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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 00-26810
LOGIC WORKS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2663477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Campus Drive
Princeton, N.J. 08540
(Address and zip code of principal executive offices)
(609) 514-1177
(Registrant's telephone number, including area code)
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 |_| No |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 12,839,000 common stock shares
outstanding at May 11, 1998.
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LOGIC WORKS, INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 1998 and December 31, 1997 ............................ 3
Condensed Consolidated Statements of
Operations for the Three Months Ended
March 31, 1998 and 1997 ......................................... 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1997 .............. 5
Notes to Condensed Consolidated Financial Statements ............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................... 13
Item 2. Changes in Securities ........................................... 13
Item 3. Defaults Upon Senior Securities ................................. 13
Item 4. Submission of Matters to a Vote of Security Holders ............. 13
Item 5. Other Information ............................................... 13
Item 6. Exhibits and Reports on Form 8-K ................................ 13
Signatures ...................................................... 15
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LOGIC WORKS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
1998 1997
-----------------------------
Assets (unaudited) (audited)
Current Assets
Cash and cash equivalents $ 40,988 $ 26,186
Marketable securities 2,515 12,188
Accounts receivable, net 9,853 11,211
Other current assets 4,416 3,735
-----------------------------
Total current assets 57,772 53,320
Property and equipment, net 4,079 4,305
Other assets 1,749 1,825
=============================
$ 63,600 $ 59,450
=============================
Liabilities and stockholders' equity
Current Liabilities
Accounts payable $ 1,347 $ 1,923
Accrued compensation 2,989 2,574
Deferred revenue 7,551 6,806
Income taxes payable 2,626 467
Other current liabilities 4,096 4,382
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Total current liabilities 18,609 16,152
Total stockholders' equity 44,991 43,298
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$ 63,600 $ 59,450
=============================
See notes to condensed consolidated financial statements.
3
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LOGIC WORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
--------------------------------
1998 1997
--------------------------------
Revenues
License fees $ 8,465 $ 7,563
Maintenance & service fees 4,486 2,954
--------------------------------
Total revenues 12,951 10,517
Cost of licenses and services
Cost of license fees 653 721
Cost of maintenance & service fees 1,197 822
--------------------------------
Total cost of revenues 1,850 1,543
Gross margin 11,101 8,974
Operating expenses
Sales and marketing 6,409 5,825
Research and development 1,877 1,722
General and administrative 1,546 1,411
--------------------------------
Total operating expenses 9,832 8,958
Operating income 1,269 16
Other income, net 392 217
--------------------------------
Income before income taxes 1,661 233
Income taxes 621 89
--------------------------------
Net income $ 1,040 $ 144
================================
Basic earnings per share $ 0.08 $ 0.01
================================
Diluted earnings per share $ 0.08 $ 0.01
================================
Weighted average shares outstanding
Basic 12,484 11,757
================================
Diluted 13,373 12,679
================================
See notes to condensed consolidated financial statements.
4
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LOGIC WORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1998 1997
-------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,040 $ 144
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 463 412
Compensation element of common
stock, warrants and stock option grants 17 36
Changes in operating assets and liabilities:
Decrease in current assets and other noncurrent assets 677 2,139
Increase in accounts payable and other current liabilities 1,712 989
Increase in deferred revenue 745 266
-------------------------------
Net cash provided by operating activities 4,654 3,986
-------------------------------
Cash flows from investing activities
Purchase of property and equipment (161) (453)
Purchase of marketable securities - (2,323)
Proceeds from sale of marketable securities 9,673 473
Other - (29)
-------------------------------
Net cash provided by (used in) investing activities 9,512 (2,332)
-------------------------------
Cash flows from financing activities
Proceeds from the issuance of stock 612 233
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Net cash provided by financing activities 612 233
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Effect of foreign exchange rate on cash 24 (141)
-------------------------------
Net increase in cash and cash equivalents 14,802 1,746
Cash and cash equivalents at beginning of period 26,186 20,385
-------------------------------
Cash and cash equivalents at end of period $ 40,988 $ 22,131
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</TABLE>
See notes to condensed consolidated financial statements.
5
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LOGIC WORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Organization and Basis of Presentation
Logic Works, Inc. (the "Company") is a leading provider of modeling and design
solutions. The Company was incorporated in Delaware in 1985 and operates in one
industry segment. The Company has subsidiaries in Australia, Canada, England,
Germany and France to further broaden its global market. The Company markets its
products worldwide primarily through direct and indirect sales and marketing
channels. The accompanying condensed consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries.
The accompanying condensed consolidated financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange
Commission and, accordingly, do not include all financial information and
footnotes required under generally accepted accounting principles for complete
financial statements. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments consisting of normal
recurring adjustments that the Company considers necessary for a fair
presentation of the financial position of the Company as of March 31, 1998 and
the results of the Company's operations for the three months ended March 31,
1998 and 1997, respectively, and its cash flows for the three months ended March
31, 1998 and 1997, respectively. This report on Form 10-Q should be read in
conjunction with the Company's audited financial statements for the year ended
December 31, 1997 and the notes therein, included in the Company's annual report
on Form 10-K. Certain amounts have been reclassified to conform with current
year presentation. The results of operations for interim periods are not
necessarily indicative of the results of operations to be expected for the
entire year.
2. Proposed Merger
On March 14, 1998, the Company and PLATINUM technology, inc. ("PLATINUM")
announced the execution of a definitive merger agreement (the "Merger
Agreement") pursuant to which PLATINUM will acquire the Company. Under the terms
of the Merger Agreement, the Company will become a wholly-owned subsidiary of
PLATINUM and PLATINUM will exchange 0.5769 of a share of PLATINUM common stock
for each share of the Company's common stock. PLATINUM will also assume the
Company's stock options which will convert into options to purchase PLATINUM
common stock at the same exchange ratio. It is expected that the merger will
qualify as a tax-free reorganization and be accounted for as a pooling of
interests. A registration statement on Form S-4 covering the shares of PLATINUM
common stock to be issued in the merger was declared effective by the Securities
and Exchange Commission on April 23, 1998. The merger was also granted an early
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; however, such termination does not
preclude the antitrust division, the FTC or any other party from challenging or
seeking to delay or enjoin the merger on antitrust grounds. The merger is
subject to the approval of the Company's stockholders, at a meeting scheduled
for May 28, 1998, and certain other conditions.
3. Per Share Amounts
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share, ("FAS 128"). FAS 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the FAS 128
requirements.
6
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The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended
(All amounts in thousands, except per share amounts) March 31,
----------------------------
1998 1997
----------------------------
<S> <C> <C>
Numerator:
Net income $ 1,040 $ 144
----------------------------
Numerator for basic and diluted earnings per share -
income available to common stockholders $ 1,040 $ 144
============================
Denominator:
Denominator for basic earnings per share
weighted-average shares 12,484 11,757
Effect of dilutive securities:
Employee stock options 889 922
----------------------------
Dilutive potential common shares 889 922
Denominator for diluted earnings per share adjusted
weighted-average shares and assumed conversions 13,373 12,679
============================
Basic earnings per share $ 0.08 $ 0.01
============================
Diluted earnings per share $ 0.08 $ 0.01
============================
</TABLE>
4. Reporting Comprehensive Income
As of January 1, 1998, the Company adopted Financial Accounting Standards Board
Statement No. 130, "Reporting Comprehensive Income" ("FAS 130"). FAS 130
establishes new rules for the reporting and display of comprehensive income and
its components. The adoption of FAS 130 had no impact on the Company's results
of operations or stockholders' equity. FAS 130 requires unrealized gains or
losses on the Company's available-for-sale securities and foreign currency
translation gains or losses, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income. The
components of comprehensive income for the three month periods ended March 31,
are as follows:
1998 1997
---------------
Net income $1,040 $144
Foreign currency translation (loss) (14) (162)
Unrealized gain on securities 37 21
---------------
Total comprehensive income $1,063 $3
===============
5. Legal Proceedings
7
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The Company is subject to lawsuits and other claims arising in the ordinary
course of its operations. In the opinion of management, based on consultation
with legal counsel, the effect of such matters will not have a material adverse
effect on the Company's business, financial condition or results of operations.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed in "Business Considerations" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997, which
has been filed with the Securities and Exchange Commission.
The Company is a leading provider of modeling and design solutions. The
Company's Windows-based products allow customers to realize the benefits of
client/server systems by enabling easy, rapid and high-quality design,
deployment and management of relational databases and related applications.
Results of Operations
The following table sets forth certain operating data as a percentage of total
revenues for the periods indicated (subtotals not adjusted for rounding):
Three Months
Ended March 31,
-----------------------
1998 1997
-----------------------
Percentages of Revenues:
Revenues:
License fees 65.4% 71.9%
Maintenance and service fees 34.6 28.1
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Total revenues 100.0 100.0
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Cost of revenues:
License fees 5.0 6.9
Maintenance and service fees 9.2 7.8
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Total cost of revenues 14.2 14.7
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Gross margin 85.8 85.3
-----------------------
Operating expenses:
Sales and marketing 49.5 55.4
Research and development 14.5 16.4
General and administrative 11.9 13.4
-----------------------
Total operating expenses 75.9 85.2
-----------------------
Operating income 9.9 0.1
Other income 3.0 2.1
-----------------------
Income before income taxes 12.9 2.2
Income taxes 4.8 0.8
-----------------------
Net income 8.1% 1.4%
=======================
Total Revenues. The Company's revenues are derived from two sources: license
fees and maintenance and service fees. Total revenues increased 23.8% to $13.0
million in the three months ended March 31, 1998 from $10.5 million in the three
months ended March 31, 1997. The Company derived approximately $3.0 million and
$2.3 million, or 23.1% and 21.9% of its total revenues, from international
customers in the three months ended March 31, 1998 and 1997, respectively. To
date, the majority of the Company's international license fees and maintenance
and service fees have been denominated in U.S. dollars and, accordingly, the
Company has not hedged its exposure to foreign currency fluctuations. During the
fourth quarter of 1997, the U.S. dollar strengthened against certain major
international currencies. The Company believes that the strengthening of the
U.S. dollar against international currencies will not have a material adverse
effect on consolidated revenues. The Company believes it has adequate revenue
and accounts receivable reserves in
9
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total and specifically for this sector of business. The Company anticipates
that, in the future, an increasing proportion of the Company's sales will be
from the international sector. In such event, an increasingly significant
portion of the Company's revenues will be subject to the risks inherent in
international operations. These risks include, but are not limited to,
unexpected changes in regulatory requirements, tariffs and other barriers, and
potentially adverse tax consequences.
License Fees. License fees include revenues from software licensed either
directly from the Company or through value added resellers, dealers or
distributors, and from the resale of third party software. License fees
increased 11.8% to $8.5 million in the three months ended March 31, 1998 from
$7.6 million in the three months ended March 31, 1997. The increase during this
period resulted from continued market acceptance of the Company's products,
primarily ERwin, which was stimulated by the Company's sales and marketing
activities, including the expansion of the Company's direct and indirect
channels. The ERwin product line accounted for 76% and 75% of the Company's
license fees for the three months ended March 31, 1998 and 1997, respectively.
ModelMart accounted for 11% and 10% of license fees for the three months ended
March 31, 1998 and 1997, respectively. The remainder of the license fees were
received primarily from licenses of BPwin.
Cost of License Fees. Cost of license fees consists primarily of the costs of
product media, duplication, manuals, and shipping for software licensed to the
Company's customers. Cost of license fees as a percentage of license fee
revenues was 7.7% and 9.5% for the three months ended March 31, 1998 and 1997,
respectively. This decrease is primarily the result of additional costs incurred
by the Company during the three months ended March 31, 1997 to redesign the
packaging of all the Company's products to create a unified brand image of the
product suite. No such costs were incurred during the three months ended March
31, 1998. The Company anticipates entering into, from time to time, arrangements
under which the Company will resell third party products which could result in
future increases in costs of license fees.
Maintenance and Service Fees. Maintenance and service fees include revenues from
software maintenance agreements and training and consulting services.
Maintenance and service fees increased by 50.0% to $4.5 million in the three
months ended March 31, 1998 from $3.0 million in the three months ended March
31, 1997. The growth in maintenance and service fee revenues during the periods
presented was primarily the result of increased maintenance fees as a result of
a targeted effort from the sales force to increase the renewal rate on
maintenance agreements and due to a resurgence in revenue generated by the
Professional Services Group.
Cost of Maintenance & Service Fees. Cost of maintenance and service fees
consists primarily of personnel and related costs for training, consulting and
payments to third party service providers. Cost of maintenance and services also
reflects the costs of customer support as well as costs associated with product
media, duplication, manuals and shipping product upgrades to customers who have
subscribed to the Company's maintenance plans. Cost of maintenance and service
fees as a percentage of maintenance and service fees was 26.7% and 27.8% for the
three months ended March 31, 1998 and 1997, respectively. The decrease in costs
of maintenance and service fees as a percentage of maintenance and service fees
in the three months ended March 31, 1998 is the result of a larger increase in
maintenance fees which has a lower cost than training and consulting services.
Training and consulting fees generate lower margins than maintenance fees
because of the labor intensive nature of training and consulting.
Sales and Marketing. Sales and marketing expenses consist primarily of salaries,
commissions and bonuses paid to sales and marketing personnel, as well as travel
and promotional expenses. Sales and marketing expenses increased 10.3% to $6.4
million in the three months ended March 31, 1998 from $5.8 million in the three
months ended March 31, 1997 and represented 49.5% and 55.4%, of total revenues
in each period, respectively. The decrease in sales and marketing as a
percentage of total revenues is attributable to an increased level of
productivity from the Company's sales force during 1998. The dollar increase
during the three months ended March 31, 1998 reflects the expansion of its
direct field sales force and reflects increased advertising and promotional
programs related to releases of extended versions of ERwin, ModelMart and
Universal Directory.
10
<PAGE>
Research and Development. Research and development expenses consist primarily of
software engineering, personnel costs, software for development purposes and
costs of outside consultants hired by the Company to assist in its product
development efforts. Research and development expenses increased 11.8% to $1.9
million in the three months ended March 31, 1998 from $1.7 million in the three
months ended March 31, 1997 and represented 14.5% and 16.4% of total revenues,
respectively. Research and development expenses are generally charged to
operations as they are incurred and have not been capitalized since
capitalizable costs have not been material. The increase in research and
development expenses during the periods presented was the result of the
Company's ongoing development of extended versions of ERwin, BPwin, ModelMart
and Universal Directory, as well as ongoing development of new products, and the
continuation of its quality control and quality assurance programs.
General and Administrative. General and administrative expenses consist
primarily of salaries of administrative, executive and financial personnel,
provision for doubtful accounts, and outside professional fees. General and
administrative expenses increased 7.1% to $1.5 million for the three months
ended March 31, 1998 from $1.4 million for the three months ended March 31, 1997
and represented 11.9% and 13.4% of total revenues, respectively. The percentage
decrease from 1997 to 1998 resulted from the Company's concerted effort to
control costs and specifically general and administrative headcount. The dollar
increase in general and administrative expenses related primarily to the overall
expansion of the Company's operations and facilities.
Income Taxes. The Company provides for income taxes at an effective tax rate
based on estimated annual federal and state statutory rates.
Impact of Recently Issued Accounting Standards. In June 1997, the Financial
Accounting Standards Board issued Statement No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("FAS 131"), effective for years
beginning after December 15, 1997. FAS 131 requires that a public company report
financial and descriptive information about its reportable operating segments in
annual and interim financial statements. The adoption of FAS 131 will not affect
results of operations or financial position, but may affect the Company's
reporting of segment information. Management is currently evaluating the
disclosure impact of FAS 131.
Proposed Merger. On March 14, 1998, the Company and PLATINUM technology, inc.
("PLATINUM") announced the execution of a definitive merger agreement (the
"Merger Agreement") pursuant to which PLATINUM will acquire the Company. See
Note 2 of Notes to Condensed Consolidated Financial Statements.
11
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Liquidity and Capital Resources
At March 31, 1998, the Company had cash and cash equivalents of $41.0 million
and marketable securities of $2.5 million.
Net cash provided by operating activities was $4.7 million and $4.0 for the
three months ended March 31, 1998 and 1997, respectively. The net increase in
cash provided by operating activities consists primarily of an increase in net
income, increases in accounts payable and other current liabilities, deferred
revenue and decreases in accounts receivable.
Net cash and cash equivalents used in investing activities increased $11.8
million in the first three months of 1998 as compared to the same period in
1997. The increase in investing activities primarily reflects the net change in
the marketable securities position.
Net cash provided by financing activities increased by $0.4 million in the first
three months of 1998 compared to the same period in 1997 as a result of the
increase in the exercising of employee stock options .
The Company believes that its existing cash balances together with cash flow
from operations will be sufficient to meet its cash requirements for at least
the next twelve months.
"LOGIC WORKS," "ERwin," "TESTBytes," "BPwin," "OOwin," and "RPTwin" are
registered trademarks of the Company. "ModelMart," "Universal Directory,"
"Universal Modeling Architecture (UMA)," "Logic Works" with logo and the phrase
"Making Database Design Easier in a Client/Server World" are trademarks of the
Company. This filing on Form 10-Q also includes trademarks and tradenames of
companies other than Logic Works, Inc.
12
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not subject to any lawsuits or other claims brought
in the ordinary course of business, which, in the opinion of
management, based upon consultation with legal counsel, will have a
material adverse effect on the Company's business, financial
condition, and/or results of operations.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.7 Severance Agreement, dated March 12, 1998, between the
Registrant and Gregory A. Peters.
10.8 Severance Agreement, dated March 12, 1998, between the
Registrant and Flint Lane.
10.9 Severance Agreement, dated March 12, 1998, between the
Registrant and Edward McLaughlin.
10.10 Severance Agreement, dated March 12, 1998, between the
Registrant and Daniel Shiffman.
10.11 Severance Agreement, dated March 12, 1998, between the
Registrant and Frank Watts.
27. Statement regarding financial data schedule.
b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated March
18, 1998, to report the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") with PLATINUM
technology, inc. and PT Acquisition Corporation II, a wholly
owned subsidiary of PLATINUM. Pursuant to the Merger
Agreement, and subject to the terms and conditions thereof,
the Company will become a wholly-owned subsidiary of PLATINUM
and
13
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PLATINUM will exchange 0.5769 shares of PLATINUM common stock
for each share of the Company's common stock.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LOGIC WORKS, INC.
Dated: May 15 , 1998 By: /s/ GREGORY A. PETERS
-------------------------
Gregory A. Peters
Chief Executive Officer, President and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
15
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EXHIBIT INDEX
Number Description Page No.
- ------ ----------- --------
10.7 Severance Agreement, dated March 12, 1998, between
the Registrant and Gregory A. Peters. 17
10.8 Severance Agreement, dated March 12, 1998, between the
Registrant and Flint Lane. 21
10.9 Severance Agreement, dated March 12, 1998, between the
Registrant and Edward McLaughlin. 24
10.10 Severance Agreement, dated March 12, 1998, between the
Registrant and Daniel Shiffman. 27
10.11 Severance Agreement, dated March 12, 1998, between the
Registrant and Frank Watts. 30
27 Statement re: Financial Data Schedule 33
16
Exhibit 10.7
LOGIC WORKS, INC.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
March 12, 1998
Gregory A. Peters
c/o Logic Works, Inc.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
Dear Mr. Peters:
We are pleased to inform you that the Board of Directors has
recently authorized a special severance benefit package for you and other key
executives of the Company. Your severance benefits as described below will
become payable in the event your employment terminates under certain
circumstances described below. This Agreement clarifies and confirms the current
severance obligations of the Company set forth in the employment letter to you
dated July 3, 1996 (the "Letter Agreement") and sets forth certain additional
severance benefits in Section 5.
1. Severance Payments. Upon your involuntary discharge or dismissal
(for reasons other than Misconduct), you will receive severance payments in an
aggregate amount equal to one-half the annual base salary in effect for you at
the time of such termination. Additionally, if such termination is an
Involuntary Termination in connection with or within eighteen (18) months
following a Change in Control, you will receive additional severance payments in
an aggregate amount equal to one-half of your annual base salary in effect for
you at the time of your termination (or the base salary in effect prior to a
reduction which triggered the Involuntary Termination under Section 4(b)(ii)(B)
of this letter agreement).
Your severance payments will be paid monthly over the six (6)-month
period following the effective date of any termination described above and will
be subject to the Company's collection of applicable Federal and state income
and employment withholding taxes.
2. Health Care Coverage. If you become entitled to severance
payments under Paragraph 1, the Company will, at its expense, provide you and
your eligible dependents with continued health care coverage under the Company's
medical/dental plan until the earlier of (i) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions or
(ii) the end of the severance payment period under Paragraph 1. Any further
coverage to which you or your dependents may be entitled during the remainder
(if any) of your COBRA coverage period under Internal Revenue Code Section 4980B
will be at your sole expense.
3. Limitation on Benefits. In the event your employment terminates
by reason of your death or disability or in the event of your termination for
Misconduct, you will not be entitled to receive any severance benefits under
this letter agreement.
17
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4. Definitions. For purposes of this letter agreement, the following
definitions will be in effect:
a. Change in Control means any of the following transactions
effecting a change in ownership or control of the Company:
(1) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately
prior to such transaction, or
(2) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company, or
(3) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's stockholders, or
(4) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority
of the Board members ceases by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (A)
who were still in office at the time such election or nomination was
approved by the Board.
b. Involuntary Termination means the termination of your
employment with the Company:
(1) involuntarily upon your discharge or dismissal (for
reasons other than Misconduct), or
(2) voluntarily upon your resignation following (A) a
change in your position with the Company which materially reduces your
duties or level of responsibility, (B) a reduction in your level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) or (C) a change
in your place of employment which is more than fifty (50) miles from your
place of employment prior to the Change in Control, provided and only if
such change or reduction is effected without your written concurrence.
In no event shall an Involuntary Termination be deemed to occur
should your employment terminate by reason of your death or disability.
c. Misconduct means the commission of any act of fraud,
embezzlement or dishonesty by you, any unauthorized use or disclosure by you of
confidential information or trade secrets of the Company, or any other
intentional misconduct by you adversely affecting the business or affairs of the
Company in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company may consider as grounds
for the dismissal or discharge of you or any other individual in the service of
the Company.
18
<PAGE>
5. Tax Gross-Up.
a. Tax Gross-Up. Should one or more benefits which become
payable to you under the Letter Agreement (as clarified by Section 1 of this
Agreement) or with respect to your outstanding options under the Company's 1995
Stock Option/Stock Issuance Plan be deemed, by reason of the acquisition of the
Company by PLATINUM technology, inc. ("PLATINUM") pursuant to the Agreement Plan
of Merger by and among PLATINUM, PT Acquisition Corporation II, a Delaware
corporation and a wholly-owned subsidiary of PLATINUM, and the Company, dated
March 14, 1998, to constitute an excess parachute payment under Section 280(G)
of the Internal Revenue Code, then the Company shall provide you with a full tax
gross-up with respect to your parachute tax liability under Section 4999 of the
Internal Revenue Code. The amount of such tax gross-up shall be determined
pursuant to the following formula:
X = Y / 1 - (A + B + C), where
X is the total dollar payment (the "Tax Gross-Up")
required to be paid under this Agreement,
Y is the total excise tax (the "Parachute Tax") imposed
on you pursuant to Internal Revenue Code Section 4999
(or any successor provision) with respect to the excess
parachute payment,
A is the excise tax rate in effect under Internal
Revenue Code Section 4999 for such excess parachute
payment,
B is the highest combined marginal federal income and
applicable state income tax rate in effect for you,
after taking into account the deductibility of state
income taxes against federal income taxes to the extent
allowable, for the calendar year in which the Tax
Gross-Up is paid, and
C is the applicable Hospital Insurance (Medicare) Tax
Rate in effect for you for the calendar year in which
the Tax Gross-Up is paid.
b. Initial Payment. Within ninety (90) days after each
determination is made by your tax advisor that you have received a parachute
payment for which you are liable for a Parachute Tax, you shall identify the
nature of such parachute payment to the Company and submit to the Company the
calculation of the Parachute Tax attributable to that payment and the Tax
Gross-Up to which you are entitled with respect to such tax liability. The
Company shall pay such Tax Gross-Up to you (net of all applicable withholding
taxes, including any taxes required to be withheld under Internal Revenue Code
Section 4999) within ten (10) business days after your submission of the
calculation of such Parachute Tax and the resulting Tax Gross-Up, provided such
calculations represent a reasonable interpretation of the applicable law and
regulations.
c. Final IRS Determination. In the event that your actual
Parachute Tax liability is determined by a Final IRS Determination to be greater
than the Parachute Tax liability taken into account for purposes of the
Tax-Gross-Up paid to you pursuant to this Section, then within ninety (90) days
following the Final IRS Determination, you shall submit to the Company a new
Parachute Tax calculation based upon the Final IRS Determination. Within ten
(10) business days after receipt of such calculation, the Company shall pay to
you the additional Tax Gross-Up attributable to such excess Parachute Tax
liability.
19
<PAGE>
d. Refund. In the event that your actual Parachute Tax
liability is determined by a Final IRS Determination to be less than the
Parachute Tax liability taken into account for purposes of the Tax Gross-Up paid
to you pursuant to this Section, then you shall refund to the Company, promptly
upon receipt, any federal or state tax refund attributable to the Parachute Tax
overpayment.
e. Definition. For purposes of this Section, a Final IRS
Determination means an audit adjustment by the Internal Revenue Service that is
either agreed to by you or your estate or an adjustment that is sustained by a
court of competent jurisdiction in a decision with which you concur or with
respect to which the period within which an appeal may be filed has lapsed
without a notice of appeal being filed.
6. General Creditor Status. The payments and benefits to which you
become entitled hereunder will be paid, when due, from the general assets of the
Company, and no trust fund, escrow arrangement or other segregated account will
be established as a funding vehicle for such payment. Accordingly, your right
(or the right of the personal representatives or beneficiaries of your estate)
to receive any payments or benefits hereunder will at all times be that of a
general creditor of the Company and will have no priority over the claims of
other general creditors.
7. Death. Should you die before receipt of one or more severance
payments to which you become entitled under this letter, then those payment or
payments will be made to the executors or administrators of your estate.
8. Miscellaneous. This letter agreement will be binding upon the
Company, its successors and assigns (including, without limitation, the
surviving entity in any Change in Control) and is to be construed and
interpreted under the laws of the State of New Jersey. This letter agreement
supersedes all prior agreements between you and the Company relating to the
subject of severance benefits payable upon your termination of employment.
9. At Will Employment. Nothing in this letter agreement is intended
to provide you with any right to continue in the employ of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
your rights or the rights of the Company, which rights are hereby expressly
reserved by each party, to terminate your employment at any time for any reason
whatsoever, with or without cause.
We hope that you find the new severance benefit program to be an
important addition to your total compensation package which will provide you
with certain financial assurances in the event your employment were to terminate
under the circumstances indicated in this letter agreement.
LOGIC WORKS, INC.
BY: /s/ Benjamin C. Cohen
---------------------------------
TITLE: Chairman of the Board of Directors
---------------------------------
/s/ Gregory A. Peters
---------------------------
Gregory A. Peters
20
Exhibit 10.8
LOGIC WORKS, INC.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
March 12, 1998
Mr. Flint Lane
c/o Logic Works, Inc.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
Dear Mr. Lane:
We are pleased to inform you that the Board of Directors has
recently authorized a special severance benefit package for you and other key
executives of the Company. Your severance benefits as described below will
become payable in the event your employment terminates in connection with or
within a specified time period following certain changes in ownership or control
of the Company.
1. Severance Payments. Upon an Involuntary Termination in connection
with or within eighteen (18) months following a Change in Control, you will
receive severance payments in an aggregate amount equal to one-half of the sum
of (i) the base salary in effect for you at the time of your Involuntary
Termination (or the base salary in effect prior to a reduction which triggered
the Involuntary Termination under Section 5(b)(ii)(B) of this letter agreement)
plus (ii) your target bonus for the fiscal year of the Company in which such
Involuntary Termination occurs.
Your severance payments will be paid monthly over the six (6)-month
period following the effective date of your Involuntary Termination and will be
subject to the Company's collection of applicable Federal and state income and
employment withholding taxes.
2. Health Care Coverage. If you become entitled to severance
payments under Paragraph 1, the Company will, at its expense, provide you and
your eligible dependents with continued health care coverage under the Company's
medical/dental plan until the earlier of (i) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions or
(ii) the end of the severance payment period under Paragraph 1. Any further
coverage to which you or your dependents may be entitled during the remainder
(if any) of your COBRA coverage period under Internal Revenue Code Section 4980B
will be at your sole expense.
3. Consulting Services. You will make yourself available to perform
consulting services reasonably requested of you during the severance payment
period under Paragraph 1. You will not
21
<PAGE>
receive any cash compensation for the first ten (10) hours of consulting
services you render per month. To the extent you are requested to render more
than ten (10) hours of consulting services in any month, you will be compensated
for each additional hour at an hourly rate to be agreed upon by you and the
Company at the time such consulting services are to be rendered. In no event
will you be required to render more than twenty (20) hours of consulting
services per month. You will also be reimbursed for all reasonable out-of-pocket
expenses incurred in rendering any consulting services upon your submission of
appropriate documentation for those expenses.
4. Limitation on Benefits. In the event your employment terminates
by reason of your death or disability or in the event of your termination for
Misconduct, you will not be entitled to receive any severance benefits under
this letter agreement.
5. Definitions. For purposes of this letter agreement, the following
definitions will be in effect:
(a) Change in Control means any of the following transactions
effecting a change in ownership or control of the Company:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company, or
(iii) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's stockholders, or
(iv) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority
of the Board members ceases by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (A)
who were still in office at the time such election or nomination was
approved by the Board.
(b) Involuntary Termination means the termination of your
employment with the Company:
(i) involuntarily upon your discharge or dismissal (for
reasons other than Misconduct), or
(ii) voluntarily upon your resignation following (A) a
change in your position with the Company which materially reduces your
duties or level of responsibility, (B) a reduction in your level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) or (C) a change
in your place of employment which is more than fifty (50) miles from your
22
<PAGE>
place of employment prior to the Change in Control, provided and only if
such change or reduction is effected without your written concurrence.
In no event shall an Involuntary Termination be deemed to occur
should your employment terminate by reason of your death or disability.
(c) Misconduct means the commission of any act of fraud,
embezzlement or dishonesty by you, any unauthorized use or disclosure by you of
confidential information or trade secrets of the Company, or any other
intentional misconduct by you adversely affecting the business or affairs of the
Company in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company may consider as grounds
for the dismissal or discharge of you or any other individual in the service of
the Company.
6. General Creditor Status. The payments and benefits to which you
become entitled hereunder will be paid, when due, from the general assets of the
Company, and no trust fund, escrow arrangement or other segregated account will
be established as a funding vehicle for such payment. Accordingly, your right
(or the right of the personal representatives or beneficiaries of your estate)
to receive any payments or benefits hereunder will at all times be that of a
general creditor of the Company and will have no priority over the claims of
other general creditors.
7. Death. Should you die before receipt of one or more severance
payments to which you become entitled under this letter, then those payment or
payments will be made to the executors or administrators of your estate.
8. Miscellaneous. This letter agreement will be binding upon the
Company, its successors and assigns (including, without limitation, the
surviving entity in any Change in Control) and is to be construed and
interpreted under the laws of the State of New Jersey. This letter agreement
supersedes all prior agreements between you and the Company relating to the
subject of severance benefits payable upon your termination of employment.
9. At Will Employment. Nothing in this letter agreement is intended
to provide you with any right to continue in the employ of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
your rights or the rights of the Company, which rights are hereby expressly
reserved by each party, to terminate your employment at any time for any reason
whatsoever, with or without cause.
We hope that you find the new severance benefit program to be an
important addition to your total compensation package which will provide you
with certain financial assurances in the event your employment were to terminate
under the circumstances indicated in this letter agreement.
LOGIC WORKS, INC.
BY: /s/ Gregory A. Peters
----------------------------------------
TITLE: President and Chief Executive Officer
-------------------------------------
/s/ Flint Lane
--------------------------------------------
Flint Lane
23
Exhibit 10.9
LOGIC WORKS, INC.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
March 12, 1998
Mr. Edward McLaughlin
c/o Logic Works, Inc.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
Dear Mr. McLaughlin:
We are pleased to inform you that the Board of Directors has
recently authorized a special severance benefit package for you and other key
executives of the Company. Your severance benefits as described below will
become payable in the event your employment terminates in connection with or
within a specified time period following certain changes in ownership or control
of the Company.
1. Severance Payments. Upon an Involuntary Termination in connection
with or within eighteen (18) months following a Change in Control, you will
receive severance payments in an aggregate amount equal to one-half of the sum
of (i) the base salary in effect for you at the time of your Involuntary
Termination (or the base salary in effect prior to a reduction which triggered
the Involuntary Termination under Section 5(b)(ii)(B) of this letter agreement)
plus (ii) your target bonus for the fiscal year of the Company in which such
Involuntary Termination occurs.
Your severance payments will be paid monthly over the six (6)-month
period following the effective date of your Involuntary Termination and will be
subject to the Company's collection of applicable Federal and state income and
employment withholding taxes.
2. Health Care Coverage. If you become entitled to severance
payments under Paragraph 1, the Company will, at its expense, provide you and
your eligible dependents with continued health care coverage under the Company's
medical/dental plan until the earlier of (i) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions or
(ii) the end of the severance payment period under Paragraph 1. Any further
coverage to which you or your dependents may be entitled during the remainder
(if any) of your COBRA coverage period under Internal Revenue Code Section 4980B
will be at your sole expense.
3. Consulting Services. You will make yourself available to perform
consulting services reasonably requested of you during the severance payment
period under Paragraph 1. You will not
24
<PAGE>
receive any cash compensation for the first ten (10) hours of consulting
services you render per month. To the extent you are requested to render more
than ten (10) hours of consulting services in any month, you will be compensated
for each additional hour at an hourly rate to be agreed upon by you and the
Company at the time such consulting services are to be rendered. In no event
will you be required to render more than twenty (20) hours of consulting
services per month. You will also be reimbursed for all reasonable out-of-pocket
expenses incurred in rendering any consulting services upon your submission of
appropriate documentation for those expenses.
4. Limitation on Benefits. In the event your employment terminates
by reason of your death or disability or in the event of your termination for
Misconduct, you will not be entitled to receive any severance benefits under
this letter agreement.
5. Definitions. For purposes of this letter agreement, the following
definitions will be in effect:
(a) Change in Control means any of the following transactions
effecting a change in ownership or control of the Company:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company, or
(iii) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's stockholders, or
(iv) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority
of the Board members ceases by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (A)
who were still in office at the time such election or nomination was
approved by the Board.
(b) Involuntary Termination means the termination of your
employment with the Company:
(i) involuntarily upon your discharge or dismissal (for
reasons other than Misconduct), or
(ii) voluntarily upon your resignation following (A) a
change in your position with the Company which materially reduces your
duties or level of responsibility, (B) a reduction in your level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) or (C) a change
in your place of employment which is more than fifty (50) miles from your
25
<PAGE>
place of employment prior to the Change in Control, provided and only if
such change or reduction is effected without your written concurrence.
In no event shall an Involuntary Termination be deemed to occur
should your employment terminate by reason of your death or disability.
(c) Misconduct means the commission of any act of fraud,
embezzlement or dishonesty by you, any unauthorized use or disclosure by you of
confidential information or trade secrets of the Company, or any other
intentional misconduct by you adversely affecting the business or affairs of the
Company in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company may consider as grounds
for the dismissal or discharge of you or any other individual in the service of
the Company.
6. General Creditor Status. The payments and benefits to which you
become entitled hereunder will be paid, when due, from the general assets of the
Company, and no trust fund, escrow arrangement or other segregated account will
be established as a funding vehicle for such payment. Accordingly, your right
(or the right of the personal representatives or beneficiaries of your estate)
to receive any payments or benefits hereunder will at all times be that of a
general creditor of the Company and will have no priority over the claims of
other general creditors.
7. Death. Should you die before receipt of one or more severance
payments to which you become entitled under this letter, then those payment or
payments will be made to the executors or administrators of your estate.
8. Miscellaneous. This letter agreement will be binding upon the
Company, its successors and assigns (including, without limitation, the
surviving entity in any Change in Control) and is to be construed and
interpreted under the laws of the State of New Jersey. This letter agreement
supersedes all prior agreements between you and the Company relating to the
subject of severance benefits payable upon your termination of employment.
9. At Will Employment. Nothing in this letter agreement is intended
to provide you with any right to continue in the employ of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
your rights or the rights of the Company, which rights are hereby expressly
reserved by each party, to terminate your employment at any time for any reason
whatsoever, with or without cause.
We hope that you find the new severance benefit program to be an
important addition to your total compensation package which will provide you
with certain financial assurances in the event your employment were to terminate
under the circumstances indicated in this letter agreement.
LOGIC WORKS, INC.
BY: /s/ Gregory A. Peters
----------------------------------------
TITLE: President and Chief Executive Officer
-------------------------------------
/s/ Edward McLaughlin
-------------------------------------------
Edward McLaughlin
26
Exhibit 10.10
LOGIC WORKS, INC.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
March 12, 1998
Mr. Daniel Shiffman
c/o Logic Works, Inc.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
Dear Mr. Shiffman:
We are pleased to inform you that the Board of Directors has
recently authorized a special severance benefit package for you and other key
executives of the Company. Your severance benefits as described below will
become payable in the event your employment terminates under certain
circumstances described below. This Agreement replaces and supersedes the
current severance obligations of the Company set forth in the employment letter
to you dated May 15, 1995.
1. Severance Payments. Upon (a) your involuntary discharge or
dismissal (for reasons other than Misconduct), or (b) an Involuntary Termination
in connection with or within eighteen (18) months following a Change in Control,
you will receive severance payments in an aggregate amount equal to one-half of
the sum of (i) the base salary in effect for you at the time of such termination
(or the base salary in effect prior to any reduction which triggered an
Involuntary Termination under Section 5(b)(ii)(B) of this letter agreement) plus
(ii) your target bonus for the fiscal year of the Company in which any such
termination occurs.
Your severance payments will be paid monthly over the six (6)-month
period following the effective date of such termination and will be subject to
the Company's collection of applicable Federal and state income and employment
withholding taxes.
2. Health Care Coverage. If you become entitled to severance
payments under Paragraph 1, the Company will, at its expense, provide you and
your eligible dependents with continued health care coverage under the Company's
medical/dental plan until the earlier of (i) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions or
(ii) the end of the severance payment period under Paragraph 1. Any further
coverage to which you or your dependents may be entitled during the remainder
(if any) of your COBRA coverage period under Internal Revenue Code Section 4980B
will be at your sole expense.
27
<PAGE>
3. Consulting Services. You will make yourself available to perform
consulting services reasonably requested of you during the severance payment
period under Paragraph 1. You will not receive any cash compensation for the
first ten (10) hours of consulting services you render per month. To the extent
you are requested to render more than ten (10) hours of consulting services in
any month, you will be compensated for each additional hour at an hourly rate to
be agreed upon by you and the Company at the time such consulting services are
to be rendered. In no event will you be required to render more than twenty (20)
hours of consulting services per month. You will also be reimbursed for all
reasonable out-of-pocket expenses incurred in rendering any consulting services
upon your submission of appropriate documentation for those expenses.
4. Limitation on Benefits. In the event your employment terminates
by reason of your death or disability or in the event of your termination for
Misconduct, you will not be entitled to receive any severance benefits under
this letter agreement.
5. Definitions. For purposes of this letter agreement, the following
definitions will be in effect:
(a) Change in Control means any of the following transactions
effecting a change in ownership or control of the Company:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company, or
(iii) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's stockholders, or
(iv) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority
of the Board members ceases by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (A)
who were still in office at the time such election or nomination was
approved by the Board.
(b) Involuntary Termination means the termination of your
employment with the Company:
(i) involuntarily upon your discharge or dismissal (for
reasons other than Misconduct), or
(ii) voluntarily upon your resignation following (A) a
change in your position with the Company which materially reduces your
duties or level of responsibility, (B) a reduction in your level of
compensation (including base salary, fringe
28
<PAGE>
benefits and participation in corporate-performance based bonus or
incentive programs) or (C) a change in your place of employment which is
more than fifty (50) miles from your place of employment prior to the
Change in Control, provided and only if such change or reduction is
effected without your written concurrence.
In no event shall an Involuntary Termination be deemed to occur
should your employment terminate by reason of your death or disability.
(c) Misconduct means the commission of any act of fraud,
embezzlement or dishonesty by you, any unauthorized use or disclosure by you of
confidential information or trade secrets of the Company, or any other
intentional misconduct by you adversely affecting the business or affairs of the
Company in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company may consider as grounds
for the dismissal or discharge of you or any other individual in the service of
the Company.
6. General Creditor Status. The payments and benefits to which you
become entitled hereunder will be paid, when due, from the general assets of the
Company, and no trust fund, escrow arrangement or other segregated account will
be established as a funding vehicle for such payment. Accordingly, your right
(or the right of the personal representatives or beneficiaries of your estate)
to receive any payments or benefits hereunder will at all times be that of a
general creditor of the Company and will have no priority over the claims of
other general creditors.
7. Death. Should you die before receipt of one or more severance
payments to which you become entitled under this letter, then those payment or
payments will be made to the executors or administrators of your estate.
8. Miscellaneous. This letter agreement will be binding upon the
Company, its successors and assigns (including, without limitation, the
surviving entity in any Change in Control) and is to be construed and
interpreted under the laws of the State of New Jersey. This letter agreement
supersedes all prior agreements between you and the Company relating to the
subject of severance benefits payable upon your termination of employment.
9. At Will Employment. Nothing in this letter agreement is intended
to provide you with any right to continue in the employ of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
your rights or the rights of the Company, which rights are hereby expressly
reserved by each party, to terminate your employment at any time for any reason
whatsoever, with or without cause.
We hope that you find the new severance benefit program to be an
important addition to your total compensation package which will provide you
with certain financial assurances in the event your employment were to terminate
under the circumstances indicated in this letter agreement.
LOGIC WORKS, INC.
BY: /s/ Gregory A. Peters
----------------------------------------
TITLE: President and Chief Executive Officer
-------------------------------------
/s/ Daniel Shiffman
-------------------------------------------
Daniel Shiffman
29
Exhibit 10.11
LOGIC WORKS, INC.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
March 12, 1998
Mr. Frank Watts
c/o Logic Works, Inc.
University Square at Princeton
111 Campus Drive
Princeton, New Jersey 08540
Dear Mr. Watts:
We are pleased to inform you that the Board of Directors has
recently authorized a special severance benefit package for you and other key
executives of the Company. Your severance benefits as described below will
become payable in the event your employment terminates under certain
circumstances described below. This Agreement replaces and supersedes the
current severance obligations of the Company set forth in the Addendum to
Employment Agreement/Offer Letter to you dated April 24, 1997.
1. Severance Payments. Upon (a) your involuntary discharge or
dismissal (for reasons other than Misconduct), or (b) an Involuntary Termination
in connection with or within eighteen (18) months following a Change in Control,
you will receive severance payments in an aggregate amount equal to one-half of
the sum of (i) the base salary in effect for you at the time of such termination
(or the base salary in effect prior to any reduction which triggered an
Involuntary Termination under Section 5(b)(ii)(B) of this letter agreement) plus
(ii) your target bonus for the fiscal year of the Company in which any such
termination occurs.
Your severance payments will be paid monthly over the six (6)-month
period following the effective date of such termination and will be subject to
the Company's collection of applicable Federal and state income and employment
withholding taxes.
2. Health Care Coverage. If you become entitled to severance
payments under Paragraph 1, the Company will, at its expense, provide you and
your eligible dependents with continued health care coverage under the Company's
medical/dental plan until the earlier of (i) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions or
(ii) the end of the severance payment period under Paragraph 1. Any further
coverage to which you or your dependents may be entitled during the remainder
(if any) of your COBRA coverage period under Internal Revenue Code Section 4980B
will be at your sole expense.
30
<PAGE>
3. Consulting Services. You will make yourself available to perform
consulting services reasonably requested of you during the severance payment
period under Paragraph 1. You will not receive any cash compensation for the
first ten (10) hours of consulting services you render per month. To the extent
you are requested to render more than ten (10) hours of consulting services in
any month, you will be compensated for each additional hour at an hourly rate to
be agreed upon by you and the Company at the time such consulting services are
to be rendered. In no event will you be required to render more than twenty (20)
hours of consulting services per month. You will also be reimbursed for all
reasonable out-of-pocket expenses incurred in rendering any consulting services
upon your submission of appropriate documentation for those expenses.
4. Limitation on Benefits. In the event your employment terminates
by reason of your death or disability or in the event of your termination for
Misconduct, you will not be entitled to receive any severance benefits under
this letter agreement.
5. Definitions. For purposes of this letter agreement, the following
definitions will be in effect:
(a) Change in Control means any of the following transactions
effecting a change in ownership or control of the Company:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company, or
(iii) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of
securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender
or exchange offer made directly to the Company's stockholders, or
(iv) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority
of the Board members ceases by reason of one or more contested elections
for Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such
period by at least a majority of the Board members described in clause (A)
who were still in office at the time such election or nomination was
approved by the Board.
(b) Involuntary Termination means the termination of your
employment with the Company:
(i) involuntarily upon your discharge or dismissal (for
reasons other than Misconduct), or
(ii) voluntarily upon your resignation following (A) a
change in your position with the Company which materially reduces your
duties or level of responsibility, (B) a reduction in your level of
compensation (including base salary, fringe
31
<PAGE>
benefits and participation in corporate-performance based bonus or
incentive programs) or (C) a change in your place of employment which is
more than fifty (50) miles from your place of employment prior to the
Change in Control, provided and only if such change or reduction is
effected without your written concurrence.
In no event shall an Involuntary Termination be deemed to occur
should your employment terminate by reason of your death or disability.
(c) Misconduct means the commission of any act of fraud,
embezzlement or dishonesty by you, any unauthorized use or disclosure by you of
confidential information or trade secrets of the Company, or any other
intentional misconduct by you adversely affecting the business or affairs of the
Company in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company may consider as grounds
for the dismissal or discharge of you or any other individual in the service of
the Company.
6. General Creditor Status. The payments and benefits to which you
become entitled hereunder will be paid, when due, from the general assets of the
Company, and no trust fund, escrow arrangement or other segregated account will
be established as a funding vehicle for such payment. Accordingly, your right
(or the right of the personal representatives or beneficiaries of your estate)
to receive any payments or benefits hereunder will at all times be that of a
general creditor of the Company and will have no priority over the claims of
other general creditors.
7. Death. Should you die before receipt of one or more severance
payments to which you become entitled under this letter, then those payment or
payments will be made to the executors or administrators of your estate.
8. Miscellaneous. This letter agreement will be binding upon the
Company, its successors and assigns (including, without limitation, the
surviving entity in any Change in Control) and is to be construed and
interpreted under the laws of the State of New Jersey. This letter agreement
supersedes all prior agreements between you and the Company relating to the
subject of severance benefits payable upon your termination of employment.
9. At Will Employment. Nothing in this letter agreement is intended
to provide you with any right to continue in the employ of the Company for any
period of specific duration or interfere with or otherwise restrict in any way
your rights or the rights of the Company, which rights are hereby expressly
reserved by each party, to terminate your employment at any time for any reason
whatsoever, with or without cause.
We hope that you find the new severance benefit program to be an
important addition to your total compensation package which will provide you
with certain financial assurances in the event your employment were to terminate
under the circumstances indicated in this letter agreement.
LOGIC WORKS, INC.
BY: /s/ Gregory A. Peters
----------------------------------------
TITLE: President and Chief Executive Officer
-------------------------------------
/s/ Frank Watts
-------------------------------------------
Frank Watts
32
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