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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934.
For The Fiscal Year Ended: June 30, 1998
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: 0-26100
________________________________
DISCREET LOGIC INC.
(Exact name of registrant as specified in its charter)
QUEBEC 98-0150790
- - ------------------------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 DUKE STREET,
MONTREAL, QUEBEC, CANADA H3C 2L7
- - ---------------------------------------- ----------
(Address of principal executive officer) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (514) 393-1616
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON SHARES, WITHOUT PAR VALUE
--------------------------------
(Title of class)
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]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of September 24, 1998 (based on the closing price as quoted by
Nasdaq National Market as of such date) was $239,788,835. As of September 24,
1998, 28,819,358 of the registrant's common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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The undersigned registrant, Discreet Logic Inc. (the "Company"), hereby
amends the following items, financial statements, exhibits or other portions of
its Annual Report on Form 10-K as set forth on the pages attached hereto.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors, executive officers and holders of more than 10% of the
Company's Common Shares (collectively, "Reporting Persons") to file with the
Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of Common Shares of the Company.
Such persons are required by regulations of the Commission to furnish the
Company with copies of all such filings. Based on its review of the copies of
such filings received by it with respect to the fiscal year ended June 30, 1998
and written representations from certain Reporting Persons, the Company believes
that all Reporting Persons complied with all Section 16(a) filing requirements
in the fiscal year ended June 30, 1998.
ITEM 11. EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
The Company entered into an agreement with Winston Rodrigues dated as of
September 26, 1997 related to Mr. Rodrigues' employment as Senior Vice
President, Operations of the Company. Pursuant to such agreement, Mr. Rodrigues
received an annual base salary of US$119,315 (Cdn. $175,000 converted as of
June 30, 1998) and was eligible to receive an annual bonus in an amount
determined by the Compensation Committee of the Board of Directors, such amount
not to exceed 40% of the annual base salary, if the Company achieved certain
budgets and forecasts approved by the Board of Directors from time to time. In
addition, in the event the Company did not meet such budgets and forecasts, the
Board of Directors could approve for Mr. Rodrigues an annual bonus not to exceed
40% of his annual base salary if the Board of Directors was of the view that Mr.
Rodrigues' performance was outstanding and the Company's failure to achieve its
budgets and forecasts was not attributable to factors within Mr. Rodrigues'
control. In addition, the Company agreed to advance Mr. Rodrigues $23,000,
interest free, if Mr. Rodrigues left his former employer prior to December 31,
1997 and thereby incurred a $23,000 resignation penalty. The Company further
agreed to forgive such advance if Mr. Rodrigues remained at the employment of
the Company for at least twelve consecutive months, provided Mr. Rodrigues
complied with all other terms and obligations under the agreement, failing which
the advance would become immediately due and payable upon Mr. Rodrigues'
cessation of employment. In August 1998, the Board of Directors of the Company
increased Mr. Rodrigues' annual base salary from Cdn. $175,000 to Cdn. $210,000,
and increased his eligible annual bonus from 40% to 50% of his annual base
salary.
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The agreement provides that Mr. Rodrigues' employment with the Company may
be terminated by Mr. Rodrigues upon three months written notice to the Company,
in which case the Company must pay to Mr. Rodrigues his salary and benefits for
the remaining time period specified in his notice of termination. The agreement
further provides that the Company may terminate the agreement at any time, with
or without cause, upon written notice. In the event Mr. Rodrigues' employment
is terminated by the Company without cause, the Company must pay Mr. Rodrigues a
lump sum amount equal to six months of his base annual salary at the time of
such termination. In addition, Mr. Rodrigues was granted an incentive stock
option to purchase 45,000 Common Shares of the Company under the Company's
Amended and Restated 1994 Restricted Stock and Stock Option Plan at an exercise
price of $21.00 per share. In the event that Mr. Rodrigues' employment is
terminated without cause after October 27, 1998, then all options to purchase
shares of the Company which would have next vested, shall immediately vest upon
such termination.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Amendment No. 1 to the
Annual Report on Form 10-K to be signed on the Company's behalf by the
undersigned, thereunto duly authorized.
DISCREET LOGIC INC.
By: /s/ Francois Plamondon
--------------------------------
Francois Plamondon
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Dated: October 27, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- - ----------- -------------------------------------------------------------------
<S> <C>
10.1 Employment Agreement dated September 26, 1997, by and between the
Company and Winston Rodrigues.
</TABLE>
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EXHIBIT 10.1
September 26, 1997
Mr. Winston Rodrigues
Dear Winston,
Discreet Logic Inc. ("DISCREET") is pleased to offer you employment upon the
terms and conditions set out below.
1. Duties and Responsibilities
---------------------------
Discreet hereby agrees to engage your services as Senior Vice-President,
Operations of Discreet. In such capacity, you shall report directly to the Chief
Executive Officer of Discreet or such other person as may be designated by
Discreet from time to time and you shall be accountable to both the latter and
the board of directors of Discreet.
By your acceptance hereof, you agree to devote all of your working time,
attention and skill to Discreet and to make every effort necessary to promote
the success of Discreet's business and perform adequately the duties that are
assigned to you as of the Date of Commencement (as defined below).
You further agree that you may not pursue any activities which could be
detrimental to Discreet's interests.
2. Compensation
------------
Discreet shall pay you a base annual salary (the "SALARY") of Cdn. $175,000 as
of the Date of Commencement. The Salary shall be reviewed annually by Discreet
in accordance with its applicable internal policies in effect from time to time.
You shall furthermore be eligible for an annual target bonus at the sole
discretion of the compensation committee of the board of directors of Discreet
based on the achievement by Discreet, on a consolidated basis, of the budgets
and forecasts approved by the board of directors from time to time, which annual
bonus shall not exceed 40% of your Salary. Notwithstanding the foregoing, in the
event that the budgets and forecasts approved by the board of directors from
time to time are not met, the board of directors of Discreet shall have the
right, at its sole discretion, to approve the payment of a bonus not to exceed
40% of your Salary if the board of directors is of the view that your
performance was outstanding and the failure to meet the budgets and forecasts
was not attributable to factors within your control. This annual bonus, if any,
shall be determined and paid annually.
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3. Reimbursement
-------------
Discreet will reimburse you, upon presentation of appropriate receipts or other
evidence thereof, all expenses and fees reasonably incurred by you in the
exercise of your functions hereunder, the whole provided that such expenses and
fees were incurred in direct relation to the accomplishment of your duties
hereunder, the whole in accordance with the policy of Discreet then in effect as
modified from time to time at the sole discretion of the board of directors of
Discreet.
4. Stock Options
-------------
Discreet will grant you (the "INITIAL GRANT") no later than two weeks following
the Date of Commencement an option to purchase 45,000 common shares in the share
capital of Discreet pursuant to the "Amended and Restated 1994 Restricted Stock
and Stock Option Plan" of Discreet (the "PLAN"). The exercise price of each
option will be an amount equal to the "Fair Market Value" of the optioned shares
(as determined in accordance with the provisions of the Plan) as at the date on
which the Initial Grant shall be approved by the board of directors of Discreet
(the "DATE OF INITIAL GRANT"). Your options pursuant to the Plan will vest as
follows:
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Number of Shares Date of Vesting
- - ---------------- ---------------
- - --------------------------------------------------------------------------------
22,500 Date of 2nd anniversary of Date of Initial Grant
an additional 11,250 Date of 3rd anniversary of Date of Initial Grant
an additional 11,250 Date of 4th anniversary of Date of Initial Grant
================================================================================
The Initial Grant shall be subject to you executing the standard form Stock
Option Agreement as required by the Plan.
5. Duration and Termination
------------------------
This agreement is for an indeterminate term commencing not later than October
27, 1997 (the "DATE OF COMMENCEMENT").
This agreement may be terminated, except for continuing obligations hereunder as
at any such termination, in any of the following eventualities and with the
following consequences:
(a) at any time, for Cause, on simple notice from Discreet to you the whole
without any other notice or any pay in lieu of notice or any indemnity
whatsoever from Discreet to you, and any further claims or recourse by you
against Discreet or its affiliates in respect of such termination;
(b) upon three (3) months notice in writing from you to Discreet, specifying
your intention to resign, in which event Discreet shall only be obliged to
pay you your remuneration hereunder for such remaining part of the period
specified in your notice, and Discreet shall have no further obligations
hereunder in the event of your
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resignation, it being understood that you shall not benefit, after your
resignation, from any additional vesting of your options to purchase common
shares referred to herein; or
(c) upon written notice from Discreet to you in the event of termination of
your employment without Cause, in which event Discreet shall pay you an
indemnity in lieu of notice in a lump sum equal to six (6) months of your
Salary at the time of termination, and Discreet shall have no further
obligations hereunder in the event of such termination of your employment,
and you shall have no further claims or recourse against Discreet or any of
its affiliates in respect of such termination. Notwithstanding any
provision herein to the contrary, if your employment with Discreet is
terminated without Cause after the first anniversary date of the Date of
Commencement, then the options to purchase common shares of Discreet which
would have vested next as set forth above shall immediately vest.
"Cause" shall mean cause for dismissal without either notice or payment in lieu
of notice for reasons of fraud, embezzlement, gross negligence, wilful and
careless disregard or gross dereliction of duty, incapacity or refusal to
perform employment functions due to drug use or alcohol addiction, conviction of
a felony, serious breach of duty not corrected within thirty (30) days of notice
to that effect and discriminatory practices governed by statute.
6. Benefit Plans and Vacation
--------------------------
You shall have the right to participate to all benefit programs and/or plans
granted to senior employees of Discreet, the whole in accordance with the actual
programs or plans that Discreet may institute from time to time. You shall be
granted a minimum of four (4) weeks of annual vacation for each whole calendar
year of this agreement.
7. Non-Competition
---------------
Without the prior written approval of Discreet, you agree not, during your
employment with Discreet and for a subsequent period of eighteen (18) months
thereafter, on your own behalf or on behalf of any other person, whether
directly or indirectly, in any capacity whatsoever alone, or through or in
connection with any person, carry on or be engaged in or do consulting work for
or have any financial or other interest in or be otherwise commercially
involved in any endeavour, activity or business in all or part of the Territory
(as hereinafter defined) which is in competition with the Business (as
hereinafter defined) or which provides similar competitive services.
You shall not, during your employment with Discreet and for a period of eighteen
(18) months thereafter, directly or indirectly, solicit, interfere with or
endeavour to entice away any employee of, any person who within six (6) months
of your departure left his or her employment with, or any consultant under
contract with, Discreet.
Without limiting the remedies available to Discreet, you hereby expressly
acknowledge and agree that a breach by you of any of the covenants contained in
this paragraph may result in materially irreparable harm to the Business and,
hence, to Discreet for which there is no adequate remedy at law; that it will
not be possible to measure damages for such injuries precisely; and that, in the
event of such a breach or threat thereof, Discreet shall be entitled to
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obtain any or all of a temporary restraining order and a preliminary or
permanent injunction restraining you from engaging in activities prohibited by
the said provisions of paragraph 7 or such other relief as may be required to
enforce specifically any of the covenants of this paragraph 7.
"TERRITORY" shall mean worldwide.
"BUSINESS" shall mean the business now and heretofore conducted by Discreet,
its subsidiaries and its affiliates provided that such affiliate is in a
business similar or related to the business of Discreet and its subsidiaries.
8. Confidentiality and Non-Disclosure
----------------------------------
You hereby expressly covenant and agree that you shall not, during and for a
period of ten years following termination of your employment with Discreet,
disclose any Confidential Information (as hereinafter defined) to any person
other than such persons as expressly approved by Discreet nor use any
Confidential Information for your own benefit, or for the benefit of any other
person, or for any purpose other than within the scope of your employment by
Discreet.
"CONFIDENTIAL INFORMATION" shall mean confidential, secret or proprietary
information of Discreet or related to the Business, whether recorded or not,
howsoever received or generated by Discreet or you from, through or relating to
Discreet or the Business and in whatever from (whether oral, written, machine
readable or otherwise) which pertains to Discreet, its affiliates, its
subsidiaries or the Business. "Confidential Information" shall not include
information which (i) is in the public domain, without any fault or violation of
this agreement on your part, (ii) is generally disclosed by Discreet without any
restriction to third parties, (iii) is properly within your legitimate
possession prior to its disclosure hereunder and without any obligation of
confidences attaching thereto, (iv) after disclosure, is lawfully received by
you from another person who is lawfully in possession of such Confidential
Information and such other person was not restricted from disclosing the said
information to you and (v) you are legally compelled to divulge by order of a
governmental agency or a court of competent jurisdiction.
9. Transfer and Release of Rights
------------------------------
You hereby acknowledge and agree that all right, title and interest in and to
any Work vests and is owned exclusively by Discreet immediately on its creation
and regardless of the stage of its completion. To that effect, you further
agree, and do hereby covenant with and to Discreet, to promptly and fully
disclose to Discreet and to deliver to Discreet all Work created, developed or
conceived by him during the term of your employment with Discreet. Accordingly,
you hereby irrevocably transfer, assign and release to Discreet all Intellectual
Property Rights in the or any part of the Work that you now have or may
hereafter acquire. You hereby represent and warrant that you have not granted,
and covenant and agree that you shall not grant, Intellectual Property Rights in
any Work to any other person.
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For the purposes hereof:
"COMPUTER PROGRAMS" shall mean a set of ordered steps or list of instructions
used in connection with a computer to cause the computer to indicate, perform or
achieve particular functions, tasks or results, and includes but is not limited
to, source-code listings in human or machine readable form, objects codes in
machine readable form, program files, data files, program and system logic,
pseudo-code, algorithms, interfaces, routines, design concepts and program
structure.
"DERIVATIVE WORK" shall mean a Work, however recorded, based upon one or more
pre-existing Works, and includes revisions, modifications, translations,
abridgements, condensations, expansions or any other forms in which such
pre-existing Works may be recast, transformed or adapted.
"INTELLECTUAL PROPERTY RIGHTS" means all worldwide intellectual and industrial
property rights in connection with the Work, including, without limitation, (i)
patents, inventions, and discoveries, (ii) copyrights, (iii) Confidential
Information, (iv) trademarks, (v) industrial and artistic designs, (vi)
software, source codes, application codes, including the right to apply for
registration or protection of any of the foregoing, and includes proprietary,
possessory and ownership rights and interests of all kinds whatsoever or
howsoever arising.
"WORK" shall mean any and all source code or other Computer Programs, any design
specification created to describe the source code or other Computer Programs,
any methods, processes, apparatus, products, hardware, or firmware, any
drawings, reports, memoranda, specimens, models, letters or notebooks, made,
developed or conceived by you, either solely or jointly with others, during the
entire period that you are employed by Discreet or any of its affiliates,
whether or not they were, are, or will be made, developed or conceived during
working hours using Discreet or any of its affiliates' data or facilities, and
which relate to Discreet or any of its affiliates' existing or projected areas
of business, and includes, without limitation, Derivative Work, drafts,
versions, and parts thereof, disks, tapes, files, listings, screen displays,
enhancements and developments thereto, user manuals, marketing materials,
demonstration reels, technical manuals, flow charts, log books and all
supporting documentation.
10. Protection of Intellectual Property Rights
------------------------------------------
You hereby acknowledge and agree that Discreet and its affiliates shall have the
exclusive right to file applications, obtain and maintain protection and
registration for, and assign, the or any part of the Work and the Intellectual
Rights therein and to perform all acts necessary or desired by Discreet and its
affiliates to enable Discreet and its affiliates, their successors, assigns and
nominees, to secure and enjoy the full and exclusive benefits and advantages
thereof. In this respect, you agree to cooperate and to provide all necessary
assistance as may be reasonably required by Discreet and its affiliates for
these purposes. After any termination of your employment hereunder, you shall,
from time to time, at Discreet's expense (which shall be limited to a reasonable
per diem to cover lost wages in your then existing employment and reimbursement
of any expenses incurred at the request of Discreet), execute and deliver all
documents and instruments (including instruments or conveyance and waivers of
moral rights) and do all acts and things as Discreet may
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reasonably require to carry out effectively, or to better evidence, or perfect
the full intent and meaning of this agreement.
11. Property
--------
Confidential Information and the documents, works, instruments, media or other
embodiments of or containing Confidential Information shall remain the property
of Discreet and be returned to Discreet upon request, or, at the latest,
immediately upon any termination of your employment.
12. Special Reimbursement
---------------------
You have informed us that you will have to reimburse to Memotec Communications
Inc. an amount of $23,000 (the "AMOUNT") if you leave the employment of Memotec
Communications Inc. prior to December 31, 1997. If you accept this offer of
employment, we will advance to you, on an interest free basis, the Amount, which
shall be forgiven by Discreet if you remain at the employment of Discreet for a
period of not less than twelve consecutive months commencing on the Commencement
Date, provided you shall have complied during said period with the terms of this
agreement, failing which the Amount shall become immediately due and payable
upon your cessation of employment.
13. General Provisions
------------------
This agreement shall be governed, interpreted and construed by and in accordance
with the laws of the Province of Quebec and the laws of Canada applicable
therein.
This offer of employment is subject to receipt of satisfactory references.
You hereby acknowledge having received a copy of the Plan.
The parties acknowledge that they have requested and are satisfied that this
agreement and all related documents be drawn up in the English language; les
parties aux presentes reconnaissent qu'ils ont exigees que la presente
convention et touts documents qui s'y rattachent soient rediges en langue
anglaise et s'en declarent satisfaites.
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If you wish to accept this position, please sign and return a signed copy to us.
We are delighted to have you join us.
/s/ Richard J. Szalwinski
Richard J. Szalwinski
ACCEPTED at Montreal, Quebec, on this 27/th/ day of September, 1997.
/s/ Winston Rodrigues
Winston Rodrigues
