. The provisions hereof shall not
apply to the determination of the Commencement Date.
B. If any provision of this Lease or application to any party or
circumstances shall be determined by any court of competent jurisdiction to be
invalid and unenforceable to any extent, the remainder of this Lease or the
application of such provision to such person or circumstances, other than those
as to which it is so determined invalid or unenforceable to any extent, shall
not be affected thereby, and each provision hereof shall be valid and shall be
enforced to the fullest extent permitted by law.
C. The headings of sections are for convenience only and do not
define, limit or construe the contents of such sections or subsections.
References made in this Lease to numbered sections and subsections shall refer
to the numbered sections or subsections of this Lease, unless otherwise
indicated.
D. The Lease is to be executed in copies, each of which executed
copy shall constitute an original. In the event of a conflict between the
provisions of any original lease with the provisions of any other original
lease, then in such event, the provisions of Landlord's original lease will
govern and control.
E. Each of the parties agrees, at the request of the other, to
execute such instruments or documents as any party may reasonably request,
acknowledging: the date of Completion of the Premises; the date of acceptance of
possession of the same; the date of commencement of rentals; the commencement of
the term; the commencement and expiration dates of this Lease; the Taxes and
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Consumer Price Index for any Lease Year; the Estimated Rent Adjustment Payments
for any Lease Year; the number of rentable square feet demised to the Tenant;
Annual Base Rental amount; and the compliance or noncompliance by any party with
any of the terms or provisions of this Lease: and to evidence such other or
further matters as may be so reasonably requested.
F. Tenant represents that except for Stein & Company and
Miglin-Beitler Management Corporation, it has not dealt with any real estate
broker in connection with this Lease and, to its knowledge, no broker other than
Stein & Company and Miglin-Beitler Management Corporation initiated or
participated in the negotiation of this Lease, submitted or showed the Premises
to Tenant or is entitled to any commission in connection with this Lease. Tenant
hereby indemnifies, defends, and holds Landlord harmless from and against any
and all claims of any real estate broker for commissions in connection with this
Lease. SEE SECTION 23 OF THE LEASE RIDER.
G. No receipt of money by Landlord from Tenant after the termination
of this Lease, the service of any notice, the commencement of any suit or final
judgment for possession shall reinstate, continue or extend the term of this
Lease or affect any such notice, demand, suit or judgment.
H. No waiver of default of Tenant or Landlord shall be implied, and
no express waiver shall affect any default other than the default specified in
such waiver and that only for the time and to the extent therein stated.
I. Clauses, plats and riders, if any signed by Landlord and Tenant
and endorsed on or affixed to this Lease are part hereof and in the event of
variation or discrepancy, and duplicate original hereof, including such clauses,
plats and riders, if any, held by Landlord shall control.
J. Submission of this instrument for examination or signature by
Tenant does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution and delivery by both Landlord
and Tenant.
K. Wherever the consent of either Landlord or Tenant is required by
the provisions of this Lease, such party shall not unreasonably withhold or
delay such consent.
27. Estoppel Certificates. The parties hereto agree that, from time
to time upon not less than ten days prior request a statement in writing
certifying; (i) that this Lease is unmodified and in full force and effect (or
if there have been modifications that the Lease, as modified, is in full force
and effect); (ii) the dates to which Rent and other charges have been paid; and
(iii) that the Landlord and Tenant are not in default under any provision of
this Lease, or, if in default, the nature thereof in detail, it being intended
that any such statement may be relied upon by any prospective purchaser or
tenant of the Property, any mortgagees or prospective mortgagees thereof, or any
prospective assignee of any mortgage thereof. The parties shall execute and
deliver whatever instruments may be required for such purposes, and in the event
either party fails so to do within twenty (20) days after demand in writing,
such party shall be considered in default under this Lease.
28. Exculpatory Provisions. It is expressly understood and agreed by
and between the parties hereto, anything to the contrary notwithstanding, that
each and all of the warranties, indemnities, representations, covenants,
undertakings and agreements herein made on the part of the Trustee while in form
purporting to be the warranties, indemnities, representations, covenants,
undertakings and agreements of said Trustee are nevertheless each and every one
of them, made and intended not as personal warranties, indemnities,
representations, covenants, undertakings and agreements by the Trustee or for
the purpose or with the intention of binding said Trustee personally, but are
made and intended for the purpose of binding only that portion of the trust
property specifically described herein, and this instrument is executed and
delivered by said Trustee not in its own right, but solely in the exercise of
the powers conferred upon it as such Trustee; and that no personal liability or
personal responsibility is assumed by nor shall at any time be asserted or
enforceable against chicago Title and Trust Company, on account of this
instrument or on account of any warranty, indemnity, representation, covenant or
agreement of the said Trustee in this instrument contained, either expressed or
implied, all such personal liability, if any, being expressly waived and
released.
14
<PAGE>
29. Unrelated Business Income. (a) Landlord shall have the right at
any time and from time to time to unilaterally amend the provisions of this
Lease, if Landlord is advised by its counsel that all or any portion of the
monies paid by Tenant to Landlord hereunder are, or may be deemed to be,
unrelated business income within the meaning of the United States Internal
Revenue Code or regulations issued thereunder, and Tenant agrees that it will
execute all documents or instruments necessary to effect such amendment or
amendments, provided that no such amendment shall result in Tenant having to pay
in the aggregate more money on account of its occupancy of the Premises under
the terms of this Lease, as so amended, and provided further that no such
amendment shall result in Tenant receiving less services than it is presently
entitled to receive under this Lease, nor services of a leasser quality.
(b) Any services which Landlord is required to furnish pursuant to
the provisions of this Lease may at Landlord's option, be furnished from time to
time, in whole or in part, by employees of Landlord or Landlord's beneficiaries,
the managing agent of the Real Property or its employees or by one or more third
persons hired by Landlord. Landlord's beneficiaries or the managing agent of the
Real Property, Tenant agrees that upon Landlord's written request it will enter
into direct agreements with the managing agent of the Real Property or other
parties designated by Landlord for the furnishing of any such services required
to be furnished by Landlord hereunder, in form and content approved by Landlord;
provided, however, that no such contract shall result in Tenant having to pay in
the aggregate more money on account of its occupancy of the Premises under the
terms of this Lease, and provided further that no such contract shall result in
Tenant receiving less services than it is presently entitled to receive under
this Lease, nor services or a lesser quality.
IN WITNESS WHEREOF, this instrument has been duly executed by the parties
hereto, as of the date first above written.
LANDLORD TENANT
OAKBROOK TOWER LIMITED PARTNERSHIP PLATINUM TECHNOLOGY, INC. a
By: M&M Realty Corporation, Delaware corporation
General Partner
BY Roland V. Siegl BY /s/ M. Cullinane
--------------------------------- ----------------------------
Its V.P. Its EXECUTIVE VICE PRESIDENT
------------------------------ CHIEF FINANCIAL OFFICER
--------------------------
ATTEST Michael Strone ATTEST /s/ Michael C. Wyatt
---------------------------- ------------------------
Its Secretary Its VICE PRESIDENT AND
------------------------- GENERAL COUNSEL
--------------------
15
<PAGE>
LANDLORD'S ACKNOWLEDGEMENT
STATE OF CONNECTICUT )
) SS
COUNTY OF FAIRFIELD )
I, the undersigned, a Notary Public in and for the County and State
aforesaid, DO HEREBY CERTIFY, that the above named Assistant Vice President and
Assistant Secretary of the OAKBROOK TOWER LIMITED PARTNERSHIP, Grantor,
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument as such Assistant Vice President and Assistant Secretary
respectively, appeared before me this day in person and acknowledged that they
signed and delivered the said instrument as their own free and voluntary act and
as the free and voluntary act of said Company for the uses and purposes therein
set forth; and the said Assistant Secretary then and there acknowledged that
said Assistant Secretary, as custodian of the corporate seal of said Company,
caused the corporate seal of said Company to be affixed to said instrument as
said Assistant Secretary's own free and voluntary act and as the free and
voluntary act of said Company for the uses and purposes therein set forth.
Given under my hand and Notarial Seal this 2nd day
of August 1996.
[SEAL]
/s/ Corinne Basta
--------------------------------------------------
16
<PAGE>
TENANT'S ACKNOWLEDGEMENT
STATE OF ILLINOIS )
) SS
COUNTY OF DUPAGE )
I, the undersigned, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that Michael P. Cullinane personally known to me to
be the Exec. VP. & CFO of PLATINUM Technology, Inc. and Michael C. Wyatt
personally known to me to be the General Counsel, Secretary of said corporation,
and personally known to me to be the same persons whose names are subscribed to
the foregoing instrument, appeared before me this day in person and severally
acknowledged that as such Michael P. Cullinane CFO and Michael C. Wyatt
Secretary, they signed and delivered the said instrument as Michael P. Cullinane
CEO and Michael C. Wyatt Secretary of said corporation, and caused the corporate
seal of said corporation to be affixed thereto, pursuant to authority given by
the Board of Directors of said corporation as their free and voluntary act and
as the free and voluntary act and deed of said corporation, for the uses and
purposes therein set forth.
GIVEN under my hand and Notarial seal this 18th day of July, 1996.
[SEAL] /s/ Maria L. Dalesandro
---------------------------
Notary Public
STATE OF ILLINOIS )
) SS
COUNTY OF DUPAGE )
I, the undersigned, a Notary Public in and for said County, in the state
aforesaid, DO HEREBY CERTIFY that ________________ and ______________________,
personally known to me to be the same person(s) whose name(s) is (are)
subscribed to the foregoing instrument appeared before me this day in person and
acknowledged that _________________________ signed, sealed and delivered the
said instrument as _________________ free and voluntary act, for the uses and
purposes therein set forth, including the release and waiver of the right of
homestead.
GIVEN under my hand and official seal this ______ day of _________________,
19_____
______________________________
Notary Public
17
<PAGE>
EXHIBIT A
(Plan of Premises)
The Premises consist of that area outlined in red or a heavy line on the
plan affixed (excluding from the foregoing any, if any, elevator shafts; flues;
stacks; vertical and horizontal ducts; pillars; demising walls; electrical
boxes; firehose cabinets; and stairways) together with the right to use in
common with all other occupants of the Building, their invitees and the
Landlord, the common areas of the Building consisting of corridors, elevators
and lobby for ingress and egress to the Premises, washrooms and similar common
facilities for their intended purposes, all subject to the terms and provisions
of the Lease.
LANDLORD TENANT
OAKBROOK TOWER LIMITED PARTNERSHIP PLATINUM TECHNOLOGY, INC. a
By: M & M REALTY CORPORATION,
GENERAL PARTNERSHIP
BY Roland V. Siegl BY /s/ M. Cullinane
--------------------------------- ----------------------------------
EXECUTIVE VICE PRESIDENT
Its V.P. Its CHIEF FINANCIAL OFFICER
----------------------------- -------------------------------
ATTEST Michael Strone
-------------------------------
Its Secretary
-------------------------------
A-1
<PAGE>
Diagram Showing Plan of Premises
<PAGE>
EXHIBIT TF
TRADE FIXTURES
PLATINUM technology, Inc.
TRADE FIXTURES
- --------------
THE FOLLOWING ARE CATEGORIES OF TRADE FIXTURES ISSUES THAT MAY BE REMOVED BY
TENANT AS TENANT'S PROPERTY, AT THE CONCLUSION OF THE LEASE TERM. BELOW EACH
GROUP ARE SOME EXAMPLES OF SPECIFIC ITEMS THAT MAY BE INCLUDED IN THE GROUP. THE
GROUP IS NOT LIMITED TO THE EXAMPLE ISSUES LISTED (A, B, C). EACH GROUP MAY
INCLUDE ADDITIONAL SIMILAR ITEMS.
1) TELEPHONE/COMPUTER SYSTEMS:
A) SWITCH
B) PATCH PANELS
C) UPS SYSTEM
D) SUPPLEMENTAL COOLING EQUIPMENT
2) FREESTANDING CUSTOM FURNITURE/MILLWORK:
A) RECEPTION DESK
B) CONFERENCE TABLES
C) APPLIANCES
D) PREFABRICATED COUNTER AND STORAGE UNITS
FOR DISTRIBUTION AREAS
3) FREESTANDING MANUFACTURED FURNITURE AND EQUIPMENT:
A) DESKS, CHAIRS, FILES, COUNTERS, WORKSTATIONS
B) COMPUTERS, PRINTERS, COPIERS
4) ARTWORK:
A) PAINTINGS
B) GRAPHICS, MURALS
C) CUSTOM RUGS, UNATTACHED
5) PLANTINGS
6) SECURITY SYSTEMS:
A) CARDS, READERS
B) SECURITY SYSTEMS DRIVERS
C) CAMERAS
7) INTERIOR SIGNAGE
8) PAGING SYSTEMS
9) FREESTANDING DISTRIBUTION EQUIPMENT
A) CONVEYOR SYSTEM
B) SHELVING AND PALETTE RACKS
C) FORK LIFTS AND CHARGING STATION
<PAGE>
LEASE RIDER
This Lease Rider is made and entered into as of the 17th day of July,
1996, at Chicago, Illinois by and between OAKBROOK TOWER LIMITED PARTNERSHIP,
not individually, but solely and only as Trustee under a certain Trust Agreement
dated the 1st day of September, 1984 and known as Trust No. 1087600 (the
"Landlord") and PLATINUM TECHNOLOGY, INC. a Delaware corporation (the
"Tenant").
R E C I T A L S:
----------------
A. The Landlord and the Tenant are executing simultaneously herewith a
written lease (the "Lease") leasing certain premises (the "Premises") in the
storage area of a building (the "Building") located on the real estate commonly
known as OAKBROOK TERRACE TOWER, located at One Tower Lane, Oakbrook Terrace,
Illinois 60181, as more particularly set forth in the Lease.
B. The Landlord and Tenant desire to modify and amend some of the
provisions of the Lease by the terms and provisions of this lease rider (the
"Rider").
NOW, THEREFORE, in consideration of the respective covenants of the parties
hereto contained in the Lease and in this Rider, Landlord and Tenant further
mutually agree as follows:
1. CONTROLLING LANGUAGE. Insofar as the specific terms and provisions of
--------------------
this Rider purport to amend or modify or are in conflict with the specific terms
and provisions of the Lease (the specific, but not implied), the terms and
provisions of this Rider shall govern and control; in all other respects, the
terms and provisions (and definitions) of the Lease shall remain in full force
and effect and unmodified.
2. BASE RENTAL TABLE. The Tenant shall pay as Annual Base Rent and
-----------------
monthly installment of Base Rent (pursuant to subsection 3 A of the Lease) the
following sums during the Term:
<TABLE>
<CAPTION>
================================================================================
MONTHLY
MONTHS PER SQ/FT INSTALLMENTS BASE RENT
OF TERM RENTAL OF BASE RENT (ANNUALIZED)
------- ------ ------------ ------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Commencement Date - $ 7.55 $25,166.67 $302,000.00
12/31/96
- --------------------------------------------------------------------------------
1/1/97 - 12/31/97 7.85 26,166.67 314,000.00
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
==========================================================================
MONTHLY
MONTHS PER SQ/FT INSTALLMENTS BASE RENT
OF TERM RENTAL OF BASE RENT (ANNUALIZED)
------- ------ ------------ ------------
- --------------------------------------------------------------------------
<S> <C> <C> <C>
1/1/98 - 12/31/98 8.17 27,233.33 326,800.00
- --------------------------------------------------------------------------
1/1/99 - 12/31/99 8.49 28,300.00 339,600.00
- --------------------------------------------------------------------------
1/1/2000 - 12/31/2000 8.83 29,433.33 353,200.00
- --------------------------------------------------------------------------
1/1/2001 - 12/31/2001 9.19 30,633.33 367,600.00
- --------------------------------------------------------------------------
1/1/2002 - 12/31/2002 9.55 31,833.33 382,000.00
- --------------------------------------------------------------------------
1/1/2003 - Last month
of Term 9.94 33,133.33 397,600.00
==========================================================================
</TABLE>
For the purposes of determining the applicable Annual Base
Rent and monthly installments of Base Rent, the beginning
and ending months are inclusive in the applicable rate
periods and the first month shall be the month in which the
Commencement Date, as determined pursuant to Section 2 of
the Lease, occurs.
3. SERVICES/MAINTENANCE/REPAIRS. Tenant shall be responsible for
----------------------------
obtaining and furnishing all cleaning, heating, air conditioning, ventilating,
electricity and gas to the Premises that is desired by Tenant. Except for the
"Landlord Maintenance Items" (hereinafter defined), Tenant shall be solely
responsible at Tenant's sole cost and expense, for maintaining and repairing any
equipment necessary to furnish the above-mentioned services. Except for the
"Landlord Maintenance Items" (hereinafter defined), and the furnishing of cold
water to the Premises, Landlord shall not be required to furnish any services to
the Premises whatsoever, including, but not limited to, janitorial services,
heating or air conditioning services, repairs or maintenance services.
The Landlord at Landlord's sole cost and expense, does not hereby
agree to keep, maintain, repair and if necessary, replace the following items
which in the aggregate are herein referred to as the "Landlord Maintenance
Items":
1. The foundation and floor slabs (including the slab located
under and providing support to the loading docks) of the Building;
2. Any structural components of the Building including the
roof, load bearing walls and all structural walls;
3. Those portions and only those portions of plumbing,
electrical, utility and sewer lines which service the entire Building and are
neither owned by the applicable
2
<PAGE>
utility company nor located within the Premises. Notwithstanding the foregoing,
the Tenant shall be solely responsible at Tenant's sole cost and expense for the
repair, maintenance and replacement, if necessary, of the HVAC units servicing
the Premises which are located on the roof of the Building.
The Landlord agrees that in relation to the Landlord Maintenance Items
it shall keep the same in good condition and repair and in compliance with any
and all applicable federal, state or local laws, ordinances, rules and
regulations. The Landlord shall be responsible in relation to the Landlord
Maintenance Items for paying any and all fines or penalties assessed by any
governmental authority if said Landlord Maintenance Items fail to meet the
requirements of such applicable federal, state or local laws, ordinances, rules
and regulations. It is expressly acknowledged by Landlord and Tenant that the
Landlord Maintenance Items do not include, (i) entryways, doors, loading dock
facilities (except for the structural integrity of the slab), or rubber aprons,
doors and mechanical equipment associated with loading docks, (ii) any duty to
repair or provide any service for and in relation to utilities which are either
located within the Premises or which are owned and operated by a third party
such a public utility company, and (iii) any maintenance, repair, or replacement
of any of the Landlord Maintenance Items set forth above which is or becomes
necessary as a result of the misuse, neglect or intentional misconduct of the
Tenant.
In the event the structural integrity of the loading dock slab shall
require repair, maintenance, or replacement the Tenant does hereby agree to
notify the Landlord of such necessity in writing. The Landlord does hereby agree
within a reasonable period of time (taking into account the time necessary to
obtain bids and award contracts), not to exceed thirty (30) days from the
receipt of Tenant's notice concerning the loading dock slab, to commence such
maintenance, repairs, or replacement, and to diligently pursue to completion
such maintenance, repair, or replacement. In the event Landlord fails to
commence or diligently pursue to completion such maintenance, repair, or
replacement, the Tenant shall have the right upon forty-eight (48) hours written
notice to the Landlord to commence or continue to completion such maintenance,
repairs, or replacement of the loading dock slab (the "Tenant Slab Self-Help
Right"). In the event the Tenant shall exercise the Tenant Slab Self-Help Right,
the Tenant shall have the right upon completion by the Tenant and/or its
contractors or agents of the repairs, maintenance, or replacement to invoice the
Landlord and the Landlord shall be required to pay within ten (10) business days
of receipt of said invoice, the reasonable costs incurred by the Tenant in so
exercising its Tenant Slab Self-Help Right, unless the Landlord shall within
said ten (10) business day time period dispute the Landlord's duty to pay for
such item based upon Landlord's belief that the Tenant was responsible for the
necessity of maintaining, repairing or replacing said loading dock slab. In the
event it becomes necessary for the Landlord and Tenant to litigate the issue of
responsibility for the payment of the cost of such repair, maintenance, or
replacement and judgement is entered in favor of the Tenant in such proceeding,
and Landlord fails to pay the Tenant such judgement within ten (10) business
days after said judgement becomes final, the Tenant shall have the right without
notice to deduct the amount of the
3
<PAGE>
judgement from the next due monthly installments of Base Rent until the amount
of the judgement has been exhausted.
4. LANDLORD'S ACCESS TO THE PREMISES. The Landlord does hereby agree
----------------------------------
that whenever the Landlord shall exercise any right of access or entry into the
Premises for purposes permitted under or pursuant to the Lease, the Landlord
shall orally notify the Tenant at least forty-eight (48) hours in advance
(except in the case of an emergency, or at any time after the Tenant is in
default of its obligations under the Lease, the applicable cure period, if any
having expired), of Landlord's intent to enter or otherwise access the Premises.
The Landlord does hereby agree that it will conduct any access or entry into the
Premises in such a manner as will cause the least interference reasonably
necessary given the nature or reason for such access or entry; provided however
that nothing herein contained shall be deemed or construed as requiring the
Landlord to conduct any right of access or entry into the Premises after hours
in the event that waiting until after hours will either exasperate an emergency
or require the Landlord to pay overtime or premium costs to contractors or
others.
The Landlord does hereby acknowledge that the Tenant will designate
certain areas of the Premises as "Security Areas". Notwithstanding any
provision of the Lease to the contrary, the Landlord shall not be entitled to
keys or access cards for such Security Areas. In the event of an emergency
requiring immediate access by Landlord to such Security Areas, the Landlord
shall not be responsible to Tenant for any damage reasonably believed necessary
and caused by Landlord's accessing the Security Areas for emergency purposes.
Notwithstanding any provision of the Lease to the contrary, the Tenant
shall be entitled to install such locks, security devices (including card key
access systems) as the Tenant desires without first notifying the Landlord in
advance. Provided, however that in relation to any such locks, security devices
(including card key access systems), the Tenant shall except in relation to
Security Areas concurrently with the installation of the same, provide the
Landlord with keys, access cards or combinations (as may be appropriate) in
relation to such newly installed items.
Notwithstanding any provision of the Lease to the contrary, so long as
Tenant is not in default, Landlord's right to show the Premises to prospective
tenants shall be limited to the last six (6) months of the Term (as the same may
have been renewed by Landlord and Tenant). Landlord shall provide oral notice to
Tenant twelve (12) hours in advance prior to exhibiting the Premises.
5. SIGNAGE. Notwithstanding the provisions contained in Subsection 8F of
--------
the Lease to the contrary, Tenant shall be entitled to paint, display, inscribe
or affix any sign, trademark, picture, advertising, notice, lettering or
direction on any part of the interior portions of the Premises without
Landlord's consent. Landlord shall not have the right to remove any of such
items except to the extent said items remain in the Premises after the
expiration of the term of this Lease.
4
<PAGE>
6. LOAD BEARING CAPABILITIES. The Landlord does hereby represent to the
--------------------------
Tenant that the floor slab of the Premises is capable of bearing a load of 300
lbs. per square foot.
7. ADDRESS OF BUILDING. Notwithstanding the provisions contained in
--------------------
Section 9 of the Lease to the contrary, in the event the Landlord shall change
the street address of the Building (as opposed to said street address being
changed by the U.S. Postal service without request by the Landlord), the
Landlord agrees to provide Tenant with reasonable prior notice thereof and to
reimburse the Tenant for the reasonable costs of replacing the Tenant's
stationery, letterhead, envelopes and other similar printed documentation then
in Tenant's possession.
8. PRIOR OCCUPANCY. Notwithstanding the provisions of Section 22 of the
----------------
Lease to the contrary, the Tenant shall have the right to access the Premises
commencing with the execution of the Lease by all necessary parties to begin the
Tenant's Work (as hereinafter defined). That period of time commencement on the
date the Lease is signed by all necessary parties and ending on the Commencement
Date is hereinafter referred to as the Prior Occupancy Period. Notwithstanding
any provision of the Lease to the contrary, the Landlord does hereby grant the
Tenant the right of limited access and limited occupancy of the Premises during
the Prior Occupancy Period without payment or accrual of liability for Rent
described in the Lease. Said right of limited access and limited occupancy shall
be solely and only for the purposes of the Tenant constructing Tenant's Work and
storing in not more than ten percent (10%) of the Premises; inventories and
supplies.
9. GROSS LEASE. It is intended by the parties hereto, that with the
------------
exception of real estate taxes, the Lease be a Gross Lease and accordingly the
Landlord shall have no right to pass through any operating expenses relating to
the Property (except real estate taxes attributed to the warehouse/storage
portion of the Property as hereinafter described) directly to the Tenant as is
the case with office tenants of the Property. It expressly acknowledged by the
Tenant however, that the Tenant is responsible for certain other costs which, if
not paid by the Tenant shall constitute an additional component of Rent under
specific provisions of the Lease. Such additional costs include the costs
associated with or resulting from the necessity to repair and/or maintain the
Premises due to Tenant's failure to perform its maintenance and repair
obligation under the Lease as amended, the costs of remedying any default of the
Tenant, the payment of bills for water or other services provided by Landlored
or other third parties (including the municipality) and for Tenant's
indemnification duties hereunder.
10. REAL ESTATE RENT. In addition to every other component of Rent
-----------------
specified in the Lease and this Rider the Tenant shall pay to the Landlord
50% of the real estate taxes attributable to the warehouse/storage portion of
the Property (the "Tax Rent"). The Tenant shall be required to pay to the
Landlord estimated deposits of the Tax Rent (the "Tax Rent Deposits") on the
first day of each and every month of the Term. The Tax Rent Deposits shall be
equal to one twelveth (1/12) of Landlord's reasonable estimate of Tax Rent as
communicated in writing by the Landlord to the Tenant. The Landlord reserves
the right to adjust the Tax Rent
5
<PAGE>
Deposits from time to time upon not less than thirty (30) days prior written
notice. Within a reasonable time after Landlord's receipt of the tax bill
applicable to the storage/warehouse portion of the property on which the
Building is located for the applicable year of the Term for which the Tax Rent
is being calculated (the"Calculation Year"), the Landlord shall cause to be
furnished to Tenant a statement showing the following:
(i) Real estate taxes attributable to the warehouse/storage portion
of the Property for the Calculation Year as indicated on the real estate tax
bills for pin number 06-23-101-023;
(ii) The amount of the Tax Rent due to the Landlord for the
Calculation Year less credit for the Tax Rent Deposits paid by the Tenant in and
allocable to said Calculation Year; and
(iii) The Tax Rent Deposits due monthly as aforesaid during the
calendar year next following the Calculation Year for which such statement is
given (subject to revision as aforesaid) including the amount or revised
amount for the months prior to the rendition of the statement.
Within thirty (30) days after receipt of such statement the Tenant
shall pay to the Rental Agent the amount of the Tax Rent due to the Landlord for
the Calculation Year as reflected in said statement and the amount of the Tax
Rent Deposits due for the months between the expiration of the Calculation Year
described in the statement to and including the month in which the statement is
furnished. If such statement reflects an amount due from the Landlord to the
Tenant the Landlord shall apply such amount against the next due Tax Rent
Deposits until exhausted and refunds to the Tenant any remaining unapplied
amount at the end of the Term.
If the Lease Term commences on any day other than the first (1st) day
of January or if the Lease Term ends on any day other than the last day of
December, any Tax Rent payment due Landlord shall be prorated and the Tenant
shall pay such amount within ten (10) days after being billed. Tenant's
obligation and covenant to pay the Tax Rent Deposits and the Tax Rent are each
and all independent of every other covenant set forth in the Lease and shall
survive the expiration or termination of the Lease.
Landlord and Tenant do hereby acknowledge that the Tax Rent shall consist
solely and only of the general real estate taxes attributable to the storage
warehouse portion of the Property on which the Building is located, and any
special assessments of taxes levied on such storage warehouse portion of the
Property on which the Building is located. The Landlord and Tenant do hereby
agree that in regard to any special assessment which may be paid in installments
whether or not the Landlord elects to pay such special assessment in
installment, the Tenant shall only be responsible for the portions of such
special assessment which would become due and payable during the Term had the
Landlord elected to pay the same in installments.
6
<PAGE>
11. LANDLORD'S WORK. The Landlord does hereby agree to cause the following
---------------
alterations, improvements, and repairs (in the aggregate "Landlord's Work") to
be accomplished on the Premises and Property at Landlord's sole cost and
expense:
1. Re-roof the entire warehouse building utilizing a roofing
contractor mutually acceptable to Landlord and Tenant;
2. In conjunction with the re-roofing referred to above, remove the
HVAC unit located at the southwest corner of the roof;
3. Clean concrete floor within the Premises and grind down existing
exposed bolts in said floor;
4. Install power supply to adapt to Tenant's reasonable alarm
requirements in conjunction with Tenant's contractor; and
5. Disconnect and remove abandoned telephone wires.
The Landlord agrees to commence the Landlord's Work within a
reasonable period of time after receiving the Tenant's Plans (as hereinafter
defined) and to complete the same within a reasonable period of time given the
type and progress of the Tenant's Work. The Landlord and Tenant agree to
reasonably cooperate in scheduling Landlord's Work and Tenant's Work so that
they do not unreasonably interfere with each other's work or unreasonably delay
the completion of the either the Landlord's Work or the Tenant's Work. It is
expressly acknowledged by the Landlord and the Tenant that no delay in
completion of the either the Landlord's Work or Tenant's Work shall delay the
commencement of the Term or the Tenant's duty to pay all components of Rent
under the Lease which shall begin irrespective of the completion or
non-completion of Landlord's or Tenant's Work on the Commencement Date.
In the event item numbers 1 and 2 above of the Landlord's Work are not
completed by August 31, 1996 and the non-completion of the said items 1 and 2 of
Landlord's Work has resulted from the failure of the Landlord to award contracts
for said items 1 and 2 of the Landlord's Work or the failure of the Landlord to
replace contractors to whom awards of said items 1 and 2 of Landlord's Work have
been made but who have failed to diligently pursue completion of said items 1
and 2 of Landlord's Work, the Tenant shall have the right upon forty-eight (48)
hours prior written notice to the Landlord to hire a contractor reasonably
acceptable to Landlord to complete items 1 and 2 of Landlord's Work (the
"Landlord's Work Self-Help Right"). In the event the Tenant shall exercise its
Landlord's Work Self-Help Right, the Landlord shall, pay to the Tenant the
reasonable costs incurred by the Tenant in exercising its Landlord's Work
Self-Help Right within ten (10) business days of receiving invoices and proof of
payment relating to the same. In the event the Landlord shall fail to pay the
Tenant such reasonable costs within said ten (10) business day time period, the
Tenant shall have the right without notice to deduct such reasonable costs from
the next due monthly installments of Base
7
<PAGE>
Rent until exhausted. The Tenant and Landlord do hereby acknowledge that the
Tenant shall not have the right to exercise the Landlord's Work Self Help Right
as to any items of Landlord's Work other than the items 1 and 2 above.
Furthermore, the Tenant shall have no right to exercise the Landlord's Work Self
Help Right in the event that items 1 and 2 above of Landlord's Work are not
completed by August 31, 1996 as a result of a delay caused by the Tenant,
scheduling conflicts with the "General Contractor" (as defined in Section 14
hereof), or delays due to acts of God, strikes, governmental control or other
factors beyond the reasonable control of the Landlord.
12. HEALTH CLUB MEMBERSHIPS. The Tenant is hereby granted two (2) health
-----------------------
club memberships in the health club located in the Building, free from initial
membership initiation fees. Tenant shall be responsible for the payment of all
other dues and/or fees imposed by the health club operator, including but not
limited to monthly dues, guest fees, and membership renewal and transfer fees
associated with such memberships. Tenant must complete and submit to the health
club operator a membership application designating an officer or employee of
Tenant thereon for such membership. Such membership is for the use and only for
the use of the officer or employee of Tenant whose name is contained on the
membership application approved by the health club operator and, subject to
payment of guest fees, the invitees of such member. The Tenant shall be required
in utilizing such membership to comply with all reasonable rules and regulations
promulgated by the health club operator in association with such use of health
club facilities.
13. RENEWAL OPTION. The Tenant is hereby granted one (1) five (5) year
---------------
option to renew the Lease (the "Renewal Option") at a Base Rental Rate equal to
95% of the then "current building market rate", for similar upper level storage
space (and office use ancillary thereto) as reasonably determined by the
Landlord taking into account the rate (excluding market concessions) at which
similar space in the Building and other Class A Buildings within a five (5) mile
radius of the Building are then being offered (the "Extended Term Rent"). If the
Tenant desires to exercise its Renewal Option, it shall do so in the following,
and only in the following, manner:
A. If the Tenant desires to exercise its Renewal Option, it
shall so notify the Landlord, in writing, no earlier than the first day of the
12th month prior to the then current expiration date of the Lease Term and no
later than the first day of the sixth (6th) month prior to the then current
expiration date of the Lease Term. Such notice shall only be effective if
delivered at a time when the Tenant is not in default of its obligations beyond
any, if any applicable notice and cure periods, under the terms and provisions
of the Lease and this Rider.
B. Within a reasonable period of time after receipt of Tenant's
notice of its desire to exercise its Renewal Option, given at the time and in
the manner provided above, the Landlord shall prepare and transmit to the Tenant
an appropriate lease amendment to the Lease extending the Term for five years
(the "Extended Term") and modifying the Base Rent to equal the Extended Term
Rent, modifying the monthly installments of the Base Rent to equal
8
<PAGE>
1/12th of the new Base Rent, as determined aforesaid and including all market
concessions utilized to determine the Extended Term Rent.
C. The Landlord shall transmit such lease amendment to the
Tenant for execution and Tenant shall execute and deliver the same to the
Landlord within ten (10) business days of Tenant's receipt thereof. In the event
the Tenant fails for any reason to execute and deliver the lease amendment to
the Landlord within the time period provided herein, then in such event, at
Landlord's option and only at Landlord's option, Tenant's purported exercise of
its Renewal Option shall be of no force or effect and the Renewal Option shall
become null and void.
D. Sections 2, 8, 11, 14, and 15 of this Rider shall be of no
force or effect during such Extended Term brought about as a result of Tenant's
exercise of its Renewal Option.
E. Notwithstanding any of the foregoing, if Tenant disputes
Landlord's determination of the rental rate for the Extended Term, then Tenant
shall provide notice of such dispute within fifteen (15) days following
Landlord's delivery of the amendment referred to above. In the event Landlord
and Tenant are unable to agree on the Extended Term Rent within fifteen business
days following Tenant's delivery of notice of such dispute to Landlord, then
either Tenant or Landlord shall be entitled to terminate the exercise of the
Renewal Option and such Renewal Option shall be deemed null and void.
14. TENANT'S CONSTRUCTION AND ALTERATION. Notwithstanding any provision of
------------------------------------
the Lease to the contrary, included but not limited to the provisions contained
in Subsection 8Q thereof, the Landlord and Tenant do hereby acknowledge that the
Tenant desires to make certain improvements and alterations in and to the
Premises and to commence making those improvements and alterations prior to
occupying the Premises for business purposes therein and may desire to continue
to make alterations or improvements to the Premises until December 31, 1996 (in
the aggregate those improvements and alterations desired by the Tenant prior to
December 31, 1996 are hereinafter referred to as the "Tenant's Work"). In
relation to any Tenant's Work, the Tenant shall be required to prepare and
submit to Landlord at Tenant's sole cost and expense all plans, specifications,
information and architectural, engineering and mechanical drawings concerning
Tenant's Work (in the aggregate the "Tenant's Plans"). The Landlord shall review
Tenant's Plans and either approve the same or disapprove the same, giving
specific reasons for said disapproval, within a reasonable period of time after
Landlord's receipt of Tenant's Plans. In the event the Landlord disapproves of
the Tenant's Plans the Tenant may revise the Tenant's Plans in accordance with
the comments contained in Landlord's notice of disapproval and resubmit Tenant's
Plans as modified to Landlord for review and approval. The Landlord does hereby
agree to not unreasonably withhold or delay its approval to Tenant's Plans (as
the same may be modified).
9
<PAGE>
Once Tenant's Plans have been approved by the Landlord, the Tenant shall
use Leopardo Construction Company as the general contractor (the "General
Contractor"). The General Contractor shall carry adequate insurance, insuring
both the Landlord and Tenant, supply general contractor statements, appropriate
partial and final lien waivers and certifications and/or guarantees concerning
the work performed by the General Contractor. The Tenant shall enter into the
written contract with the General Contractor for the Tenant's Work and shall be
responsible for all costs associated therewith. The Tenant does hereby agree to
indemnify, defend and hold the Landlord harmless from and against any and all
claims of the General Contractor or arising out of the Tenant's Work. The Tenant
does hereby further agree to provide to the Landlord such reasonable proof as
Landlord may reasonably request concerning the status of Tenant's Work, payments
therefore, and the completion of the Tenant's Work in compliance with all
applicable laws, rules and regulations.
It is expressly acknowledged by Tenant that the Landlord shall have no
responsibility regarding the quality of the Tenant's Work nor its usefulness for
the purposes desired by the Tenant or for any delays of the General Contractor.
15. ALTERATION ALLOWANCE. The cost of all Tenant's Work to be performed in
--------------------
or to the Premises shall, subject to the allowance hereinafter granted by the
Landlord, be the sole responsibility of the Tenant. The Landlord does hereby
grant to the Tenant an allowance equal to $400,000.00 (the "Alteration
Allowance"). The Landlord agrees to pay the Tenant the Alteration Allowance as
the Tenant's Work progresses (but in no more than four (4) draws). Within thirty
(30) days of receipt from the Tenant of; (a) sworn contractors statements; (b)
partial and/or final lien waivers, as the case may be; (c) certification by the
Tenant that it is satisfied with the work to date; and (d) proof by the Tenant
that it has paid the General Contractor the amounts specified in the Tenant's
draw request. Notwithstanding the foregoing the Landlord shall not be required
to pay the Tenant any portion of the Alteration Allowance while any pending lien
is outstanding for and in relation to the Tenant's Work unless Tenant bonds over
the same to the satisfaction of Landlord's title insurance carrier, nor shall
the Landlord be required to pay more than 80% of the Alteration Allowance until
such time as all of the Tenant's Work has been completed and the Tenant has
provided the reasonable proof specified above for and in relation to said final
completion of the Tenant's Work. It is expressly acknowledged by Landlord and
Tenant that the Alteration Allowance described in this Section 11 shall apply
solely and only to the Tenant's Work desired by the Tenant in and to the
Premises and completed prior to December 31, 1996. Any unused portion of the
Alteration Allowance as of January 1, 1997 shall be applied by the Landlord
until exhausted, against the Tenant's duty to pay monthly installments of Base
Rent.
16. PROHIBITED USES. Notwithstanding the provisions of Section 6 and
---------------
Subsection 8 J of the Lease to the contrary; (i) the Tenant is hereby granted
the right to bring food into the Premises for preparation and consumption by
Tenant's employees and business invitees only; (ii) the Landlord agrees that it
will not unreasonably withhold its consent to the installation by Tenant of
refrigerators, microwave ovens or coffee warmers in the Premises for
10
<PAGE>
the sole use of Tenant's employees and business invitees; (iii) the Tenant shall
be permitted to install and operate heating and air conditioning apparatus
within the Premises; and (iv) the Tenant shall be permitted as ancillary use
(and not as a primary use) to utilize not more than thirty three percent (33%)
of the Premises for office purposes.
17. MUTUAL INCORPORATION. All negotiations, considerations,
--------------------
representations and understandings between Landlord and Tenant are incorporated
herein and may be modified or altered only by agreement, in writing, between
Landlord and Tenant. No modifications, termination, or surrender of the Lease or
surrender of the Premises or any part thereof or of any interest therein by
Tenant shall be valid or effective unless agreed to and accepted, in writing, by
the Landlord and no act by any representative or agent of the Landlord other
than delivery of such a written agreement and acceptance by the Landlord shall
constitute acceptance thereof. Any prior negotiations or intentions of the
parties, whether oral or evidenced by written documentation dated prior to the
date of this Lease, are null and void.
18. REMOVAL OF ADDITIONS. Notwithstanding the provisions contained in
--------------------
Section 15 of the Lease, Tenant shall be entitled to remove any of the
installations, additions, hardware, non-trade fixture and improvements set forth
in Exhibit TF to this Lease.
Notwithstanding any provision of subsection 15 C of the Lease to the
contrary, the Tenant, upon termination of the Lease, shall not be required to
remove any installations, additions, hardware, non-trade fixtures and
improvements, temporary or permanent (except movable furniture, trade fixtures
and equipment belonging to the Tenant and the items specified on Exhibit TF)
initially installed in the Premises, unless the Landlord shall have stated in
writing such specific items for removal at the expiration of the Term at the
time of Landlord's approval of Tenant's Plans. The Tenant shall have the right
from time to time during the Term to inform the Landlord by written notice of
any new installations, additions, hardware, non-trade fixtures and improvements,
temporary or permanent, which Tenant intends to bring into or incorporate into
the Premises and receive a designation from Landlord pursuant to said subsection
15 C of the Lease as to whether or not the Landlord will require the Tenant to
remove such item at the expiration of the Term. If Landlord does not respond to
the Tenant's notice within ten (10) business days of Landlord's receipt of
Tenant's notice, the Tenant will not be required to remove any of the items
identified by Tenant in its notice at the expiration of the Term. Landlord's
waiver of its rights under said subsection 15 C of the Lease, as set forth
herein, shall only apply to items originally incorporated in the Premises and
indicated on the Tenant's Plans or subsequent requests from the Tenant as being
exceptions to the removal rights of Landlord pursuant to said subsection 15 C of
the Lease and consented to by Landlord.
19. WAIVER AND INDEMNITY.
--------------------
A. (1) To the extent permitted by law, Tenant releases
Landlord Related Parties (as defined in Section 19) from, and waives all claims
for, damage to person or property sustained by Tenant or any occupant of the
Premises or Property resulting from the
11
<PAGE>
Property or Premises or any part of either or any equipment or appurtenance
becoming out of repair or resulting from any accident in or about the Property,
or resulting directly or indirectly from any act or omission of any tenant or
occupant of the Property or of any other person, other than Landlord Related
Parties. This Section 19 shall apply especially, but not exclusively, to the
flooding of basements or other subsurface areas, and to damage caused by
refrigerators, sprinkling devices, air conditioning apparatus, water, snow,
frost, steam, excessive heat or cold, falling plaster, broken glass, sewage,
gas, odors or noise, or the bursting or leaking of pipes or plumbing fixtures
and shall apply equally whether such damage be caused or result from anything
or circumstance above mentioned or referred to, or any other thing or
circumstance whether of a like nature or of a wholly different nature.
(2) The Landlord Related Parties shall not be liable for any
loss or damage to property even if due to the negligence, gross negligence or
intentional misconduct of any of the Landlord Related Parties, to the extent of
the greater of: (i) the recovery by Tenant under any property damage insurance
carried by it (whether or not required to be carried by the terms of the Lease);
or (ii) such amounts as would have been recovered if Tenant had carried the
insurance required under the Lease. Tenant shall make reasonably diligent
efforts to recover from its insurers the full amount of any insured claim.
B. (1) To the extent permitted by law, Landlord releases Tenant
Related Parties (as defined in Section 19) from, and waives all claims for,
damage to person or property sustained by Landlord or any occupant of the
Premises or Property resulting from the Property or Premises or any part of
either or any equipment or appurtenance becoming out of repair or resulting from
any accident in or about the Property, or resulting directly or indirectly from
any act or omission of any tenant or occupant of the Property, or of any other
person, other than Tenant Related Parties. This Section 19 shall apply
especially, but not exclusively, to the flooding of basements or other
subsurface areas, and to damage caused by refrigerators, sprinkling devices, air
conditioning apparatus, water, snow, frost, steam, excessive heat or cold,
falling plaster, broken glass, sewage, gas odors or noise, or the bursting or
leaking of pipes or plumbing fixtures and shall apply equally whether such
damage be caused or result from any thing or circumstance above mentioned or
referred to, or any other thing or circumstance whether of a like nature or of a
wholly different nature.
(2) The Tenant Related Parties shall not be liable to Landlord
for any loss or damage to property even if due to the negligence, gross
negligence or intentional misconduct of any of the Tenant Related Parties to the
extent of the greater of: (i) the recovery of Landlord under any property damage
or rent loss insurance carried by it (whether or not required to be carried by
the terms of the Lease); or (ii) such amount as would have been recovered if
Landlord had carried the insurance required under the Lease. Landlord shall make
reasonably diligent efforts to recover from its insurers the full amount of any
insured claim.
C. Except as provided in Section 19 or as specifically set forth in
the Lease, Tenant agrees to indemnify and save all of the Landlord Related
Parties harmless against any
12
<PAGE>
and all claims, demands, liabilities, costs and expenses, including, without
limitation, reasonable attorneys' fees for the defense thereof, arising from any
breach or default on the part of Tenant in the performance of any covenant or
agreement on the part of Tenant to be performed pursuant to the terms of this
Lease, or from any negligence of any of the Tenant Related Parties in or about
the Property or Premises. In case of any action or proceeding brought against
any of the Landlord Related Parties by reason of any such claim, upon notice
form Landlord, Tenant covenants to defend such action or proceeding by counsel
reasonably satisfactory to Landlord. Except as provided in Section 19 or as
specifically set forth in the Lease, Landlord agrees to indemnify and save all
of the Tenant Related Parties harmless against any and all claims, demands,
liabilities, costs and expenses, including, without limitation, reasonable
attorneys' fees for the defense thereof, arising from any breach or default
on the part of Landlord in the performance of any covenant or agreement on the
part of Landlord to be performed pursuant to the terms of this Lease, or from
any negligence of any of the Landlord Related Parties in or about the Property
of Premises. In case of any action or proceeding brought against any of the
Tenant Related Parties by reason of any such claim, upon notice from Tenant,
Landlord covenants to defend such action or proceeding by counsel reasonably
satisfactory to Tenant.
D. For purposes of this Section 19:
(1) "Landlord Related Parties" means Landlord, Miglin-Beitler
Management Corporation, the beneficiaries of Landlord, the partners which
comprise the beneficiaries of Landlord, the partners which comprise such
partners, and the agents, employees, officers, directors, shareholders, partners
or principals (disclosed or undisclosed) of any of them.
(2) "Tenant Related Parties" means Tenant and the officers,
directors, agents and employees of Tenant (whether disclosed or undisclosed).
20. ASSIGNMENT AND SUBLETTING. Notwithstanding the provisions
-------------------------
contained in Section 16 of the Lease, without Landlord's consent and without
being subject to; (i) Landlord's right to recapture; or (ii) any obligation to
share excess rent, Tenant shall have the right, so long as it is not in default
beyond any, if any applicable nature and cure period, to assign or sublease all
or a portion of the Premises to:
(a) any entity succeeding to the business and assets of Tenant
except by way of bankruptcy or consolidation in lieu of
bankruptcy; and
(b) any entity which is a subsidiary or an affiliate of Tenant.
Tenant shall, however, prior to the effective date of such
assignment or sublease, cure any defaults of the Tenant and notify Landlord in
writing of its intent to so assign or sublease, and the portion of the Premises
to which such sublease or assignment pertains, and the resulting entity that
will be the Tenant hereunder.
13
<PAGE>
In addition to the above, Tenant shall have the right, without
Landlord's consent, to assign this Lease to any entity which controls, is
controlled by, or is under common control with Tenant, or any entity resulting
from a merger or consolidation with Tenant, or which acquires all or
substantially all Tenant's assets, provided, however, that the foregoing are not
as a result of bankruptcy or reorganization in lieu thereof. Nothing herein
contained shall be deemed or construed as relieving Tenant from any liability
under the terms and provisions of the Lease as a result of any assignment or
sublet pursuant to the aforesaid.
Notwithstanding any provision of Section 16 of the Lease to the
contrary, in the event the Tenant shall make an assignment of the Lease to any
entity, which pursuant to the provisions above in this Section 20 does not
require the Landlord's consent, such entity shall have the rights (if any)
contained in the Lease as amended, to (i) extend or renew the term; (ii) lease
additional space in the Building; (iii) utilize reserved underground parking
spaces; and (iv) utilize health club memberships. Nothing herein contained shall
be deemed or construed as requiring the Landlord to offer to such assignee the
aforementioned rights, unless, and then only to the extent such rights have been
specifically granted to the Tenant pursuant to the terms and provisions of the
Lease.
21. CONDEMNATION. Notwithstanding the provisions contained in Section 19
------------
of the Lease, the Tenant shall be entitled to seek a condemnation award relating
to moving expenses, loss of Tenant's property and the unamortized value of
Tenant's leasehold improvements within the Premises paid for by Tenant without
reimbursement or credit from Landlord, notwithstanding that such award may undue
any award inuring to the benefit of Landlord. Any condemnation which takes all
or a substantial part of the Loading Dock or materially limits the Tenant's
ability to access the Loading Dock, shall be treated as a condemnation of the
entire Premises.
22. INSURANCE. At all times during the term of this Lease, Landlord shall
---------
at its sole cost and expense maintain in full force and effect insurance
protecting Landlord and Tenant and their respective agents and any other parties
designated by Tenant from time to time, with terms, coverages and at companies
reasonably satisfactory to Tenant. Such coverage shall be in the following
amounts:
(i) Comprehensive General Liability Insurance, including contractual
liability insuring the indemnification provisions contained in this
Lease, with limits of not less than Two Million Dollars ($2,000,000)
combined single limit per occurrence for bodily injury, death and
property damage. The Comprehensive General Liability policy shall
include as additional insureds the Tenant and its agents, with a
severability of interest endorsement.
(ii) Insurance against all risks of physical loss coverage, moveable
fixtures, office equipment, furniture, trade fixtures, merchandise
and all other improvements and betterments constituting the Premises,
Building and/or Property.
14
<PAGE>
Landlord shall, prior to the commencement of the term hereof and prior to
the expiration of any policy, furnish Tenant certificates evidencing that all
required insurance is in force and providing that such insurance shall not be
canceled or changed without at least thirty (30) days' prior written notice to
Tenant (unless such cancellation is due to nonpayment of premiums, in which
event ten (10) days' prior written notice shall be provided).
23. BROKERS. Landlord hereby warrants and represents that it has not
-------
employed or dealt with any other broker or finder in connection with this Lease
of the Premises except Stein & Company and Miglin-Beitler Management
Corporation. Landlord further covenants and agrees that it shall be responsible
to pay any and all commission to Stein & Company and Miglin-Beitler Management
Corporation in connection with this Lease. Landlord shall indemnify, defend,
protect and hold Tenant harmless from and against any claims, losses,
liabilities, demands, costs, expenses or causes of action by any other broker,
agent or person claiming a commission or other form of compensation by virtue of
having represented Landlord with regard to this Lease and transaction.
24. RULES AND REGULATIONS. Notwithstanding any provision of the Lease to
---------------------
the contrary, the Landlord does hereby acknowledge that it does not have
standardized rules for the office warehouse Building. The Landlord reserves the
right at any time during the Term to promulgate reasonable rules and regulations
for the office warehouse Building for the protection and welfare of the Building
and property and its tenants and occupants. The Landlord does hereby agree that
any such rules and regulations shall not materially impair the Tenant's use and
occupancy of the Premises, or its access rights and use of the loading dock
servicing the Premises. The Landlord does hereby agree that any such rules and
regulations shall be non-discriminatory in nature and shall be uniformly applied
to all tenants of the Building. Nothing herein contained shall be deemed or
construed as relieving the Tenant of compliance with all laws, ordinances,
orders, and regulations and with the directions of any public officer authorized
by law with respect to the Premises and the use and occupancy thereof by Tenant.
25. HAZARDOUS MATERIALS. Notwithstanding the provisions contained in
-------------------
Subsection 8I of the Lease, the Tenant shall be permitted to bring into and keep
in the Premises such hazardous materials as are normally and customarily
utilized in a storage warehouse/office environment, including, but not limited
to, cleaning materials and photostatic chemicals. The Tenant shall be
responsible for compliance with all laws, ordinances, rules and regulations
promulgated by any governmental authority having jurisdiction over the Property
and/or the Premises in relation to the use or presence of such hazardous
materials. Tenant does hereby agree to indemnify and save the Landlord harmless
from and against any and all claims, costs and expenses (including reasonable
attorney's fees), incurred by the Landlord resulting from or arising out of the
presence, use, or maintenance on the Premises and within the Property of
hazardous materials brought on to the Property by the Tenant, its employees,
agents, contractors, and invitees. Notwithstanding any provision of the Lease to
the contrary, the Landlord does hereby agree to indemnify and defend and hold
the Tenant harmless from and against any and all claims, costs and expenses
(including reasonable attorney's fees), resulting
15
<PAGE>
from the presence of hazardous material in the Premises or on the Property which
have been brought thereon by Landlord, its employees, agents, contractors, and
invitees; provided however that for the purposes hereof, other tenants on the
Property as well as their respective employees, agents and invitees shall not,
for the purposes hereof be deemed agents or invitees of the Landlord.
26. ABANDONMENT. Notwithstanding any provision of the Lease to the
------------
contrary, the Tenant shall not be deemed or construed to have abandon the
Premises unless the Tenant has vacated the Premises and is not current in its
obligations to pay Rent.
27. TENANT'S ACCESS AND USE RIGHTS. Notwithstanding the provisions
-------------------------------
contained in Subsection 9H of the Lease, the Landlord does hereby acknowledge
that the Tenant will be conducting 24-hour operations from the Premises. Tenant
shall be entitled to have access to the Premises and arrange for delivery and
shipping of its inventory and items stored therin (subject to necessary
maintenance and repair and the laws, ordinances, rules and regulations
promulgated by any governmental authority having authority over the Premises and
the Property) on a 24-hour basis, seven (7) days per week through the loading
dock area for the Premises. The Tenant hereby acknowledges that Landlord may
impose reasonable restrictions on Tenant or its employees, agents, contractors,
or invites from entering the other building (the "Office Building") located on
the Property, and from main areas of the Building during non-business hours.
28. RESTORATION/CANCELLATION. Notwithstanding the provisions of Section
-------------------------
17 of the Lease, in the event the Premises are made partially or wholly
untenantable by fire or other casualty and the Landlord elects to rebuild,
restore or repair the Building or the Premises but fails to complete such
rebuilding, repairing or restoring within 180 days after such fire or other
casualty, and subject to the provisions of Section 26 A of the Lease (but in no
event more than 240 days after the date of such fire or casualty), the Tenant
shall have the right, upon written notice delivered prior to the Premises being
restored, to cancel the Lease as of the date of such fire or other casualty.
29. NON-MONETARY DEFAULTS. Notwithstanding the provisions of subsection
---------------------
18B of the Lease to the contrary, in the event a non-monetary default to which
the ten (10) day time period set forth in said Subsection 18B is not cured by
the Tenant within said ten (10) day time period, but the Tenant commences to
cure such default within said ten (10) day time period and diligently pursues a
cure of such non-monetary default and the same is capable of being cured, such
ten (10) day cure period for non-monetary defaults shall be extended for so long
as the Tenant is actively and diligently attempting to effectuate a cure of such
non-monetary default.
30. COST OF ENFORCEMENT. The Landlord shall pay all Tenant's costs,
--------------------
charges and expenses, including the fees of counsel, agents and other retained
by Tenant, incurred in enforcing Landlord's obligations hereunder or incurred
by Tenant in any litigation,
16
<PAGE>
negotiation, or transaction in which Landlord causes Tenant, without Tenant's
fault, to become involved or concerned.
31. NON-DISTURBANCE AGREEMENT. Notwithstanding the provisions of Section
--------------------------
20 of the Lease to the contrary, the Tenant shall not be deemed to have
subordinated its interest under this Lease to any mortgage or trust deed or
ground lease that now exists or may hereinafter be placed upon the Building,
Real Estate, or Property unless such mortgagee, trustee or groundlessor shall
have provided the Tenant with a standard form of non-disturbance, attornment and
recognition agreement substantially in the form attached to the Lease as Exhibit
G. Landlord agrees to obtain such non-disturbance and attornment agreement from
any existing mortgagee, trustee or groundlessor as soon as feasible.
32. MISCELLANEOUS. Notwithstanding anything to the contrary contained in
--------------
this Lease, Landlord hereby represents, covenants, warrants and agrees that (i)
Landlord has complete and lawful title (subject to a mortgage) to the building
and has full right, power and authority to enter into and execute and deliver
this Lease; (ii) as of the date hereof to the best of Landlord's knowledge
without making inquiry, the Building and Property comply with all applicable
laws, ordinances, regulations and requirements of governmental authorities
having jurisdiction thereof; (iii) it has not received nor has any notice of any
building, municipal or health department code, regulation, statue or law which
would adversely affect Tenant's leasehold improvement in the Premises and/or
Tenant's operation of its business in the Premises; (iv) it has no knowledge of
any existing or pending special assessment applicable to the Property; and (v)
the real Estate tax PIN number specified in Subparagraph 10(i) above concerns
the storage/warehouse portion of the Property and does not include the highrise
office portion of the Property.
33. HVAC CREDIT. The Tenant is hereby granted a credit (the "HVAC
------------
Credit") equal to the lessor of, (i) the actual costs incurred by the Tenant in
installing two (2) condenser units and two (2) gas furnaces in the Premises (or
in the case of the condenser units on the roof of the Building), or (ii)
$8,755.00. The Landlord agrees to pay the Tenant the HVAC Credit within thirty
(30) days of the Landlord's receipt of paid invoices evidencing the actual cost
incurred by the Tenant relating to said two (2) condenser units and two (2) gas
furnaces. The Landlord and Tenant do hereby acknowledge that this HVAC Credit
has been granted in exchange for a modification of the Landlord's obligation
concerning the air conditioning unit located on the southwest corner of the roof
of the Building, In relation to said air conditioning unit located on the
southwest corner of the roof of the Building, the Landlord's only obligation
shall be to remove the same as provided above in this Rider.
34. PRE-COMMENCEMENT DATE STORAGE. Notwithstanding the provisions
------------------------------
contained in Subsection 2(iii) of the Lease, the utilization by the Tenant of
not more than ten percent (10%) of the area of the Premises for storage prior to
October 15, 1996 shall not in and of itself trigger the occurrence of the
"Commencement Date".
17
<PAGE>
35. LANDLORD'S SUPERVISION FEES. The Landlord does hereby agree that any
---------------------------
and all supervision fees for and in relation to alterations desired by the
Tenant and conducted pursuant to Subsection 8Q of the Lease shall be limited
solely and only to the direct costs actually incurred by Landlord in so
supervising any such alterations.
36. SCAVENGER SERVICE. The Tenant shall make its own arrangements and be
-----------------
responsible for all costs incurred for waste and garbage disposal and pick-up
from the Premises.
37. LANDLORD'S EXCULPATION. Landlord's exculpation clause, as set forth in
----------------------
Section 28 of the Lease, is incorporated herein by reference, as if full set
forth.
IN WITNESS WHEREOF, this instrument has been duly executed by the parties
hereto, as of the date first above written.
LANDLORD TENANT
- -------- ------
OAKBROOK TOWER LIMITED PARTNERSHIP PLATINUM TECHNOLOGY, INC. a
By: M&M REALTY CORPORATION, Delaware corporation
GENERAL PARTNER
BY: Roland V. Siegl BY: /s/ M. Cullinane
------------------------------- --------------------------------------
Its V.P. Its Executive Vice President
------------------------- Chief Financial Officer
--------------------------------
Attest: Michael Strone Attest /s/ Michael C. Wyatt
--------------------------- ----------------------------------
Michael c. Wyatt
Its Vice President and General
Secretary Counsel
Its _____________________ ---------------------------
18
<PAGE>
STATE OF Illinois )
----------------
) ss
COUNTY OF DuPage )
--------------
I, Maria L Dalesandro, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that Michael P. Cullinane, personally known to me
to be the CFO of PLATINUM TECHNOLOGY, INC. a Delaware corporation authorized to
conduct business in the State of Illinois, and Michael C. Wyatt, personally
known to me to be the General Counsel, Secretary of said corporation, and
personally know to me to be the same persons whose names are subscribed to the
foregoing instrument, appeared before me this day in person and severally
acknowledged that as such CFO and ______________ Secretary, they signed and
delivered the said instrument as ______________ President and ____________
Secretary of said corporation, and caused the corporate seal of said corporation
to be affixed thereto, pursuant to authority given by the Board of Directors of
said corporation as their free and voluntary act for the uses and purposes
therein set forth.
GIVEN under my hand and NOTARY seal this 18th day of July, 1996.
[SEAL] /s/ Maria L. Dalesandro
-----------------------
Notary Public
19
<PAGE>
<TABLE>
<CAPTION>
PLATINUM - LEASE ABSTRACT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lease ID/Site ID 38/31 Expiration Notice Comments
Old Lease ID Renew Notice 04/14/2002
Last Update 01/08/1997 Renewal Notice Comments One five year option at 95%
of market. See lease rider,
item 13.
RSF 40,000
Suite/Floor
Building Name Oakbrook Terrace Tower Cancel Notice
Address 1 Tower Lane Cancelation Comments
City Oakbrook Terrace
State IL First Refusal Comments
Zip 60181
Office Type Regular
Lease Type original First Offer Comments
Lease Status active
Occupancy Status occupied Other Options Notes
Occupancy Type mixed
First in Location 10/15/1996
Site Notes 40,000 square feet -
warehouse space Rent Escalation Type fixed
Escalation Comments See rent schedule
Premises Notes 40,000 square feet for
warehouse space,
Late Charge Notes Prime - 3% Late fee.
Lease Date 01/07/1996
Term 78
Commence 10/15/1996 Holdover 150%
Expire 04/14/2003 Expense Type gross
Deposit $0.00 Code method none
Deposit Comments Est. Mo Exp. $1,624.91
Last Update 01/01/1997
Expense Notes Tenant responsible for clearing
and HVAC costs.
Landlord Contact
Company Oakbrook Tower Limited
Partnership
Address 1 C/O M&M Realty Corporation,
General Partners Pay Taxes When Due? Yes
Address 2 Estimated Tax $19,499.00
City Property Tax Notes Tenant to pay 50% of real estate
taxes assessed against
warehouse.
State
Zip
Phone Parking Notes
Fax
Landlord Notes
Assignment/Sublet Notes Prior written consent of LL is
needed. Can sublet to
subsidiary/affiliate without
LL's consent.
Rent Contact George Rumel
Same As Landlord? No Misc, Lease Notes
Company Miglin-Beitler Management
PS Vendor # MIGLIN
Address 1 C/O LaSalle National Bank # Empl.
Address 2 135 LaSalle St. Dept 3057 Open Ofc/Wksta
City Chicago
State IL Platinum Contact (1)
Zip 60674-3057 Contact's Title (1)
Phone (830) 571-8757 Phone (1)
Fax Fax (1)
Real Contact Notes Platinum Contact (2)
Contact's Title (2)
Phone (2)
Legal Contact Fax (2)
Same As Landlord? Yes Platinum Contacts Notes
Company
Address 1
Address 2 Broker ID
City Contact
State Company
Zip Address 1
Phone Address 2
Fax City
Legal Contact Notes State
Zip
Phone
Improvement Type allowance Fax
LL Allowance $400,000.00 Notes
Important Notes
</TABLE>
<TABLE>
<CAPTION>
Rent Period Rent Start Rent End Mo. Rent Abatement Abated Rent Real Notes
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 10/15/1996 12/31/1996 $25,166.67 $25,166.67 Expenses include real taxes only.
2 01/01/1997 12/31/1997 $26,166.67 $26,166.67 Expenses include real taxes only.
3 01/01/1998 12/31/1998 $27,233.33 $27,233.33 Expenses include real taxes only.
4 01/01/1999 12/31/1999 $28,300.00 $28,300.00 Expenses include real taxes only.
5 01/01/2000 12/31/2000 $29,433.33 $29,433.33 Expenses include real taxes only.
6 01/01/2001 12/31/2001 $30,633.33 $30,633.33 Expenses include real taxes only.
7 01/01/2002 12/31/2002 $31,833.33 $31,833.33 Expenses include real taxes only.
8 01/01/2003 12/31/2003 $33,133.33 $33,133.33 Expenses include real taxes only.
</TABLE>
Page 1 of 1
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF PLATINUM technology, inc.
-----------------------------------------
Jurisdiction of
Entity Incorporation
- ------ -------------
Reltech Group, Inc. Delaware
Trinzic Corporation Delaware
Channel Computing California
Trinzic UK Ltd. United Kingdom
Trinzic Sarl France
Trinzic Deutschland GmbH Germany
Trinzic Benelux NV Belgium
Trinzic Australasia pty Ltd. Australia
Trinzic Europe BV Belgium
Trinzic International Ltd. United Kingdom
AICorp Netherlands BV Netherlands
Aion SA France
Aion SARL France
TDG Software GmbH Germany
AICorp Canada, Inc. Ontario, Canada
Answer Systems, Inc. California
Altai, Inc. Texas
Altai Software France SARL France
Altai Software UK Ltd. United Kingdom
Altai Software Canada Inc. Ontario, Canada
PLATINUM Solutions, Inc. California
Uniform Software Systems, Inc. California
Locus Computing Corporation Ltd. United Kingdom
I&S Informationstechnik and Services GmbH Germany
Software Interfaces, Inc. Texas
Software Interfaces Q.T.B.V. The Netherlands
Softool Corporation California
Softool Limited United Kingdom
Softool GmbH Germany
Softool Technologies SARL France
AIB Software, Inc. Maryland
Protellicess Software, Inc. California
PLATINUM Air, Inc. Illinois
Advanced System Technologies, Inc. Colorado
<PAGE>
Prodea Software Corporation Minnesota
Browning & Clements, Inc. Illinois
QED Information Sciences, Inc. Delaware
Axis Systems International, Inc. New York
Paradigm Systems Corporation of America New York
Paradigm Systems Corporation of New York New York
Paradigm Systems Corporation of America Delaware
Paradigm Systems Corporation of America - Washington Washington
TSI of New York New York
Rubicon Software, Inc. California
Paradigm Systems Brazil Comercioe Representacoes Ltd. Brazil
Grateful Data, Inc. California
VREAM, Inc. Illinois
GEJAC, Inc. Maryland
GEJAC UK Limited United Kingdom
GEJAC International B.V. Netherlands
PLATINUM Holdings I, Inc. Delaware
PLATINUM Holdings II, Inc. Delaware
PLATINUM Applications Solutions, Inc. Massachusetts
PLATINUM technology Financial Services, Inc. Delaware
PLATINUM Internet Advance Group, Inc. Illinois
PLATINUM technology AG Switzerland
PLATINUM technology Australia Pty. Limited Australia
PLATINUM technology B.V. Netherlands
PLATINUM technology Denmark A-S Denmark
PLATINUM technology GesmbH Austria
PLATINUM technology GmbH Germany
PLATINUM technology Finland Oy Finland
Platinum Technology International, Inc. US Virgin Islands
PLATINUM technology NV Belgium
PLATINUM technology S.r.l. Italy
<PAGE>
PLATINUM technology Software SL Spain
PLATINUM technology Sweden AB Sweden
PLATINUM technology UK Limited United Kingdom
Echo-Soft Technologies Sarl France
Krystal Software S.A. and STARTUP Software Sarl France
PLATINUM technology Snd Bnd Malaysia
PLATINUM technology Norway AS Norway
PLATINUM technology Limited Hong Kong
PLATINUM technology Pte. Ltd. Singapore
PLATINUM technology Pty. Ltd. South Africa
PLATINUM technology KK Japan
DB Tech/Symbiosis United Kingdom
Australian Technology Resources Pty Limited Australia
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
PLATINUM technology, inc.:
We consent to incorporation by reference in the registration statements (No.
333-07783) on Form S-1 and (Nos. 33-41248, 33-85798, 33-96762, 333-00454,
333-03284 and 33-20897) Forms S-8 of PLATINUM technology, inc. of our reports
dated February 19, 1997 (except as to Note 15, which is as of February 28,
1997), relating to the consolidated balance sheets of PLATINUM technology, inc.
and subsidiaries as of December 31, 1995 and 1996, 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, 1996, and all related
consolidated financial statement schedules, which reports appear in the
December 31, 1996 annual report on Form 10-K of PLATINUM technology, inc.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Chicago, Illinos
March 26, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in Registration Statements No.
333-03284, 333-20897, 333-00454, 33-41248, 33-85798 and 33-96762 on Form S-8 and
333-07783 on Form S-1 of PLATINUM technology, inc. 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, 1996.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
San Jose, California
March 26, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference of our reports for Locus Computing Corporation dated March 20, 1995
incorporated by reference in this Form 10-K, into PLATINUM technology, inc.'s
previously filed Form S-8 Registration Statements (Registration Nos. 333-20897,
333-3284, 333-00454, 33-96762, 33-85798 and 33-41248) and previously filed Form
S-1 Registration Statement (Registration No.333-07783).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
March 26, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference of our report for Softool Corporation dated August 29, 1995
incorporated by reference in this Form 10-K, into PLATINUM technology, inc.'s
previously filed Form S-8 Registration Statements (Registration Nos. 333-20897,
333-3284, 333-00454, 33-96762, 33-85798 and 33-41248) and previously filed Form
S-1 Registration Statement (Registration No. 333-07783).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
March 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 136,932
<SECURITIES> 44,890
<RECEIVABLES> 162,975
<ALLOWANCES> 2,503
<INVENTORY> 0
<CURRENT-ASSETS> 366,093
<PP&E> 115,866
<DEPRECIATION> 43,523
<TOTAL-ASSETS> 609,512
<CURRENT-LIABILITIES> 156,472
<BONDS> 0
0
0
<COMMON> 59
<OTHER-SE> 291,142
<TOTAL-LIABILITY-AND-EQUITY> 609,512
<SALES> 0
<TOTAL-REVENUES> 439,190
<CGS> 0
<TOTAL-COSTS> 521,683
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 905
<INTEREST-EXPENSE> 1,737
<INCOME-PRETAX> (77,337)
<INCOME-TAX> (9,375)
<INCOME-CONTINUING> (67,962)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,962)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> (1.22)
</TABLE>
<PAGE>
EXHIBIT 99.1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Trinzic Corporation:
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Trinzic Corporation and subsidiaries
for the year ended March 31, 1995 (not presented separately herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of Trinzic
Corporation and subsidiaries for the year ended March 31, 1995 in conformity
with generally accepted accounting principles.
DeLoitte & Touche LLP
San Jose, California
April 28, 1995
<PAGE>
EXHIBIT 99.2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Locus Computing Corporation:
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of LOCUS COMPUTING CORPORATION (a
California corporation) AND SUBSIDIARIES for the year ended January 31, 1995
(not presented herein). These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of LOCUS
COMPUTING CORPORATION AND SUBSIDIARIES for the year ended January 31, 1995 in
conformity with generally accepted accounting principles.
As discussed further in Note 6, the Company's Articles of Incorporation
allow for a redemption privilege of the Series A preferred stock together with
accrued dividends on March 27, 1992. While the ultimate outcome is uncertain,
it is the belief of management that total redemption would not currently be
allowed under California law. Management has reached an agreement with the
remaining Series A preferred stockholders that the Company will make
redemptions based on cash flows, current profitability, and planned future
profitability, as defined. As there is no assurance that amounts will be
redeemed in the next year, the Company has not included the redemption amount
in current liabilities at January 31, 1995 (see Note 6).
Arthur Andersen LLP
Los Angeles, California
March 20, 1995
<PAGE>
EXHIBIT 99.3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Softool Corporation:
We have audited the accompanying combined and consolidated statements of
operations, shareholders' equity and cash flows of SOFTOOL CORPORATION (a
California corporation) AND SUBSIDIARIES AND SOFTOOL INTERNATIONAL CORPORATION
(a California corporation) for the year ended December 31, 1994 (not presented
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of SOFTOOL
CORPORATION AND SUBSIDIARIES AND SOFTOOL INTERNATIONAL CORPORATION for the
year ended December 31, 1994 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Los Angeles, California
August 29, 1995 (except with respect to
the matter discussed in Note 14, as to
which the date is November 17, 1995).
