-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IW96ZmKGihgcnJnuVOyhRu6mHwkLNEjnHP3usXSEjjUzXvDEE+t7ibrf6tD58W0d iYxqZzoPTfjOyC3oO4219Q== 0000950112-95-002558.txt : 19951002 0000950112-95-002558.hdr.sgml : 19951002 ACCESSION NUMBER: 0000950112-95-002558 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950928 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEYENNE SOFTWARE INC CENTRAL INDEX KEY: 0000738830 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 133175893 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09189 FILM NUMBER: 95577001 BUSINESS ADDRESS: STREET 1: 3 EXPRESSWAY PLZ CITY: ROSLYN HEIGHTS STATE: NY ZIP: 11577 BUSINESS PHONE: 5164845110 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ( x ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ----------------------- ---------------------- Commission File Number 1-9189 ---------------------------------------------------------- CHEYENNE SOFTWARE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3175893 - -------------------------------------------- ----------------------------------- (State or other jurisdiction of organization)(I.R.S.Employer Identification No.) 3 Expressway Plaza, Roslyn Heights, NY 11577 - -------------------------------------------- ----------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 484-5110 -------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock, par value $.01 per share American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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: ----- ----- As of September 20, 1995, the aggregate market value of Common Stock held by non-affiliates of the Registrant, computed by reference to the closing price as reported by the American Stock Exchange on September 20, 1995 was $756,861,323. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec. 229.405 of this chapter) 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 of this Form 10-K. [ ] The aggregate number of Registrant`s outstanding shares on September 20, 1995 was 37,423,426 shares of Common Stock, $0.01 par value (excluding 2,035,000 shares of treasury stock). DOCUMENTS INCORPORATED BY REFERENCE: Registrant's definitive proxy statement for its 1995 Annual Meeting of Stockholders will be filed with the Securities and Exchange Commission on or before October 30, 1995 (incorporated by reference under Part 111). TABLE OF CONTENTS ----------------- Part I Item 1 - Business .............................................................3 Item 2 - Properties ..........................................................15 Item 3 - Legal Proceedings ...................................................15 Item 4 - Submission of Matters to a Vote of Security Holders .................17 Part II Item 5 - Market for Registrant's Common Stock and Related Matters ............18 Item 6 - Selected Financial Data .............................................19 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................20 Item 8 - Financial Statements and Supplementary Data .........................27 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............................27 Part III Item 10- Directors and Executive Officers of the Registrant...................28 Item 11- Executive Compensation...............................................28 Item 12- Security Ownership of Certain Beneficial Owners and Management.....................................................28 Item 13- Certain Relationships and Related Transactions.......................28 Part IV Item 14- Exhibits, Financial Statement Schedules and Reports on Form 8-K................................................29 2 P A R T I --------- Item 1 Business Cheyenne Software, Inc. ("Cheyenne", the "Registrant" or the "Company"), formed in 1983, is engaged in the development, sale and support of software products for use in microcomputers and computer systems mainly for Local Area Network (LAN) and, more recently, Wide Area Network (WAN) applications. Cheyenne's key technical product strategy is to employ the network file server's high performance capabilities based on the client/server model. The Company's products provide key services to administrators and users of computer networks, in the following categories: a) Network Data Storage Management - includes ARCserve, HSM and JETserve b) Network Security - includes InocuLAN c) Network Management - includes Monitrix d) Network Communications - includes FAXserve and Bit products In July, 1995, Cheyenne established three divisions based upon operating system platforms, a NetWare division, a Windows/NT division and a UNIX division. By focusing on serving the needs of each platform, the Company expects to align its activities closer to its channels of distribution, strategic partners and customers. Cheyenne has network data storage management products for these major and other platforms. With respect to other product categories, Cheyenne has products which support some of these major and other platforms. Software Products - ----------------- A brief description of key Cheyenne software products follows below. Network Data Storage Management - ------------------------------- Approximately 88.6% of Cheyenne's revenues for the fiscal year ended June 30, 1995 ("FY95") relate to the ARCserve(R) product line. The last major enhancement for the NetWare platform was at the end of the fourth quarter of the fiscal year ended June 30, 1993 ("FY93"). A major enhancement for the NetWare platform is anticipated by the end of calendar year 1995. A Microsoft NT version was released in FQ395. ARCserve/Open for UNIX was extended in FY95 to support additional UNIX operating systems. ARCserve(R) for NetWare Version 4.x - ----------------------------------- ARCserve DOS Edition provides fully automated data management services for Novell networks. ARCserve consists of the ARCserve Server, a VAP or NLM (NetWare Loadable Module) that resides on a computer server. It also includes ARCserve Manager, a workstation front-end that lets the user execute or schedule services to be performed by the VAP or NLM. This client/server architecture lets the user perform centralized data backup without a dedicated workstation and gives users simultaneous access to data management services while it enhances security for the network. The VAP or NLM performs backup and restore for the entire network while remaining completely in the background. ARCserve allows hardware to operate at its optimum speed. Data is sent directly from the file server to attached storage devices without traveling over the network. ARCserve offers flexibility in media and device selection. It supports most available SCSI and QIC-02 tape drives, disk and optical hardware, and a wide variety of host adapters. ARCserve includes Auto Pilot Tape Management, an invisible operator which guides the user through tape management, rotation, and labeling. The Disk Grooming option frees up valuable disk space by moving outdated files to tape automatically. For disaster recovery, AutoPilot's Quick Recover feature restores the system or a designated file to any specified date. Also 3 included is a File Tracking System and Quick File Access. The user queries the system to locate a backup session or specific file, and ARCserve prompts the user to mount the tapes needed to perform the restore. For preventive maintenance, ARCserve's Tape Usage Database gives the user factual information on the condition of tapes. This enables the user to make educated decisions about tape usage and tape retirement. ARCserve 4.x is compatible with NetWare 3.X and 4.X. ARCserve(R) for NetWare Version 5.x - ------------------------------------ ARCserve Windows Edition maintains the same innovative functions as ARCserve 4.x DOS Edition and adds new functionality. Whether the user has a small single-server or a large multiserver network environment, ARCserve Windows Edition will back up all NetWare servers, DOS, Windows, OS/2, and MacIntosh workstations and certain UNIX workstations, as well as certain database servers. Using the Microsoft Windows 3.1 Graphical User Interface (GUI), ARCserve Windows Edition manages backup easily. Parallel Streaming simultaneously processes backup and/or restore operations to seven devices chained on one SCSI adapter. ARCserve supports most industry standard SCSI and QIC-02 tape drivers and a wide variety of host adapters. Messages notify the user in a timely manner if any problems occur, and are configurable on a per job basis using the ARCserve Manager. ARCserve integrates with Cheyenne's InocuLAN to ensure virus-free backups and sends alert messages and reports via facsimile with Cheyenne's FAXserve. ARCserve(R) for Windows NT Version 2.x - -------------------------------------- In FQ3/95, Cheyenne began to ship ARCserve for NT Version 1.0. The product offers the same comprehensive, high performance features found in ARCserve for NetWare Windows Edition. It functions as an operating system service, rather than as an application, permitting system-wide backups to be scheduled and performed, regardless of user log-in. Once ARCserve for NT schedules the backup, the control is given to the Windows NT operating system. A maximum level of security is therefore obtained because the need to remain connected to the server during the backup process is eliminated. This product also includes a virus scanning engine for Cheyenne's InocuLAN for Windows NT anti-virus software to further provide high data integrity. Version 2.x began to ship in late FQ4/95. ARCserve(R)/Open - ---------------- ARCserve(R)/Open provides fully automated data management services for certain UNIX environments. The software operates natively in a UNIX environment that does not include a Novell network. It offers automation, reliability and performance to the UNIX back-up operation, which can be performed in the background or in real time. ARCserve(R)/Open has been available since September 1992. The product line was extended to include platform support for additional UNIX operating systems in FY95. ARCserve(R) for MacIntosh - ------------------------- In the third quarter of the fiscal year ended June 30, 1994 ("FY94"), Cheyenne began to ship ARCserve for MacIntosh. The product offers backup and restore for stand-alone and networked MacIntosh computers. ARCserve(R) Options - ------------------- Shipments of the Tape Changer and Stacker software modules for ARCserve (NLM only), providing fully automated, high capacity NetWare data storage and management commenced toward the end of the fiscal year ended June 30, 1992 ("FY92"). Agent options for MacIntosh and UNIX workstations including IBM AIX, HP/UX, DEC Ultrix, SunSoft Solaris, Univel and Unixware are available for ARCserve (NLM only). They give the user a single source for effective data management in multiple operating system environments. 4 The DBagent options for ARCserve (including agents for NetWare Btrieve, SQL, Oracle and Gupta) provide on-line backup of mission critical databases on the network. Traditionally, databases that are continuously on-line or "active" have been difficult to backup completely, as they are constantly being modified. HSM - --- Cheyenne HSM Hierarchical Storage Management is a process of automatically and transparently migrating data across a hierarchy of storage media. Infrequently accessed files typically are moved from primary storage on a server hard drive to more cost effective storage media, including optical and tape storage. While HSM systems have been available for mainframe environments, they are just now being recognized as critical to managing storage in large networked environments. In FQ3/95, Cheyenne began to ship Cheyenne Hierarchical Storage Manager 1.0, a fully automated storage product for NetWare 3.11, 3.12 and 4.x servers. In FQ2/95, Cheyenne acquired an HSM for UNIX product from NETstor, discussed below. The NetWare and UNIX HSM products are used in combination with ARCserve for NetWare and ARCserve/Open. JETserve(TM) - ------------ JETserve is a high-performance data disaster recovery solution that provides fast, image-based backup and data restore services. Combined with RAID fault tolerance, the product offers a high level of data protection for large volumes of mission-critical data residing on NetWare superservers. The product is based on technology purchased from NetFrame, discussed below. Cheyenne is currently developing versions of JETserve for the NT and UNIX markets. The JETserve product can be used in combination with ARCserve, as well as an independent product. ARCsolo(R) - ---------- ARCsolo for DOS backs up and restores a workstation and, if necessary, the file server. The user can also back up and restore other network workstations by using any mapping facility. ARCsolo for Windows was introduced in FQ2/94, with similar features as ARCsolo for DOS, but it has a "Windows" front end. ARCsolo for OS/2 was introduced in late FY94. It provides reliable backup and restore for OS/2 workstations and LAN servers. ARCsolo supplements ARCserve and maintains the same tape format. Network Security - ---------------- InocuLAN(R) for NetWare - ----------------------- InocuLAN protects a file server, networked PC's, and stand-alone PC's from computer viruses. Shipments of the product started during June 1992. Version 3.0 with a Windows front end began shipping in FQ1/95. The server-based module of InocuLAN is an NLM. This NLM scans servers for known viruses, completely in the background at user-defined intervals. Small resident programs (TSR's) in workstations or stand-alone PCs provide immunity and prevention from known and unknown viruses. The hard drive, floppy disk, and other storage media are scanned for viruses by InocuLAN. InocuLAN enforces security from the file server; a user cannot access the network on an unprotected workstation. Since the user can distribute InocuLAN software updates from the file server, the tedious process of updating each workstation individually is eliminated. When InocuLAN detects a virus, it alerts the user by network broadcast, MHS message, or pager. The user often may be able to remove the virus from the infected file and restore that file to its original state. Backup, restore, and notification of corruption of critical hard disk area is also provided. 5 InocuLAN(R) for NT - ------------------ In FQ4/95, Cheyenne began to ship InocuLAN for Windows NT Version 1.x. The product has been optimized for Windows NT and functions as a 32-bit operating system service. The product offers anti-virus protection for all files residing on Windows NT, as well as the PC's and MacIntosh workstation attached to the network. Network Management - ------------------ Monitrix(R) - ----------- Monitrix is an intuitive inventory, monitoring and documenting solution for network management. Running NetWare 3.11, 3.12, and 4.x, Monitrix takes advantage of the MSWindows 3.1 interface and provides the centralized tools which enable effective LAN/WAN management. Asset Management accurately tracks and accounts computer hardware and software assets; supporting both networked nodes and isolated workstations without a TSR. Monitrix automatically inventories NetWare file servers and DOS, Window, OS/2, and MacIntosh workstations, offering analysis of current and future computing needs. Administrators can easily construct network sensors to identify vital system thresholds, including file server utilization, network traffic, volume status and disk space, and buffer and memory usage. If any threshold is crossed, specified users are notified through a Robust Alert System. Monitrix also obtains and graphs IPX, SPC, System and CPU trends for timely network analysis. All statistics can be documented via built-in or customized reports. Network Communications - ---------------------- FAXserve(TM) - ------------ FAXserve provides secure, easy-to-use, economical facsimile services for a Novell network operating system. The user prepares a document at the workstation in DOS, Windows, or E-Mail applications, and schedules where and when it should be sent. FAXserve also lets the user create and send documents with any CAS application. Shipments of this product started during the first quarter of FY93. Shipments of the latest version, V3.0, commenced in FQ4/95. FAXserve takes full advantage of the server's power. It eliminates the need for a dedicated workstation or proprietary hardware. In addition, the fax device can be shared by all users. FAXserve improves the quality of outgoing faxes and sends documents electronically to the destination's fax device. With FAXserve, the user can reduce communication costs by scheduling unattended fax transmissions during less costly off-peak hours. Bit Products - ------------ This product line was acquired from Bit Software, Inc. and has been significantly modified. It consists of stand-alone communications (voice, data, fax) products with peer-to-peer networking capabilities aimed at the work group computing market. In connection with its adoption of a divisional structure (NetWare, NT and Unix) described above, the FAXserve and Bit products, which previously formed the product line for Cheyenne Communications, Inc., a wholly-owned subsidiary of Cheyenne, were recently consolidated with Cheyenne's operations. Channels of Distribution - ------------------------ A. DISTRIBUTORS - Cheyenne's distributors are independent companies ------------ with multiple sales and stocking locations, which sell computer-related hardware and software products, principally to value-added-resellers (VAR's). Cheyenne provides sales and technical training to its distributors; such distributors cooperatively advertise and promote Cheyenne's products. Cheyenne has entered into non-exclusive agreements with each distributor. Most distributor agreements have one year 6 terms, may be canceled by either party upon 30-60 days' notice, provide for the exchange of inventory by Cheyenne within 90 days of delivery and contain no minimum purchase requirements by the distributor. Presently, Cheyenne's key distributors and their territories include (listed alphabetically):
North America ------------- 1) Ameriquest 2) Dallas Digital 3) Gates/FA Distributing, Inc. 4) GBC 5) Globelle (formerly Canadian Computer Brokers) 6) Ingram Micro D, Inc. 7) Intelligent Electronics 8) Law Cypress Distributing 9) Merisel and Merisel Canada, Inc. 10) MicroAge 11) Synnex Information Systems 12) Tech Data Corporation 13) Tenex 14) Value Added Distribution 15) Vitek System Distribution Europe Rest of World (ROW) ------ ------------------- 1) Actebis Computer (Germany) 1) Abcom (Brazil) 2) Adcomp Data Systems (Holland) 2) Com Tech Communications (Australia) 3) Akam Data (Holland, Belgium) 3) Eden (Brazil) 4) Azlan (UK, Ireland) 4) Laser (Hong Kong) 5) CCG (Holland) 5) Peridata Communications PTY Ltd. (Australia) 6) Computer 2000 (Germany, Belgium, Austria UK, Holland, Finland, Hungary & Dubai, Switzerland) 7) C.O.S. (Switzerland) 8) Frontline (UK, Ireland) 9) Ideal Hardware (UK) 10) Interquad (France, Morocco, Tunisia, Algeria) 11) Megabyte (Germany) 12) Omnilogic (Belgium, Luxembourg, France, Morocco, Tunisia, Algeria) 13) Peacock (Germany) 14) Persona (UK) 15) Tallgrass (Norway, Denmark)
In FY95, one distributor accounted for more than 10% of Cheyenne's total sales. Such distributor accounted for 14.4% of revenues by purchasing $18,393,000 of standard products from the Company. Sales through distributors (excluding Japan) have increased in FY92, FY93, FY94 and FY95 as follows: Distribution Sales ($ Thousands) Territory FY92 FY93 FY94 FY95 ------------- -------- -------- -------- -------- North America $ 5,040 $ 15,785 $ 37,028 $ 41,089 Europe 4,158 16,792 33,696 45,394 ROW 510 1,888 4,097 7,640 -------- -------- -------- -------- $ 9,708 $ 34,465 $ 74,821 $ 94,123 ======== ======== ======== ======== 7 The above increases were mainly due to: a) An expanding LAN market; b) Better recognition and acceptance of Cheyenne's products in the LAN marketplace; c) Increased advertising, training, sales and customer support; d) A broader product line; e) The increased availability of foreign language-translated products; and f) The addition of new distributors, particularly outside the United States. To support the growing sales in North America, the Company added 15 sales and marketing personnel in FY95. Cheyenne now has regional sales offices in Atlanta, Chicago, Dallas, Seattle and San Diego and Ontario, Canada. In Europe, sales and service centers were added in the U.K. and Germany during FY93 to augment the Company's European presence and to support sales efforts out of its French office. The number of full time European employees grew from 40 to 76 in FY95. The Company rapidly expanded sales in the rest of the world (ROW) by adding new distributors during FY95. Sales and service centers were added in FY95 in Australia, Brazil, Mexico, Singapore and Taiwan, in addition to Miami, FL (the U.S. base for Cheyenne's ROW sales), added in FY94. Singapore now serves as the Company's base for Asia (excluding Japan) and the Company has relocated there a key manager from the United States to oversee expansion in this area. Employees directly supporting ROW sales increased to 10 in FY95 from 2 in FY94 (the Company also has retained 2 sales consultants in ROW). Although the Japanese networking market is still relatively small, Cheyenne's management believes the potential is significant. In February 1993, the Company formed a subsidiary in Tokyo (Cheyenne KK) which now has 21 full time employees. Subsequent to June 30, 1995, Cheyenne repurchased the 40 shares (5%) of capital stock of Cheyenne KK it did not own for an immaterial amount. In FY95, Cheyenne entered into OEM agreements with Fujitsu LTD. and Mitsubishi and a letter of intent with NEC in Japan. Sales in Japan have increased in FY92, FY93, FY94 and FY95 as follows: Japan Sales (In Thousands) -------------------------- FY92 FY93 FY94 FY95 ---- ---- ---- ---- $65 $725 $2,341 $7,828 B. ORIGINAL EQUIPMENT MANUFACTURERS (OEM) - Since Cheyenne's products -------------------------------------- have the ability to add value and capability to hardware products such as computers, tape drives, data storage devices, etc., a number of hardware producers have bundled Cheyenne products with their products. As a consequence, Cheyenne has entered into many OEM agreements with producers of computer and computer-related equipment. Management believes that its OEM agreements have made a significant contribution to the growth in the Company's unit sales, because of the enhanced market penetration and visibility that resulted from the investments in advertising and promotion that OEM companies normally undertake. There are more than 20 OEM agreements currently in force. No one OEM relationship produced more than 5% of Cheyenne's revenues in FY95. Total OEM revenues, excluding those of Bit, were $7.9 million or about 35% of total revenues in FY92, were $13.3 million or about 23% of total revenues in FY93, were $13.3 million or about 14% of total revenues in FY94, and were $15.3 million or about 12% of total revenues in FY95. During the last two years, as Cheyenne's ARCserve product has become more readily available throughout the world via Distribution, the need for OEM customers to bundle the product has lessened. Distributors now bundle ARCserve with many different hardware devices and provide the value-added services to customers that were previously the responsibility of the OEM. As a result of this change in the marketplace, Distributor sales have grown more rapidly than OEM sales. 8 Below is a brief description of Cheyenne's major OEM agreements listed alphabetically. 1) Compaq - In FY93, Cheyenne optimized ARCserve 4.0 for use with ------ Compaq's full family of System Pro/XL network servers. Shipments to Compaq started in FQ4/93. This enhanced the relationship between Cheyenne and Compaq, which began in FY92 when the two companies created a Technical Support Alliance. In FQ1/95 Cheyenne announced an agreement with Compaq which provides for the distribution of ARCserve 4.x and 5.x on Smartstart CD-ROM. During FQ1/95, Compaq began shipping software CD's with each ProLiant and ProSignia server. The Smartstart CD includes ARCserve 5.01 for NetWare, Windows Edition and ARCserve 4.05 for NetWare, DOS Edition. This agreement represents the first CD-ROM distribution of ARCserve and appears to mark the beginning of a general change in the way the Company's software will be distributed throughout the world. In FQ395, Compaq also began distribution of ARCserve for NT on SmartStart CD-ROM. 2) Computer Associates - A technology and marketing partnership with ------------------- Computer Associates ("CA") was established in FQ4/93 which enables CA to employ Cheyenne's extensive LAN storage technology with all CA's OS/2 based network backup and archiving systems. Cheyenne's agent technology provides common access to a diverse list of network clients such as Windows, DOS, OS/2 and UNIX. Cheyenne is providing CA-Unicenter with complete support for the storage media that clients depend upon in networks of PCs. In FQ1/96, Cheyenne announced the expansion of its relationship with CA by establishing a technology partnership to integrate Cheyenne's multi-platform storage management software with the CA-Unicenter environment. As a result, CA-Unicenter users will have access to a wide variety of essential data and storage services including disaster recovery, data protection, hierarchical storage management, and on-line database backup/restore for the NetWare, Windows NT and UNIX operating system environments. The final terms of the expanded relationship will be subject to a definitive agreement, currently being negotiated. 3) Hewlett Packard - In FY95, HP's Bristol division and Cheyenne --------------- entered into an agreement to bundle ARCserve with HP's SureStore tape drives as HP's premier solution. HP offers ARCserve for NetWare, ARCsolo for Windows and ARCsolo for OS/2 under the agreement. HP has offered Cheyenne products in previous years under earlier agreements. 4) IBM - In FQ3/93, Cheyenne and EduQuest, the IBM Educational Systems --- Company entered into an OEM relationship in which ARCserve is being bundled with IBM's 4mm and 8mm DAT Tape drives. EduQuest specializes in the development and marketing of technology solutions designed for elementary and secondary school levels (K-12) which assist teachers and administrators in improving the quality of education for America's children. During FY94, Cheyenne furthered its relationship with IBM by becoming a Business Partner with the Personal Software Products group although no significant revenues have resulted from this relationship. 5) Intel - An agreement was signed during June 1991 jointly to develop ----- a specialized LAN storage management system entitled Storage Express in which Cheyenne's ARCserve technology is included. The product was introduced to the marketplace during September 1992. A non-refundable advance against future royalties was earned by Cheyenne. Additional royalties were earned during FY94 and FY95 when ongoing shipments of Storage Express exceeded those covered by the original advance. Also, additional small non-recurring fees were earned by Cheyenne as Intel incorporated Cheyenne's most current technology in its Storage Express product. C. MAJOR ACCOUNTS - During FY92, the Company initiated a Major Account -------------- sales program in which Cheyenne sales employees directly call on LAN administrators of Fortune 1000 companies. These potential customers can buy Cheyenne product through local value-added resellers (VAR's), distributors or directly from Cheyenne. Many large companies have found it convenient to deal directly with Cheyenne on a "site license" basis in which the Company provides a "golden master" disk that enables the customer to produce Cheyenne's software product, as needed. Revenues from these type of sales in FY94 were $1,534,000 and grew to $3,108,000 in FY95. 9 D. DIRECT SALES - The Company in FY95 expanded its work force focusing ------------ on direct sales of upgrades and other products. The Company also has contracted with outside third parties to assist in this direct marketing and sales project. This project, initiated with an outside company, began in FQ494. The project increased sales of Cheyenne's secondary products, as well as upgrades and sales directly to end-users. The costs associated with this project are relatively high compared to revenues thus far. FY95 Acquisitions - ----------------- On December 19, 1994, the Company acquired certain assets and assumed certain liabilities of NETstor, Inc. (NETstor), a developer of Hierarchical Storage Management software products for the UNIX computer platform in the network storage management market, for $1,150,000 of cash and $200,000 of additional future contingent payments. The acquisition has been accounted for as a purchase and the operating results of NETstor are included in the consolidated statement of earnings from the date of acquisition. In connection with the acquisition, the Company in FQ295 recorded a $547,000 expense for purchased research and development and $94,000 of capitalized software, which is included in other assets and is being amortized on a straight line basis over two years. On March 30, 1995, the Company acquired the DataJET product line and certain other assets and assumed certain liabilities of NetFRAME Systems, Inc. (NetFRAME). DataJET is an image based, high performance software backup product for NetWare file servers. Cheyenne made an $801,000 cash payment for DataJET and will pay royalties to NetFRAME based on the Company's sales of products utilizing the DataJET technology. The acquisition has been accounted for as a purchase. In connection with the acquisition, the Company in FQ395 recorded a $704,000 expense for purchased research and development. The technological feasibility of the in-process technology related to the NETstor and DataJET product acquisitions was not yet established at the dates of acquisition and the technology has no alternative use. Research & Development - ---------------------- Cheyenne primarily develops its software products internally. However, outside contractors and third party publishers are used for the development or supply of software that provides certain aspects of some products. Cheyenne's industry is characterized by rapid technological change, resulting in continuing pressure for price/performance improvements in response to advances in computer software and hardware technology. Cheyenne believes that its future success will depend, in large part, on its ability to enhance and develop its software products satisfactorily to meet specific market needs and to maintain its technological leadership. As noted above, Cheyenne has introduced products that function in many different operating system environments. ARCserve(R) and related Cheyenne software products currently offer users the ability to back up the data from Microsoft DOS, Windows and NT, MacIntosh and certain UNIX workstations connected to a Novell NetWare network. A substantial portion of Cheyenne revenues are derived from products that work in the Novell NetWare network operating system environment. Novell faces increasing competition from a number of sources in the network environment, including Microsoft. Microsoft may enjoy certain competitive advantages over Novell, which may enable Microsoft to compete effectively against Novell in the market for network operating systems. As a result, sales of Cheyenne products into the Novell network marketplace may be affected. In FY95, Cheyenne began to ship a version of ARCserve(R) that operates natively in the Microsoft NT environment, which offers users the ability to back up data from Microsoft NT servers and workstations not connected to a Novell NetWare network. Some of Cheyenne's competitors also offer native Microsoft NT backup. The market for Microsoft NT backup products is in the early stages of development and it is too soon to predict whether Cheyenne will obtain market share in the NT market similar to the Company's market share in the NetWare market. Cheyenne is also developing anti-virus and communications software products for the NT marketplace. Failure to succeed in the NT market could have a material adverse affect on Cheyenne's operating results, especially if NT becomes the dominant network operating system. 10 Cheyenne has developed hierarchical storage management products for the NetWare and UNIX markets. Cheyenne also continues to develop backup products directed at the UNIX operating system environment, some of which natively operate in those environments. UNIX operating systems are now increasingly competitive with Novell NetWare and Microsoft NT operating systems. Cheyenne's competitive position in these markets is presently insignificant, but is expected by the Company to improve during the next few years. There can be no assurance that Cheyenne's efforts to develop Microsoft NT, additional UNIX and other products will be technologically successful, that any resulting products will achieve market acceptance or that Cheyenne will elect to develop software products for the operating environments that ultimately are accepted by the marketplace. The failure to do so may have a materially adverse affect on the Company. The computer software industry has experienced delays in its product development and 'debugging' efforts, and Cheyenne has experienced such delays and could experience additional delays in the future. Significant delays in developing, completing or shipping new or enhanced products and/or the inability of such products to perform as expected could adversely affect Cheyenne in a number of ways, including a loss of competitiveness of Cheyenne's products, negative publicity and delayed purchasing decisions, and could, therefore, adversely affect Cheyenne's financial results. Furthermore, it can be expected that as products become more complex, development cycles will become longer and more expensive. Cheyenne intends to continue the use of strategic acquisitions to provide certain technology for its overall product strategy. Cheyenne completed two acquisitions during FY95 and anticipates the acquisition of other companies and products in the future. In addition to the significant business risks associated with acquisitions, which include the failure to combine the companies in an efficient and timely manner, the failure to coordinate research and development and sales efforts, the failure to retain key personnel and the failure to integrate the acquired products into Cheyenne's product mix, Cheyenne may incur significant acquisition expenses for legal, accounting and financial advisory services and other costs related to the combination of the companies. These costs, when added to the consideration paid to the Sellers, may have a significant adverse impact on Cheyenne's profitability and financial resources. The R&D staff at the end of FY95 increased to 130 engineers, programmers and documentation specialists from 94 at the end of FY94. This group is responsible for developing new software products and enhancing, documenting and supporting existing software products. In addition, a group of 55 engineers/testers are employed in testing and quality control of Cheyenne software products versus 32 last year. Technical Support - ----------------- The technical and customer support staff that is responsible for training OEM customers, distributors, resellers and end-users, as well as responding to all technical questions from customers throughout the world, now numbers 136 employees versus 80 last year. The expenses associated with technical support were reclassified at the end of FY95 from Research and Development to cost of goods sold. Prior periods have been restated. Sales and Marketing - ------------------- Fluctuations in Purchasing Patterns - ----------------------------------- Changes in purchasing patterns of one or more of Cheyenne's major customers could result in material fluctuations in quarterly operating results. Cheyenne's major customers are large, sophisticated businesses which make their own independent purchasing decisions. The timing of new product announcements and introductions by Cheyenne could also have an impact on the purchasing patterns of Cheyenne's major customers. Typically, the personal computer industry experiences some seasonal variations in demand, with weaker sales in the summer months (FQ1) because of customers' vacations and planned shutdowns. This seasonality is more pronounced in Europe. 11 Quarterly results are difficult to predict until the end of each quarter and may fluctuate significantly from quarter to quarter. Substantially all of Cheyenne's revenue in each quarter results from orders booked in that quarter because lead times for delivery of Cheyenne's products are typically very short. The difficulty in predicting quarterly revenues is also increased by the fact that a high percentage of Cheyenne's revenues are earned in the third month of each fiscal quarter and tend to be concentrated in the latter half of that month. Significant Customers - --------------------- One distributor accounted for greater than 10% of the Company's revenues in FY95 (14%), FY94 (17%) and FY93 (14%). At June 30, 1995, this customer accounted for 26% of Cheyenne's outstanding net trade accounts receivable. The loss of this customer, or any of the other major distributors of Cheyenne's products or their failure to pay for products purchased, could have a material adverse affect on Cheyenne's operating results. Returns and Exchanges; Price Protection - --------------------------------------- Like other manufacturers of computer software and hardware products, Cheyenne is exposed to the risk of product returns and exchanges from its distributors. Cheyenne's exchange policy generally allows its distributors, subject to certain limitations, to exchange purchased products. Although certain major distributors and OEM's have return rights, most of Cheyenne's contracts provide for no or only limited return rights. The risk of product returns and exchanges may increase if the demand for new products introduced by Cheyenne is lower than Cheyenne anticipates at the time of introduction. Should any new product experience a high rate of bugs or performance difficulties, Cheyenne could experience product returns and exchanges, unexpected warranty expenses and lower than expected revenues in a particular quarter. Individual end users may return products to Cheyenne through dealers and distributors within 90 days from the date of purchase. Cheyenne offers a 30 day money back guarantee for certain direct purchases from Cheyenne by individual end users. Such returns have historically been minimal. Although Cheyenne believes that it provides an adequate allowance for sales returns and exchanges in its financial statements, there can be no assurance that actual sales returns and exchanges in the future will not exceed Cheyenne's allowance. Product returns or exchanges materially in excess of recorded allowances could result in a material adverse affect on operating results. In FY95, Cheyenne increased the allowance for sales returns and exchanges due to, among other things, new product releases and product upgrades in FY95. Cheyenne is also exposed to the impact on its distributors of list price reductions by Cheyenne of its products. As with many other suppliers, Cheyenne provides many of its distributors with some price protection in the event that Cheyenne reduces the list price of its products. Distributors are usually offered some credit for the impact of a list price reduction on the expected revenue from Cheyenne's products in the distributors' inventories at the time of the price reduction. Through June 30, 1995, there have been no price reductions on Cheyenne products and therefore no credits have been issued for list price reductions. However, there can be no assurance that in the future there will not be credits for price protection. New Channels - ------------ As noted above, a substantial portion of Cheyenne's revenues are derived from products that function in a Novell NetWare operating environment. Cheyenne has introduced products that work in different operating environments, such as Microsoft NT, UNIX and MacIntosh. Some of these type products are not sold in Cheyenne's traditional channel of distribution. The success of these products will therefore in part be determined by Cheyenne's ability to develop and maintain relationships with new channels of distribution. There can be no assurance that Cheyenne will be able to develop these relationships or that such relationships, if developed, will be successful. 12 Cheyenne at the end of FY95 had 205 full time employees devoted to its worldwide sales and marketing activities versus 153 people last year. In addition, four of the Company's senior executives spend a significant portion of their time supporting this activity. Cheyenne participated in more than 200 trade shows and similar events around the world in FY95 and advertised in many of the industry trade journals. New brochures, new product packaging designs and direct mail advertising programs were also developed and utilized to support the sales campaigns during FY95. Competition - ----------- Cheyenne operates in a highly competitive market for computer software products. The success of a product depends upon two factors: (i) the fundamental quality of the product, i.e., whether it carries out the functions that the user expects, smoothly and efficiently; and (ii) the strength of the company marketing and supporting the product. Management is confident that Cheyenne produces high quality products, as demonstrated by the fact that the products which have come to market continue to be favorably reviewed by trade publications and to achieve growing acceptance by major OEM accounts, distributors and end-users. The market for network backup computer software is becoming more competitive. This competition is likely to intensify as current competitors expand their product lines and/or enter into relationships with large companies and new companies enter the market. While the Company believes its products are still technologically superior to the competition, many competitors now offer features once only offered by Cheyenne and offer some features not offered by Cheyenne. Novell, Microsoft, IBM and other network operating systems vendors may also offer increased backup functionality in future versions of their respective products. In such event, the market for Cheyenne's ARCserve(R) could be materially adversely impacted. While discounts are typically granted from the suggested retail price for most computer software, price competition has not been a major factor to date in the high performance end of the network backup software business in which Cheyenne primarily competes, although price competition in that segment of the market has increased. Significant price competition currently exists in the low performance sector of that market. In FY94, Cheyenne introduced an OEM network backup product into the low performance sector. The introduction of this product into the low performance sector may have adversely affected sales of Cheyenne's high performance product. Cheyenne believes that price competition, with its attendant reduced profit margins, may also emerge as a more significant factor in the high performance sector. Some of Cheyenne's competitors also have significantly greater financial resources, research and development, marketing resources and customer support organizations than Cheyenne. The competitors of Cheyenne include computer companies which develop software for use with their own equipment and software development companies such as Novell, Inc., Computer Associates International, Inc., IBM, Palindrome, a subsidiary of Seagate Corporation, Sterling Software, Symantec Corporation, Tecmar, EMC Corp., Microsoft Corp., Arcada Software, a subsidiary of Connor Peripherals, Intel, Legato Systems, Inc. and other software developers. Some of these competitors license and distribute Cheyenne technology. Proprietary Information, Patents and Trademarks - ----------------------------------------------- Cheyenne currently relies on copyright, trade secret and trademark law, as well as provisions in its license, distribution and other agreements in order to protect its intellectual property rights. Cheyenne has registered certain patents in the United States and has other United States patents pending and intends to file further patent applications. No assurance can be given that any Cheyenne patent will provide protection for Cheyenne's competitive position or that the patents pending will be issued or, if issued, will provide protection for Cheyenne's competitive position. Although Cheyenne intends to protect patent rights vigorously, there can be no assurance that these measures will be successful. Additionally, no assurance can be given that the claims on any patents held by Cheyenne will be sufficiently broad to protect Cheyenne's technology. In addition, no assurance can be given that any patents issued to Cheyenne will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages to Cheyenne. The loss of patent protection 13 on Cheyenne's technology or the circumvention of its patent protection by competitors could have a material adverse effect on Cheyenne's ability to compete successfully in its business. The software industry is characterized by frequent litigation regarding copyright, patent and other intellectual property rights. Cheyenne believes that its products, trademarks and other proprietary rights do not infringe on the proprietary rights of third parties. There can, however, be no assurance that third parties will not assert claims against Cheyenne with respect to existing or future products or that licenses will be available on reasonable terms, or at all, with respect to any third party technology. Cheyenne receives such claims from time to time. In the event of litigation to determine the validity of any third party claims, such litigation could result in significant expense to Cheyenne and divert the efforts of Cheyenne's technical and management personnel, whether or not such litigation is determined in favor of Cheyenne. In the event of an adverse result in any such litigation, Cheyenne could be required to expend significant resources to develop non-infringing technology or to obtain licenses to the technology which is the subject of the litigation. There can be no assurance that Cheyenne would be successful in such development or that any such licenses would be available. In addition, the laws of certain countries in which Cheyenne's products are or may be developed, manufactured or sold may not protect Cheyenne's products and intellectual property rights to the same extent as the laws of the United States. As set forth and further disclosed in Item 3 (Legal Proceedings), Cheyenne (along with some of its competitors) is the subject of a patent litigation suit. Executive officers and employees have agreed to assign to Cheyenne certain technical and other information and patent rights, if any, acquired by them during their employment by Cheyenne. Executive officers and employees have also agreed not to use or disclose any confidential information for a period of at least one year following the termination of their employment. Cheyenne applied for and received Federal Trademark Registrations for Cheyenne(R) in 1986, for ARCserve(R) and Monitrix(R) in FY90, for InocuLAN(R) in FY94 and for ARCsolo(R) in FY95. Certain other Cheyenne marks have been registered or applied for registration in the United States and other countries. Employees - --------- As of June 30, 1995, Cheyenne employed 621 persons, consisting of 15 in production, shipping and receiving, 130 engineers, programmers and documentation specialists, 55 engineers/testers responsible for quality assurance, 136 employees providing technical and customer support, 205 in Sales and Marketing (including Europe), 59 in administration and accounting and 21 full time employees at Cheyenne KK in Tokyo. Last year, the Company employed a total of 430 persons on a worldwide basis. None of Cheyenne's employees are represented by a labor union. Cheyenne considers its relations with its employees to be satisfactory. Past Relationships - ------------------ Cheyenne entered into the microcomputer distribution business in July 1987 via the acquisition of F.A. Computer Technologies, Inc. which then sold shares to the public in 1988 and then merged with Gates Distributing, Inc., forming Gates/FA Distributing, Inc. ("Gates/FA"). In a secondary offering, Cheyenne sold 801,710 common shares of Gates/FA on June 17, 1992. The Company sold an additional 100,000 common shares of Gates/FA on February 3, 1993. At that time, Cheyenne's ownership of Gates/FA was reduced from 49% to 21.35% of the outstanding shares of common stock of Gates/FA. Thereafter, Cheyenne reflected its investment in Gates/FA in its consolidated financial statements using the equity method of accounting. On August 29, 1994, Cheyenne exchanged its remaining 1,348,290 shares of Gates/FA common stock for 798,996 common shares of Arrow Electronics, Inc. ("Arrow"), a public company. In FY95, the contribution to net income from the Gates/FA equity ownership was therefore only approximately 0.2% of net income. 14 The Arrow transaction qualified as a tax-free exchange and resulted in a pre-tax gain of $21,232,000 for financial reporting purposes. After the transaction, Cheyenne owned approximately 2% of Arrow's outstanding common stock. The Company therefore accounted for its investment in Arrow common stock under the cost method of accounting. In FY95, Cheyenne sold its 798,996 shares of Arrow common stock for $30,324,000, which resulted in a net loss of $11,000. Item 2 Properties - ---------------------- The main offices of Cheyenne were moved from 55 Bryant Avenue, Roslyn, New York to 3 Expressway Plaza, Roslyn Heights, New York during FY93. Due to the Company's rapid expansion, the original lease at 3 Expressway Plaza for 33,000 square feet has been expanded to 44,000 square feet. The basis of the new master lease for 3 Expressway Plaza started January 1, 1993. As of June 30, 1994, the average annual rental expense for the remaining four and a half year term is approximately $1,049,000 per year, exclusive of electricity, certain real estate tax escalations and other related costs. In FY95, Cheyenne entered into a lease for a building located at 2000 Marcus Avenue, Lakes Success, New York. The facility is 100,000 square feet. The lease commenced on June 1, 1995 and the average annual rental expense for the seven year term is $1,316,000 per year, exclusive of electricity, certain real estate taxes, escalations and other related costs. The Company leases additional facilities, including facilities in Atlanta, Chicago, Austin, Dallas, Miami, Seattle, San Diego, Fremont, Minneapolis, and Canada, France, Germany, the United Kingdom, Japan, Brazil, Mexico, Taiwan and Singapore. Item 3 Legal Proceedings - ---------------------------- Neither Cheyenne nor any of its subsidiaries is a party to any material pending legal proceedings, other than routine litigation incidental to the business, and other than as set forth below: 1) Coldata, Incorporated v. Cheyenne Software, Inc. ------------------------------------------------ An action was commenced in July 1991, in the Supreme Court of the State of New York, County of Nassau, entitled "Coldata, Incorporated v. Cheyenne Software, Inc." Coldata, Incorporated ("Coldata") alleged, among other things, that Cheyenne failed to complete the detailed design specifications and implementation schedule for the development of a particular computer program (called "CAAMS"), and therefore, breached the agreement between the parties. Coldata also alleged that Cheyenne breached its fiduciary duties to Coldata by failing to develop and market CAAMS and by its participation in other unrelated software projects to the exclusion of Coldata. On February 17, 1995, the parties settled this lawsuit and Cheyenne, in connection therewith, paid Coldata $170,000. Neither party admitted any liability in connection with the settlement. 2) In re Cheyenne Software, Inc. Securities Litigation --------------------------------------------------- Master File No. 94 Civ. 2771 (TCP) On or about June 11, 1994, a securities fraud class action complaint, entitled Bell v. Cheyenne Software, Inc., et al., was filed in the United States --------------------------------------- District Court for the Eastern District of New York. The lawsuit names as defendants the Company and several of its officers and directors. In the following weeks, several other similar lawsuits were filed in the Eastern District of New York. The actions allege securities fraud claims under Sections 10(b) and 20 of the Securities Exchange Act of 1934, and seek compensatory damages on behalf of all the shareholders who purchased shares between approximately January 24, 1994 and approximately June 17, 1994, as well as attorneys' fees and costs. The gravamen of the actions is that the Company and the individual defendants made misrepresentations and omissions to the public, which caused the Company's stock to be artificially inflated. The suits rely on what is known as the "fraud on the market" theory of liability. On July 20, 1994, the Court ordered that all of the actions be consolidated under the caption of In re Cheyenne Software, Inc. Securities ---------------------------------------- Litigation. On March 8, 1995, plaintiffs filed an Amended Complaint. On - ---------- March 23, 1995, plaintiffs served a Motion 15 for Class Certification. The Company has contested certain aspects of that Motion, and the Court has yet to issue a ruling. On April 11, 1995, the Company served a Motion to Dismiss certain of the claims alleged in the Amended Complaint. The Motion to Dismiss is expected to be heard in Fall, 1995. The defendants deny any and all liability and intend to vigorously defend against the claims. 3) Rand v. Oxenhorn, et al. ------------------------ Delaware Chancery Court (New Castle County) No. 13583 On or about June 27, 1994, a shareholder derivative complaint, entitled Rand v. Oxenhorn, et al., was filed in the Court of Chancery for the State of - ------------------------ Delaware in and for New Castle County. The lawsuit, purportedly filed derivatively on behalf of the Company, names as defendants eleven of its present or former officers and directors. The complaint's factual allegations are similar to those of In re Cheyenne Software, Inc. Securities Litigation --------------------------------------------------- described above. However, instead of securities fraud claims, the action alleges that the defendants breached their fiduciary obligations to the Company. The suit seeks a variety of compensatory damages as well as attorneys fees. On August 19, 1994, the defendants filed a motion to dismiss on the grounds that (1) the plaintiff failed to comply with the pleading and demand requirements of a derivative action and (2) the pleadings fail to state a claim upon which relief may be granted. On October 14, 1994, and before defendants' motion to dismiss was ruled on, an amended complaint was filed only naming as defendants six of Cheyenne's officers or directors. Cheyenne filed a motion to dismiss the Amended Complaint on the same grounds listed above on February 16, 1995. The defendants deny any and all liability and intend to vigorously defend against the claims. 4) SEC Formal Private Investigation -------------------------------- On June 28, 1994, the SEC commenced an informal inquiry into Cheyenne. On or about April 14, 1995, the SEC advised the Company that it had issued a Formal Order of Private Investigation of the Company. The Private Investigation is a continuation of the informal inquiry. The Formal Order, among other things, enables the SEC to utilize its subpoena powers to obtain relevant information from third parties as well as the Company. The Private Investigation relates to possible violations of federal securities laws. The Company has been cooperating and will continue to cooperate fully with the SEC. 5) JWANCO, Inc., et al. v. Cheyenne Software, Inc. et al. ------------------------------------------------------ California Superior Court (County of Alameda) No. H-183331-1 On or about May 2, 1995, plaintiffs JWANCO, Inc. (formerly known as Bit Software, Inc.), Jonathan Wan, Yau Ki Chuck, Norman Chan, David Law and David Wong filed an action in the Superior Court of California in and for the County of Alameda against the Company, Cheyenne Communications, Inc., a wholly owned subsidiary of the Company, and several of its officers, directors and employees. The action alleges breach of contract, fraud, wrongful termination, negligent infliction of emotional distress, and a number of other related torts. The essence of the allegations is that the defendants breached agreements and defrauded JWANCO, Inc., and the individual plaintiffs in connection with the Company's acquisition of certain assets and assumption of certain liabilities of Bit Software, Inc. on May 19, 1994. These allegations are substantially similar to those In re Cheyenne Software, Inc. Securities Litigation described above. In --------------------------------------------------- addition, the Complaint alleges, on behalf of plaintiff Jonathan Wan only, wrongful termination and a variety of other causes of action relating to the employment and termination of the employment of Jonathan Wan by Cheyenne Communications. The defendants have removed the action to the United States District Court, and have moved to transfer it to New York. Management of the Company, based on advice of outside legal counsel, does not believe that the ultimate resolution of this lawsuit will have a material adverse affect on the financial position or results of operations of the Company. Although no answer has yet been filed, the defendants deny any and all liability and intend to vigorously defend against the claims. 16 6) PCPC v. Cheyenne Software, Inc. ------------------------------- United States District Court (District of Delaware) Case No. On May 19, 1995, Personal Computer Peripherals Corporation ("PCPC") filed a lawsuit in the United States District Court for the District of Delaware, Case No. 95-301(SLR), naming Cheyenne, Legato Systems, Inc., Arcada Software, Artisoft, Palindrome (a subsidiary of Seagate) and Symantec as defendants. PCPC alleges infringement of patent No. 5,135,065, entitled "Backup Computer Program for Networks" issued to PCPC on July 21, 1992. PCPC is seeking an injunction against infringement of its patent, treble damages, attorneys' fees and other damages. On July 10, 1995, Cheyenne answered the complaint and denied any and all liability. Cheyenne intends to vigorously defend against the claims. Management of the Company, based on advice of outside legal counsel, does not believe that the ultimate resolution of this lawsuit will have a material adverse affect on the financial position or results of operations of the Company. Item 4 Submission of Matters to a Vote of Security Holders. - ---------------------------------------------------------------- None. 17 PART II ------- Item 5 Market for Registrant's Common Stock and Related Matters - ------------------------------------------------------------------- (a) Commencing March 20, 1990, the Registrant's common stock was traded on the American Stock Exchange (the "AMEX") under the symbol of "CYE". From July 7, 1986, through the opening of business on March 28, 1994, the common stock was listed on the Pacific Stock Exchange under the symbol "CYE". From October 3, 1985 through March 20, 1990, the common stock was quoted on the National Association of Securities Dealers Automated Quotation System (NASDAQ) under the symbol "CHEY". The following table sets forth the high and low sales prices for the period July 1, 1993 through June 30, 1995, as reported by the AMEX. The high and low sales prices for the period July 1, 1993 through June 30, 1995 have been adjusted to reflect the 1994 Stock Split paid on March 29, 1994 (as described below). QUARTER ENDED HIGH LOW ------------- ---- --- September 30, 1993 $ 26.83 $ 19.25 December 31, 1993 25.58 17.67 March 31, 1994 30.33 16.92 June 30, 1994 28.38 7.00 September 30, 1994 $ 13.38 $ 7.75 December 31, 1994 13.88 9.13 March 31, 1995 17.75 13.25 June 30, 1995 20.00 12.38 At a meeting held on February 10, 1994 (the "1994 Stock Split") and a meeting held on February 23, 1993 (the "1993 Stock Split"), the Board of Directors of Cheyenne declared separate three-for two stock splits payable in the form of 50% stock dividends with respect to the issued and outstanding shares of common stock. The 1994 Stock Split was paid on March 29, 1994 to stockholders of record at the close of business on March 1, 1994 and the 1993 Stock Split was paid on April 8, 1993 to stockholders of record at the close of business on March 12, 1993. No fractional shares were distributed in connection with either stock split. Each stockholder of record whose total number of shares was not exactly divisible by two, received cash in lieu of fractional shares. The cash was in an amount equal to one-half of the fair market value of a share of common stock after giving effect to the stock split. Such market value was determined on the basis of 66-2/3% of the closing price of Cheyenne's Common Stock reported for the American Stock Exchange composite transactions on each record date. (b) As of September 20, 1995, the number of holders of record of the Company was 877. (c) Cheyenne has never paid a cash dividend on its common stock. The declaration and payment of future cash dividends by Cheyenne will be determined by the Board of Directors in light of conditions then existing, including Cheyenne's earnings, financial condition, capital requirements, and other circumstances. It is the present policy of Cheyenne's Board of Directors to retain cash and any earnings for the operation and expansion of the Company and, therefore, it is not anticipated that cash dividends will be paid on its common stock in the foreseeable future even if legally permissible. (d) On February 23, 1995, Cheyenne announced that the Board of Directors had authorized management to purchase up to 4,000,000 shares of the Company's outstanding common stock. Purchases are dictated by overall financial and market conditions and other factors affecting the operations of the Company. 18 During FY95, Cheyenne purchased 2,035,000 shares of its common stock for approximately $30,458,000, at prices ranging from approximately $13.50 to $17.25 per share. Item 6 Selected Financial Data (2) - -------------------------------------- The following information has been summarized from the Registrant's consolidated financial statements included elsewhere in this Annual Report on Form 10-K and should be read in connection with such consolidated financial statements and the related notes thereto.
Year Ended June 30 ------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands) Statement of Operations Data (1) Revenues $127,927 $97,737 $56,694 $22,353 $ 8,193 Net Income (3) $38,504 $32,538 $20,650 $ 8,833 $ 2,089 Income Before Extraordinary Credit Per Share (3) .97 .82 .53 .17 .05 Net Income Per Share (3) .97 .82 .53 .24 . 06 June 30 ------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- (in thousands) Balance Sheet Data - ------------------ Total Assets $129,394 $115,387 $65,741 $29,743 $14,461 Working Capital $57,786 $87,378 $48,589 $18,695 $ 3,998 Shareholders' Equity $116,310 $105,071 $61,262 $26,825 $13,106 (1) All per share data have been restated for all periods presented to reflect the payment on March 29, 1994, April 8, 1993 and March 25, 1992 of three-for-two stock splits. (2) The acquisition of the net assets of Bit Software, Inc. ("Bit") in May, 1994 for 140,590 shares of common stock was accounted for under the pooling of interests method and, accordingly, prior year financial data have been restated to include Bit's financial data. (3) FY95 net income per share includes a one-time gain, net of income taxes, of $.28 per share in connection with the Company's exchange of 1,348,290 shares of Gates/FA common stock for 798,996 shares of Arrow Electronics common stock.
19 Item 7 Management's Discussion and Analysis of Financial Condition and - ---------------------------------------------------------------------------- Results of Operations --------------------- Despite lower than expected sales in FQ195, sales for FY95 increased 31%. Operating income as a percentage of sales in FY95 (30%) fell from FY94 (46%). This decrease resulted from an increase in operating expenses of 68% over the same time period, primarily consisting of increased expenditures for research and development and selling and marketing. The Company views these expenditures as strategic investments necessary to expand product offerings and to increase market acceptance and penetration of its products. Such investments are further necessitated by increased competition. Cheyenne has several key competitors, many of which compete with Cheyenne only in specific segments of the market for network essentials. Cheyenne competes across many segments of the network data storage management market, as well as certain segments of the network security and network communications markets. Development of these markets requires significant resources. The Company believes these investments in broader market segments will result in long term competitive advantages and establish Cheyenne as a leader in this overall market and further establish Cheyenne as the leader in the enterprise network backup market. One of the greatest challenges for Cheyenne is to respond quickly and effectively to market changes. The expected significant growth of Microsoft NT network operating systems will affect the market for Cheyenne's products. The Company has proven itself as the leader in the NetWare network operating systems backup market. The Company now intends to be a major factor in the NT market and also to increase its presence in the UNIX markets as well as maintaining its leadership position in the NetWare market. An important change in the software industry also continues. Presently, almost all software products are delivered in shrink-wrapped packages. New techniques, such as electronic distribution (bulletin boards) and CD-ROM are being increasingly considered as the mechanism to deliver software products to the end-user. It is possible that, during this potential transition phase, software revenues may be negatively affected on a short-term basis. Cheyenne experienced such a negative affect on revenues in the first quarter of FY95 when one of its key OEM customers began distribution of Cheyenne and other software products on CD-ROM. Other customers are considering such methods which could create further short-term fluctuations in revenue. Market changes create opportunity for the Company. It also creates increased volatility as success is dictated by successful development and market acceptance of new products and responding to changes in distribution mechanisms. Cheyenne is confident that its strong technology and market acceptance will result in continued long term success. Results of Operation - -------------------- The following table includes a summary of each item from the consolidated statements of earnings as a percentage of revenues. Please refer to this table while reading the following discussion. 20
TABLE 1 ------- Comparison FY95 v FY94 v FY93 (in thousands except per share data) FY95 FY94 FY93 ---- ---- ---- Amount Ratio Amount Ratio Amount Ratio ------ ----- ------ ----- ------ ----- Revenues $127,927 100% $ 97,737 100% $ 56,694 100% Cost of Sales 21,690 16.95% 11,641 11.91% 6,850 12.08% ------ ------ ------ ------ ----- ------ Gross Profit 106,237 83.05% 86,096 88.09% 49,844 87.92% Operating Expenses Research & Development 15,174 11.86% 8,981 9.19% 4,805 8.48% Sales & Marketing 41,222 32.22% 23,747 24.30% 9,891 17.45% General & Administrative 10,784 8.43% 8,066 8.25% 6,658 11.74% Charge for purchased R&D 1,251 0.98% 0 0.00% 0 0.00% ----- ----- - ----- - ----- Total Operating Expenses 68,431 53.49% 40,794 41.74% 21,354 37.67% ------- ------ ------- ------ ------- ------ Operating Income 37,806 29.55% 45,302 46.35% 28,490 50.25% Non Operating Income: Interest Income 3,437 2.69% 1,668 1.71% 871 1.54% Other gains, net 21,431 16.75% 738 0.76% 400 0.71% ------ ------ --- ----- --- ----- Total Non-Operating Income 24,868 19.44% 2,406 2.46% 1,271 2.24% Income before income taxes & Equity in earnings of Gates/FA 62,674 48.99% 47,708 48.81% 29,761 52.49% Provision for Income Taxes 24,255 18.96% 16,742 17.13% 10,510 18.54% Equity in Earnings of Gates/FA 85 0.07% 1,572 1.61% 1,399 2.47% -- ----- ----- ----- ----- ----- Net Income $38,504 30.10% $32,538 33.29% $20,650 36.42% ======= ====== ======= ====== ======= ====== Net Income per share* $0.97 $0.82 $0.53 ===== ===== ===== Weighted average number of common shares and equivalents outstanding 39,617 39,877 38,992 ====== ====== ====== *All per share data has been restated for all periods presented to reflect the payments on (i) April 8, 1993 of a three-for-two stock split and (ii) March 29, 1994 of a three-for-two stock split. 21
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994* - -------------------------------------------------------------- Revenues - -------- Cheyenne's revenues increased 31% in FY95 over FY94 to $127,927,000 from $97,737,000. A detailed breakdown of sales is shown in Table 2
TABLE 2 ------- SOFTWARE SALES BREAKDOWN FY95 % FY94 % FY93 % FY92 % ---- - ---- - ---- - ---- - Distribution: North America $41,089 32.1 $37,028 37.9 $15,785 27.8 $5,040 22.5 Europe 45,394 35.5 33,696 34.5 16,792 29.6 4,158 18.6 Rest of World 7,640 6.0 4,097 4.2 1,888 3.4 510 2.3 -------- --- -------- ----- ----- ----- ------ ----- Total Distribution $94,123 73.6 $74,821 76.6 $34,465 60.8 9,708 43.4 ------- ---- ------- ---- ------- ---- ----- ---- Japan 7,828 6.0 2,341 2.4 725 1.3 65 0.3 OEM 15,295 12.0 13,335 13.6 13,308 23.5 7,890 35.3 Major Accounts 3,108 2.4 1,534 1.6 1,316 2.3 ----- ----- Direct and Other (US) 7,573 6.0 5,706 5.8 6,880 12.1 4,690 21.0 -------- --- --------- ----- -------- ------ -------- ------ Total $127,927 100% $97,737 100% $56,694 100% $22,353 100% ======== ==== ======= ==== ======= ==== ======= ====
As shown, North America Distribution sales increased 11% in FY95, European Distribution sales increased 35%, Rest of World Distribution sales increased 86% (from a low base) and sales to Japan grew 234% (from a low base). The significant increase in distribution sales is attributed to an expanding LAN market, better recognition and acceptance of Cheyenne products in the LAN marketplace, a broader product line, the addition of new distributors, particularly international distributors, and the increased availability of foreign language-translated products. OEM sales increased 15% in FY95, but decreased as a percentage of consolidated sales to 12.0% in FY95 from 13.6% in FY94. Cheyenne distributors around the world are now offering the Company's software products in configurations similar to, and competitive with, those offered by the OEM channel. This trend resulted in increased sales to Cheyenne distributors at the expense of OEM sales. Major Account sales were up 103%, as a result of increased penetration into Fortune 1000 companies. The Company believes that its salespersons also initiated significant sales to Major Account customers that were booked and handled by Cheyenne resellers and distributors and thus were classified as Distribution sales. Please Refer to Table 1 - ----------------------- Gross Profit - ------------ Gross profit represents revenues less cost of sales. In FY95, technical support costs were reflected in cost of sales rather than Research & Development as in previous periods. All past periods have been restated to make them comparable with FY95. Cost of sales consists primarily of technical support costs, production costs, manuals, packaging, order fulfillment, product costs, shipping costs and royalties paid (when applicable) to third parties under licensing agreements. The gross profit margin decreased to 83.0% in FY95 from 88.1% in FY94, primarily due to a significant increase in technical support costs. Excluding technical support costs, FY95 versus FY94 gross margins would have been 90.3% versus 91.0%. 22 Purchased Research and Development - ---------------------------------- In connection with the acquisition of NETstor, Inc., the Company recorded a $547,000 expense for purchased research and development in FQ295. In connection with the acquisition of the DataJET product line from NetFRAME Systems, Inc., the Company recorded a $704,000 expense for purchased research and development in FQ395. The technological feasibility of the in-process technology was not yet established at the dates of acquisition and the technology had no alternative use. Research & Development ("R&D") - ------------------------------ R&D expenses increased 69% in FY95 versus FY94. Since sales only increased 31%, R&D as a percentage of sales increased from 9.2% in FY94 to 11.9% in FY95. The increase was due to the Company's significantly broader product line that must be further developed and supported by Cheyenne's engineering and technical personnel. Therefore, additional engineers were added during FY95. The percentage increase in R&D was much greater than the percentage sales increase since developing new and enhancing existing products has become an increasingly more sophisticated and complicated task, requiring even higher manpower levels. The Company believes this investment in a large R&D staff will provide a long-term competitive advantage. Selling and Marketing Expenses - ------------------------------ Selling expenses increased 74% in FY95 over FY94 and increased as a percentage of sales to 32.2% from 24.3%. The increase was mainly due to additional sales and marketing personnel, particularly in Europe, where less sales support from the Company's traditional distributors is anticipated as new distributors enter this market competing more on price and less on service. Also, expanded marketing programs and promotions and increased expenditures on direct sales to end-users of upgrades, etc. were factors in the increase. General and Administrative Expenses (G&A) - ----------------------------------------- G&A expenses include the costs of the finance department, human resources, legal, audit, reception, office and facilities management, rent, utilities, employee benefits, depreciation and amortization, etc. G&A expenses increased 34% in FY95 over FY94, and slightly increased as a percentage of sales to 8.4% from 8.3%. The main factor was increases in legal fees arising from the class action securities litigation and the SEC Formal Private Investigation. Higher depreciation costs were also incurred, due to increases in investments in capital equipment and facilities throughout the world. The cost of an expanded intellectual property protection program and start-up costs in new countries were also factors in increased G&A expenses. Interest Income - --------------- Interest income for the year increased to $3,437,000 up from $1,668,000 in FY94. The gain was due to increased cash, cash equivalents and investment balances, most of which was generated from operations, and the exercise of stock options. Cash, cash equivalents and investments grew to $71,435,000 at June 30, 1995 from $69,431,000 at the end of FY94. The Company employs the services of three outside fixed income investment managers to manage its portfolio of mainly tax exempt bonds. 23 Other Gains - ----------- In connection with its sale of Gates F/A shares, Cheyenne realized a pre-tax gain of $21,232,000 in FQ195 for financial reporting purposes. Provision for Income Taxes - -------------------------- The provision for income taxes for FY95 was $24,255,000 or 38.6% of pretax income. Excluding the Federal and State increases in the rate due to the excess tax gain on the sale of Gates/FA shares, the effective income tax rate for FY95 would have been approximately 34%. Such rate is lower than the combined Federal and State statutory rate due mainly to the benefits from the Company's Foreign Sales Corp. (FSC), tax exempt investment income and R&D tax credits. Equity in Earnings of Gates/FA - ------------------------------ The equity in earnings of Gates/FA in FY95 was $85,000 versus $1,572,000 in FY94, because in FQ195, Cheyenne exchanged its 1,348,290 shares of Gates/FA common stock for 798,996 shares of Arrow common stock. Prior to its sale of the Arrow shares, Cheyenne accounted for its Arrow investment under the cost method of accounting. Per Share Data - -------------- The net income per share in FY95 was $0.97 per share, including a one time net gain, net of income taxes, of 26 cents per share, as a result of the exchange of Gates/FA shares for Arrow shares and the write-off of purchased R & D related to the two acquisitions in FY95, versus $0.82 per share in FY94. The weighted average number of common shares and equivalents outstanding decreased to 39,617,000 shares versus 39,877,000 shares last year. The number of shares decreased mainly due to the share repurchase program discussed above, although this was offset by an increase in shares due to stock option exercises, new stock option grants and the increase in share price in FY95. Year Ended June 30, 1994 Compared to Year Ended June 30, 1993* - -------------------------------------------------------------- Please refer to Table 1 and Table 2. Revenues - -------- Cheyenne's revenues increased 72% in FY94 over FY93 to $97,737,000 from $56,694,000. As previously mentioned, the Company's results have been restated for the acquisition in May, 1994 of Bit Software, Inc. accounted for as a pooling of interests. The increase in revenues in FY94 was primarily for the same reasons noted for FY95. Gross Profit - ------------ After reclassification of technical support expenses to cost of sales in FY94 and FY93, the gross profit margin increased to 88.1% in FY94 from 87.9% in FY93. Research & Development - ---------------------- After reclassification of technical support expenses to cost of sales in FY94 and FY93, R&D expenses increased 87% in FY94 versus FY93. Since sales only increased 72%, R&D as a percentage of sales increased from 8.5% in FY93 to 9.1% in FY94. The increase was due to the Company's significantly broader product line that must be further developed and supported by Cheyenne's engineering and technical personnel. Therefore, additional engineers were added during FY94. The percentage increase in R&D and technical personnel was much greater than the percentage sales increase since developing new and enhancing existing products has become an increasingly more sophisticated and complicated task, requiring even higher manpower levels. Selling and Marketing Expenses - ------------------------------ Selling expenses increased 140% in FY94 over FY93 and increased as a percentage of sales to 24.3% from 17.4%. The increase was mainly due to additional sales and marketing personnel. 24 General and Administrative Expenses (G&A) - ----------------------------------------- G&A expenses increased 21% in FY94 over FY93, but decreased as a percentage of sales to 8.2% from 11.7%. The main reason for the decrease was that many G&A expense items such as rent, telephone and utilities which were fully charged to G&A in past years, were also allocated to R&D and Selling and Marketing expenses in FY94 due to the increased significance of these functions. If this expense allocation change was also made to FY93 amounts, the G&A percentage for FY93 would have been similar to the percentage for FY94. Legal and accounting expenses relative to the Bit acquisition are included in FY94 expenses, and depreciation and amortization in FY94 increased to $1,792,000 versus $802,000 in FY93. The increase was due to expenditures relating mainly to the purchase of computers, test equipment and furniture and fixtures in expanded offices throughout the world. Interest Income - --------------- Interest income for FY94 increased to $1,668,000 up from $871,000 in FY93. The gain was due to increased cash, cash equivalents and investment balances, most of which was generated from operations, and the exercise of stock options. Cash, cash equivalents and investments grew to $69,431,000 at June 30, 1994 from $36,101,000 at the end of FY93. Other Gains - ----------- During FQ494, the Company settled a lawsuit with Legato Systems, Inc. for $649,000, net of related expenses, arising out of an advertisement placed by Legato. In addition, the Company had an insignificant gain from the sale of shares in a minor investment. The gain in FY93 relates to the gain on the sale of a portion of the Company's investment in Gates/FA. Provision for Income Taxes - -------------------------- The provision for income taxes for FY94 was $16,742,000 or 34.0% of pretax income. This effective income tax rate was lower than the expected Federal and State effective rate of approximately 38% due mainly to the benefit from the Foreign Sales Corp. (FSC) the Company formed on July 1, 1992, tax exempt investment income and R&D tax credits. Equity in Earnings of Gates/FA - ------------------------------ The equity in earnings of Gates/FA in FY94 was $1,572,000 versus $1,399,000 in FY93. Per Share Data - -------------- The net income per share in FY94 was $0.82 per share versus $0.53 per share in FY93. The weighted average number of common shares and equivalents outstanding increased to 39,877,000 shares in FY94 versus 38,992,000 shares in FY93. The number of shares increased mainly due to stock option exercises plus shares issued in the Bit Software acquisition. 25 LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company has no debt and $71,202,000 in cash, cash equivalents and investments as of June 30, 1995. Cash, cash equivalents and investments increased during FY95 due to cash generated from operations of $13,326,000 (net of an approximate $12,000,000 income tax payment related to the sale of Arrow common stock) and $1,520,000 of cash received from the exercise of employee stock options. All accounts payable are current, and accounts receivable collections average about 77 days, versus 72 days at the end of FY94. Net accounts receivables increased 34% versus FY94 on a sales increase of 31%. Cheyenne received approximately $30,324,000 in cash in connection with the sale of 798,996 shares of Arrow common stock in FY95. Cheyenne paid out approximately $30,458,000 of cash in connection with the repurchase of 2,035,000 of its shares in FY95. Capital expenditures were $10,974,000 in FY95 versus $5,290,000 in FY94. The largest type of capital expenditure was for computers and software for the Company's increased number of personnel. Cheyenne also made significant investments in equipment, furniture, fixtures, test equipment, new computers, new communications and MIS equipment on a worldwide basis. Further increases in capital expenditures are expected in FY96 as the Company adds additional office space and begins to utilize the facility at 2000 Marcus Avenue noted above. Management believes its current cash and investment position coupled with anticipated cash flow from operations, will be more than adequate to meet anticipated cash requirements in FY96. No financing for current operations will be required during the near future. 26 Item 8. Financial Statements and Supplementary Data. - -----------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a)) The following financial statements of the Registrant are included in Item 8 and appear following Item 14: Page ---- Report of Independent Auditors F - 1 Consolidated Balance Sheets: June 30, 1995 and 1994 F - 2 Consolidated Statements of Earnings: Years ended June 30, 1995, 1994 and 1993 F - 3 Consolidated Statements of Shareholders' Equity: Years ended June 30, 1995, 1994 and 1993 F - 4 Consolidated Statements of Cash Flows: Years ended June 30, 1995, 1994 and 1993 F - 5 Notes to Consolidated Financial Statements F - 6 The following Schedules are included in Part IV of this Report. Other schedules are omitted because of (i) the absence of conditions requiring the filing of such Schedules or (ii) the inclusion of the applicable information in the consolidated financial statements included in this Report. Schedule II - Valuation and Qualifying Accounts S - 1
Item 9. Changes in and Disagreements with Accountants on - ------- ------------------------------------------------ Accounting and Financial Disclosure. ------------------------------------ None. 27 PART III -------- Item 10. Directors and Executive Officers of the Registrant. - -------- --------------------------------------------------- Incorporated herein by reference is the information to appear under the caption "Election of Directors" in the Registrant's definitive proxy statement for its Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than October 30, 1995. Item 11. Executive Compensation. - -------- ----------------------- Incorporated herein by reference is the information to appear under the caption "Executive Compensation" in the Registrant's definitive proxy statement for its Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than October 30, 1995. Item 12. Security Ownership of Certain Beneficial Owners and Management. - -------- --------------------------------------------------------------- Incorporated herein by reference is the information to appear under the caption "Principal Stockholders; Shares Held by Management" in the Registrant's definitive proxy statement for its Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than October 30, 1995. Item 13. Certain Relationships and Related Transactions. - -------- ----------------------------------------------- Incorporated herein by reference is the information to appear under the caption "Certain Transactions" in the Registrant's definitive proxy statement for its Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission not later than October 30, 1995. 28 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. - ------- --------------------------------------------------------------- (a) The following documents are filed as part of this Report: 1. Consolidated Financial Statements --------------------------------- See the Index to Consolidated Financial Statements included in Item 8 of this Report for a description of the consolidated financial statements filed as part of this Report. 2. Financial Statement Schedules ----------------------------- See the Index to Consolidated Financial Statements included in Item 8 of this Report for a description of the financial statement schedules filed as part of this Report. 3. Exhibits incorporated by reference or filed with this Report: Number Exhibits - ----- -------- 3.1 Certificate of Incorporation of Cheyenne, as amended. (See Exhibit 4.1). 3.2 Restated By-laws of the Registrant, incorporated herein by reference to Exhibit 2 to Cheyenne's Current Report on Form 8-K, dated December 2, 1986. 3.3 Restated By-Laws of Cheyenne as of October 7, 1993. 4.1 Certificate of Incorporation of Cheyenne, incorporated herein by reference to Exhibit 3.1 to Cheyenne's Registration Statement on Form S-1, No. 33-8113 ("Cheyenne's 1986 Registration Statement"). 4.2 Certificate of Amendment of the Certificate of Incorporation of Cheyenne (increase in authorized capital stock), incorporated herein by reference to Exhibit 3.1 to Cheyenne's 1986 Registration Statement. 4.3 Certificate of Amendment of the Certificate of Incorporation of Cheyenne (limited personal liability for Directors for monetary damages) incorporated herein by reference to Exhibit 1 to Cheyenne's Current Report on Form 8-K, dated December 2, 1986. 4.4 Certificate of Amendment of the Certificate of Incorporation of Cheyenne. _10.1.3 Employment Agreement between Cheyenne and Eli Oxenhorn, dated October 1, 1991. @10.1.4 Amendment to Employment Agreement between Cheyenne and Eli Oxenhorn, dated October 7, 1993. <10.5.2 Employment Agreement between Cheyenne and Alan Kaufman, dated January 1, 1993. @10.5.3 Amendment to Employment Agreement between Cheyenne and Alan Kaufman, dated October 7, 1993. 10.10 Incentive Stock Option Plan, incorporated herein by reference to Exhibit 10.9 to Cheyenne's 1986 Registration Statement. 10.11 Form of Non-Qualified Stock Option, incorporated herein by reference to Exhibit 10.10 to Cheyenne's 1986 Registration Statement. +10.13.3 Letter Agreement, dated September 19, 1990, between Cheyenne and Bartony Realty, for additional space at 55 Bryant Avenue, Roslyn, New York. ^10.13.4 Letter Agreements, dated February 25, 1991 and June 3, 1991, between Cheyenne and Dr. Richard Linchitz, for additional space at 55 Bryant Avenue, Roslyn, New York. _10.13.5 Lease, dated June 30, 1992, between Cheyenne and LKM Expressway Plaza Limited Partnership, as amended. 29 <10.13.7 First Modification of Lease Agreement, dated February 1, 1993, between Cheyenne and LKM Expressway Plaza Limited Partnership. <10.13.8 Lease, dated August 31, 1993, between Cheyenne and Plaza North Company. @10.13.9 Second Modification of Lease Agreement, dated October 25, 1993, between Cheyenne and LKM Expressway Plaza Limited Partnership. <10.42.3 Employment Agreement between Cheyenne and Elliot Levine, dated September 1, 1992. @10.42.4 Amendment to Employment Agreement between Cheyenne and Elliot Levine, dated October 7, 1993. 10.42.5 Amendment to Employment Agreement between Cheyenne and Elliot Levine, dated October 24, 1994. 10.42.6 Amendment to Employment Agreement between Cheyenne and Elliot Levine, dated August 30, 1995. 10.52 Cheyenne's 1987 Non-Qualified Stock Option Plan, incorporated herein by reference to Cheyenne's Proxy Statement, Commission File No. 1-9189, for the Annual Meeting of Stockholders held on December 1, 1987. 10.53 Cheyenne's 1989 Incentive Stock Option Plan, incorporated herein by reference to Cheyenne's Proxy Statement, Commission File No. 1-9189, for the Annual Meeting of Stockholders held on November 30, 1989. ^10.54 Employment Agreement between Cheyenne and ReiJane Huai, dated September 5, 1991. @10.54.1 Amendment to Employment Agreement between Cheyenne and ReiJane Huai, dated October 7, 1993. ^10.55 Deferred Compensation Agreement between Cheyenne and Elliot Levine. ^10.56 Cheyenne 401(K) Plan. @10.57.1 Employment Agreement between Cheyenne and James P. McNiel, dated May 4, 1992. @10.57.2 Amendment to Employment Agreement between Cheyenne and James P. McNiel, dated October 7, 1993. <10.59 Deferred Compensation Agreement between Cheyenne and ReiJane Huai. <10.61 Employment Agreement between Cheyenne and Lisa Merkin, dated September 27, 1993. 10.62 Cheyenne's 1992 Stock Option Plan for Outside Directors, incorporated by reference to Exhibit C to Cheyenne's Proxy Statement, dated November 5, 1992, Commission File No. 1-9189, for the Annual Meeting of Stockholders held on December 16, 1992. <10.63 Cheyenne's 1987 Non-Qualified Stock Option Plan, as amended. <10.64 Cheyenne's 1989 Incentive Stock Option Plan, as amended. @10.65 Cheyenne Communications, Inc. 1993 Stock Option Plan for Directors. @10.66 Consulting and Noncompetition Agreement between Cheyenne and Eli Oxenhorn. 10.67 Employment Agreement between Cheyenne and Michael B. Adler, Esq., dated July 1, 1995. 10.68 Employment Agreement between Cheyenne and Yuda Doron, dated June 8, 1995. 10.69 Employment Agreement between Cheyenne and Doris Granatowski, dated November 16, 1994. 30 10.70 Lease Agreement between Cheyenne and Elan Associates, dated December 20, 1994. 10.71 Cheyenne's 1987 Non-Qualified Stock Option Plan, as amended during the fiscal year ended June 30, 1995. 10.72 Cheyenne's 1989 Incentive Stock Option Plan, as amended during the fiscal year ended June 30, 1995. 21. Subsidiaries of the Company. 23. Consent of KPMG Peat Marwick LLP. 27. Financial Data Schedule. / Option information reflects three-for-two stock splits effected on March 25, 1992, April 8, 1993 and March 29, 1994 by Cheyenne. + Incorporated herein by reference to the correspondingly numbered Exhibit to Cheyenne's Annual Report on Form 10-K, for the year ended June 30, 1990. ^ Incorporated herein by reference to the correspondingly numbered Exhibit to Cheyenne's Annual Report on Form 10-K, for the year ended June 30, 1991. _ Incorporated herein by reference to the correspondingly numbered Exhibit to Cheyenne's Annual Report on Form 10-K, for the year ended June 30, 1992. < Incorporated herein by reference to the correspondingly numbered Exhibit to Cheyenne's Annual Report on Form 10-K, for the year ended June 30, 1993. @ Incorporated herein by reference to the correspondingly numbered Exhibit to Cheyenne's Annual Report on Form 10-K, for the year ended June 30, 1994. _________________ (b) Reports on Form 8-K: None 31 Independent Auditors' Report ---------------------------- Shareholders and Board of Directors Cheyenne Software, Inc. and Subsidiaries: We have audited the consolidated financial statements of Cheyenne Software, Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cheyenne Software, Inc. and subsidiaries as of June 30, 1995 and 1994 and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1995 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in note 11(b) to the consolidated financial statements, the Company is a defendant in a class action lawsuit. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon adjudication has been recognized in the accompanying consolidated financial statements. KPMG PEAT MARWICK LLP Jericho, New York August 18, 1995 F-1
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Consolidated Balance Sheets June 30, 1995 and 1994 Assets 1995 1994 ------ ---- ---- (In thousands) Current assets: Cash and cash equivalents $ 15,592 11,629 Short-term investments 15,088 57,802 Accounts receivable, less allowance for doubtful accounts of $1,302,000 and $611,000, respectively 31,201 23,231 Deferred income taxes 1,400 -- Prepaid expenses and other current assets 6,218 3,983 -------- -------- Total current assets 69,499 96,645 Investment in Gates/FA -- 9,019 Long-term investments 40,522 -- Fixed assets, net 16,511 8,567 Other assets 2,862 1,156 -------- -------- Total assets $ 129,394 115,387 ======== ======== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable 5,962 3,679 Accrued expenses 5,751 2,984 Income taxes payable -- 2,604 -------- -------- Total current liabilities 11,713 9,267 Deferred income taxes 1,352 1,030 ----- ----- Total liabilities 13,065 10,297 ------ ------ Minority interest in subsidiary 19 19 Shareholders' equity: Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued -- -- Common stock, par value $.01 per share; 75,000,000 shares authorized; 39,313,861 and 38,785,915 shares issued and outstanding 393 388 Additional paid-in capital 53,008 50,085 Retained earnings 93,046 54,542 Foreign currency translation adjustment 464 56 Net unrealized loss on investments (143) -- Treasury stock, at cost; 2,035,000 shares (30,458) -- -------- -------- Total shareholders' equity 116,310 105,071 ------- ------- Total liabilities and shareholders' equity $ 129,394 115,387 ======== ========
See accompanying notes to consolidated financial statements. F-2
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Years ended June 30, 1995, 1994 and 1993 1995 1994 1993 ---- ---- ---- (In thousands, except per share data) Revenues $ 127,927 97,737 56,694 Cost of sales 21,690 11,641 6,850 ------- ------ ------ Gross profit 106,237 86,096 49,844 ------- ------ ------ Operating expenses: Research and development 15,174 8,981 4,805 Selling and marketing 41,222 23,747 9,891 General and administrative 10,784 8,066 6,658 Charge for purchased research and development 1,251 -- -- ------- ------ ------ Total operating expenses 68,431 40,794 21,354 ------- ------ ------ Operating income 37,806 45,302 28,490 Non-operating income: Interest income 3,437 1,668 871 Other gains, net 21,431 738 400 ------- ------ ------ Total non-operating income 24,868 2,406 1,271 ------- ------ ------ Income before income taxes and equity in earnings of Gates/FA 62,674 47,708 29,761 Provision for income taxes 24,255 16,742 10,510 Equity in earnings of Gates/FA 85 1,572 1,399 ------- ------ ------ Net income $ 38,504 32,538 20,650 ======= ====== ====== Net income per share $ .97 .82 .53 ======= ====== ====== Weighted average number of common shares and equivalents outstanding 39,617 39,877 38,992 ======= ====== ======
See accompanying notes to consolidated financial statements. F-3
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Years ended June 30, 1995, 1994 and 1993 Common stock Foreign ---------------------- Additional currency Number paid-in Retained translation of shares Amount capital earnings adjustment --------- ------ ------- -------- ---------- (In thousands) Balances at June 30, 1992 15,726 $ 157 25,314 1,354 -- Three-for-two common stock split 7,793 78 (78) -- -- Issuance of common stock on exercise of stock options 1,455 15 4,682 -- -- Tax benefit from exercise of stock options -- -- 8,848 -- -- Transactions involving affiliate's common stock -- -- (23) -- -- Common stock issued in connection with acquisition 143 1 231 -- -- Foreign currency translation adjustment -- -- -- -- 33 Net income for the year ended June 30, 1993 -- -- -- 20,650 -- ------- ------- ------- -------- ------ Balances at June 30, 1993 25,117 251 38,974 22,004 33 Three-for-two common stock split 12,812 128 (128) -- -- Issuance of common stock on exercise of stock options 857 9 5,314 -- -- Tax benefit from exercise of stock options -- -- 5,975 -- -- Transactions involving affiliate's common stock -- -- (50) -- -- Foreign currency translation adjustment -- -- -- -- 23 Net income for the year ended June 30, 1994 -- -- -- 32,538 -- ------- ------- ------- -------- ------ Balances at June 30, 1994 38,786 388 50,085 54,542 56 Issuance of common stock on exercise of stock options 532 5 1,515 -- -- Tax benefit from exercise of stock options -- -- 1,882 -- -- Transactions involving affiliate's common stock -- -- (474) -- -- Adjustment to common stock issued in connection with acquisition (4) -- -- -- -- Purchase of treasury stock -- -- -- -- -- Foreign currency translation adjustment -- -- -- -- 408 Net unrealized loss on investments -- -- -- -- -- Net income for the year ended June 30, 1995 -- -- -- 38,504 -- ------- ------- ------- -------- ------ Balances at June 30, 1995 39,314 $ 393 53,008 93,046 464 ====== === ====== ====== === Net unrealized Treasury stock --------------------------- loss on Number investments of shares Amount ----------- --------- ------ (In thousands) Balances at June 30, 1992 -- -- $ -- Three-for-two common stock split -- -- -- Issuance of common stock on exercise of stock options -- -- -- Tax benefit from exercise of stock options -- -- -- Transactions involving affiliate's common stock -- -- -- Common stock issued in connection with acquisition -- -- -- Foreign currency translation adjustment -- -- -- Net income for the year ended June 30, 1993 -- -- -- -- -- -- Balances at June 30, 1993 -- -- -- Three-for-two common stock split -- -- -- Issuance of common stock on exercise of stock options -- -- -- Tax benefit from exercise of stock options -- -- -- Transactions involving affiliate's common stock -- -- -- Foreign currency translation adjustment -- -- -- Net income for the year ended June 30, 1994 -- -- -- -- -- -- Balances at June 30, 1994 -- -- -- Issuance of common stock on exercise of stock options -- -- -- Tax benefit from exercise of stock options -- -- -- Transactions involving affiliate's common stock -- -- -- Adjustment to common stock issued in connection with acquisition -- -- -- Purchase of treasury stock -- 2,035 (30,458) Foreign currency translation adjustment -- -- -- Net unrealized loss on investments (143) -- -- Net income for the year ended June 30, 1995 -- -- -- ----- ----- ------- Balances at June 30, 1995 (143) 2,035 $ (30,458) ==== ===== =======
See accompanying notes to consolidated financial statements. F-4
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended June 30, 1995, 1994 and 1993 1995 1994 1993 ---- ---- ---- (In thousands) Operating activities: Net income $ 38,504 32,538 20,650 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of Gates/FA common stock (21,232) -- (754) Tax benefit from exercise of stock options 1,882 5,975 8,848 Equity in earnings of Gates/FA (85) (1,572) (1,399) Loss on sale of Arrow Electronics common stock 11 -- -- Charge for purchased research and development 1,251 -- -- Depreciation and amortization 3,587 1,792 802 Minority interest in subsidiary -- -- 19 Change in assets and liabilities, net of effects from acquisitions: Increase in accounts receivable (7,721) (9,073) (9,295) Increase in prepaid expenses and other current assets (2,187) (2,071) (692) Increase in other assets (1,211) (802) (189) Increase in accounts payable, accrued expenses and income taxes payable 1,605 5,685 1,323 Deferred income taxes (1,078) 802 (37) -------- ------- ------- Net cash provided by operating activities 13,326 33,274 19,276 Investing activities: Purchases of fixed assets (10,974) (5,290) (3,959) Purchases of investments (29,265) (51,916) (26,631) Proceeds from sales and maturities of investments 31,033 17,320 14,873 Net proceeds from sale of Arrow Electronics common stock 30,324 -- -- Payment for acquisition of NETstor (1,150) -- -- Payment for acquisition of DataJET technology (801) -- -- -------- ------- ------- Net cash provided by (used in) investing activities 19,167 (39,886) (15,717) Financing activities: Net cash proceeds from sale of Gates/FA common stock -- -- 1,236 Proceeds from exercise of stock options 1,520 5,323 4,697 Purchase of treasury stock (30,458) -- -- -------- ------- ------- Net cash (used in) provided by financing activities (28,938) 5,323 5,933 -------- ------- ------- Effect of exchange rate changes on cash 408 23 33 -------- ------- ------- Increase (decrease) in cash and cash equivalents 3,963 (1,266) 9,525 Cash and cash equivalents at beginning of year 11,629 12,895 3,370 -------- ------- ------- Cash and cash equivalents at end of year $ 15,592 11,629 12,895 ======== ======= ======= Supplemental information - ------------------------ Noncash investing and financing activities: Issuances of and other transactions related to affiliate's common stock $ (474) (50) (23) ======== ======= ======= Cash paid during the year for income taxes $ 26,723 6,949 1,201 ======== ======= =======
See accompanying notes to consolidated financial statements. F-5 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements June 30, 1995 (1) Business and Significant Accounting Policies -------------------------------------------- Business -------- Cheyenne Software, Inc. and its subsidiaries (Cheyenne or the Company) are engaged in the development, sale and support of software products for use in microcomputers and computer systems mainly for Local Area Network (LAN) and Wide Area Network (WAN) applications. On July 1, 1992, Cheyenne Software International, Inc., a wholly-owned subsidiary operating as a foreign sales corporation (FSC), was incorporated in the U.S. Virgin Islands. On February 1, 1993, the Company commenced operations of a 95% owned Japanese subsidiary, Cheyenne Software KK, to produce and market certain of the Company's products in Japan. Subsequent to June 30, 1995, the Company acquired the 5% minority interest in Cheyenne Software KK for a nominal amount. During fiscal 1995 and 1994, Cheyenne established wholly owned subsidiaries in France, Germany, the United Kingdom and Canada to provide sales and support of its software products in those countries. In February 1993, Cheyenne acquired the net assets of Applied Programming Technologies, Inc. (APT) for 214,286 shares of the Company's common stock. The acquisition was accounted for as a pooling of interests. Revenues and net earnings of APT for years prior to the acquisition are insignificant in relation to the Company's consolidated results. Accordingly, prior year's consolidated financial statements were not restated for this acquisition. On May 19, 1994, Cheyenne acquired the net assets of Bit Software Inc. (Bit), which develops and markets communication software products, for 140,590 shares of the Company's common stock. The acquisition was accounted for as a pooling of interests. Accordingly, the consolidated financial statements have been restated for all periods prior to the merger. Prior to the merger, Bit used a fiscal year ending December 31. Accordingly, the restated financial statements combine the Company's June 30, 1994 and 1993 financial statements with Bit's June 30, 1994 and December 31, 1993 financial statements, respectively. Bit's revenue for the six months ended December 31, 1993 was $2,675,000, Bit had no transactions during that period which changed stockholders' equity and Bit's results of operations for that period were approximately breakeven, thus there was no adjustment to retained earnings from changing its fiscal year. There were no intercompany transactions between Cheyenne and Bit. Separate results of the combining entities for the years ended June 30, 1994 and 1993 are as follows (in thousands): 1994 1993 ---- ---- Revenues: Cheyenne $92,863 50,735 Bit 4,874 5,959 ----- ----- $97,737 56,694 ====== ====== Net income (loss): Cheyenne 32,699 20,628 Bit (161) 22 ------ ------ $32,538 20,650 ======= ====== (Continued) F-6 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued On December 19, 1994, the Company acquired certain assets and assumed certain liabilities of NETstor, Inc. (NETstor), a developer of Hierarchical Storage Management software products for the UNIX computer platform in the network storage management market, for $1,150,000 of cash and $200,000 of additional future contingent payments. The acquisition has been accounted for as a purchase and the operating results of NETstor are included in the consolidated statement of earnings from the date of acquisition. In connection with the acquisition, the Company recorded a $547,000 expense for purchased research and development and $94,000 of capitalized software which is included in other assets in the accompanying balance sheet and is being amortized on a straight line basis over two years. On March 30, 1995, the Company acquired the DataJET product line and certain other assets and assumed certain liabilities of NetFRAME Systems, Inc. (NetFRAME). DataJET is an image based, high performance software backup product for NetWare file servers. Cheyenne made cash payments aggregating $801,000 for DataJET and will pay royalties to NetFRAME based on the Company's sales of products utilizing the DataJET technology. The acquisition has been accounted for as a purchase. In connection with the acquisition, the Company recorded a $704,000 expense for purchased research and development. The technological feasibility of the in-process technology related to the NETstor and DataJET product acquisitions was not yet established at the dates of acquisition and the technology had no alternative use. The revenues and net earnings for NETstor and the DataJET product for the years prior to the acquisition were insignificant compared to the Company's consolidated results. Consolidation Policy -------------------- The consolidated financial statements include the accounts of Cheyenne Software, Inc. and its majority-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Revenue and Profit Recognition ------------------------------ The Company recognizes revenue from software licenses and sales and the sale of upgrades or enhancements to customers at delivery provided no significant vendor and post-contract customer support (PCS) obligations remain and collectibility of the resulting receivables is probable. Revenue attributable to PCS included in site-license agreements, primarily consisting of free upgrades for a specified period, is deferred and recognized over the period it is earned. Development fee income is recognized ratably during the software development period and royalty income is recognized when earned. The Company provides a liability for future PCS (primarily telephone customer support) related to revenue recorded, which is included in accrued liabilities in the accompanying balance sheets. The Company also provides for estimated product returns and exchanges, rebates and co-op advertising costs, which are reflected as reductions to accounts receivable in the accompanying balance sheets since the Company grants credits for such items. The provision for returns and exchanges reduces revenues and the provision for co-op advertising is included in sales and marketing expenses. Technical support costs are included in cost of sales. (continued) F-7 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Cash Equivalents ---------------- The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments ----------- Effective July 1, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities". This Statement requires that investments in such securities be designated as trading, held-to-maturity or available-for-sale. Trading securities are reported at fair value with unrealized gains and losses recognized in earnings. Available-for-sale securities are reported at fair value with unrealized gains and losses included in shareholders' equity. Securities which are classified as held-to-maturity are reported at amortized cost. The adoption of SFAS No.115 had no effect on the Company's consolidated statement of earnings for the year ended June 30, 1995 and the prior years' financial statements were not restated. While it is the Company's general intent to hold securities until maturity, management will occasionally sell particular securities for cash flow purposes. Accordingly, at June 30, 1995, all the Company's investments have been classified as available for sale. Investment in Gates/FA ---------------------- As discussed in note 2(b), on August 29, 1994 Cheyenne sold its remaining shares of Gates F/A common stock in exchange for Arrow Electronics, Inc. (Arrow) common stock. Cheyenne accounted for its investment in Gates/FA using the equity method of accounting, which reflected the cost of the Company's investment adjusted for its proportionate share of the net income or loss and capital transactions of Gates/FA. Fixed Assets ------------ Fixed assets are stated at cost. Amortization of leasehold improvements is provided for over the lesser of the term of the related leases or the estimated life of the assets, and depreciation of equipment, furniture and fixtures, and purchased computer software is provided for over their estimated useful lives. The straight-line method is used for financial reporting purposes, and an accelerated method is used, where applicable, for income tax purposes. Software Development Costs -------------------------- Costs associated with the development and enhancement of proprietary software are expensed as incurred. Such costs that could be capitalized pursuant to FASB Statement No.86 are immaterial due to the short period of time and minimal costs incurred between when the Company's products reach technological feasibility and when they are available for general release to the public. Income Taxes ------------ Effective July 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires deferred tax assets and liabilities to ____ (Continued) F-8 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued be recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Prior year's financial statements were not restated to apply the provisions of SFAS 109 and its adoption did not have a significant impact on the Company's net earnings for the year ended June 30, 1994. Pursuant to the deferred method under APB 11, which was applied in fiscal 1993, deferred income taxes were recognized for income and expense items that were reported in different years for financial reporting purposes and income tax purposes using the tax rate applicable for the year of the calculation. Under the deferred method, deferred taxes were not adjusted for subsequent changes in tax rates. Common Stock ------------ Cheyenne's Certificate of Incorporation was amended on December 15, 1994 to increase the number of authorized shares of common stock from 50,000,000 to 75,000,000. Earnings Per Share ------------------ Net income per share is based on the weighted average number of shares of common stock and common stock equivalents (stock options) outstanding. All references to number of shares and per share data have been restated for all periods presented to reflect the three-for-two stock splits (note 6). Foreign Currency Translation ---------------------------- Assets and liabilities of the Company's foreign subsidiaries have been translated at rates of exchange at the end of the period. Revenues and expenses have been translated at the weighted average rates of exchange in effect during the period. Gains and losses resulting from translation are accumulated as a separate component of stockholders' equity. Treasury Stock -------------- On February 23, 1995, the Board of Directors of the Company authorized management to purchase up to 4,000,000 shares of the Company's outstanding common stock. Purchases are dictated by overall financial and market conditions and other factors affecting the operations of the Company. During fiscal 1995, Cheyenne purchased 2,035,000 shares of its common stock for approximately $30,458,000, at prices ranging from approximately $13.50 to $17.25 per share. Treasury stock is recorded at cost. Reclassification ---------------- Certain prior year information has been reclassified to conform with the 1995 presentation format. (Continued) F-9 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (2) Investment in Gates/FA Distributing, Inc. (Gates/FA) and Arrow Electronics, Inc. -------------------------------------------------------------------------------- (a) At June 30, 1992, Cheyenne owned 24.2% (1,448,290 common shares) of Gates/FA, a distributor of microcomputers, software and computer peripheral equipment. On February 3, 1993, Cheyenne sold 100,000 shares of Gates/FA common stock and recognized a gain of approximately $754,000. This transaction resulted in a reduction of Cheyenne's ownership interest in Gates/FA to approximately 21.5% (1,348,290 common shares).
(b) On August 29, 1994, Cheyenne exchanged its remaining 1,348,290 shares of Gates/FA common stock for 798,996 common shares of Arrow, a public company. The transaction qualified as a tax-free exchange and resulted in a pre-tax gain of $21,232,000 for financial reporting purposes. After the transaction, Cheyenne owned approximately 2% of Arrow's outstanding common stock. Accordingly, the Company accounted for its investment in Arrow common stock under the cost method of accounting. (c) During the third and fourth quarters of fiscal 1995, Cheyenne sold its Arrow common stock for $30,324,000, which resulted in a net loss of approximately $11,000. (3) Investments ----------- At June 30, 1995, the amortized costs and related fair values of investments are as follows (in thousands):
Gross Gross Amortized Fair unrealized unrealized cost value gains losses ---- ----- ----- ------ Available-for-sale: Municipal debt $ 37,956 37,736 20 (240) U.S. Treasury bills and notes 9,555 9,555 -- -- U.S. government agencies debt 4,841 4,829 20 (32) Preferred securities 3,393 3,393 -- -- Corporate debt 98 97 -- (1) Equity securities 150 240 90 -- -------- ------- ----- ------- $ 55,993 55,850 130 (273) ======== ======= ===== =======
Of the above investments, $15,088, $240 and $40,522 are included in the balance sheet captions "short-term investments", "other assets" and "long-term investments", respectively. (Continued) F-10 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The contractual maturities of debt securities at amortized cost are as follows:
Within 1 1 to 5 5 to 10 After 10 year years years years Totals ---- ----- ----- ----- ------ (In thousands) Municipal debt $ 5,190 24,360 1,306 7,100 37,956 U.S. Treasury bills and notes 5,564 3,991 -- -- 9,555 U.S. government agencies debt 1,934 2,907 -- -- 4,841 Preferred securities 2,400 993 -- -- 3,393 Corporate debt -- 98 -- -- 98 ------ ------ ----- ----- ------ $ 15,088 32,349 1,306 7,100 55,843 ====== ====== ===== ===== ======
At the time the Company implemented SFAS 115 during the first quarter of fiscal 1995, management decided to classify certain investments as held-to-maturity due to its having the positive intent and ability to hold those securities to maturity. During the fourth quarter of fiscal 1995, the Company sold a portion of its securities classified as held-to-maturity prior to their maturity dates to purchase treasury stock. The amortized cost of these securities was approximately $16,683,000 and the net realized gain amounted to approximately $5,000. Proceeds from the sale of available-for-sale securities (Arrow common stock; note 2(c)) was approximately $30,324,000 in fiscal 1995, which resulted in a net realized loss of approximately $11,000. Short-term investments at June 30, 1994 consisted of the following: Fair Cost value ---- ----- Municipal debt $ 39,509 38,887 U.S. Treasury bills and notes 5,849 5,849 Preferred securities 5,704 5,704 Corporate debt 4,485 4,480 Government agencies debt 2,255 2,173 ----- ----- $ 57,802 57,093 ====== ====== (Continued) F-11 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (4) Fixed Assets ------------ Fixed assets consist of the following: June 30, ---------------- 1995 1994 ---- ---- (In thousands) Computer equipment $ 14,143 6,871 Purchased computer software 3,083 818 Leasehold improvements 1,646 972 Office equipment 2,175 1,508 Furniture and fixtures 2,049 1,559 Trade show equipment 586 317 ------- ------- 23,682 12,045 Less accumulated depreciation and amortization 7,171 3,478 ------- ------- $ 16,511 8,567 ======= ======= (5) Income Taxes ------------ Income tax expense consists of: Current Deferred Total ------- -------- ----- (In thousands) 1995: Federal $ 21,249 (906) 20,343 State 3,306 (172) 3,134 Foreign 778 -- 778 ------- ------- ------- $ 25,333 (1,078) 24,255 ======= ======= ======= 1994: Federal 13,714 720 14,434 State 2,226 82 2,308 ------- ------- ------- $ 15,940 802 16,742 ======= ======= ======= 1993: Federal 8,942 (34) 8,908 State 1,608 (6) 1,602 ------- ------- ------- $ 10,550 (40) 10,510 ======= ======= ======= (Continued) F-12 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The tax effects of temporary differences that give rise to significant portions of the Company's deferred tax asset and liability at June 30, 1995 and 1994 are as follows:
1995 1994 ---- ---- (In thousands) Deferred tax assets: Allowance for doubtful accounts receivable $ 487 231 Accrual for product returns and exchanges 646 240 Other 267 70 ------- ------ $ 1,400 541 ===== === Deferred tax liabilities: Fixed assets depreciation 853 518 Equity in earnings of Gates/FA -- 823 Other 499 230 ------- ------ $ 1,352 1,571 ===== =====
Management of the Company has determined, based upon historical pre-tax earnings and expected taxable income in the future, that it is more likely than not that the Company will realize its deferred tax assets and therefore, no valuation allowance is warranted. The following is a reconciliation of the provision for income taxes to the "expected" amounts computed by applying the statutory Federal income tax rate to the Company's income before income taxes:
1995 1994 1993 ---- ---- ---- (In thousands) Computed "expected" income tax expense $ 21,966 35.0% $ 17,248 35.0% $ 10,594 34.0% Increase (decrease) in income taxes resulting from: State income taxes, net of Federal benefit 2,037 3.3 1,500 3.0 1,057 3.4 Foreign income tax rate differential 428 .7 -- -- -- -- Excess tax gain on sale of Gates/FA common stock 1,779 2.8 -- -- 106 .3 Equity in earnings of Gates/FA -- -- -- -- (306) (1.0) Foreign Sales Corporation (FSC) benefit (809) (1.3) (1,244) (2.5) (862) (2.7) Tax-exempt investment income (919) (1.5) (452) (.9) (26) (.1) Research and development tax credit (227) (.4) (374) (.8) -- -- Other -- -- 64 .2 (53) (.2) ------- ---- ------- ---- ------- ---- Provision for income taxes $ 24,255 38.6% $ 16,742 34.0% $ 10,510 33.7% ======= ==== ======= ==== ======= ====
(Continued) F-13 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (6) Stock Splits ------------ On February 10, 1994, the Company's Board of Directors declared a three-for-two stock split, payable in the form of a 50% stock dividend (1994 Stock Split) which was distributed on March 29, 1994 to holders of record on March 1, 1994. On February 23, 1993, the Company's Board of Directors declared a three-for-two stock split payable in the form of a 50% stock dividend (1993 Stock Split) which was distributed on April 8, 1993 to holders of record on March 12, 1993. The par value of the additional 12,812,458 and 7,792,516 shares of common stock issued in connection with the 1994 and 1993 Stock Splits, respectively, was transferred to common stock from additional paid-in capital. All references to number of shares (except shares authorized), per share data and stock option plan data have been restated for all periods presented to reflect the stock splits. (7) Stock Options ------------- 1984 Incentive Stock Option Plan -------------------------------- Cheyenne adopted an incentive stock option plan (1984 Plan) and has reserved 1,687,500 shares for issuance to key employees. Options are not exercisable until two years after their grant and expire if not exercised within five years. The number of shares that may be exercised under the option are limited, on a cumulative basis, to not more than 25% in the first year in which they become exercisable, 50% in the second year, and 100% thereafter. Options may not be granted at less than the fair market value of the underlying shares at date of grant. 1989 Incentive Stock Option Plan -------------------------------- Cheyenne has adopted an incentive stock option plan (1989 Plan) and has reserved 4,806,250 shares, as amended, for issuance to key employees. Options are not exercisable until two years after their grant and expire if not exercised within five years. The 1989 Plan was amended during fiscal 1995 to increase the maximum term for which options are exercisable from five to seven years. The number of shares that may be exercised under the option are limited, on a cumulative basis, to not more than 25% in the first year in which they become exercisable, 50% in the second year, and 100% thereafter. Options may not be granted at less than the fair market value of the underlying shares at the date of grant. The option price may be paid in cash or with previously owned stock. Nonqualified Stock Option Plan ------------------------------ In December 1987, a nonqualified stock option plan (1987 Plan) was adopted and 4,237,500 common shares have been reserved, as amended, for issuance to officers, directors and employees of the Company at such exercise prices, in such amounts, and upon such terms and conditions, as determined by the Option Committee of the Board of Directors. Option prices may be paid in cash or with previously owned common stock. The 1987 Plan was amended in fiscal 1995 to include consultants as eligible for grants under the 1987 Plan and the maximum term for which options are exercisable was increased from five to seven years. F-14 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Directors' Plan --------------- In fiscal 1993, a stock option plan for outside directors (Directors' Plan) was adopted and 405,000 common shares have been reserved for issuance to members of the Board of Directors who are not employees (Outside Directors). Pursuant to the plan, each Outside Director will receive options to purchase 16,875 shares of common stock on January 1 of each calendar year that such director serves the Company in such capacity, commencing January 1, 1993. All stock options granted under the Directors' Plan are immediately exercisable. The exercise price per share of each option will be equal to the fair market value of the shares of common stock on the date of grant. Each option granted under the Directors' Plan expires upon the earlier of five years following the date of grant or one year following the date an Outside Director ceases to serve in such capacity, provided that the option is exercised within the five years after the date of its grant. No grants may be made under the Directors' Plan subsequent to the earlier to occur of January 2, 1997 or the issuance of common stock or exercise of options pursuant to the Directors' Plan equal to the maximum number of shares of common stock reserved for under the Directors' Plan. Other Stock Options ------------------- During the year ended June 30, 1993, certain key personnel exercised nonqualified stock options to purchase 388,125 shares of common stock at $1.19 per share. In addition, during the years ended June 30, 1994 and 1993, certain directors exercised nonqualified stock options to purchase 67,500 and 286,875 shares of common stock, respectively, at $1.41 per share. A summary of activity under the 1984 Plan, 1989 Plan, the 1987 Plan, and the Directors' Plan, which have all been restated to reflect the stock splits, is as follows:
Number of Option price shares range per share ------ --------------- Outstanding at June 30, 1992 3,579,075 $ 1.11-21.33 Granted 833,700 8.95-17.42 Exercised (1,508,412) 1.11-3.52 Canceled (27,000) 1.15-1.67 ------------ Outstanding at June 30, 1993 2,877,363 1.11-21.33 Granted 1,171,951 18.58-21.33 Exercised (1,113,738) 1.11-8.95 Canceled (76,650) 1.67-21.33 ------------ Outstanding at June 30, 1994 2,858,926 1.11-21.33 Granted 2,241,110 8.63-13.75 Exercised (531,844) 1.11-8.94 Canceled (125,526) 8.63-21.33 ----------- Outstanding at June 30, 1995 4,442,666 3.51-21.33 ============
(Continued) F-15 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued At June 30, 1995, 1,129,151 options were exercisable and options to purchase 1,831,728 shares were available for future grant under all stock option arrangements. The exercise prices of all nonqualified stock options were equal to the fair market value of the underlying shares at date of grant. (8) Operating Leases ---------------- Cheyenne leases office facilities under noncancellable operating leases. The leases expire through 2003 and are subject to escalation clauses for taxes and other expenses. Future minimum rentals required as of June 30, 1995 are as follows: Year ending June 30: 1996 $ 2,579,000 1997 3,368,000 1998 3,204,000 1999 2,920,000 2000 2,274,000 Thereafter 3,496,000 ----------- $ 17,841,000 =========== Rent expense was $1,995,000, $1,121,000 and $592,000 for the years ended June 30, 1995, 1994 and 1993, respectively. (9) Employee Benefit Plans ---------------------- Effective May 1, 1991, Cheyenne established a voluntary savings and defined contribution plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees meeting certain eligibility requirements. For the years ended June 30, 1995, 1994 and 1993, Cheyenne provided a matching contribution of $242,000, $142,000 and $82,000, respectively, which was equal to 25% of each participant's contribution up to a maximum of 16% of annual compensation. Employees are 100% vested in their own contributions and become fully vested in the employer contributions after 3 years. The Company does not provide its employees any other postretirement or postemployment benefits. (10) Business and Credit Concentrations and Export Sales --------------------------------------------------- The majority of the Company's customers are original equipment manufacturers and distributors of computer equipment and software. There was one customer that accounted for greater than 10% of the Company's revenues in fiscal 1995 (14%), fiscal 1994 (17%) and fiscal 1993 (14%). At June 30, 1995, there were four customers which accounted for more than five percent of the Company's outstanding accounts receivable, aggregating 40% of accounts receivable. (Continued) F-16 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Export sales by geographic area are as follows (in thousands): 1995 1994 1993 ---- ---- ---- Europe $48,802 35,156 20,584 Canada 2,219 3,159 2,052 Rest of World 8,580 4,099 1,900 ------ ------ ------ $59,601 42,414 24,536 ====== ====== ====== (11) Legal and Other Matters ----------------------- (a) In fiscal 1994, the Company received $649,000 in settlement of a lawsuit, net of related expenses, from Legato Corp. arising out of an advertisement placed by Legato, which is included in other gains in the accompanying consolidated statement of earnings. (b) In June 1994, a securities fraud class action complaint was filed against the Company and several of its officers and directors. The actions allege securities fraud claims under Section 10(b) and 20 of the Securities Exchange Act of 1934 whereby it was alleged that the Company and the individual defendants made misrepresentations and omissions to the public which caused the Company's stock to be artificially inflated, and seek compensatory damages on behalf of all the shareholders who purchased shares between approximately January 24, 1994 and approximately June 17, 1994, as well as attorneys' fees and costs. In addition, there is a shareholder derivative complaint alleging that certain officers and directors breached their fiduciary obligations to the Company. The defendants deny any and all liability and intend to vigorously defend against the claims. The ultimate outcome of the litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon adjudication has been recognized in the accompanying consolidated financial statements. On or about April 14, 1995, the Securities and Exchange Commission (SEC) advised the Company that it had issued a Formal Order of Private Investigation of the Company related to possible violations of federal securities laws, which was the continuation of an informal inquiry which began in June 1994. The Company has been cooperating with the SEC. (c) In May 1995, JWANCO, Inc. (formerly known as Bit Software, Inc.), and various related individuals filed an action against the Company, Cheyenne Communications, Inc., a wholly owned subsidiary of the Company, and several of its officers, directors and employees. The action alleges breach of contract, fraud, wrongful termination, negligent infliction of emotional distress and a number of other related torts. The essence of the allegations is that the defendants breached agreements and defrauded JWANCO, Inc., and the individual plaintiffs in connection with the Company's acquisition of certain assets and assumption of certain liabilities of Bit Software, Inc. on May 19, 1994. These allegations are substantially similar to those described in note 11(b) above. In addition, the complaint alleges, on behalf of one individual plaintiff only, wrongful termination and a variety of other causes of action relating to his employment and termination of the employment by the Company. Management of the Company, based on advice from its legal counsel, does not believe that the ultimate resolution of this lawsuit will have a material adverse effect on the financial position or results of operations of the Company. F-17 CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (d) In May 1995, Personal Computer Peripherals Corporation (PCPC) filed an action against the Company and five other defendants alleging patent infringement. Cheyenne has filed its answer to the complaint in which it denied patent infringement on its part and in which it asserted affirmative defenses and counterclaims. The relief sought by the complaint is a preliminary and permanent injunction, a judgment of willful infringement, an accounting of sales, revenues and profits, unspecified damages to be trebled, reasonable attorney's fees and other related costs. Management of the Company, based on advice from its legal counsel, does not believe that the ultimate resolution of this lawsuit will have a material adverse effect on the financial position or results of operations of the Company. (12) Interim Financial Information (Unaudited) ----------------------------------------- The following is a summary of selected quarterly financial data for the fiscal years ended June 30, 1995 and 1994 (in thousands, except per share data):
September 30, December 31, March 31, June 30, Total ----------------- -------------- ------------ ----------------- --------------- 1994 1993 1994 1993 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- Revenues $ 21,652 20,043 29,611 24,196 35,636 28,364 41,028 25,134 127,927 97,737 Operating income 5,062 9,946 9,585 12,487 10,770 14,839 12,389 8,030 37,806 45,302 Other gains, net 21,232 -- (379) 89 315 -- 263 649 21,431 738 Income taxes 12,108 3,606 3,406 4,502 4,116 5,512 4,625 3,122 24,255 16,742 Net income 14,938 7,057 6,613 8,706 7,975 10,258 8,978 6,517 38,504 32,538 ------ ------- ------- ------- ------- ------ ------- ------- -------- ------- Net income per share $ .38 .18 .17 .22 .20 .25 .23 .16 .97 .82 ====== ======= ======= ======= ======= ====== ======= ======= ======== =======
F-18
Schedule II ----------- CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts Charged Balance at Charged to to other Balance beginning costs and accounts - Deductions - at end Description of period expenses describe describe of period ----------- --------- -------- -------- -------- --------- Year ended June 30, 1995: Allowance for doubtful accounts $ 611,000 1,079,000 -- 388,000 (1) 1,302,000 ======= ========= ======== ======= ========= Year ended June 30, 1994: Allowance for doubtful accounts $ 436,500 634,800 -- 460,300 (1) 611,000 ======= ========= ======== ======= ========= Year ended June 30, 1993: Allowance for doubtful accounts $ 174,100 398,400 -- 136,000 (1) 436,500 ======= ========= ======== ======= =========
(1) Uncollectible amounts written off, net of recoveries. S-1 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHEYENNE SOFTWARE, INC. Date: September 27, 1995 By:/s/ ReiJane Huai --------------------------------- ReiJane Huai, Chairman of the Board, President and Chief Executive Officer (principal executive officer) Date: September 27, 1995 By:/s/ Elliot Levine --------------------------------- Elliot Levine, Executive Vice President, Senior Financial Officer and Treasurer (principal financial and accounting officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. September 27, 1995 /s/ Rino Bergonzi -------------------------------------- Rino Bergonzi, Director September 27, 1995 /s/ Richard F. Kramer -------------------------------------- Richard F. Kramer, Director September 27, 1995 /s/ Bernard D. Rubien -------------------------------------- Bernard D. Rubien, Director September 27, 1995 /s/ Ginette Wachtel -------------------------------------- Ginette Wachtel, Director EX-3.3 2 Exhibit 3.3 CHEYENNE SOFTWARE, INC. * * * * RESTATED BY-LAWS AS OF OCTOBER 7, 1993 * * * * ARTICLE I OFFICES Section 1. The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETING OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the City of New York, County of New York, at such place as may be fixed from time to time by the board of directors, or at such other place, either within or without the State of Delaware, as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of meeting or in a duly executed waiver of notice thereof. Section 2. A meeting of stockholders shall be held annually, at which the stockholders shall elect, by a plurality vote, a board of directors, and transact such other business as may properly be brought before the meeting. Commencing with the year 1986, such annual meetings shall be held at 10:00 A.M., on the fifteenth day of November, if such day is a legal holiday, then on the next secular day following, or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Section 3. Written notice of the annual meeting stating the.place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certification of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a 2 majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjournment meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 3 Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. 4 ARTICLE III Section 1. The number of directors which shall constitute the whole board shall be not less than three nor more than thirteen. The first board shall consist of three directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors or by the stockholders at the annual meeting. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do 5 all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. MEETING OF THE BOARD OF DIRECTORS Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to be given to the newly elected directors in order to legally constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the president on ten days' notice to each director, either personally or by mail or by telegram; special meetings 6 shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. Section 8. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the board of directors or of any commitment thereof may be taken without a meeting, if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. Section 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. 7 COMMITTEES OF DIRECTORS Section 11. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation) adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or 8 to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined, from time to time, by resolution adopted by the board of directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. REMOVAL OF DIRECTORS Section 14. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. 9 ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and there shall be a chief executive officer, a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, including executive or assistant vice- presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. 10 Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a chief executive officer, a president, one or more vice-presidents, a secretary and a treasurer. Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined, from time to time, by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE CHAIRMAN OF THE BOARD OF DIRECTORS Section 6. The chairman of the board of directors shall preside at all meetings of the board of directors. Except as the board of directors shall authorize the execution thereof in some other manner, he or the president shall execute bonds, mortgages, and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. 11 THE PRESIDENT AND THE CHIEF EXECUTIVE OFFICER Section 7. The president shall serve as the chief executive officer of the corporation, and have the general powers and duties of supervision and management usually vested in the office of president of a corporation, including direct supervision of the day to day activities of the corporation, and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7A. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. THE VICE-PRESIDENT Section 8. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The corporation is authorized to designate executive vice presidents or assistant vice presidents. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 12 THE SECRETARY AND ASSISTANT SECRETARY Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any officer to affix the seal of the corporation and to attest the affixing by his signature. Section 10. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books 13 belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. Section 12. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. Section 13. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there shall be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. 14 ARTICLE VI CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by, or in the name of the corporation, by the chairman or vice-chairman of the board of directors, or the president or a vice-president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation. Within a reasonable time after the issuance or transfer of uncertified stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Section 151, 156, 202(a) or 218(a) or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights or each class of stock or series thereof and qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any of all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. 15 LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates or uncertificated shares to be issued ln place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representatives, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence or succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation. 16 FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting: provided, however, that the board of directors may fix a new record date for the adjournment meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 17 ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. 18 CHECKS Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate. FISCAL YEAR Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. INDEMNIFICATION Section 7. The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware. The corporation may maintain insurance to protect its officers and directors against the liability, cost, payment or expenses associated with the foregoing indemnification. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceedings upon receipt of an undertaking by or on behalf 19 of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation. The indemnification and advancement of expenses provided by, or granted by the corporation shall unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such persons. ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation at any regular meeting of the stockholders or of the board of directors at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by- laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the board of directors by the certificate of incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws. 20 EX-4.4 3 Exhibit 4.4 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CHEYENNE SOFTWARE, INC. ======================= CHEYENNE SOFTWARE, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of CHEYENNE SOFTWARE, INC., resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing Article 4 thereof so that, as amended, said Article shall be and read as follows: "The total number of shares of common stock which the Corporation shall have authority to issue is seventy-five million (75,000,000) and the par value of each such share of common stock is One Cent ($0.01), amounting in the aggregate to Seven Hundred and Fifty Thousand Dollars ($750,000.00). The total number of shares of preferred stock which the Corporation shall have authority to issue is five million (5,000,000) and the par value of each such share of preferred stock is One Cent ($0.01), amounting in the ag- gregate to Fifty Thousand Dollars ($50,000.00). The preferred stock of the Corporation may be issued in series, and shall have such relative rights, prefer- ences and limitations, dividend or interest rates, conversion prices, voting rights, redemption prices and similar rights as the Board of Directors of the Corporation shall determine upon the issuance of such preferred stock." SECOND: That thereafter, pursuant to resolution of its Board of Directors, a meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said CHEYENNE SOFTWARE, INC. has caused this Certificate to be signed by ReiJane Huai, its President and attested by Alan Kaufman, its Secretary, this 23rd day of December, 1994. CHEYENNE SOFTWARE, INC. By:/s/ ReiJane Huai --------------------------- ReiJane Huai, President ATTEST: By:/s/ Alan Kaufman -------------------------------- Alan Kaufman, Secretary 2 EX-10.42.5 4 Exhibit 10.42.5 AMENDMENT 2 TO EMPLOYMENT AGREEMENT (ELLIOT LEVINE) This Amendment ("Amendment") is effective as of the 24th day of October, 1994, between CHEYENNE SOFTWARE, INC., a Delaware corporation, with an office at Three Expressway Plaza, Roslyn Heights, New York 11577 ("Cheyenne") and ELLIOT LEVINE, with an address of 12 Whitewood Drive, Roslyn, New York 11576 ("Employee"). RECITALS -------- A. On September 1, 1992 Cheyenne and Employee entered into an Employment Agreement (the "Agreement"). On October 7, 1993, the parties amended the Agreement. B. Cheyenne and Employee desire to further amend the Agreement, as provided for below. C. All capitalized terms not defined herein shall have the meaning set forth in the Agreement. AMENDMENT --------- 1. In Section 5(c), delete "in an amount equal to twelve thousand dollars ($12,000) per annum" and replace with "in an amount not to exceed thirteen thousand five hundred dollars ($13,500) per annum." 2. Except as amended herein, the Agreement shall remain unmodified. IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first written above. CHEYENNE SOFTWARE, INC. By: /s/ ReiJane Huai ----------------------- Its: President ----------------------- /s/ Elliot Levine - ---------------------------- Elliot Levine 1 EX-10.42.6 5 Exhibit 10.42.6 AMENDMENT 3 TO EMPLOYMENT AGREEMENT (ELLIOT LEVINE) This Amendment ("Amendment") is effective as of the 30th day of August, 1995, between CHEYENNE SOFTWARE, INC., a Delaware corporation, with an office at Three Expressway Plaza, Roslyn Heights, New York 11577 ("Cheyenne") and ELLIOT LEVINE, with an address of 12 Whitewood Drive, Roslyn, New York 11576 ("Employee"). RECITALS -------- A. On September 1, 1992 Cheyenne and Employee entered into an Employment Agreement, as amended by Amendment 1 on October 7, 1993 and by Amendment 2 on October 24, 1994 (the "Agreement"). B. Cheyenne and Employee desire to amend the Agreement, as provided for below. C. All capitalized terms not defined herein shall have the meaning set forth in the Agreement. AMENDMENT --------- 1. The Employment Period shall be extended to August 31, 1998. 2. In Section 5(b) delete "Eight Thousand ($8,000) dollars" and replace with "Ten Thousand ($10,000) dollars." 3. In Section 7, first sentence, delete "one hundred (100%) percent" and replace with "one hundred fifty (150%) percent." 4. In Section 7, third sentence, delete "five (5) years" and replace with "ten (10) years." 5. In Section 8(a), delete "September 1, 1995" and replace with "September 1, 1998" and delete "August 31, 1996" and replace with "August 31, 1999." 6. Except as amended herein, the Agreement shall remain unmodified. 1 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above. CHEYENNE SOFTWARE, INC. By: /s/ ReiJane Huai ----------------------- Its: President ----------------------- /s/ Elliot Levine - ---------------------------- Elliot Levine EX-10.67 6 CHEYENNE SOFTWARE, INC. EMPLOYMENT AGREEMENT Employee: Michael B. Adler EMPLOYMENT AGREEMENT made effective this 1st day of July, 1995 (hereinafter referred to as "Employment Agreement") between Cheyenne Software, Inc., a Delaware corporation (hereinafter referred to as the "Corporation") and Michael B. Adler with an address at 64 Morewood Oaks, Port Washington, NY 11050 (hereinafter referred to as the "Employee"). WHEREAS, the Employee has substantial experience as a corporate attorney; WHEREAS, the Employee desires to be employed by the Corporation as Vice President and General Counsel, and the Corporation desires that the Employee be so employed, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties intending to be legally bound, agree as follows: 1. Term of Employment. Subject to the approval of the Corporation's ------------------ Board of Director's, the Corporation hereby employs the Employee as Vice President and General Counsel, and the Employee hereby agrees to serve the Corporation in such capacity for the period commencing on the date first written above, (the "Effective Date"), and ending on June 30, 1997 (hereinafter referred to as the "Employment Period"), unless sooner terminated as hereinafter provided. 2. Scope of Duties. The Employee shall serve as Vice President and ---------------- General Counsel and shall be responsible for management of the legal affairs of the Corporation. The Employee shall report and be responsible to the Chief Financial Officer or other person designated by the President or the Board of Directors. The Employee's performance shall be reviewed annually. 3. Time To Be Devoted to Employment. The Employee shall, except during --------------------------------- vacation periods or absences due to temporary illness, devote substantially all of his professional and business time, attention and energies to his duties and responsibilities hereunder, and except for business trips which shall be necessary or desirable in the Corporation's business, shall render such services at the principal office of the Corporation. Nothing herein contained shall prevent or be construed as preventing the Employee from holding or purchasing five (5%) percent or less of any class of stock or securities of a corporation which is listed on a national securities exchange or regularly traded in the over-the-counter market, or making other investments or participating in business ventures not in competition with the business of the Corporation, as long as such investments and business ventures shall not require any time during normal business hours and do not conflict with his duties or obligations to the Corporation as provided in this Employment Agreement. 4. Direct Compensation. (a) In consideration for services rendered and -------------------- to be rendered by the Employee hereunder during the Employment Period, the Employee shall receive a salary of One Hundred Twenty Thousand ($120,000) Dollars per year, which shall be paid semi-monthly ($5,000.00) in arrears or at such other intervals as other employees are paid. (b) Employee shall be eligible to receive additional payments or bonuses which will be determined by Cheyenne's top management and Board of Directors based on personal and corporate objectives and achievements. 5. Fringe Benefits. The Employee shall be entitled to participate in ---------------- any and all fringe benefits and/or plans, generally afforded to other employees of the Corporation (to the extent the Employee otherwise qualifies therefor under the specific terms and conditions of each such benefit), including, without limitation, group disability, life insurance, medical insurance and pension plans (401K) which are, or which may become available generally to senior personnel of the Corporation. The Employee shall be entitled to unlimited vacation time during each year of the Employment Period. The Corporation shall reimburse the Employee in an amount equal to $500 per month for expenses relating to an automobile used by the Employee in connection with the business of the Corporation. 6. Termination of Employment. During the Employment Period, the -------------------------- Employee's employment may be terminated by the President, the Board of Directors or the Executive Committee of the Corporation on the occurrence of any one or more of the following events: a. The death of the Employee; b. The failure by the Employee to substantially perform his duties and hereunder, owing to physical or mental incapacity (hereinafter referred to as "disability"), which disability shall continue for more than four (4) consecutive months or an aggregate or more than six (6) months in any calendar year; or c. For "Cause", which shall mean (i) the willful failure by the Employee to substantially perform his duties hereunder (including the breach of any provision of Section 9 and/or 10 hereof), for reasons other than death or disability; (ii) the willful engaging by the Employee in misconduct materially injurious to the Corporation; or (iii) 2 the commission by the Employee of an act constituting common law fraud or a felony against the Corporation. 7. Death Benefit. In addition to all other insurance and similar death -------------- benefits generally made available to employees of the Corporation, if Employee's death occurs during the term of the Employment Period, the Corporation shall provide a death benefit to the estate of the Employee equal to one hundred percent (100%) of the Employee's then current annual Base Salary at the date of death. Such death benefit shall be payable as may be determined by the Corporation, but not less often than twelve (12) equal monthly installments, payable on the last day of each month, commencing in the month subsequent to the month in which the death occurs. 8. Severance Payment. (a) If the Corporation and the Employee do not ------------------ enter into a renewal agreement to be effective July 1, 1997 for a period of at least two years and containing similar terms and conditions to those set forth herein, then the Corporation will pay the Employee, as additional compensation, an amount equal to thirty (30%) of the Employee's then current annual Base Salary, as determined under Section 4, payable semi-monthly in arrears for the six months ending December 31, 1997; such compensation is hereunder referred to as the "Severance Payment". (b) Notwithstanding the provisions of Section 8 (a) above, the Employee will not receive the Severance Payment if, (i) the Corporation declines to enter into a renewal agreement with the Employee because the Employee breached the confidentiality and/or non-compete provisions of this Agreement or any other terms or conditions of his employment; (ii) the Employee has been terminated for Cause hereunder; or (iii) the Employee declines to enter into a renewal agreement with the Corporation, and the Corporation has offered a renewal agreement for a period of not less than two years, containing similar terms and conditions as discussed herein. 9. Disclosure of Information. All memoranda, notes, records or other -------------------------- documents made or compiled by the Employee or made available to him during the term of his employment concerning the business of the Corporation shall be the Corporation's property and shall be delivered to the Corporation on the termination of the Employee's employment. The Employee shall not use for himself or others, or divulge to others, any proprietary or confidential information of the Corporation, obtained by him as a result of his employment, unless authorized by the Corporation. For purposes of this Section 9, the term "proprietary or confidential information" shall mean all information which is known only to the Employee or to the Employee and the employees, former employees, consultants or others in a confidential relationship with the Corporation and relates to 3 specific matters such as trade secrets, marketing programs, customers, potential customers and vendor lists, pricing and credit techniques, program codes, software design know-how, research and development activities, private processes, and books and records, as they may exist from time to time, which the Employee may have acquired or obtained by virtue of work heretofore or hereafter performed for or on behalf of the Corporation or which he may acquire or may have acquired knowledge of during the performance of said work, and which is not known to others, or readily available to others from sources other than the Employee or officers or other employees of the Corporation, or is not in the public domain. In the event of a breach or a threatened breach by the Employee of the provisions of this Section 9, the Corporation shall be entitled to an injunction restraining the Employee from disclosing, in whole or in part, the aforementioned proprietary or confidential information of the Corporation, or from rendering any services to any person, firm, corporation, association or other entity to whom such proprietary or confidential information, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available to the Corporation for such breach or threatened breach, including the recovery of damages from the Employee. 10. Restrictive Covenants. (a) The Employee hereby acknowledges and ---------------------- recognizes the highly competitive nature of the Corporation's business and accordingly agrees that, in consideration of the premises contained herein, he will not during the Employment Period, until the Designated Date (as hereinafter defined): (i) directly or indirectly engage in any Competitive Activity (as hereinafter defined), whether such engagement shall be as an officer, director, employee, consultant, agent, lender, stockholder, or other participant; or (ii) assist others in engaging in Competitive Activity. As used herein, the term "Competitive Activity" shall mean and include the development and/or marketing of computer hardware and/or software for server-based local area network (LAN) and enterprise wide applications, including but not limited to storage management, data management/monitoring, data security and data communications. (b) As used in this Section 10, the "Designated Date" shall mean the following: (i) if the Employee willfully terminates his employment with the Corporation in violation of this Employment Agreement prior to the expiration of the Employment Period, then the "Designated Date" shall mean the second (2nd) anniversary of the effective date of such termination; 4 (ii) if the Corporation terminates the employment of the Employee under this Employment Agreement for cause, then the "Designated Date" shall be the second (2nd) anniversary of the effective date of such termination; or (iii) if the Corporation, after the Employment Period, terminates the employment of the Employee without cause, then the term "Designated Date" shall mean the effective date of such termination. (c) It is the desire and intent of the parties that the provisions of this Section 10 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Section 10 shall be adjudicated to be invalid or unenforceable, such provision of this Section 10 shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provisions of this Section 10 in the particular jurisdiction in which such adjudication is made. In addition, if the scope of any restriction contained in this Section 10 is too broad to permit enforcement thereof to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and the Employee hereby consents and agrees that such restriction shall be enforced to the maximum extent permitted by law, and the Employee hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. (d) (i) Employee shall promptly disclose to Employer all Inventions (as defined below) and keep accurate records relating to the conception and reduction to practice of all Inventions. A report shall be submitted by Employee upon completion of any studies or research projects undertaken on Employer's behalf whether or not in the Employee's opinion a given project has resulted in an Invention. Such records shall be the sole and exclusive property of Employer, and the Employee shall surrender possession of the records to Employer upon any suspension or termination of Employee's employment with Employer. (ii) Employee hereby assigns to Employer, without additional consideration to Employee, the entire right, title and interest in and to the Inventions and Work Product (as defined below) and in and to all copyrights, patents, trademarks and any and all other proprietary rights therein or based thereon. Employee agrees that the Work Product shall be deemed to be a "work made for hire." Employee shall execute all such assignments, oaths, declarations and other documents as may be prepared by Employer to obtain and maintain United States and/or foreign letters patent or other 5 registrations in connection with any Invention or Work Product, to vest the entire right in any Invention or Work Product and related applications and registrations in Employer and to otherwise effect the foregoing. (iii) Employer, without additional consideration to Employee, shall have the exclusive worldwide and perpetual right to use, make, and sell products and/or services derived from any Inventions, Work Product and other discoveries, concepts, ideas, applications, methods, formulas, techniques, improvements or know-how, whether or not within the scope of Inventions or Work Product but which are obtained, created or made by the Employee during the Employment Period. (iv) Employee shall provide Employer with all information, documentation, and assistance Employer may request to perfect, enforce or defend the proprietary rights in or based on the Inventions and Work Product. Employer, in its sole discretion, shall determine the extent of the proprietary rights, if any, to be protected in or based on the Inventions and Work Product. All such information, documentation and assistance shall be provided by Employee at no additional expense to Employer, except for out-of-pocket expenses which Employee incurred at Employer's request. (v) Inventions shall mean all inventions, processes, methods, formulas, techniques, improvements, modifications and enhancements, whether or not patentable, made or conceived by Employee, whether or not during the hours of Employee's employment or with the use of Employer's facilities, materials or personnel, either solely or jointly, during Employee's employment by Employer, or within one year after termination of such employment, or within two years after termination of such employment if such termination is based on or related to unauthorized use or disclosure of proprietary or confidential information by the Employee. (vi) Work Product shall mean all documentation, software, creative works, know-how and information created, in whole or in part, by Employee during Employee's employment by Employer, whether or not copyrightable or otherwise protectable, excluding Inventions. (e) If there is a breach or threatened breach by the Employee of the provisions of this Section 10, the Corporation shall be entitled to an injunction restraining him from such breach. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available for such breach or threatened breach or any other breach of this Employment Agreement. 6 (f) Employee hereby warrants and represents that he is not prohibited by any agreement or the order of any court from entering into and carrying out the terms of this Agreement. In particular, the Employee, warrants and represents that the scope of his activity is not restricted in any way with respect to the design, development, enhancement, sale, marketing and/or promotion of computer software and hardware. 11. (a) Notices. All notices required or permitted to be given under -------- the provisions of this Employment Agreement shall be in writing and delivered personally or by certified or registered mail, return receipt requested, postage prepaid to the following persons at the following addresses, or to such other persons at such other addresses as any party may request by notice in writing to the other party to this Agreement: If to Employee: Michael B. Adler 64 Morewood Oaks Port Washington, NY 11050 If to the Corporation: Cheyenne Software, Inc. 3 Expressway Plaza Roslyn Heights, NY 11577, Att: President With a copy to: Michael Reiner, Esq. Morrison Cohen Singer & Weinstein 750 Lexington Avenue New York, NY 10022 (b) Construction. This Employment Agreement shall be construed with, ------------ and be governed by, the laws of the State of New York for contracts entered into and to be performed in New York, without regard to principles of conflicts of law. (c) Successors and Assigns. This Employment Agreement shall be binding ---------------------- on the successors and assigns of the Corporation and shall inure to the benefit and be enforceable by and against its successors and assigns. This Employment Agreement is personal in nature and may not be assigned or transferred by the Employee without the prior written consent of the Corporation. 7 (d) Entire Agreement. This instrument contains the entire understanding ----------------- and agreement between the parties relating to the subject matter hereof and all prior oral and written agreements are extinguished, and neither this Employment Agreement nor any provision hereof may be waived, modified, amended, changed, discharged or terminated, except by an agreement in writing signed by the party against whom enforcement of any waiver, modification, change, amendment, discharge or termination is sought. (e) Counterparts. This Employment Agreement may be executed ------------- simultaneously in counterparts, each of which shall be deemed an original, and all of which counterparts shall together constitute a single agreement. (f) Illegality. If any one or more of the provisions of this Employment ----------- Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (g) Captions. The captions of the sections hereof are for convenience --------- only and shall not control or affect the meaning or construction of any of the terms or provisions of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have set their hands and executed this Agreement the day and year first above written. CHEYENNE SOFTWARE, INC. By: /s/ ReiJane Huai ----------------------- ReiJane Huai, President By: /s/ Michael B. Adler ----------------------- Michael B. Adler EX-10.68 7 Exhibit 10.68 _______________________ EMPLOYMENT AGREEMENT EMPLOYEE: YUDA DORON EMPLOYMENT AGREEMENT, made as of this 9th day of May, 1995 ("Employ- ment Agreement"), between Cheyenne Software, Inc., a Delaware corporation (the "Corporation" or "Cheyenne") with its principal place of business at Three Expressway Plaza, Roslyn Heights, New York 11577, and YUDA DORON, an individual residing at 2600 Netherland Avenue, Riverdale, NY 10463, (the "Employee"). WHEREAS, prior to the date of this Employment Agreement Employee has served as the President of Cheyenne's wholly-owned subsidiary, Cheyenne Com- munications, Inc. ("CheyComm"), pursuant to an Employment Agreement dated September 29, 1993 (the "Cheycomm Employment Agreement") and the parties hereto desire to terminate the Cheycomm Employment Agreement; WHEREAS, the Employee has substantial experience as a software developer and marketer; and WHEREAS, the Employee and Cheyenne (on behalf of Cheycomm as well as itself) desire to terminate the Cheycomm Employment Agreement, Employee desires to be employed by the Corporation as Executive Vice President upon the terms and conditions hereinafter set forth, and the Corporation desires that the Employee be employed as its Executive Vice President. NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties, intending to be legally bound, agree as follows: 1. Term of Employment. The Corporation hereby agrees to employ the ------------------ Employee as Executive Vice President, and the Employee hereby agrees to serve the Corporation in such capacity for the period commencing on the date hereof (the "Effective Date") and ending on the third (3rd) anniversary of the Effec- tive Date (the "Employment Period"), unless sooner terminated as hereinafter provided. 2. Scope of Duties. The Employee shall serve as Executive Vice --------------- President of the Corporation, General Manager - Netware Division, and shall assist in the operation of the Corporation, which shall include, but shall not be limited to the sale, promotion and development of the products and business of the Corporation. In addition, the Employee shall perform such other duties as the President of the Corporation may assign to the Employee from time to time. The Employee shall report and be responsible to the President of the Corporation or to such other person or persons designated by the Corporation's Board of Directors. 3. Time to be Devoted to Employment. The Employee, except during -------------------------------- 2 vacation periods or absences due to temporary illness, shall devote his full professional and business time, attention, and energies to his duties and responsibilities hereunder, and except for business trips which shall be necessary or desirable in the Corporation's business, shall render such services at the principal office of the Corporation. Nothing contained herein shall prevent or be construed as preventing the Employee from holding or purchasing up to five percent (5%) or less of any class of stock or securities of a cor- poration which is listed on a national securities exchange or regularly traded in the over-the-counter market, or making other investments or participating in business ventures not in competition with the business of the Corporation; provided, such investments and business ventures do not require any time during normal business hours and do not conflict with his duties or obligations to the Corporation as provided in this Employment Agreement. 4. Direct Compensation. ------------------- In consideration for services to be rendered by the Employee hereunder during the Employment Period: (a) The Employee shall receive a salary at the rate of One Hundred Eighty Thousand Dollars ($180,000) per annum ("Base Salary"), which Base Salary shall be subject to federal, state, and other tax withholdings, and which shall be paid semi-monthly in arrears or on such other basis as other employees of the Corporation generally are paid; (b) The Corporation shall pay to or for the account of the Employee (as the Corporation may determine) during each twelve (12) month period falling within the Employment Period, a sum not to exceed $2,562, payable in twelve (12) equal monthly 3 installments in arrears on the last day of each month, representing the payment of a portion of the premiums on New England Mutual Life Insurance Company Policy No. 8714531 on the life of the Employee; and (c) The Corporation shall pay to or for the account of the Employee (as the Corporation may determine) during each twelve (12) month period falling within the Employment Period, a sum not to exceed $5,585, payable in twelve (12) equal monthly installments in arrears on the last day of each month, representing the payment of a portion of the premiums on Provident Life and Casualty Company Disability Policy No. 36-337-6069043 (including the Non- Disabling Injury Rider). (d) The Corporation shall reimburse the Employee in an amount equal to Three Thousand Six Hundred Dollars ($3,600) per annum for automobile expenses incurred by the Employee in connection with the business of the Corporation, payable at the sole option of the Corporation, in twelve (12) equal installments in arrears, on the first day of each month, or in twenty-four (24) equal installments in arrears on the first and fifteenth day of each month. (e) The Employee shall be eligible to receive additional payments or bonuses as may be determined, in the sole discretion of the Cor- poration's Board of Directors. However, nothing contained in this Section shall obligate the Board of Directors to approve such additional payments or bonuses for the Employee. 5. Fringe Benefits. The Employee shall be entitled to participate --------------- in any and all fringe benefits and/or plans (except for life insurance benefits and/or plans or disability 4 income benefits and/or plans, which benefits and/or plans have been provided to Employee under Section 4(b) and 4(c) above), generally afforded to other executives of the Corporation (to the extent the Employee otherwise qualifies therefor under the specific terms and conditions of each such benefit or plan), including, without limitation, medical insurance and pension plans (401K) which are, or which may become available generally to senior management of the Corporation. The Employee shall be entitled to four (4) weeks vacation during each year of the Employment Period, to be taken at such time or times as the reasonable needs of the Corporation's business shall allow. 6. Termination of Cheycomm Employment Agreement; Waiver and Release ---------------------------------------------------------------- of Cheycomm; Cheyenne Options. - ----------------------------- (a) The Cheycomm Employment Agreement is hereby terminated and no party thereunder shall have any continuing rights, duties or obligations thereunder. Cheycomm shall be deemed to be a third party beneficiary of this Section 6(a). (b) As a concurrent condition to the effectiveness of this Employment Agreement, Employee shall have executed and delivered the Waiver and Release Agreement in the form annexed to this Employment Agreement as Exhibit A. (c) Employee hereby acknowledges receipt of an option certificate evidencing his option to purchase up to 240,000 shares of Cheyenne common stock, par value $.01 per share issued to him pursuant to the Cheyenne Software, Inc. 1987 Non-Qualified Stock Option Plan. 5 7. Termination of Employment. During the Employment Period, the ------------------------- Employee's employment may be terminated by the Board of Directors of the Corporation, on the occurrence of any one or more of the following events: (a) The death of the Employee; (b) The failure by the Employee to substantially perform his duties and responsibilities hereunder, owing to physical or mental incapacity (hereinafter referred to as "disability"), which disability shall continue for more than four (4) consecutive months or an aggregate of more than six (6) months in any twelve (12) consecutive months; or (c) For "Cause", which shall mean: (i) the willful failure by the Employee to substantially perform his duties hereunder (including the breach of any provision of Section 9 and/or 10 hereof), for reasons other than death or disability; (ii) the willful engaging by the Employee in misconduct materially injurious to the Corporation; or (iii) the commission by the Employee of an act constituting common law fraud or a felony against the Corporation. 8. Death Benefit; Severance. ------------------------ (a) (i) In addition to all other insurance and similar death benefits generally made available to employees of the Corporation, if the Employee's employment is terminated upon the occurrence of the death of the Employee as provided under Section 7(a) hereof, the Corporation shall provide a death benefit to the estate of the Employee equal to one hundred (100%) percent of the Employee's then current annual Base Salary at the date of death. Such death benefit shall be payable as may be determined by the Corporation, but not less than twelve (12) equal monthly installments, payable on the last day of each month, commencing in the month subse- quent to the month in which the death occurs. 6 (ii) In addition to all other insurance and similar disability benefits generally made available to employees of the Corporation, if the Employee's employment is terminated upon the occurrence of the disability of the Employee as provided under Section 7(b) hereof, the Corporation agrees to pay to the Employee the sum of $31,250, in three equal monthly installments of $10,416.66 each, payable on the last day of each month commencing in the month which is subsequent to the month in which the termination oc- curs. (iii) The Corporation also agrees to continue to provide all other fringe benefits contained in Section 5 for a period of three months from the termination date, so long as such benefits were actually ob- tained by the Employee prior to the Employee's death or disability, and continue to be obtainable by the Employee. (b) If the Corporation and the Employee do not enter into a renewal agreement to be effective May 9, 1998, for a period of at least two (2) years and containing similar terms and conditions to those set forth herein, then the Corporation will pay the Employee, as additional compensation, an amount equal to one hundred (100%) percent of the Employee's then current annual Base Salary, payable semi-monthly in arrears, for the twelve (12) months ending May 9, 1998; such additional compensation is hereinafter referred to as the "Payment". Notwithstanding the immediately preceding sentence, the Employee will not receive the Payment if: (i) the Corporation declines to enter into a renewal agreement with the Employee because the Employee breached the con- fidentiality and/or non-compete provisions of this Employment Agreement or any other terms or conditions of his employment; (ii) the Employee has been terminated for Cause hereunder; or (iii) the Employee declines to enter into a renewal agreement with the Corporation, and the Corporation has offered a renewal agreement for a period of not less than two (2) years, containing similar terms and conditions as dis- cussed in this Employment Agreement. 7 9. Disclosure of Information. All memoranda, notes, records, or ------------------------- other documents made or compiled by the Employee or made available to him during the term of his employment concerning the business of the Corporation or any affiliate of the Corporation, shall be the Corporation's property and shall be delivered to the Corporation on the termination of the Employee's employment. The Employee shall not use for himself or others, or divulge to others, any proprietary or confidential information of the Corporation, obtained by him as a result of his employment, unless authorized by the Corporation. For purposes of this Section 9, the term "proprietary or confidential information" shall mean all information which is known only to the Employee or to the Employee and the employees, former employees, consultants, or others in a confidential relation- ship with the Corporation, and relates to specific matters such as trade secrets, customers, potential customers and vendor lists, pricing and credit techniques, programs, source codes, program codes, software design know-how, research and development activities, private processes, and books and records, as they may exist from time to time, which the Employee may have acquired or obtained by virtue of work heretofore or hereafter performed for or on behalf of the Corporation or which he may acquire or may have acquired knowledge of during the performance of said work, and which is not known to others, or readily available to others from sources other than the Employee or officers or other employees of the Corporation, or is not in the public domain. In the event of a breach or a threatened breach by the Employee of the provisions of this Section 9, the Corporation shall be entitled to an injunction, without being required to post any bond, restraining the Employee from disclosing, in whole or in part, the aforementioned proprietary or confidential information of the 8 Corporation, or from rendering any services to any person, firm, corporation, association, or other entity to whom such proprietary or confidential infor- mation, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing contained herein shall be construed as prohibiting the Corporation from pursuing any other remedies available to the Corporation for such breach or threatened breach, including the recovery of damages from the Employee. 10. Restrictive Covenants. --------------------- (a) The Employee hereby acknowledges and recognizes the highly competitive nature of the Corporation's business and accordingly agrees that, in consideration of the premises contained herein, from and after the date hereof and during the Employment Period, until the Designated Date (as hereinafter defined), he shall not: (i) directly or indirectly engage in any Competitive Ac- tivity (as hereinafter defined), whether such engagement shall be as an officer, director, employee, consultant, agent, lender, stockholder (except as permitted by Section 3 hereto), or other participant; or (ii) assist others in engaging in Competitive Activity. As used herein, the term "Competitive Activity" shall mean and include the development and/or marketing of computer hardware and/or software for server-based local area network (LAN) and enterprise wide ap- plications, including but not limited to storage management, data management/monitoring, data security and data communications. (b) As used in this Section 10, the "Designated Date" shall mean the following: (i) if the Employee willfully terminates his employment with the Corporation in violation of this Employment Agreement 9 and prior to the expiration of the Employment Period, then the "Designated Date" shall mean the second (2nd) anniversary of the effective date of such termination; (ii) if the Corporation terminates the employment of the Employee under this Employment Agreement for "Cause" (as defined in Section 7 herein), then the "Designated Date" shall be the second (2nd) anniversary of the effective date of such termination; or (iii) if during the Employment Period, the Corporation terminates the employment of the Employee without cause, then the term "Designated Date" shall mean the effective date of such termination. (c) It is the desire and intent of the parties that the provisions of this Section 10 shall be enforced to the fullest extent permis- sible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Section 10 shall be adjudicated to be invalid or unenforceable, such provision of this Section 10 shall be deemed amended to delete therefrom the portion thus ad- judicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provisions of this Section 10 in the particular jurisdiction in which such adjudication is made. In addition, if the scope of any restriction contained in this Section 10 is too broad to permit enforcement thereof to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and the Employee hereby consents and agrees that such restriction shall be enforced to the maximum extent permitted by law, and the Employee hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. (d) With respect to Inventions (as hereinafter defined, including, but not limited to, software) made or conceived by the Employee, whether or not during the hours 10 of his employment or with the use of the Corporation's facilities, materials, or personnel, either solely or jointly with others during the Employee's employment by the Corporation, or within one (1) year after termination of such employment, or within two (2) years after termination of such employment if such termination is based on or related to unauthorized use or disclosure of proprietary or confidential information obtained by the Employee as a result of his employment and without the payment to the Employee of a royalty or any other consideration: (i) The Employee shall inform the Corporation promptly and fully of such Inventions by written report, setting forth in detail the procedures employed and results achieved. A report shall be submitted by the Employee upon completion of any studies or research projects undertaken on the Corporation's behalf, whether or not in the Employee's opinion a given project has resulted in an Invention. (ii) At the Corporation's request and expense, the Employee shall apply for the United States and/or foreign let- ters patent or other registrations, including, but not limited to, copyrights (collectively, the "Other Registrations"), either in the Employee's name or otherwise, as the Corporation shall desire. (iii) The Employee hereby assigns and agrees to assign to the Corporation all of his right and interest to any and all such Inventions and to make ap- plications for United States and/or foreign let- ters patent or Other Registrations granted upon such Inventions. (iv) The Employee shall acknowledge and deliver promptly to the Corporation, without charge to the Corporation, but at its expense, such written instruments and do such other acts in support of his inventorship as may be necessary in the opinion of the Corporation to obtain and maintain United States and/or foreign letters patent or Other Registrations, and to vest the entire right in such Inventions, patents, patent applications, and Other Registrations in the Corporation. (v) The Corporation shall also have the royalty-free right to 11 use in its business, and to make, use, and sell products and/or services derived from any Inventions, discoveries, concepts, and ideas, whether or not paten- table or copyrightable, including, but not limited to, applications, methods, formulas, and techniques, as well as improvements or know-how, whether or not within the scope of Inventions, but which are obtained, created, or made by the Employee during the Employment Period or with the use or assistance of the Cor- poration's facilities, materials, or personnel. (vi) For the purposes of this Agreement, "Inventions" mean discoveries, concepts, and ideas, whether or not paten- table or copyrightable, including, but not limited, to processes, methods, formulas, and techniques, as well as improvements or know-how concerning any present or prospective activities of the Corporation which the Employee has become acquainted as a result of his employment by the Corporation or any related work product of any kind. (e) In the event of a breach or threatened breach by the Employee of the provisions of this Section 10, the Corporation shall be entitled to an injunction and such other equitable relief as may be necessary or desirable to enforce the restrictions contained herein. Nothing herein con- tained shall be construed as prohibiting the Corporation from pursuing any other remedies available for such breach or threatened breach or any other breach of this Employment Agreement. (f) Employee hereby warrants and represents that he is not prohibited by any agreement or the order of any court from entering into and carrying out the terms of this Agreement. In particular, the Employee warrants and represents that the scope of his activity is not restricted in any way with respect to the design, development, enhancement, sale, marketing, and/or promotion of computer software and hardware. 12 11. Notices. ------- (a) All notices required or permitted to be given under the provisions of this Employment Agreement shall be in writing and delivered personally or by certified or registered mail, return receipt requested, postage prepaid, to the following persons at the following addresses, or to such other persons at such other addresses as any party may request by notice in writing to the other party to this Agreement. If to Employee: Mr. Yuda Doron 2600 Netherland Avenue Riverdale, NY 10463 If to the Corporation: Cheyenne Software, Inc. Three Expressway Plaza Roslyn Heights, NY 11577 Attn: General Counsel With a copy to: Michael R. Reiner, Esq. Morrison Cohen Singer & Weinstein, LLP 750 Lexington Avenue New York, NY 10022 (b) Construction. This Employment Agreement shall be construed ------------ with, and be governed by, the laws of the State of New York for contracts entered into and to be performed in New York, without regard to principles of conflicts of law. (c) Successors and Assigns. This Employment Agreement shall be ---------------------- binding upon the successors and assigns of the Corporation, and shall inure to the benefit of and be enforceable by and against its successors and assigns. This Employment Agreement is 13 personal in nature and may not be assigned or transferred by the Employee without the prior written consent of the Corporation. (d) Representations. Employee represents and warrants that he --------------- has no written contract with his former employer, employers or their affiliates that would impair or otherwise interfere with Employee's entering into this Agreement and performing his contemplated duties hereunder, and the parties agree that this Agreement and all other agreements entered into in reliance upon the validity of this Agreement have been entered into on the assumption and belief of the parties that Employee's performance of his contemplated services hereunder is not prohibited or restricted by any existing agreement with Employee's former employer, employers, or their affiliates. (e) Entire Agreement. This instrument contains the entire ---------------- understanding and agreement between the parties relating to the subject matter hereof, and neither this Employment Agreement nor any provision hereof may be waived, modified, amended, changed, discharged, or terminated, except by an agreement in writing signed by the party against whom enforcement of any waiver, modification, change, amendment, discharge, or termination is sought. (f) Counterparts. This Employment Agreement may be executed ------------ simultaneously in counterparts, each of which shall be deemed an original, and all of which counterparts shall together constitute a single agreement. (g) Illegality. If any one or more of the provisions of this ---------- Employment Agreement shall be invalid, illegal, or unenforceable in any respect, the validity, legality, and 14 enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (h) Captions. The captions of the sections hereof are for -------- convenience only and shall not control or affect the meaning or construction of any of the terms or provisions of this Employment Agreement. 15 IN WITNESS WHEREOF, the parties hereto have set their hands and executed this Agreement on the 8th day of June, 1995. CHEYENNE SOFTWARE, INC. By:/s/ ReiJane Huai -------------------------------- ReiJane Huai, President and Chief Executive Officer /s/ Yuda Doron ------------------------------ Yuda Doron 16 EX-10.69 8 CHEYENNE SOFTWARE, INC. EMPLOYMENT AGREEMENT Employee: Doris A. Granatowski EMPLOYMENT AGREEMENT made effective this 16 day of November 1994 (hereinafter referred to as "Employment Agreement") between Cheyenne Software, Inc., a Delaware corporation (hereinafter referred to as the "Corporation") and Doris A. Granatowski with an address at 4 White Gate Drive, Old Brookville, New York 11545 (hereinafter referred to as the "Employee"). WHEREAS, the Employee has substantial experience as a Operations Executive; WHEREAS, the Employee desires to be employed by the Corporation as a Vice President, and the Corporation desires that the Employee be so employed, upon the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties intending to be legally bound, agree as follows: 1. Term of Employment. Subject to the approval of the Corporation's ------------------- Board of Director's, the Corporation hereby employs the Employee as a Vice President, and the Employee hereby agrees to serve the Corporation in such capacity for the period commencing on the date first written above, (the "Effective Date"), and ending on December 31, 1996, (hereinafter referred to as the "Employment Period"), unless sooner terminated as hereinafter provided. 2. Scope of Duties. The Employee shall serve as a Vice President and shall engage in Being an ISO9000 "Champion", oversee MIS globally and develop a European - -------------------------------------------------------------------------------- Business Model. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Employee shall report and be responsible to the Chief Financial Officer or other person designated by the President or the Board of Directors. The Employee's performance shall be reviewed by the Chief Financial Officer annually. 3. Time To Be Devoted to Employment. The Employee shall, except during --------------------------------- vacation periods or absences due to temporary illness, devote substantially all of her professional and business time, attention and energies to her duties and responsibilities hereunder, and except for business trips which shall be necessary or desirable in the Corporation's business, shall render such services at the principal office of the Corporation. Nothing herein contained shall prevent or be construed as preventing the Employee from holding or purchasing five (5%) percent or less of any class of stock or securities of a corporation which is listed on a national securities exchange or regularly traded in the over-the-counter market, or making other investments or participating in business ventures not in competition with the business of the Corporation, as long as such investments and business ventures shall not require any time during normal business hours and do not conflict with her duties or obligations to the Corporation as provided in this Employment Agreement. 4. Direct Compensation. (a) In consideration for services rendered and ------------------- to be rendered by the Employee hereunder during the Employment Period, the Employee shall receive a salary of One Hundred Seventy-Five Thousand ($175,000) Dollars per year, which shall be paid semi-monthly ($7,291.67) in arrears or at such other intervals as other employees are paid. (b) Employee shall be eligible to receive additional payments or bonuses which will be determined by Cheyenne's top management and Board of Directors based on personal and corporate objectives and achievements. 5. Fringe Benefits. The Employee shall be entitled to participate in ---------------- any and all fringe benefits and/or plans, generally afforded to other employees of the Corporation (to the extent the Employee otherwise qualifies therefor under the specific terms and conditions of each such benefit), including, without limitation, group disability, life insurance, medical insurance and pension plans (401K) which are, or which may become available generally to senior personnel of the Corporation. The Employee shall be entitled to 4 weeks vacation time during each year of the Employment Period. The Corporation shall reimburse the Employee in an amount equal to $600 per month for expenses relating to an automobile used by the Employee in connection with the business of the Corporation. 6. Termination of Employment. During the Employment Period, the -------------------------- Employee's employment may be terminated by the President, the Board of Directors or the Executive Committee of the Corporation on the occurrence of any one or more of the following events: a. The death of the Employee; b. The failure by the Employee to substantially perform her duties and hereunder, owing to physical or mental incapacity (hereinafter referred to as "disability"), which disability shall continue for more than four (4) consecutive months or an aggregate or more than six (6) months in any calendar year; or c. For "Cause", which shall mean (i) the willful failure by the Employee to substantially perform her duties hereunder (including the breach of any provision of Section 9 and/or 10 hereof), for reasons other than death or disability; (ii) the willful engaging by the Employee in misconduct materially injurious to the Corporation; or (iii) the commission by the Employee of an act constituting common law fraud or a felony against the Corporation. 7. Death Benefit. In addition to all other insurance and similar death -------------- benefits generally made available to employees of the Corporation, if Employee's death occurs during the term of the Employment Period, the Corporation shall provide a death benefit to the estate of the Employee equal to one hundred percent (100%) of the Employee's then current annual Base Salary at the date of death. Such death benefit shall be payable as may be determined by the Corporation, but not less 2 often than twelve (12) equal monthly installments, payable on the last day of each month, commencing in the month subsequent to the month in which the death occurs. 8. Severance Payment. (a) If the Corporation and the Employee do not ----------------- enter into a renewal agreement to be effective December 31, 1996, for a period of at least two years and containing similar terms and conditions to those set forth herein, then the Corporation will pay the Employee, as additional compensation, an amount equal to thirty (30%) of the Employee's then current annual Base Salary, as determined under Section 4, payable semi-monthly in arrears for the six months ending June 30, 1997; such compensation is hereunder referred to as the "Severance Payment". (b) Notwithstanding the provisions of Section 8 (a) above, the Employee will not receive the Severance Payment if, (i) the Corporation declines to enter into a renewal agreement with the Employee because the Employee breached the confidentiality and/or non-compete provisions of this Agreement or any other terms or conditions of her employment; (ii) the Employee has been terminated for Cause hereunder; or (iii) the Employee declines to enter into a renewal agreement with the Corporation, and the Corporation has offered a renewal agreement for a period of not less than two years, containing similar terms and conditions as discussed herein. 9. Disclosure of Information. All memoranda, notes, records or other ------------------------- documents made or compiled by the Employee or made available to him during the term of her employment concerning the business of the Corporation shall be the Corporation's property and shall be delivered to the Corporation on the termination of the Employee's employment. The Employee shall not use for himself or others, or divulge to others, any proprietary or confidential information of the Corporation, obtained by him as a result of her employment, unless authorized by the Corporation. For purposes of this Section 9, the term "proprietary or confidential information" shall mean all information which is known only to the Employee or to the Employee and the employees, former employees, consultants or others in a confidential relationship with the Corporation and relates to specific matters such as trade secrets, marketing programs, customers, potential customers and vendor lists, pricing and credit techniques, program codes, software design know-how, research and development activities, private processes, and books and records, as they may exist from time to time, which the Employee may have acquired or obtained by virtue of work heretofore or hereafter performed for or on behalf of the Corporation or which she may acquire or may have acquired knowledge of during the performance of said work, and which is not known to others, or readily available to others from sources other than the Employee or officers or other employees of the Corporation, or is not in the public domain. In the event of a breach or a threatened breach by the Employee of the provisions of this Section 9, the Corporation shall be entitled to an injunction restraining the Employee from 3 disclosing, in whole or in part, the aforementioned proprietary or confidential information of the Corporation, or from rendering any services to any person, firm, corporation, association or other entity to whom such proprietary or confidential information, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available to the Corporation for such breach or threatened breach, including the recovery of damages from the Employee. 10. Restrictive Covenants. (a) The Employee hereby acknowledges and ---------------------- recognizes the highly competitive nature of the Corporation's business and accordingly agrees that, in consideration of the premises contained herein, she will not during the Employment Period, until the Designated Date (as hereinafter defined): (i) directly or indirectly engage in any Competitive Activity (as hereinafter defined), whether such engagement shall be as an officer, director, employee, consultant, agent, lender, stockholder, or other participant; or (ii) assist others in engaging in Competitive Activity. As used herein, the term "Competitive Activity" shall mean and include the development and/or marketing of computer hardware and/or software for server-based local area network (LAN) and enterprise wide applications, including but not limited to storage management, data management/monitoring, data security and data communications. (b) As used in this Section 10, the "Designated Date" shall mean the following: (i) if the Employee willfully terminates her employment with the Corporation in violation of this Employment Agreement prior to the expiration of the Employment Period, then the "Designated Date" shall mean the second (2nd) anniversary of the effective date of such termination; (ii) if the Corporation terminates the employment of the Employee under this Employment Agreement for cause, then the "Designated Date" shall be the second (2nd) anniversary of the effective date of such termination; or (iii) if the Corporation, after the Employment Period, terminates the employment of the Employee without cause, then the term "Designated Date" shall mean the effective date of such termination. (c) It is the desire and intent of the parties that the provisions of this Section 10 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Section 10 shall be adjudicated to be invalid or unenforceable, such provision of this Section 10 shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provisions of this Section 10 in the particular jurisdiction in which such adjudication is made. In addition, if the scope of any restriction contained in this Section 10 is too broad to permit enforcement thereof to its fullest extent, then such restriction shall be enforced to the maximum extent permitted by law, and the Employee hereby consents and agrees that such restriction shall be enforced to the maximum 4 extent permitted by law, and the Employee hereby consents and agrees that such scope may be judicially modified accordingly in any proceeding brought to enforce such restriction. (d) (i) Employee shall promptly disclose to Employer all Inventions (as defined below) and keep accurate records relating to the conception and reduction to practice of all Inventions. A report shall be submitted by Employee upon completion of any studies or research projects undertaken on Employer's behalf whether or not in the Employee's opinion a given project has resulted in an Invention. Such records shall be the sole and exclusive property of Employer, and the Employee shall surrender possession of the records to Employer upon any suspension or termination of Employee's employment with Employer. (ii) Employee hereby assigns to Employer, without additional consideration to Employee, the entire right, title and interest in and to the Inventions and Work Product (as defined below) and in and to all copyrights, patents, trademarks and any and all other proprietary rights therein or based thereon. Employee agrees that the Work Product shall be deemed to be a "work made for hire." Employee shall execute all such assignments, oaths, declarations and other documents as may be prepared by Employer to obtain and maintain United States and/or foreign letters patent or other registrations in connection with any Invention or Work Product, to vest the entire right in any Invention or Work Product and related applications and registrations in Employer and to otherwise effect the foregoing. (iii) Employer, without additional consideration to Employee, shall have the exclusive worldwide and perpetual right to use, make, and sell products and/or services derived from any Inventions, Work Product and other discoveries, concepts, ideas, applications, methods, formulas, techniques, improvements or know-how, whether or not within the scope of Inventions or Work Product but which are obtained, created or made by the Employee during the Employment Period. (iv) Employee shall provide Employer with all information, documentation, and assistance Employer may request to perfect, enforce or defend the proprietary rights in or based on the Inventions and Work Product. Employer, in its sole discretion, shall determine the extent of the proprietary rights, if any, to be protected in or based on the Inventions and Work Product. All such information, documentation and assistance shall be provided by Employee at no additional expense to Employer, except for out-of-pocket expenses which Employee incurred at Employer's request. (v) Inventions shall mean all inventions, processes, methods, formulas, techniques, improvements, modifications and enhancements, whether or not patentable, made or conceived by Employee, whether or not during the hours of Employee's employment or with the use of Employer's facilities, materials or personnel, either solely or jointly, during Employee's employment by Employer, or within one year after termination of such employment, or within two years 5 after termination of such employment if such termination is based on or related to unauthorized use or disclosure of proprietary or confidential information by the Employee. (vi) Work Product shall mean all documentation, software, creative works, know-how and information created, in whole or in part, by Employee during Employee's employment by Employer, whether or not copyrightable or otherwise protectable, excluding Inventions. (e) If there is a breach or threatened breach by the Employee of the provisions of this Section 10, the Corporation shall be entitled to an injunction restraining him from such breach. Nothing herein contained shall be construed as prohibiting the Corporation from pursuing any other remedies available for such breach or threatened breach or any other breach of this Employment Agreement. (f) Employee hereby warrants and represents that she is not prohibited by any agreement or the order of any court from entering into and carrying out the terms of this Agreement. In particular, the Employee, warrants and represents that the scope of her activity is not restricted in any way with respect to the design, development, enhancement, sale, marketing and/or promotion of computer software and hardware. 11. (a) Notices. All notices required or permitted to be given under -------- the provisions of this Employment Agreement shall be in writing and delivered personally or by certified or registered mail, return receipt requested, postage prepaid to the following persons at the following addresses, or to such other persons at such other addresses as any party may request by notice in writing to the other party to this Agreement: If to Employee: Doris A. Granatowski 4 White Gate Drive Old Brookville, NY 11545 If to the Corporation: Cheyenne Software, Inc. 3 Expressway Plaza Roslyn Heights, NY 11577, Att: General Counsel With a copy to: Michael Reiner, Esq. Morrison Cohen Singer & Weinstein 750 Lexington Avenue New York, NY 10022 (b) Construction. This Employment Agreement shall be construed with, ------------- and be governed by, the laws of the State of New York for contracts entered into and to be performed in New York, without regard to principles of conflicts of law. 6 (c) Successors and Assigns. This Employment Agreement shall be binding ----------------------- on the successors and assigns of the Corporation and shall inure to the benefit and be enforceable by and against its successors and assigns. This Employment Agreement is personal in nature and may not be assigned or transferred by the Employee without the prior written consent of the Corporation. (d) Entire Agreement. This instrument contains the entire understanding ----------------- and agreement between the parties relating to the subject matter hereof and all prior oral and written agreements are extinguished, and neither this Employment Agreement nor any provision hereof may be waived, modified, amended, changed, discharged or terminated, except by an agreement in writing signed by the party against whom enforcement of any waiver, modification, change, amendment, discharge or termination is sought. (e) Counterparts. This Employment Agreement may be executed ------------- simultaneously in counterparts, each of which shall be deemed an original, and all of which counterparts shall together constitute a single agreement. (f) Illegality. If any one or more of the provisions of this Employment ----------- Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. (g) Captions. The captions of the sections hereof are for convenience --------- only and shall not control or affect the meaning or construction of any of the terms or provisions of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have set their hands and executed this Agreement the day and year first above written. CHEYENNE SOFTWARE, INC. By: /s/ ReiJane Huai ------------------------ ReiJane Huai, President By: /s/ Doris A. Granatowski ------------------------- Doris A. Granatowski EX-10.70 9 EXHIBIT 10.70 AGREEMENT made and dated this 20 day of December, 1994, between ELAN ASSOCIATES, a Joint Venture, having its principal place of business at 1615 Northern Boulevard, Manhasset, New York, Landlord, and CHEYENNE SOFTWARE, INC., a New York corporation, having its principal place of business at 3 Expressway Plaza, Roslyn Heights, New York, as Tenant. Landlord hereby leases to Tenant and Tenant hires from Landlord the entire building and premises known as and by 2000 Marcus Avenue, Lake Success, New York located on a parcel of land approximately 5.4 acres, and the building (consisting of approximately 100,000 sq. ft. on three floors plus approximately 7500 sq. ft. of storage and archive space on the lower level and garage), for a term of years commencing June 1, 1995 and ending August 31, 2002, both dates inclusive, at an annual rental rate as hereinafter provided in Paragraph "38", including garage parking and the exterior lot, all as shown on the site plan annexed hereto as Exhibit A (collectively, the "Demised Premises") Tenant agrees to pay annual rent in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance of the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever. The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows: Rent 1. Tenant shall pay the rent as above and as hereinafter provided. Occupancy: 2. Tenant shall use and occupy demised premises for offices for the Administration of Tenant corporate affairs, research and development for the Tenant and any other lawful purpose. Tenant 3. Tenant shall make no [1] changes in or to the demised Alterations: premises of any nature without Owner's [1a] prior written consent. Subject to the prior written consent of Owner, and to the provisions of this article, Tenant at Tenant's expense, may make alterations, installations, additions or improvements which are nonstructural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises by using contractors or mechanics first approved by Owner. Tenant shall, before making any alterations, additions, installations or improvements, at its expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner and Tenant agrees to carry and will cause Tenant's contractors and sub-contractors to carry such workman's compensation, general liability, personal and property damage insurance as Owner may [2] require. If any mechanic's lien is filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant's expense, by filing the bond required by law. All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner in Tenant's behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant [3], elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the premises by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant's removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner's property or may be removed from the premises by Owner, at Tenant's expense. Maintenance 4. Tenant shall, throughout the term of this lease, take and good care of the demised premises and the fixtures and Repairs: appurtenances therein. Tenant shall be responsible for all damage or injury to the demised premises or any other part of the building and the systems and equipment thereof, whether requiring structural or nonstructural repairs caused by or resulting from carelessness, omission, neglect or improper conduct of Tenant. Tenant's subtenants, agents, employees, invitees or licensees, or [4] any work, labor, service or equipment done for or supplied to Tenant or any subtenant or arising out of the installation, use or operation of the property or equipment of Tenant or any subtenant. Tenant shall also repair all damage to the building and the demised premises caused by moving of Tenant's fixtures, furniture, and equipment. Tenant shall promptly make, at Tenant's expense, all repairs in and to the demised premises for which Tenant is responsible, using only the contractor for the trade or trades in question, selected from a list of at least two contractors per trade submitted by Owner. Any other repairs in or to the building or the facilities and systems thereof for which Tenant is responsible shall be performed by [5] at the Tenant's expense. [5] shall maintain in good working order and repair the exterior and the structural portions of the building, including the structural portions of its demised premises, and the public portions of the building interior and the building plumbing, electrical, heating and ventilating systems (to the extent such systems presently exist) serving the demised premises. Tenant agrees to give prompt notice of any defective condition in the premises for which Owner may be responsible hereunder. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or others making repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any setoff or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this Lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of an action for damages for breach of contract. The provisions of this Article 4 shall not apply in the case of fire or other casualty which are dealt with in Article 9 hereof. Window 5. Tenant will not clean nor require, permit, suffer or Cleaning: allow any window in the demised premises to be cleaned from the outside in violation of Section 202 of the Labor Law or any other applicable law or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction. Requirements 6. [6] At all times thereafter [7] Tenant, at Tenant's sole of Law, cost and expense, shall promptly comply with all present Fire Insurance, and future laws, orders and regulations of all state, Floor Loads: federal, municipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises arising out of Tenant's unique use or manner of use thereof, (including Tenant's permitted use) or, with respect to the building if arising out of Tenant's use or manner of use of the premises or the building including the use permitted under the leases. Nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operations therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto. Tenant may, after securing Owner to Owner's reasonable satisfaction against all damages, interest, penalties and expenses, including, but not limited to, reasonable attorney's fees, by cash deposit or by surety bond in an amount and in a company satisfactory to Owner, contest and appeal any such laws, ordinances, orders, rules, regulations or requirements [8] provided same is done with all reasonable promptness and provided such appeal shall not subject Owner to prosecution for a criminal offense or constitute a default under any lease or mortgage under which Owner may be obligated, or cause the demised premises or any part thereof to be condemned or vacated. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner with respect to the demised premises or the building of which the demised premises form a part, or which shall or might subject Owner [9] to any liability or responsibility to any person or for property damage. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization or other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. Tenant shall pay all costs, expenses, fines, penalties, or damages, which may be imposed upon Owner by reason of Tenant's failure to comply with the provisions of this article and if by reason of such failure the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up" of rate for the building or demised premises issued by the New York Fire Insurance Exchange, or other body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and prevent vibrations, noise and annoyance. Subordination: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demise premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument of subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall execute promptly any certificate that Owner may [10] request. Property-- 8. Owner or its agents shall not be liable for any damage to Loss, Damage, property of Tenant or of other entrusted to employees of Reimburse- the building, nor for loss of or damage to any property ment, Indem- of Tenant by theft or otherwise, nor for any injury or nity: damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees. Owner or its agents will not be liable for any such damage caused by other tenants or persons in, upon or about said building or caused by operations in construction of any private, public or quasi public work. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorneys fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant's agents, contractors, employees, invitees or licensees. Tenant's liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld. Destruction, 9. (a) If the demised premises or any part thereof shall be Fire and Other damaged by fire or other casualty, Tenant shall give Casualty: immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth. (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent [11] until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner, subject to Owner's right to elect not to restore the same as hereinafter provided. (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given with 90 days after such fire or casualty, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Landlord's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control. After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and movable equipment, furniture, and other property. Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law. Owner and Tenant each hereby releases and waives all right of recovery against the other or any one claiming through or under each of them by way of subrogation or otherwise. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefitting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's furniture and/or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. Assignment, 11. Tenant, for itself, its heirs, distributees, executors, Mortgage, administrators, legal representatives, successors and Etc.: assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant shall be deemed and assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting. Electric 12. Rates and conditions in respect to submetering or rent Current: inclusion, as the case may be, to be added in RIDER attached hereto. Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain. Access to 13. Owner or Owner's agents shall have the right (but shall Premises: not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to the demised premises or to any other portion of the building or which Owner may elect to perform. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants. If Tenant is not present to open and permit an entry into the premises, Owner or Owner's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom, Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant's obligations hereunder. Occupancy: 15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. [12] Fees and 19. If Tenant shall default [13b] in the observance or Expenses: performance of any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and with notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to attorney's fees, in instituting, prosecuting or defending any action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner with 20 days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages. [13c] No Repre- 21. Neither Owner nor Owner's agents have made any sentations by representations or promises with respect to the physical Owner: condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the premises except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same "as is" and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. End of 22. Upon the expiration or other termination of the term of Term: this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property. Tenant's obligation to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day. Quiet 23. Owner covenants and agrees with Tenant that upon Tenant Enjoyment: paying the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 31 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned. Failure 24. If Owner is unable to give possession of the demised to Give premises on the date of the commencement of the term Possession: hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession) until after Owner shall have given Tenant written notice that the premises are substantially ready for Tenant's occupancy. If permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except as to the covenant to pay rent. The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law. No Waiver: 25. The failure of [14] to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease, shall not prevent a subsequent act which would have originally constituted a violation from having all that force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises, and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises. Waiver of 26. It is mutually agreed by and between Owner and Tenant Trial by Jury: that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding, or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4. Inability to 27. This Lease and the obligation of Tenant to pay rent Perform: hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Owner is prevented or delayed from so doing by reason of strike or labor troubles or any cause whatsoever including, but not limited to, government preemption in connection with a National Emergency or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions of supply and demand which have been or are affected by war or other emergency. [15] Bills and 28. Except as otherwise in this lease provided, a bill, Notices: statement, notice or communication which Owner may desire or require to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice. Captions: 30. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provisions thereof. Definitions: 31. The term "Owner" means a landlord or lessor, and as used in this lease means only the owner, or the mortgagee in possession, for the time being of the land and building of which the demised premises form a part, so that in the event of any sale or sales of said land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, agreement between the parties or their successors in interest, or between the parties and the purchaser, at an such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of the Owner, hereunder. The words "re-enter" and "re-entry" as used in this lease are not restricted to their technical legal meaning. The term "business days" as used in this lease shall exclude Saturdays (except such portion thereof as is covered by specific hours in Article 29 hereof), Sundays and all days observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. Adjacent 32. If an excavation shall be made upon land adjacent to Excavation- the demised premises, or shall be authorized to be made, Shoring Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purposes of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent. Security: 34. Tenant has deposited with Owner the sum of $118,750.00 as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenants is in default or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the re-letting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or lessee and Owner shall thereunder be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. Estoppel 35. Tenant, at any time, and from time to time, upon Certificate at least [16] prior notice by Owner, shall execute acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this lease is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under this Lease, and, if so, specifying each such default. Successors 36. The covenants, conditions and agreements contained in and Assigns: in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise provided in this lease, their assigns. See Addendum Annexed. SEE RIDER ANNEXED FOR ADDITIONAL PROVISIONS. In Witness Whereof, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written. ------------ Witness for Owner: ELAN ASSOCIATES [CORP SEAL] /s/ Leonard Lazarus By: /s/ Ronald Deane [L.S.] ..................................... .......................... Witness for Tenant: CHEYENNE SOFTWARE, INC. [CORP SEAL] /s/ Gus P. Nuzzolese By: /s/ Elliot Levine [L.S.] ..................................... .............................. Elliot Levine, Executive Vice President, I.D. #13-3175893 Chief Financial Officer ACKNOWLEDGEMENTS CORPORATE OWNER CORPORATE TENANT STATE OF NEW YORK ss: STATE OF NEW YORK ss: County of County of On this day of , 19 , before me On this day of , 19 , before me personally came personally came to me known, who being by me duly sworn, did to me known, who being by me duly sworn, did depose and say that he resides depose and say that he resides in in that he is the of that he is the of the corporation described in and which executed the corporation described in and which executed the foregoing instrument, as OWNER; that he knows the foregoing instrument, as TENANT; that he knows the seal of said corporation; that the seal the seal of said corporation; that the seal affixed to said instrument is such corporate seal; affixed to said instrument is such corporate seal; that is was so affixed by order of the Board of that is was so affixed by order of the Board of Directors of said corporation, and that he signed Directors of said corporation, and that he signed his name thereto by like order. his name thereto by like order. ............................... ............................... INDIVIDUAL OWNER INDIVIDUAL TENANT STATE OF NEW YORK, ss: STATE OF NEW YORK, ss: County of County of On this day of , 19 , before me On this day of , 19 , before me personally came personally came to me known and known to me to be the individual to me known and known to me to be the individual described in and who, as OWNER, executed the described in and who, as TENANT, executed the foregoing instrument and acknowledged to me that foregoing instrument and acknowledged to me that he executed the same. he executed the same. ............................... ...............................
ADDENDUM TO LEASE ----------------- ELAN ASSOCIATES WITH CHEYENNE SOFTWARE, INC. -------------------------------------------- 1. structural 1a. not to be unreasonably withheld, delayed or conditioned 2. reasonably 3. at the time Landlord approves the installation, in which event Tenant, at Tenant's expense, shall restore the premises to the original condition at the expiration of the lease term 4. which are caused by 5. Tenant 6. Landlord shall deliver the premises in full compliance with all applicable codes and laws. 7. throughout the term of the lease 8. or building violations 9. in such event Tenant shall be given notice and an opportunity to cure, and shall hold Landlord harmless, 10. reasonably 11. and additional rent and other charges 12. Landlord represents and warrants that the Certificate of Occupancy for this building is in full force and effect 13a. Intentionally Deleted. 13b. beyond any applicable cure period 13c. All expenses provided for herein to be reimbursed to Owner shall be reasonable. 14. either party 15. Notwithstanding the above, there shall be no permissible delay for any correction which is reasonably foreseeable, nor shall insufficient funds constitute an acceptable reason for either party to delay performance on its part to be performed. 16. 15 days' INDEX TO RIDER TO LEASE BETWEEN ELAN ASSOCIATES, LANDLORD, AND CHEYENNE SOFTWARE, INC., TENANT ----------------------------------------------- PAGE ---- RIDER CONTROLS ..................................... 1 37. USE OF PREMISES .................................... 1 38. RENT ............................................... 1 39. PAYMENT OF RENT .................................... 2 40. REAL ESTATE TAXES .................................. 2 41. ASSESSMENTS AND NEW TAXES .......................... 5 42. SERVICES OR UTILITIES .............................. 6 43. ALTERATIONS ........................................ 7 44. TENANT'S RIGHT TO CANCEL ........................... 9 45. EXPIRATION OF TERM ................................. 9 46. RIGHT TO INSPECT ................................... 10 47. COMPLIANCE WITH LAW ................................ 10 48. NOTICES ............................................ 11 49. MEMORANDUM OF LEASE ................................ 12 50. MECHANIC'S LIENS ................................... 12 51. INDEMNIFICATION OF LANDLORD ........................ 12 52. INSURANCE .......................................... 12 53. RESTORATION OR REPAIR OF PREMISES .................. 15 54. CONDEMNATION ....................................... 16 55. CURING DEFAULTS .................................... 17 56. ASSIGNMENT OR SUBLETTING ........................... 18 57. DEFAULTS BY TENANT ................................. 23 58. INTENTIONALLY OMITTED .............................. 25 59. NO REINSTATEMENT ................................... 25 60. SUBORDINATION AND NON-DISTURBANCE .................. 26 61. ESTOPPEL CERTIFICATES .............................. 27 62. NO WAIVER .......................................... 28 63. OPTION TO RENEW .................................... 28 64. RIGHT OF FIRST REFUSAL ............................. 30 65. SIGNAGE ............................................ 31 66. INDEMNIFICATION .................................... 31 (i) PAGE ---- 67. REMEDIES CUMULATIVE ................................ 31 68. BROKER ............................................. 32 69. NO REPRESENTATIONS ................................. 32 70. SECURITY DEPOSIT ................................... 32 71. LANDLORD'S WORK .................................... 34 72. ENTIRE AGREEMENT ................................... 35 73. QUIET ENJOYMENT .................................... 35 74. SUCCESSORS AND ASSIGNS ............................. 35 (ii) RIDER CONTROLS. -------------- This Rider is attached to and made a part of the above- referenced Lease. In the event of any conflict between the terms of this Rider and the terms of the printed portion of the Lease, the terms of this Rider shall govern and control. 37. USE OF PREMISES. --------------- The premises may be used and occupied by said Tenant for such office, research and,development, incidental and accessory uses (including the cafeteria) and any other lawful use as shall be permitted by the zoning ordinance of the Village of Lake Success as the same presently exists and hereafter may be amended, and for all other uses incidental and related thereto. 38. RENT. ---- During the term of this lease, Tenant covenants to pay to the Landlord basic rental as follows: (a) Tenant shall not be obligated to pay any rent or taxes for the months of June, July and August 1995*; the first monthly installment of rent and taxes shall be due and payable on September 1, 1995. All of the other obligations contained in this agreement on the part of the Tenant with respect to insurance, maintenance, utilities, etc., shall be effective June 1, 1995 or such later date as possession will be delivered. (b) Commencing September 1, 1995, the rent, including maintenance, payable by Tenant shall be as follows: MAINTENANCE COMBINED RENT AND MAINTENANCE (per. sq. feet) ANNUAL MONTHLY --------------- ------ ------- 6/1/95-8/31/95 None None None 9/1/95-8/31/96 None None None 9/1/96-8/31/97 $0.35 $1,385,000 $115,416.67 9/1/97-8/31/98 $0.70 $1,495,000 $124,583.33 9/1/98-8/31/99 $1.05 $1,530,000 $127,500.00 9/1/99-8/31/2000 $1.40 $1,565,000 $130,416.67 9/1/2000-8/31/2001 $1.75 $1,600,000 $133,333.33 9/1/2001-8/31/2002 $2.10 $1,635.000 $136,250.00 Any delay in delivery of possession of the Premises with Landlord's Work completed in accordance with Article 71 shall entitle Tenant to pro tanto delay in the payment of rent and maintenance. (c) Date of Occupancy. Tenant acknowledges that it is aware that the ----------------- premises are presently occupied by Chase Manhattan Bank, that the lease with Chase Manhattan Bank will expire on January 31, 1995, on which date the premises will be vacant and thereafter to be occupied by Tenant herein pursuant to this lease. 1 * or the first ninety (90) days following the date on which Landlord delivers the Premises to Tenant with Landlord's Work described in Article 71 completed. Landlord will complete Landlord's Work for Tenant described in Paragraph 71 of the Rider herein, on or before June 1, 1995. 39. PAYMENT OF RENT. --------------- The annual basic rental shall be paid to the Landlord at the address of the Landlord above set forth, in equal monthly installments, in advance on the first day of each month during the term, without notice or demand and without abatement, deduction or set-off of any amount whatsoever, except as otherwise specifically set forth herein. 40. REAL ESTATE TAXES. ----------------- Except as hereinafter specifically set forth, Tenant shall be obligated to pay all real estate taxes against the demised premises and due and payable for the period commencing after the rent commencement date (September 1, 1995) or as such date may be extended in accordance with this lease. Said date shall be adjusted if possession is delayed. A proration of the real estate taxes will be made at the commencement and termination of the lease to provide for the payment by Landlord for that portion of the applicable taxes which do not relate to Tenant's obligations for the payment of taxes under this agreement. Taxes shall mean the real estate taxes and assessments ----- directly imposed upon the Land and Building by the Town, Village and School District in which the property is situated, excluding interest and penalties thereon. If there shall be any dispute concerning this provision, same shall be arbitrated under American Arbitration Association rules. Income, franchise, transfer, inheritance and capital stock taxes shall be deemed excluded from the term Taxes for the purposes hereof. However, if and to the extent that, due to a change in the method of assessment or taxation, any income, franchise, transfer, inheritance, capital stock and/or other tax or charge shall be directly attributable to and substituted for the Taxes now or hereafter imposed upon the ----- 2 Land and the Building, such income, franchise, transfer, inheritance, capital stock taxes, or other tax or charge, computed as if Landlord owned or operated no property other than the Land and the Building, shall be deemed included in the term Taxes for the purposes hereof. ----- Landlord represents that there are currently no tax abatements or tax exemptions and that the building has been fully assessed as a completed structure. Tenant shall make payment to Landlord on the first day of each month during the term of the lease of a sum equal to one- twelfth of the taxes levied, assessed and imposed by the local taxing authorities imposed by the taxing authority for the prior 12 month period. Such payments shall be in conformity with the statement to be rendered by Landlord of the monthly amount to be paid by Tenant pursuant to this lease for such taxes. Such payments, when received by Landlord, shall be deposited in an interest bearing account and interest earned thereon shall be paid to Tenant annually. Tenant's obligation to pay such taxes shall survive the termination of this lease. Payments of additional rent for any Taxes due from Tenant shall be made, and are subject to the conditions hereinafter provided in this paragraph. Within 90 days after the end of each Lease Year, Landlord shall render to Tenant a statement together with a true copy of all bills for Taxes on which any statement shall have been based, showing the amount of the Taxes for such Lease Year and adjustment, if any, in the Tax Payment due from Tenant for such Lease Year, indicating therein in reasonable detail the computation of such adjustment. Any adjustment due from Tenant for Taxes shall be paid monthly during the course of the applicable year. At the expiration of the terms of the lease, the tax amounts paid or payable by Tenant shall be apportioned based on the date of termination. Subject to the right of contest hereinafter provided, Tenant shall pay the amount of the Tax Payment shown on such 3 statement (or the balance or a proportionate installment thereof, if only an installment is involved) within twenty (20) days after being billed therefor by Landlord. Landlord's statement for a Tax Payment of any Lease year shall be conclusive and binding upon Tenant unless (i) within 30 days after receipt of such statement, Tenant shall notify Landlord that it disputes the correctness of the statement and tax bills, specifying the respects in which the statement is claimed to be incorrect, and (ii) if such dispute shall not have been settled by agreement, Tenant shall submit the dispute to arbitration pursuant to American Arbitration Association rules and procedures, within 90 days after notice, if such notice is given. Pending the determination of such dispute by agreement or arbitration as aforesaid, Tenant shall pay additional rent in accordance with Landlord's statement, and such payment shall be without prejudice to Tenant's position. If the dispute shall be determined in Tenant's favor, Landlord shall forthwith pay Tenant, or Tenant shall be entitled to credit against rents then or thereafter due hereunder, the amount of Tenant's overpayment of rents resulting from compliance with Landlord's statement plus interest thereon at the usual bank interest rate from the date or dates of Tenant's payment to the date of determination. Subject to the further provisions of this paragraph, Landlord shall be under no obligation to contest the Taxes or the assessed valuation of the Land and Building for any Lease Year, or to refrain from contesting the same, and may settle any such contest on such terms as Landlord, in its sole reasonable judgment, considers proper. If Tenant shall, by timely notice to Landlord, so request, Landlord shall institute appropriate proceedings to reduce the Taxes or the assessed valuation of the Land and Building for any Lease Year and use its best efforts jointly with Tenant, to effect a reduction therein. Tenant shall pay the reasonable costs and expenses of such proceedings and any litigation thereon as additional rent on Landlord's demand therefor, subject to recoupment from any refund obtained. Landlord shall not 4 compromise, cancel or withdraw such proceedings which shall have been instituted at the request of Tenant, unless Landlord shall first notify Tenant of its proposal to do so and shall not have received, within 10 days thereafter, objections in writing from Tenant, accompanied by a written agreement to reimburse Landlord forthwith for all of its costs and expenses and relieve Landlord of all of its commitments in connection with such proceedings and to indemnify and hold Landlord harmless against all liability, loss, damage or expense connected with the past or future conduct of such proceedings for which such objector shall be liable. Upon receipt of such objection, agreement and reimbursement, Landlord shall transfer the responsibility for such proceedings to Tenant who may carry on the same in its own name or in Landlord's name, as may be appropriate, at its own expense and shall be entitled to recoupment for all of its costs and expenses from any refund obtained, but not otherwise. However, if the taxes for such Tax Year or an installment thereof shall be reduced before such Taxes or such installment shall be paid, the amount of the costs and expenses of obtaining such reduction (but not exceeding the amount of such reduction) shall be repaid by Landlord to said Tenant and shall be added to and be deemed a part of the Taxes for such Lease Year. 41. ASSESSMENTS AND NEW TAXES. ------------------------- Either the Landlord or Tenant shall have the right, by appropriate proceedings, to protest or contest any assessment or reassessment for real estate taxes, or any special assessment, or the validity of either, or of any change in assessments or the tax rate. In any such contest or proceedings instituted by Tenant, the Tenant may act in its own name and/or the name of the Landlord and the Landlord will, at the Tenant's request, cooperate with the Tenant in any way the Tenant may reasonably require in connection with such contest or proceedings. The Landlord shall sign such consents or other documents as the Tenant may request. Any contest or proceedings conducted by the Tenant shall be at the Tenant's 5 expense and, in the event any penalties, interest or late charges become payable with respect to the real estate taxes as the result of such contest, the Tenant shall pay the same. Tenant shall, in addition to the foregoing, pay any new tax of a nature not presently in effect but which may be hereafter levied, assessed, or imposed upon the Landlord or the demised premises, if such tax shall be based on or arise out of the ownership, use or operation, of the leased premises. This additional obligation shall include charges now or formerly in the nature. of real estate taxes though denominated "fees" and attributable to some specific matter or service. For the purpose of computing Tenant's liability for such new type of tax or fee, the leased premises shall be deemed the only property of Landlord. 42. SERVICES OR UTILITIES. --------------------- Except as herein otherwise provided, the Landlord shall not be required to furnish any services or utilities to the premises during the term of this Lease, the Tenant hereby assuming full and sole responsibility for the supply of, and payment for, such services and utilities, including water. Landlord has agreed to pay for all utilities prior to June 1, 1995* Tenant acknowledges that it has examined the building and grounds, and will accept possession of the property in an "as is" condition, provided all utilities and services are delivered to Tenant in good working order. Landlord agrees to furnish and pay for the services of a building superintendent, (who shall be on duty full time, five and one half days per week, except holidays - weekdays from 8 A.M to 4:30 P.M. and on Saturdays from 8 A.M. to 12:30 P.M.) and will be responsible for structural repairs, elevator repairs, roof repairs, landscaping, repairs to lawn and garage sprinklers, repairs to building HVAC (consisting of 14 roof-top units) and to plumbing system, snow and ice removal from parking lot, maintenance and repair to parking lot, flagpoles and miscellaneous repairs. Landlord agrees that the services and the performance of such superintendent will be reasonably satisfactory to Tenant. 6 * or until Landlord has delivered the Premises to Tenant with Landlord's Work completed in accordance with Article 71. Tenant shall be responsible for maintenance and replacement, if necessary, of the following: rubbish removal, office cleaning, window cleaning, snow removal from walkways, cost of all utilities, telephone, damage caused by negligence or misuse by Tenant of sewer lines, maintenance and operation of cafeteria, security; additional air conditioning for computers, cafeteria and U.P.S. systems; the building's electrical systems (if caused by Tenant's negligence or use of same, exceeding systems' capacity), lamps, fixtures, tenant's signage, carpets and finishes. In the event Landlord is no longer the owner of the Building and the Premises, Tenant, at its option, upon fifteen (15) days prior written notice to Landlord, shall have the right to assume Landlord's responsibilities set forth in this paragraph as well as Landlord's obligation to provide the insurance described in Article 52A and B. In the event Tenant exercises this option effective on the date Tenant assumes the insurance and maintenance obligations, the Annual Rent set forth in Article 38 of this Lease shall be reduced by the sum of $2.50 per square foot plus the then applicable Maintenance Escalation per square foot described in Article 38B. At the request of Tenant, Landlord agrees to execute an agreement setting forth the new Annual Rent and Monthly Rent to be payable by Tenant during the balance of the Term of this Lease and any renewal thereof. 43. ALTERATIONS. ----------- Notwithstanding any provisions in this lease to the contrary, the Tenant may place partitions, trade or other fixtures (including lighting fixtures), personal property, machinery, equipment and the like in the premises and may make such improvements and alterations therein and thereon as it may desire at its own expense, subject to the provision of the following subparagraphs. Tenant acknowledges that Landlord has conceded to Tenant the equivalent of $1,500,000 in "free-rent" in exchange for payment by Tenant for all the alterations and other work to be performed. All such work and installations (except personal property, fixtures [other than electrical fixtures], machinery and 7 equipment) heretofore or hereafter made or installed by or for the Tenant shall become the property of Landlord and in case of damage or destruction thereto by fire or other causes, Landlord shall have the right to recover the value thereof as its own loss from any insurance company with which it has insured the same, or by separate claim, to claim an award in the event of condemnation. Subject to the provisions herein set forth, Tenant shall be permitted to make interior and non-structural alterations to the building at any time after the execution of this agreement after first obtaining written approval of the Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. On or before February 1, 1995, Tenant shall be required to submit architectural working drawings and specifications with respect to interior, exterior and structural alterations, including electric and reflective ceiling plans, and upon receiving Landlord's approval, to obtain at Tenant's expense all necessary permits, insurance and approvals. Such plans shall indicate the location, total number of persons occupying the space and all equipment locations. Within seven (7) business days after delivery to Landlord of the architectural working drawings and specifications, Landlord shall submit to Tenant any reasonable comments Landlord may have with respect thereto. Tenant shall thereafter, within five (5) business days, resubmit to Landlord revised architectural working drawings and specifications incorporating Landlord's reasonable comments. Landlord's failure to respond within the time period set forth herein shall be deemed approval of Tenant's submission. Landlord shall have the right to approve or disapprove any proposed contractors in connection therewith (but such approval shall not be unreasonably withheld, conditioned or delayed) and Landlord shall designate on the drawings submitted which of said improvements shall remain after the termination of the lease and which shall be removed by Tenant at Tenant's expense. If Tenant desires, Landlord will obtain bids from three sub-contractors, recommended by Tenant or Landlord, and known to Landlord as reputable. All alterations [as shown on the drawings to be submitted to the Building Department (if required)] costing in excess of $15,000 are to be performed by Landlord or its designee, on a construction management basis, at cost plus 10%, through subcontractors approved by Tenant and Landlord, provided the cost to perform any such work shall be no greater than the cost for same obtained from a reliable general contractor. This provision shall apply only so long as Landlord remains as Owner of the premises. 8 Landlord may withhold approval of any contractor selected by Tenant provided the contract is in excess of $100,000, if such contractor fails to post, for the benefit of Landlord and Tenant, a completion bond in form and amount reasonably satisfactory to Landlord and further, to provide certificates of insurance and proof of payment of premiums thereon. Tenant shall maintain the building in the same condition as at present throughout the Term (other than reasonable wear and tear and damage by casualty) except for those items which are the responsibility of Landlord, as hereinbefore enumerated. Upon receipt of Tenant's plans, (not later than February 1, 1995), Landlord will, at its sole cost and expense, contract for HVAC engineering drawings which will be designed in accordance with Tenant's architectural space plans, conforming with lease, whereby Landlord assumes responsibility for design of the original installation and duct work distribution of Landlord's 14 rooftop units. Tenant is solely responsible for payment for the installation of its HVAC work, computers and special equipment. 44. TENANT'S RIGHT TO CANCEL. ------------------------ Tenant is hereby given the right to cancel this lease and to vacate the building on August 31, 2000 by giving the Landlord prior written notice by certified or registered mail or overnight delivery service not later than August 31, 1999 and paying to Landlord, simultaneously with the giving of such notice, the sum of $275,000 and an additional payment of $275,000 on or before July 15, 2000. 45. EXPIRATION OF TERM. ------------------ At the expiration of the term, the Tenant will remove its goods and effects and will (a) peaceably yield up to the Landlord the premises in good order and condition, excepting ordinary wear and tear, damage, destruction or loss by fire or other casualty or by any other cause of any kind or nature, provided the Tenant delivers to the Landlord all insurance proceeds paid to the Tenant in connection with any such loss or casualty to the extent of the 9 Landlord's interest in the premises and (b) repair all damage to the premises and the fixtures, appurtenances and equipment of the Landlord therein and thereon, caused by the Tenant's removal of its furniture, fixtures, equipment, machinery and the like, and the removal of any improvements or alterations which have been installed after the execution of this agreement, which Tenant is obligated to remove as hereinbefore set forth. 46. RIGHT TO INSPECT. ---------------- The Landlord shall, upon 48 hours' advance oral notice to the Tenant (except in an emergency), have the right at all reasonable times during business hours to inspect the premises, show the same to prospective mortgagees and during the last six (6) months of the term, show the same to prospective tenants, and at all times to comply with the requirements imposed on Landlord by this Lease, or as may be otherwise necessary, provided however, that the Landlord shall use all reasonable effort not to disturb the Tenant's use and occupancy of the premises. 47. COMPLIANCE WITH LAW. ------------------- During the term the Tenant shall, at its sole cost and expense, promptly comply with all laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments and governmental agencies, which are applicable to the particular use, manner of use or occupancy thereof by Tenant and maintain the premises in compliance with the requirements of the insurance companies from which the Tenant purchases the coverage required by this Lease. Landlord states that the building has handicap (wheelchair) access with respect to elevators and the second floor toilets. After prior notice to the Landlord, the Tenant shall have the right to contest by appropriate legal proceedings (in the name of the Tenant or the Landlord or both) at the Tenant's sole cost and expense and with counsel of the Tenant's choosing, the validity of any law, ordinance, order, rule, regulation or requirement with which, by the provisions of this Lease, it is obligated to comply. 10 If, by the terms of any such law, ordinance, order, rule, regulation or requirement, compliance therewith may be legally held in abeyance without incurring any lien or charge of record against the premises, and without subjecting the Landlord to any fines, penalties or any other liability for failure to comply therewith, the Tenant may postpone compliance until the final determination of any such proceedings, provided that all proceedings shall be prosecuted with due diligence. 48. NOTICES. ------- Any notice, request, communication or demand under this Lease shall be in writing and shall be considered properly delivered when addressed as hereinafter provided, given or served by registered or certified mail (return receipt requested) and deposited in the United States general or branch post office or by Federal Express. Any notice, request, communication or demand by the Tenant to the Landlord shall be addressed to the Landlord at 1615 Northern Boulevard, Manhasset, New York 11030, with a copy to Landlord's attorney, Leonard Lazarus, EAB Plaza, West Tower/14th Floor, Uniondale, NY 11556-0120, until otherwise directed in writing by the Landlord and, if by Landlord to Tenant, shall be addressed to Tenant at 3 Expressway Plaza, Roslyn Heights, NY 11577 with a copy to Tenant's attorney, Sheldon M. Goldstein, c/o Meltzer, Lippe, Goldstein, Wolf, Schlissel & Sazer, P.C., 190 Willis Avenue, Mineola, NY 11501, until otherwise directed in writing by the Tenant. Rejection or other refusal to accept a notice, request, communication or demand or the inability to deliver the same because of a changed address of which no notice was given shall be deemed to be receipt of the notice, request, communication or demand sent. This Lease is executed in several counterparts, each of which shall be deemed to be an original, and all counterparts shall constitute one and the same instrument. This Lease shall not be binding and in effect until at least one counterpart, duly executed by the Landlord and the Tenant, has been delivered to each party hereto. 11 49. MEMORANDUM OF LEASE. ------------------- The parties shall, if requested by either, execute a memorandum of this Lease for recording purposes. The requesting party shall pay all costs of recording. 50. MECHANIC'S LIENS. ---------------- If any mechanic's or other liens or order for the payment of money shall be filed against the subject premises or any building or improvement thereon by reason of or arising out of any labor or material furnished or alleged to have been furnished or to be furnished to or for the Tenant at the leased premises, or for or by reason of any change, alteration or addition or the cost or expense thereof or any contract relating thereto, other than in respect of alterations and repairs made by Landlord, either on its own or at the request of Tenant, the Tenant shall cause the same to be cancelled and discharged of record, by bond or otherwise as allowed by law at the expense of the Tenant, within thirty (30) days after written demand therefor, and shall also defend on behalf of the Landlord at the Tenant's sole cost and expense, any action, suit or proceeding which may be brought thereon for the enforcement of such liens or orders, and the Tenant will pay any damages and satisfy and discharge any judgment entered therein and save harmless the Landlord from any claim or damage resulting therefrom. 51. INDEMNIFICATION OF LANDLORD --------------------------- The Tenant shall keep, save and hold harmless Landlord from any and all damages and liability arising out of the occupancy of the Tenant, the Tenant's agents or servants, and from any loss or damage arising from any fault or negligence by the Tenant or any failure on the Tenant's part to comply with any of the covenants, terms and conditions herein contained. 52. INSURANCE. --------- (a) Insurance on the Real Property: Landlord shall ------------------------------ purchase and maintain, at Landlord's expense during the term of the lease for the benefit of the Landlord an "All-Risk" perils property policy on the Real Property at full replacement cost valuation, without depreciation. The policy shall provide Loss of Rental 12 Income payable to and insuring the interest of the Landlord as to the value of the rental obligation hereunder to the extent of one year's gross rental value. (b) Boiler and Machinery Insurance: landlord shall also ------------------------------ purchase and maintain during the term of the lease at Landlord's expense for the benefit of Landlord Broad Form Boiler and Machinery coverage covering all insurable objects. Said policy shall provide for Repair and Replacement valuation on the insured objects. The policy shall name the Landlord as a Named Insured and Loss Payee as its interest appears. (c) Property Insurance; Indemnity for Damage to Tenant's ---------------------------------------------------- Personal Property; Landlord shall also purchase and maintain during - ----------------- the term of the Lease at Landlord's expense insurance for those items of property belonging to Landlord which, (under Paragraph 42 of this lease) are Tenant's responsibility. Tenant shall maintain at its own expense during the term of the lease, replacement cost insurance on Tenant's machinery, equipment, furniture and fixtures, goods, wares, merchandise and improvements/betterments in sufficient amounts against damage caused by Fire and all other perils covered by a standard All Risk Insurance policy. Landlord and Tenant agree to waive their respective right of subrogation against the other and shall obtain a waiver from their respective insurance companies releasing these carriers' subrogation rights against the other party. (d) Liability Insurance: Tenant shall maintain at its ------------------- own expense during the term of the lease, liability insurance as follows: (1) Comprehensive General Liability insurance at a minimum of $1,000,000 Combined Single Limit (Bodily Injury & Property Damage), including all standard Broad Form Comprehensive General Liability extensions without limitations. Contractual liability, if not written on a blanket basis, must be endorsed to cover indemnities specified herein. This policy shall be written on an "occurrence" basis. (2) Umbrella Liability insurance at a minimum of $10,000,000 Limit, providing excess coverage over all coverage 13 included in the Comprehensive or Commercial General Liability and Broad Form Comprehensive General Liability endorsement. Landlord as Additional Insured: The insurance policies noted ------------------------------ above shall name Landlord (and Landlord's Mortgagee(s), and Managing Agent, if required) as "additional insureds". Notice to the Landlord: All insurance policies noted above ---------------------- shall be endorsed to provide the owner with notice of cancellation at least thirty (30) days prior to the actual date of cancellation or non-renewal. Certificates of Insurance: Tenant shall furnish the Landlord ------------------------- with Certificates of Insurance evidencing that all insurance required and purchased by the Tenant is in full force and effect. All of said certificates shall be promptly furnished to the Landlord, but in no event later than ten (10) days prior to the expiration date of coverage. Hold Harmless and Indemnification: Tenant shall indemnify and --------------------------------- hold Landlord harmless from and against any and all loss, cost (including reasonable attorneys' and witnesses' fees and court costs), damages, expenses and liability in connection with claims for damages resulting from injury and/or death of any person or damage to any property arising out of the maintenance, use, care or control of the demised premises other than any claims arising as a result of any structural or other defects which are Landlord's responsibility. Tenant assumes liability for any Personal injury, Property Damage (including loss of use), cost or expense resulting in claims arising out of the discharge dispersal, release or escape of pollutants or contaminants, limited, however, to acts or omissions of Tenant in connection with its business activities and operations in the premises and excluding any discharge by equipment, systems, duties and obligations of Landlord. 14 The Comprehensive General liability coverage in Section (d)(1) should evidence that the $1,000,000 limit is subject to no deductible. In the case of Umbrella liability, if there is a deductible or self-insured retention, it should clearly be spelled out that Tenant assumes full responsibility for same. Tenant's failure to provide and keep in force all the aforementioned insurance shall be regarded as a material default hereunder, entitling owner to exercise any or all remedies in the event of default. 53. RESTORATION OR REPAIR OF PREMISES. --------------------------------- If the Building on the leased premises shall be damaged or destroyed by any cause whatsoever, during the term of this lease, Landlord shall, within ninety (90) days after such casualty commence repair and replacement of the Building at its own expense and within nine (9) months after commencement of such repair, restore the Building so that the property after such repair and replacement shall be substantially in the same condition as prior to the damage or destruction, and shall do so, even though the proceeds of any insurance policies shall be insufficient to reimburse the Landlord therefor. From the date of such casualty until thirty (30) days after the Building is so repaired and restored, Rent and all other charges and items payable hereunder shall abate in such proportion as the part of the Building thus destroyed or rendered untenantable bears to the total Building. However, in the event that fifty percent (50%) or more of the Building is destroyed or rendered untenantable by fire or other casualty then either party shall have the right to terminate this Lease effective as of the date of the casualty, by giving to the other party within sixty (60) days of such casualty, written notice of termination. If said notice of termination is given within the sixty (60) day period, this Lease shall terminate and Rent and all other charges shall abate as aforesaid from the date of such casualty, and Landlord shall promptly repay to Tenant any Rent paid in advance which has not been earned as of the date of such casualty. If said notice is not given and Landlord is required or 15 elects to repair or rebuild the Building as herein provided, then Tenant shall repair and replace Tenant's Property to at least their condition prior to the damage or destruction. The foregoing provision regarding Landlord's obligation to repair and replace the buildings shall not include Tenant's partitions, equipment or property of any kind. If Tenant elects to terminate this Lease because Landlord's repairs are not completed within the time period set forth herein, Landlord shall have the right to negate Tenant's notice of cancellation provided such repairs are completed to such extent to permit Tenant's use and occupancy of the Demised Premises within thirty (30) days after Tenant's notice of cancellation. Notwithstanding the foregoing provisions of this paragraph if substantial damage occurs during the last two years of this lease, Landlord shall not be obligated to repair the building, and may retain the proceeds of such insurance as its own property and by notice given within thirty (30) days of such damage occurring, serve written notice on Tenant cancelling the lease as of the date of such occurrence. 54. CONDEMNATION. ------------ A. If at any time during the Term, any municipal or other governmental agency takes title by eminent domain and/or by the exercise of right of condemnation, to the whole of the Demised Premises or such material portion thereof, [including any substantial impairment of egress and ingress to the Demised Premises and Marcus Avenue or twenty (20%) percent or more of the parking area closest to Marcus Avenue] as would render, in the reasonable judgment of Tenant, the balance of the Demised Premises not suitable for Tenant's use (hereinafter referred to as the "proceeding"), this Lease shall terminate and expire on the date of such taking and, provided that the Tenant has vacated the premises, the Annual Rent and other charges provided to be paid by Tenant shall be apportioned and paid to the date of such taking. B. If, at any time during the Term, title to less than materially all of the Demised Premises shall be taken as aforesaid 16 and the Lease is not terminated as hereinabove set forth, Landlord shall restore the building on the Demised Premises to an architecturally complete unit with reasonable promptness, subject to delay beyond Landlord's reasonable control. During such Restoration, both Annual Rent and other charges payable by Tenant shall be adjusted until restoration is complete and the Demised Premises is again fully occupied by Tenant. C. Notice of any termination relating to any condemnation or eminent domain proceeding must be made by the party electing to terminate this Lease within sixty (60) days after receipt of written notice of such taking. In the event of such termination, both Landlord and Tenant shall thereupon be released from any liability thereafter accruing hereunder. D. In the case of any taking pursuant to the provisions of this Article, Landlord shall be entitled to receive any award that may be made for the value of the portion of the Demised Premises so taken and the value of any unexpired term of this Lease, but Tenant shall have the right to pursue a separate claim against the condemning authority for the value of its leasehold fixtures and equipment and its moving and relocation expenses. Landlord and Tenant shall be entitled to separate reimbursement from the condemning authority of all reasonable costs, fees and expenses incurred in the collection of any such awards. E. Notwithstanding anything contained in this Article to the contrary, Landlord shall not be required to restore the Demised Premises if there are less than two (2) years remaining of the Term at the time of such condemnation. If Landlord elects not to restore the Demised Premises, then this Lease shall be deemed cancelled as of the date of the taking. 55. CURING DEFAULTS. --------------- Should either party fail to perform any of its obligations imposed by the terms of this lease within 20 days after written notice, but in any event, regardless of such notice or the lack thereof, promptly before the accrual of any penalty as provided by law or by any mortgage held by an institutional lender 17 superior to the lease, the other party may perform the same and add or subtract any such sum or sums paid or expended in such performance to or from any rent then due or thereafter falling due. However, this does not grant Tenant any license or privilege to allow the premises to be without the insurance coverage or the liability insurance protection provided by this lease, and the failure to promptly comply with such requirement shall entitle lessor to immediately obtain the necessary insurance, and the cost thereof shall be additional rent and collectible as such. 56. ASSIGNMENT OR SUBLETTING. ------------------------ A. Subject to Section 56(d) below, Tenant shall not assign, mortgage or pledge this Lease, nor underlet or sublease the Premises or any part thereof without the written consent of Landlord first had and obtained, which consent shall not be unreasonably withheld, conditioned or delayed and subject to any necessary consent of any mortgagee of the Premises; nor after such written consent has been given shall any assignee or sublessee assign, mortgage or pledge this Lease or such sublease, or underlet or sublease the Premises or any part thereof, including, without limitation, any collateral re-assignment, mortgage or pledge of this Lease in favor of the previous tenant hereunder, without an additional written consent by Landlord and such mortgagee. No assignment or sublease, whether or not consented to in the manner aforesaid, shall in any way relieve or release Tenant from liability upon any of the covenants of this Lease, and notwithstanding any such assignment or sublease, the responsibility and liability of Tenant hereunder shall continue in full force and effect until the expiration of the Term. B. If this Lease is assigned, or if the Premises or any part thereof are sublet or occupied by anybody other than Tenant, Landlord shall have the right, in its sole discretion, to collect rent from the assignee, sublessee or occupant, and apply the amount collected to the Rent payable hereunder; but no such collection shall be deemed a waiver of this covenant against assignment and 18 subletting, or the acceptance of the assignee, sublessee or occupant as Tenant. C. If Tenant shall desire to assign this Lease or to sublet the Premises in whole or in part, Tenant shall submit to Landlord the following information, accompanied by a written request for Landlord's consent to such assignment or subletting: (i) the name and address of the proposed assignee or subtenant; (ii) a description identifying the space to be sublet and Tenant's improvements included therein; (iii) the terms and conditions of the proposed assignment or subletting; (iv) the nature and character of the business of the proposed assignee or subtenant; and (v) current financial information and any other information Landlord may reasonably request with respect to the proposed assignee or subtenant. In connection with any assignment, underletting or sublease for which consent is sought, the following additional conditions shall be fulfilled: (i) An Event of Default shall not then, or at the time such assignment or subletting shall become effective, have occurred and be continuing. (ii) In case of a subletting, it shall be expressly subject to all of the obligations of Tenant under this Lease and the further condition and restriction that the sublease shall not be assigned, encumbered or otherwise transferred to the subleased premises or further sublet by the sublessee in whole or in part, or any part thereof suffered or permitted by the sublessee to be used or occupied by others, without the prior written consent of Landlord in each instance. D. Every subletting hereunder is subject to the express condition, and by accepting a sublease hereunder each subtenant shall be conclusively deemed to have agreed that, if this Lease should be terminated prior to the end of the stated term or any renewal term hereof, or if Landlord shall succeed to Tenant's estate in the Premises, then at Landlord's election the subtenant shall attorn to and recognize Landlord as subtenant's landlord 19 under the sublease and the subtenant shall promptly execute and deliver any instruction Landlord may reasonably request to evidence such attornment. E. Notwithstanding anything to the contrary hereinabove set forth, no assignment of this Lease shall be binding upon Landlord unless the assignee shall execute and deliver to Landlord an agreement, in recordable form, whereby such assignee agrees unconditionally to be bound by and to perform all of the obligations of Tenant hereunder and further expressly agrees that, notwithstanding such assignment, the provisions of this Article shall continue to be binding upon such assignee with respect to all future assignments and transfers. A failure or refusal of such assignee to execute or deliver such an agreement in recordable form shall not release the assignee from its liability for the obligations of Tenant hereunder assumed by acceptance of the assignment of this Lease. F. As a condition to any assignment or sublease being effective as against Landlord, a fully executed copy of the assignment or sublease shall be delivered to Landlord before its effective date. G. Tenant further agrees, if there shall be a consent to a proposed assignment or subletting under the provisions of this Article, and if Tenant shall receive from its assignee any consideration for the assignment, howsoever designated, or shall receive from its subtenant any sublet rental, howsoever designated, which exceeds the rental provided for hereunder, either on a monthly basis or in the aggregate, or both, including, but not limited to, all sums paid for the sale or rental of said assignor or sublessor Tenant's fixtures, leasehold improvements, equipment, furniture, furnishings or other personal property, Landlord shall not be entitled to receive any portion of any sums received by Tenant, which sums shall be the sole and exclusive property of Tenant. 20 H. Subject to Subparagraph I hereof and notwithstanding anything contained in this Article to the contrary, in the event that Tenant desires to sublease the Premises or assign this Lease to any other party, the terms and conditions of such sublease or assignment shall be communicated to Landlord in writing at least fifteen (15) days prior to the effective date of any such sublease or assignment, and Landlord shall have the option, exercisable in writing to Tenant within fifteen (15) days after Landlord's receipt of said communication, to recapture the Premises which is the subject of the proposed sublease, and, at the option of Landlord, to enter into a lease with such prospective sublessee or assignee, so that such party shall then become the direct tenant of Landlord hereunder. In the event of such recapture, this Lease shall terminate as to the space recaptured as of the date thereof, except for any obligations of Tenant arising prior to such termination or intended by their terms to survive such termination. Notwithstanding the foregoing, in the event Landlord elects to recapture the Premises, Tenant shall have the right to negate said recapture by giving Landlord notice, within ten (10) days following the date Tenant receives notice from Landlord of its election to recapture, that Tenant elects to withdraw its aforesaid request to assign or sublet, in which event this Lease shall continue in full force and effect. (a) Notwithstanding any contrary provision of this Article 56, the following actions may be taken without the consent of Landlord: (i) Tenant shall have the absolute right to sublet, assign or otherwise transfer its interest in this Lease to a licensee, franchisee or any parent or operating subsidiary of Tenant, or subsidiary of Tenant's parent, or to a corporation with which it has committed to merge or consolidate, without Landlord's approval, written or otherwise; (ii) Tenant shall have the right to assign or sublet this Lease to an Affiliate of Tenant; and otherwise grant a security interest in this Lease to a bank, 21 insurance company or other recognized institutional lender (the "Secured Creditor"), as collateral security for the performance by Tenant of its obligations to Secured Creditor in connection with Tenant's financing but no such assignment, subletting or transfer shall relieve Tenant of its obligations hereunder. (b) In connection with any mortgage, assignment or other security interest in favor of the Secured Creditor, Landlord will execute and deliver any consents, waivers or other instruments, and in such form, as the Secured Creditor may reasonably request to give effect to the Secured Creditor's rights hereunder; provided, however, that any further assignment or subletting of or under this Lease by the Secured Creditor following a default by Tenant under any security agreement in favor of the Secured Creditor shall be subject to the terms of, and require, the prior written consent of Landlord under this Article 56. (c) Anything to the contrary in this Article notwithstanding, Landlord's consent shall not be required to an assignment by Tenant of this Lease or a sublease by Tenant of the whole of the Premises to the purchaser in connection with the sale of Tenant's business either by way of a sale of assets or stock or in connection with a merger, consolidation or corporate reorganization, but in any such event, Tenant shall remain liable under the terms of this lease. (d) Notwithstanding anything contained in this Article 56(d) to the contrary, Tenant shall provide Landlord with notice of any assignment or subletting. (e) Except as may be effected hereunder, at no time during the term of this lease shall there be more than two sublessees occupying the premises or parts thereof, in addition to the Tenant or the operator of any cafeteria, day care center of health facility located in the Building and the Premises. 57. DEFAULTS BY TENANT. ------------------- A. The occurrence of any of the following shall constitute a default and breach of this Lease by Tenant: 22 (i) Any failure by Tenant to pay Rent or make any other payment required to be made by Tenant hereunder within five (5) days after receipt of written notice from the Landlord. (ii) A failure by Tenant to observe and perform any other material provision of this Lease to be observed or performed by the Tenant, where such failure continues for twenty (20) days after written notice thereof by Landlord to Tenant, except that this twenty (20) day period shall be extended for a reasonable period of time if the alleged default is not reasonably capable of cure within said twenty (20) day period and Tenant proceeds to diligently cure the default. B. In the event of any such default by Tenant, then Landlord shall be entitled to all of the following remedies: (i) terminate this Lease by giving written notice of termination to Tenant, in which event Tenant shall immediately surrender the Demised Premises to Landlord. If Tenant fails to so surrender the Demised Premises, then Landlord may, without prejudice to any other remedy it has for possession of the Demised Premises or arrearages in Rent or other damages, re-enter and take possession of the Demised Premises and expel or remove Tenant and any other person occupying the Demised Premises or any part thereof, in accordance with applicable law; or (ii) Landlord may re-enter and take possession of the Demised Premises without terminating the Lease in accordance with applicable law, and relet the Demised Premises and apply the Rent received to the account of Tenant. In the event Landlord so re- enters and takes possession of the Demised Premises as set forth above, Landlord agrees to use reasonable efforts to relet the Demised Premises for a commercially reasonable rate at the time of such reletting. No reletting by Landlord is considered to be for Landlord's own account unless Landlord has notified Tenant in writing that this Lease has been terminated. In addition, no such reletting to be considered an acceptance of Tenant's surrender of the Demised Premises unless Landlord so notifies Tenant in writing; or 23 (iii) re-enter the Demised Premises without terminating the Lease and without being liable for any damages, whether caused by the negligence of Landlord or otherwise, and do whatever Tenant is obligated to do under the Lease. Tenant shall pay to Landlord, upon demand, the reasonable expense paid by Landlord in satisfying Tenant's obligations under the terms of this Lease. Any sums so expended by Landlord shall bear interest from the date expended until the date Landlord is repaid. C. Notwithstanding anything to the contrary contained in this Lease: (i) Landlord shall not have any right to accelerate the Rent and other amounts payable hereunder, sue Tenant for any consequential, punitive or incidental damages, such as any claims for lost profits and/or lost business opportunity, or sue Tenant for the cost to renovate the Demised Premises for any prospective tenant except to correct or remove changes made by Tenant without Landlord's consent (where required); (ii) in the event of any default by Tenant under this Lease, Landlord shall in each case use its reasonable efforts to mitigate its damages. D. If Landlord obtains possession of the Demised Premises as a result of the Tenant's abandonment of same or by a decree from a court of competent jurisdiction, this shall not be construed as an election to terminate this Lease unless Landlord provides Tenant with a written notice of this election. E. If a petition for relief shall be filed by Tenant pursuant to any state or federal bankruptcy or insolvency law or if Tenant shall be an adjudicated bankrupt, or if Tenant shall make a general assignment for the benefit of creditors, or if in any proceeding based upon the insolvency of Tenant, a receiver of Tenant or its tenant shall be appointed and shall not be discharged within sixty (60) days thereafter, then Tenant shall be in default under the terms of this Lease, and Landlord may, to the extent permitted by law, exercise all rights and remedies available to Landlord under this Lease or in law or equity occasioned by said default. If Tenant shall become the subject of any bankruptcy or insolvency proceeding under any state or federal law, whether or 24 not pursuant to a petition or other proceeding filed by or on behalf of Tenant or by any other party, then the Tenant (whether as debtor in possession or in any other capacity), or any trustee or other party or entity, acting on behalf of Tenant, or exercising the rights of Tenant hereunder shall: (i) Afford to Landlord all rights and benefits to which Landlord is entitled under any applicable statute or rule, including, by way of example, cure of existing defaults or adequate assurance or prompt cure; compensation for pecuniary loss incurred by Landlord arising as a result of Tenant's acts or adequate assurance of prompt compensation therefor; adequate assurance of future performance of Tenant's obligations under this Lease, which may be secured by the posting of security deposits, advance payments on account of real estate taxes or other charges as accrued. (ii) Timely perform all acts, and make all payments to Landlord as required by this Lease without exception, subject to applicable statute or rule. 58. Intentionally Omitted. ---------------------- 59. NO REINSTATEMENT. ----------------- No receipt of moneys by the Landlord from the Tenant after the termination or cancellation of this lease, in any lawful manner, shall reinstate, continue or extend the term of this lease, or affect any notice theretofore given to the Tenant, or operate as a waiver of the right of the Landlord to enforce the payment of fixed or additional rent or rents then due, or thereafter falling due, or operate as a waiver of the right of the Landlord to recover possession of the leased premises by property suit, action, proceeding, or remedy. It is agreed that, after the service of notice to terminate or cancel this lease, or the commencement of suit, action or summary proceeding, or any other remedy, or after a final order or judgment for the possession of the leased premises, Landlord may demand, receive and collect moneys on account and any moneys so collected shall be deemed to be payments towards satisfying the Tenant's obligations to the Landlord. 25 The failure of either party to enforce any agreement, condition, covenant or term, by reason of its breach by the other party, after notice had been given, shall not be deemed to void or affect the right of said party to enforce the same agreement, condition, covenant or term on the occasion of a subsequent default or breach. 60. SUBORDINATION AND NON-DISTURBANCE. ---------------------------------- A. This lease shall be subject and subordinate to any and all mortgages which may now or hereafter affect the Landlord's interest in the real property of which the Demised Premises form a part and of all renewals, modifications, consolidations, replacements and extensions thereof. This clause shall be self- operative and no further instruments of subordination shall be required. In confirmation of such subordination, Tenant shall execute promptly any certificate or instrument that Landlord and/or the holder of any mortgage may reasonably request to evidence such subordination. B. The foregoing subordination as it pertains to any mortgages hereafter made, which term includes any agreement modifying any mortgage now in existence or hereafter made, is expressly contingent upon the agreement of the holder of any such mortgage, in recordable form, to be delivered to the Tenant, which agreement shall provide, in pertinent part as follows: "So long as Tenant is not in default under this lease beyond any applicable grace and cure period, which would entitle Landlord to terminate this lease or would cause, without any further action of Landlord, the termination of this lease or would entitle Landlord to dispossess Tenant thereunder, mortgagee agrees with the Tenant that the mortgagee (i) will not disturb the peaceful and quiet possession of the Premises by Tenant by reason of any foreclosure or otherwise, (ii) will not join Tenant as party in any action or proceeding brought pursuant to the mortgage and (iii) will release casualty insurance proceeds and condemnation awards to which the holder of the mortgage is entitled under the terms of the mortgage to be applied toward restoration of the Premises consistent with the provisions of the lease." (C) In the event that such mortgagee acquires the interest of Landlord or comes into the possession of or acquires 26 title to the Premises by reason of foreclosure, Tenant shall be bound to mortgagee under all of the provisions of the lease for the balance of the term thereof with the same force and effect as if mortgagee was the landlord under the lease, and Tenant agrees to attorn to the mortgagee as its landlord, such attornment to be effective and self-operative without the execution of any further instruments on the part of either of the parties hereto, and further, in such event, mortgagee shall be bound to the Tenant under all of the provisions of the lease and Tenant shall, from and after such event, have the same remedies against mortgagee for the breach of any agreement contained in the lease that the Tenant might have had under the lease against the Landlord thereunder. 61. ESTOPPEL CERTIFICATES. ---------------------- At any time and from time to time either party, upon request of the other party, will execute, acknowledge and deliver an instrument, stating, if the same be true, that this Lease is a true and exact copy of this Lease between the parties hereto, that there are no amendments hereof (or, if not so, stating what amendments there may be), that the same is then in full force and effect and that, to the best of its knowledge, there are no offsets, defenses or counterclaims with respect to the payment of Rent reserved hereunder or in the performance of the other terms, covenants and conditions hereof on the part of Tenant or Landlord, as the case may be, to be performed (or, if not so, setting forth those offsets, defenses or counterclaims existing), and that as of such date no default has been declared hereunder by either party or if a default has been declared, such instrument shall specify same. Such instrument will be executed by the other party and delivered to the requesting party within fifteen (15) days of receipt, or else the statements made in the proposed estoppel request shall be deemed to be correct. The following terms shall have the meanings below described when used in this lease: The term "Landlord" as used in this lease means only the owner of the then current interest of the Landlord in the demised 27 premises or, as the case may be, the successor thereto from time to time. In the event of any transfer at any time of the interest of the Landlord, the transferor shall be and is hereby entirely freed and relieved of all covenants and obligations of the Landlord hereunder, and it shall be deemed and construed without further agreement between the parties and the transferee that the transferee of the Landlord's interest has assumed and agreed to carry out any and all covenants and obligations of the Landlord hereunder. 62. NO WAIVER. ---------- The failure of either party to insist in any one or more instances upon a strict performance of any of the covenants of this lease, or to exercise any option herein contained, shall not be construed as a waiver of, or relinquishment for the future, of the performance of such covenant, or the right to exercise such option, but the same shall continue and remain in full force and effect. The receipt by the Landlord of annual or additional rent, with knowledge of the breach of any covenant hereof, shall not be deemed a waiver of such breach. No waiver by either party of any provision hereof shall be deemed to have been made unless expressed in writing and signed by said party. 63. OPTION TO RENEW. ---------------- Providing that Tenant is not in default under the terms of this lease, either at the time of giving such notice or at the expiration of the original term, Tenant is hereby given the right, option and privilege to extend the term of this lease for an additional five year period, by giving written notice to Landlord by registered or certified mail postmarked at least one year prior to the expiration of the original term. During said option term, all of the provisions of this lease shall remain in full force and effect, except that (a) there shall be no right on the part of the Tenant for a further extension, and (b) there shall be no rent concession during the renewal term, 28 (c) the rent shall be increased by the lesser of the following: (i) $3.00 per sq. ft. of the Building, excluding storage and archive space (not exceeding 7500 square feet) and garage space or (ii) increase in the C.P.I. to be determined as follows: the product derived by multiplying the rental paid during the last year of the original term by the percentage increase, if any, in the Consumer Price Index compared to such Index at the commencement of the initial term of the lease. Such escalation shall be determined on the first day of the extension period and shall apply throughout the extension period; CONSUMER PRICE INDEX: "Consumer Price Index" (CPI) shall -------------------- mean "Consumer Price Index for Urban Wage Earners and Clerical Workers, New York -- Northern New Jersey -- Long Island -- All Items" as published by the United States Department of Labor, Bureau of Statistics. If such index shall cease to use the 1982-1984 Index of 100 as the basis for calculation or if a substantial change is made in the basis for such index, the index shall be adjusted to reflect such change; and if such index is no longer available, such annual amount shall be adjusted by such method as is then being used to measure the value of the dollar for the New York metropolitan area. In the event that the U.S. Department of Labor, Bureau of Labor Statistics, changes the publication frequency of the Price Index (as defined in this section) so that a Price Index is not available to make a cost-of-living adjustment of annual rent, the cost-of-living adjustment shall be based on the percentage difference between the Price Index for the closest preceding month for which a Price Index is available and the Price Index for the Base Month. (d) maintenance escalation shall be increased each year during said extension at the same rate as the increases are indicated for the original term (Par. 38(b)). 64. RIGHT OF FIRST REFUSAL. ----------------------- Tenant shall have the right of first refusal to purchase the demised premises but only under the circumstances as 29 hereinafter in this Article set forth. If, at any time during the term of this lease, Landlord shall receive a bona fide offer, other than at public auction, from a third party (which does not have the power of eminent domain) for the purchase of the demised premises, which offer Landlord shall desire to accept, Landlord shall promptly deliver to Tenant a copy of such offer, and Tenant may, within 10 business days thereafter, elect to purchase the demised premises on the same terms as those set forth in such offer. If Tenant shall not accept such offer within the time herein specified therefor, said right of first refusal shall cease to exist, but this lease shall continue otherwise on all the other terms, covenants, and conditions in this lease set forth. If the transaction with the party who made the offer is not consummated for any reason, this right of first refusal shall remain in full force and effect. In the event Landlord desires to sell the demised premises, Landlord shall first notify Tenant of its intention. This right of refusal shall be inapplicable to a transfer, by way of sale, gift, or devise, including a trust by any individual having an interest in, or constituting the Landlord, from any such related party to another but shall apply to any subsequent transfer to a third person not so defined. For the purpose of this Article, if the then owner of the demised premises or a participant in such ownership shall be an individual, a related party shall include a spouse, lineal descendant or spouse of such descendant, ancestor or sibling (whether by the whole or half blood), a partnership of which such owner is a member, a joint ownership or ownership in common, which includes the then owner of the demised premises, or partnership, joint venture or corporation, the majority of whose securities is owned by the owner of the demised premises, or any one or more of the foregoing parties. If the then owner of the demised premises shall be a corporation, a related party shall include an affiliate, subsidiary or parent corporation, a successor by merger or consolidation, or the holder or holders of the majority of the securities of such corporation. 30 If the premises shall be conveyed to the Tenant under this right of first refusal, any prepaid rent shall be apportioned and applied on account of the purchase price. 65. SIGNAGE. -------- A. It is expressly understood and agreed that as an inducement for Tenant to enter into this Lease that Tenant shall have the right to install, on the building and existing stonewall, and elsewhere on the premises, if permitted by law, Tenant's signage which shall set forth the Tenant's name. All costs and expenses, including permits, if any, shall be paid by Tenant. B. Prior to or simultaneously with the execution of this Lease, Tenant shall submit to Landlord its sign package, which shall be deemed approved by the Landlord upon Landlord's execution of this Lease. Landlord will fully cooperate with Tenant in filing any required signage application, permit and/or variance for said signage or with respect to the Demised Premises generally. Tenant agrees that its signage must comply with applicable governmental requirements. 66. INDEMNIFICATION. ---------------- Each party hereby indemnifies and holds the other party harmless from and against any and all claims, demands, liabilities, and expenses, including attorney's fees, arising from its negligence or willful misconduct of its agents, employees or contractors in or about the Demised Premises. 67. REMEDIES CUMULATIVE. -------------------- All rights and remedies herein given to the Landlord for the recovery of the leased premises because of the default by the Tenant in the payment of any sums which may be payable pursuant to the terms of this lease, or upon the breach of any of the terms thereof, or the right to re-enter and take possession of the leased premises upon the happening of any of the defaults or breaches of any of the covenants, or the right to maintain any action for rent or damages and all other rights and remedies allowed at law or in equity, are hereby reserved and conferred upon the Landlord as distinct, separate and cumulative remedies, and no one of them, 31 whether exercised by the Landlord or not, shall be deemed to be in exclusion of any of the others. 68. BROKER. ------- The parties agree that this lease was brought about through the services of Sutton & Edwards, Inc., licensed real estate brokers in the State of New York. Landlord agrees to pay commissions to the broker in accordance with a separate written agreement. Tenant hereby agrees to indemnify Landlord against the claims of any other broker who claims to have brought this space to Tenant's attention in connection with the leasing of the premises concerned herein. 69. NO REPRESENTATIONS. ------------------- The Tenant is fully familiar with the physical condition of the leased premises, the building, improvements, fixtures and equipment thereof, and Tenant takes the demised premises in their "as is" condition. The Landlord has made no representation whatsoever in connection with the conditions of the demised premises or of the buildings, improvements, fixtures or equipment thereof, except as herein expressly set forth, and the Landlord shall not be liable for any latent or patent defects therein. 70. SECURITY DEPOSIT. ----------------- A. Upon the signing of the lease, Tenant shall deposit with Landlord the sum of One Hundred Eighteen Thousand Seven Hundred and Fifty ($118,750.00) Dollars, by good check payable to Landlord, or by Letter of Credit, as provided below, as security for the full and faithful performance and observance by Tenant of the terms, provisions and conditions of this lease. If Tenant defaults in respect of any of the terms, provisions and conditions of this lease, on its part to be performed or observed, including, but not limited to, the payment of Fixed Rent and Additional Rent, Landlord may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any Fixed Rent and Additional Rent or any other sum as to which Tenant is in default or for any sum which Landlord may expend or may be required to expend by reason of Tenant's default in respect of any 32 of the terms, covenants and conditions of this lease. If Tenant shall have fully and faithfully complied with all of the terms, provisions and conditions of the lease as of the Expiration Date, the security shall be promptly returned to Tenant within thirty (30) days after the Expiration Date and after delivery by Tenant of possession of the Premises to Landlord. If Landlord applies or retains any part of the security so deposited, Tenant, upon demand, shall deposit with Landlord the amount so applied or retained, so that Landlord shall have the full deposit on hand at all times during the term of this lease. Application of the security deposited by Tenant shall not be deemed to limit Landlord's rights against Tenant in the event of a default under the terms, provisions and conditions of this lease. Any cash deposit shall be placed in an interest bearing account with all interest earned thereon, less one (1%) percent per annum accruing to the benefit of Tenant annually. B. In lieu of a cash security, Tenant shall have the right during the Term of this Lease to deliver to the Landlord a clean, irrevocable and unconditional letter of credit (such letter of credit, and any replacement thereof as provided herein, is called a "Letter of Credit") issued and drawn upon any commercial bank reasonably approved by the Landlord with offices for banking purposes in the City of New York or Nassau County, New York ("Issuing Bank"), which Letter of Credit shall have a term of not less than one (1) year, to be renewed automatically from year to year, shall be in form and content reasonably satisfactory to Landlord and their counsel, for the account of the Landlord and be in the amount specified above. The Letter of Credit shall provide that the Issuing Bank shall pay to the Landlord or its duly authorized representative an amount up to the face amount of the Letter of Credit upon presentation of an affidavit from an officer of the Landlord specifying that a default under this lease has occurred, that Landlord has given the required notice of the default to Tenant and that Tenant has failed to cure the default 33 and the Letter of Credit and a sight draft in the amount shall be drawn and delivered to Landlord. C. The Letter of Credit will automatically be renewed for successive periods of one (1) year. In the event that the Letter of Credit is cancelled by the Issuing Bank for any reason whatsoever, the Landlord shall receive at least thirty (30) days' notification of such cancellation from the Issuing Bank. In the event Tenant shall fail to deliver a replacement Letter of Credit or Cash in lieu of the cancelled Letter of Credit within fifteen (15) days of such notification, the Landlord shall have the right to draw the entire amount of the Letter of Credit and to hold the proceeds as a cash security deposit pursuant to the terms of this paragraph. D. In the event of a sale by the Landlord of the Building or leasing of the Building, Landlord shall have the right to transfer either the Letter of Credit or any sums collected thereunder by Landlord from the Issuing Bank, together with any other sums then held by Landlord as such security, to the vendee or lessee, and Landlord thereupon shall be released by Tenant from all liability under this Article. Tenant agrees to look solely to the new landlord for the return of the Letter of Credit or any sums collected thereunder and any other security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the Letter of Credit or any sums collected thereunder and any other security to a new landlord. 71. LANDLORD'S WORK: Landlord agrees to perform the --------------- following work at its sole cost and expense: (1) Create and construct a new lobby and front entrance facade which would substantially enhance both the front and rear entrances including new doors, floor materials, design features, etc. in accordance with design drawings to be created by The Spector Group. (2) Landscape entire front of building included but not limited to new shrubbery, planting, curbs, etc. Landscape in 34 accordance with plans performed by a recognized landscape architect, in conjunction with The Spector Group. (3) Install handicap ramp in rear of building. (4) Perform all ADA requirements, as to all bathroom facilities, for handicapped persons. (5) Demolish and remove miscellaneous offices, storage room and mechanical rooms located in the garage area in order to maximize parking and create +\- 13 new parking spaces. Tenant will indicate to Landlord which of such rooms Tenant would prefer to lease "as is". (6) Reseal and re-stripe parking lot. (7) Power wash and clean entire facade of building. 72. Entire Agreement. ----------------- This lease contains the entire agreement between the parties, and any agreement hereafter made shall not operate to change, modify or discharge this lease in whole or in part unless such agreement is in writing and signed by the Landlord and Tenant. 73. QUIET ENJOYMENT. ---------------- Tenant, upon paying the rent and performing the other terms, provisions and covenants of this lease, shall and may, at all times during the term of this lease, peaceably and quietly have, hold and enjoy the leased premises free of molestation by the Landlord. 74. IDA FINANCING. -------------- Tenant has informed Landlord that it intends to finance improvements to and fixtures, furniture and equipment in the Premises by way of a Bond Resolution from the Nassau County Industrial Development Authority of the State of New York or other municipal agency. Tenant shall have the right to terminate this Lease if by January 19, 1995 (the "Finance Termination Date") Tenant shall not have obtained, at its sole cost and expense, a Letter of Inducement from Nassau County for the issuance of Industrial Revenue Bonds covering the improvements to and fixtures, furniture and equipment in the Premises. Tenant agrees to immediately apply for such Letter of Inducement and to pursue the applications therefor with due diligence. Tenant must 35 exercise the right of termination by written notice to Landlord made on or before the third (3rd) business day following the Finance Termination Date. If Tenant terminates this Lease, Landlord shall return the amount paid by Tenant to Landlord on the execution of this Lease and upon such return, this Lease shall be terminated and all of the rights and obligations of Landlord and Tenant hereunder shall become null and void and of no further force and effect. 75. SUCCESSORS AND ASSIGNS. ----------------------- The covenants and agreements contained in this lease inurc to the benefit of, and are binding upon, the parties hereto, their successors and assigns, but this provision does not modify the provisions governing assignment, as provided for in Paragraph 56. IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. ELAN ASSOCIATES By: /s/ Ronald Deane ------------------------- CHEYENNE SOFTWARE, INC. By: /s/ Elliot Levine ------------------------- Elliot Levine, Executive Vice President and Chief Financial Officer ACKNOWLEDGMENTS --------------- STATE OF NEW YORK) : ss.: COUNTY OF NASSAU ) On this 20th day of December, 1994, before me personally came Ronald Deane, to me known to be the person who executed the foregoing instrument, and who, being duly sworn by me, did depose and say that he is a member of the firm of ELAN ASSOCIATES, a co-partnership, and that he executed the foregoing instrument in the firm name of ELAN ASSOCIATES, and that he had authority to sign the same, and he acknowledged to me that he executed the same as the act and deed of said firm for the uses and purposes therein mentioned. /s/SHEILA KWARTLER Notary Public, State of New York No. 30-4920794 Qualified in Nassau County Commission Expires Feb. 16, 1996 STATE OF NEW YORK ) : ss.: COUNTY OF NEW YORK) On this 19th day of December, 1994, before me personally came Elliot Levine, to me known, who being by me duly sworn, did depose and say that he resides at No. ; that he is the Executive Vice President and Chief Financial Officer of CHEYENNE SOFTWARE, INC., the corporation described in, and which executed the foregoing instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation and that he signed his name thereto by like order. /s/ Gus P. Nuzzolese ---------------------------- Notary Public GUS P. NUZZOLESE NOTARY PUBLIC, State of New York No. 4859329 Qualified in Nassau County Commission Expires April 21, 1996 ELAN ASSOCIATES, Landlord, -with- CHEYENNE SOFTWARE, INC. Tenant. ======================================== LEASE ======================================== LEONARD LAZARUS Counselor at Law EAB PLAZA WEST TOWER, 14TH FL. UNIONDALE, N.Y. 11556-0120 ---------- (516)683-1940 EX-10.71 10 EXHIBIT 10.71 CHEYENNE SOFTWARE, INC. ----------------------- 1987 Non-Qualified Stock Option Plan Originally Adopted August 17, 1987 Adopted by the Board of Directors, As Amended and Restated, on September 12, 1994 ---------------------------------------------- 1. Purpose: The purpose of the Cheyenne Software, Inc. 1987 Non- ------- Qualified Stock Option Plan (the "Plan") as hereinafter set forth, is to enable Cheyenne Software, Inc. ("CSI"), a Delaware corporation, and its affiliated companies (hereinafter referred to, individually and/or collectively, as the "Corporation") to attract, retain, and reward key managerial employees and consultants, by offering them an opportunity to have a greater proprietary interest in and closer identity with the Corporation and with its financial success. Options granted under the Plan are not intended to be qualified stock options under Internal Revenue Code Sec. 422A. Proceeds of cash or property received by the Corporation from the sale of Common Stock of CSI pursuant to options granted under the Plan will be used for general corporate purposes. 2. Administration. -------------- (a) The plan shall be administered by the Board of Directors (the "Board") of CSI, or a committee (the "Committee") appointed by the Board. The Committee shall be composed of not fewer than two (2) directors, all of the members of such Board, if such Board acts as administrator of the Plan, or Committee shall be disinterested persons, as defined by the provisions of subparagraph 2(b). The Committee may have responsibilities in addition to the administration of the Plan. The Executive or Compensation Committee may be designated as the Committee which administers the Plan. Subject to the express provisions of the Plan, the Committee may interpret the Plan, prescribe, amend and rescind rules and regulations relating to it, determine the terms and provisions of respective participants' agreements (which need not be identical) and make such other determinations as it deems necessary or advisable for the administration of the Plan. The decisions of the Committee on matters within their jurisdiction under the Plan shall be conclusive and binding. No member of the Board or the Committee shall be liable for any action taken or determination made in good faith. (b) The term "disinterested person" as used in this Plan, shall mean an administrator of the Plan who has not at any time within one year prior to his/her service as an administrator of the Plan received, and who will not during the term of his/her service receive, a discretionary grant or award of a stock option or stock appreciation rights under this Plan, or any other plan or practice of CSI or any of its affiliates. Any such person shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Securities Act of 1934, as amended, as from time to time in effect. 3. Eligibility. Options may be granted under this Plan only to ----------- key managerial employees of the Corporation or its affiliates and to consultants to the Corporation. The Committee shall determine, within the limits of the express provisions of the Plan, those key managerial employees and consultants to whom, and the time or times at which, options shall be granted. The Commit- tee shall also determine the number of shares to be subject to each option, the duration of each option, the exercise price (option price) under each option, the time or times within which (during the term of the option) all or portions of each option may be exercised, and whether cash, Common Stock, or other property may be accepted in full or partial payment upon exercise of a stock option. In making such determinations, the Committee 2 may take into account the nature of the services rendered by the employee or consultant, his/her present and potential contributions to the Corporation's success and such other factors as the Committee in its discretion shall deem relevant. 4. Common Stock. Options may be granted for a number of shares not ------------ to exceed, in the aggregate, 4,237,500 shares of Common Stock, $0.01 par value, of CSI, except as such number of shares shall be adjusted in accordance with the provisions of Section 6 hereof. Such shares may be either authorized but unissued shares or reacquired shares or other treasury shares. In the event that any option granted under the Plan expires unexercised, or is surrendered by a participant for cancellation, or is terminated or ceases to be exercisable for any other reason without having been fully exercised prior to the end of the period during which options may be granted under the Plan, the shares thereto- fore subject to such option, or to the unexercised portion thereof, shall again become available for new options to be granted under the Plan to any eligible employee or consultant (including the holder of such former option) at an option price determined in accordance with Section 5(a) hereof, which price may then be greater or less than the option price of such former option. 5. Required Terms and Conditions of Options. The options granted ------------------------------------------ under the Plan shall be in such form and upon such terms and conditions as the Committee shall from time to time determine subject to the provisions of the Plan, including the following: (a) Option Price. The option price of each option to purchase ------------ Common Stock shall be at either 100% of the fair market value of the Common Stock subject to such option at the time such option is granted, or at such value to be determined in accordance with procedures established by the Commit- tee; provided that the option price shall in no event be less 3 than the par value of the Common Stock subject to such option. (b) Maximum Term. No option shall be exercisable after the ------------- expiration of seven years from the date it is granted. (c) Installment Exercise Limitations. At the discretion of the -------------------------------- Committee, options may become exercisable in such number of cumulative annual installments as the Committee may establish. (d) Termination of Option. In the event an optionee shall cease --------------------- to be employed by the Corporation for any reason other than death, the optionee shall have the right, subject to the provisions of Sections 5(b) and 6 hereof, to exercise his option at any time within three months after such cessation of employment, but only as to such number of shares as to which his option was exercisable at the date of such cessation of employment. Notwithstanding the provisions of the preceding sentence, (i) if cessation of employment occurs by reason of the disability (within the meaning of Section 105(d)(4) of the Internal Revenue Code), such three month period shall be extended to six months; and (ii) if employment is terminated at the request of the Corporation for substantial cause, the participant's right to exercise his option shall termi- nate at the time notice of termination of employment is given by the Corporation to such optionee. For purposes of this provision, substantial cause shall include: (i) the commission of a criminal act against, or in derogation of the interest of the Corporation, (ii) divulging confidential information about the Corporation to the public; (iii) interference with the relationship between the Corporation and any supplier, client, customer or similar person; or (iv) the performance of any similar action that the Committee, in its sole discretion, may deem to be sufficiently injurious to the interest of the Corporation to constitute substantial cause for 4 termination. If a participant dies while in the employ of the Corporation or its subsidiaries or within three months after cessation of such employment, his estate, personal representative or the person that acquires his option by bequest or inheritance or by reason of his death shall have the right, subject to the provisions of Section 5(b) and 6 hereof, to exercise his option at any time within six months from the date of his death, but only as to the number of shares as to which his option was exercisable on the date of his death. In any such event, unless so exercised within the period as aforesaid, the option shall terminate at the expiration of said period. The time of cessation of employment and whether an authorized leave of absence or absence on military or government service shall constitute cessation of employment, for the purpose of the Plan, shall be determined by the Committee. (e) Method of Exercise. Options may be exercised by giving ------------------ written notice to the Treasurer of CSI, stating the number of shares of Common Stock with respect to which the option is being exercised and tendering payment therefor. Payment for Common Stock, whether in cash or other shares of Common Stock shall be made in full at the time that an option, or any part thereof, is exercised. Notwithstanding the foregoing, payment for Common Stock may not be made with other shares of Common Stock acquired through previous exercise of a stock option under this Plan if such Common Stock has not been held by the participant at least six months from date of exercise. 6. Adjustments. ----------- (a) The aggregate of shares of Common Stock with respect to which options may be granted hereunder and the number of shares of Common Stock subject to each outstanding option, may all be appropriately adjusted, as the Committee may determine, for any 5 increase or decrease in the number of shares of issued Common Stock of CSI resulting from a subdivision or consolidation of shares whether through reorga- nization, payment of a share dividend or other increase or decrease in the number of such shares outstanding effected without receipt of consideration by CSI; provided, however, that no adjustment in the number of shares with respect to which options may be granted under the Plan or in the number of shares subject to outstanding options shall be made except in the event, and then only to the extent, that such adjustment, together with all respective prior adjust- ments which were not made as a result of this provision, involves a net change of more than ten percent (i) from the number of shares of Common Stock with respect to which options may be granted under the Plan or (ii) with respect to each outstanding option, from the respective number of shares of Common Stock subject thereto on the date of grant thereof. (b) Subject to any required action by the stockholders, if CSI shall be a party to a transaction involving a sale of substantially all its assets, a merger or a consolidation, any option granted hereunder shall pertain to and apply to the securities to which a holder of the number of shares of Com- mon Stock subject to the option would have been entitled if he actually owned the stock subject to the option immediately prior to the time any such transac- tion became effective; provided, however, that all unexercised options under the Plan may be cancelled by CSI as of the effective date of any such transaction, by giving notice to the holders thereof of its intention to do so and by permitting the exercise, during the 30-day period preceding the effective date of such transaction of all partly or wholly unexercised options in full (without regard to installment exercise limitations). (c) In the case of dissolution of CSI, every option outstanding 6 hereunder shall terminate; provided, however that each option holder shall have 30 days' prior written notice of such event, during which time he shall have a right to exercise his partly or wholly unexercised option (without regard to installment exercise limitations). (d) On the basis of information known to CSI, the Committee shall make all determinations under this Section 6, including whether a transac- tion involves a sale of substantially all CSI's assets; and all such determina- tions shall be conclusive and binding. 7. Option Agreements. Each optionee shall agree to such terms and ----------------- conditions in connection with the exercise of an option, including restrictions on the disposition of the Common Stock acquired upon the exercise thereof, as the Committee may deem appropriate. Option agreements need not be identical. The certificates evidencing the shares of Common Stock acquired upon exercise of an option may bear a legend referring to the terms and conditions contained in the respective option agreement and the Plan, and CSI may place a stop transfer order with its transfer agent against the transfer of such shares. 8. Certain Legal and Other Requirements. ------------------------------------ (a) The obligation of the Corporation to sell and deliver Common Stock under options granted under the Plan shall be subject to all applicable laws, regulations, rules and approvals, including, but not by way of limitation, the effectiveness of a registration statement under the Securities Act of 1933, or any state securities laws, if deemed necessary or appropriate by the Board, of the Common Stock reserved for issuance upon exercise of options. Nothing herein shall be construed to obligate the Corporation to effect any such registration or qualification. The certificates evidencing the Common Stock issued upon exercise of options may be legended to indicate a lack of such registration or qualification. The Corporation may 7 require any optionee, as a condition of exercising his option, or at any time thereafter, to represent in writing that he is acquiring (or has acquired) the Common Stock for his own account and not with a view to distribution; notwith- standing the foregoing, the Corporation's failure or refusal to request and/or obtain such representation shall not be construed as a waiver of any provision hereof. (b) A participant shall have no rights as a stockholder with respect to any shares covered by an option granted to, or exercised by, him until the date of delivery of a stock certificate to him for such shares. No adjustment other than pursuant to Section 6 hereof shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is delivered. 9. Non-transferability. During the lifetime of an optionee, any ------------------- option granted to him shall be exercisable only by him or by his guardian or legal representative. No option shall be assignable or transferable, except by will or by the laws of descent and distribution. The granting of an option shall impose no obligation upon the employee to exercise such option or right. 10. No Contract of Employment. Neither the adoption of this Plan nor ------------------------- the grant of any option shall be deemed to obligate the Corporation to continue the employment of any optionee for any particular period, or to continue to retain any consultant, nor shall the granting of an option constitute a request or consent to postpone the retirement date of any employee. 11. Indemnification of Committee. In addition to such other rights ----------------------------- of indemnification as they may have as Directors or as members of the Committee, the members 8 of the Committee shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding (or in connection with any appeal therein) to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for gross negligence or misconduct in the performance of his duties; provided that within 60 days after institution of any such action, suit or proceeding, a Committee member shall, in writing, offer the Corporation the opportunity, at its own expense, to handle and defend the same. 12. Termination and Amendment of Plan. No options shall be granted ---------------------------------- under the Plan more than ten years after the date the Plan was adopted. The Board, acting by a majority of its members, exclusive of Board members who are eligible to receive options, without further action on the part of the stock- holders, may from time to time alter, amend or suspend the Plan or any option granted hereunder or may at any time terminate the Plan; provided, however, that the Board may not (i) change the total number of shares of Common Stock avail- able for options under the Plan, except as provided in Section 6 hereof, (ii) extend the duration of the Plan, (iii) increase the maximum term of options, (iv) decrease the minimum option price or otherwise materially increase the benefits accruing to participants under the Plan, or (v) materially modify the eligibility requirements of the Plan; and provided further, that no 9 such action shall materially and adversely affect any outstanding options without the consent of the respective optionees. 13. Effective Date. -------------- (a) The Plan shall become effective upon adoption by the Board; provided, however, that it shall be submitted for approval by the holders of a majority of the outstanding shares of Common Stock of the Corporation within twelve months thereafter, and options made available prior to such stockholder approval shall become null and void if such stockholder approval is not ob- tained. (b) The 1991 amendment to paragraph 4 of the Plan shall become effective as of the date of stockholder approval and adoption of the Plan, as amended and restated, with the exception of the amendments contained in subpara- graphs 2(a) and 2(b), which provisions shall become effective as of September 1, 1992. 10 EX-10.72 11 EXHIBIT 10.72 CHEYENNE SOFTWARE, INC. 1989 Incentive Stock Option Plan Originally Adopted October 18, 1989 Adopted by the Board of Directors, As Amended and Restated, on September 12, 1994 ---------------------------------------------- 1. Purpose of the Plan. This plan shall be known as the Cheyenne -------------------- Software, Inc. 1989 Stock Option Plan (the "Plan" or the "ISOP" or the "1989 ISOP"). The purpose of the Plan is to attract and retain the best available personnel for positions of substantial responsibility and to provide additional incentives to the officers and other key employees of Cheyenne Software Inc., a Delaware corporation (the "Company") and any present or future Parent or Subsidiary of the Company to promote the success of the Company. Pursuant to the Plan, such persons will be given the opportunity to acquire common stock of the Company through the grant of incentive stock options. This Plan and the Options to be granted hereunder are intended to be "incentive stock options" as defined in Section 422A of the Internal Revenue Code of 1986, as amended. 2. Definitions. In addition to other terms defined elsewhere ----------- herein, the following capitalized terms used herein have the following definitions: "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the Option Committee of the Board, appointed by the Board in accordance with Section 4 hereof. "Common Stock" means the common stock, par value $.01 per share, of 1 the Company. "Company" means Cheyenne Software, Inc., and all present and future Subsidiaries. "Continuous Status as an Employee" means the absence of any interruption or termination of an individual's employment by, or status as an officer or director of the Company, or any present or future Parent or Subsidiary. In the case of an Employee on an approved leave of absence, the Committee may, if it determines that to do so would be in the best interests of the Company, provide in a specific case for the continuation of Options during such leave of absence, such continuation to be on such terms and conditions as the Committee determines to be appropriate. "Employee" means any person (who may be an officer or a director of the Company) employed by the Company (within the meaning of Section 3401(c) of the Code and the regulations promulgated thereunder), or any successor corporation by merger or consolidation, or employed by a Subsidiary. "ISO" means an Option. "Option" means an option granted pursuant to the Plan. Each Option shall be evidenced by a stock option agreement or certificate, which may be in the form of a letter. "Optionee" means an Employee to whom an Option has been granted. "Option Committee" means the Option Committee of the Board, appointed by the Board in accordance with Section 4 hereof. "Parent" means any present or future corporation which would be a "parent corporation" as defined in Subsections (e) and (g) of Code Section 425. When the context requires, such determination shall be made as if the Company were the employer corporation. 2 "Plan" means the Cheyenne Software, Inc. 1989 Incentive Stock Option Plan. "Share" means one share of Common Stock, adjusted if applicable in accordance with Section 6 of the Plan. "Subsidiary" shall mean any present or future corporation which would be a "subsidiary corporation" as defined in Subsections (f) and (g) of Code Section 425. When the context requires, such determination shall be made as if the Company were the employer corporation. "Underlying Stock" shall mean the Shares of Common Stock subject to an Option. 3. Shares Subject to the Plan. Except as otherwise required by the --------------------------- provisions of paragraph 9 hereof, the aggregate number of Shares which may be issued upon the exercise of all Options pursuant to the Plan shall not exceed 4,806,250 Shares, unless adjusted in accordance with paragraph 8. Such Shares may be either authorized but unissued Shares or treasury shares. If an Option shall expire without having been exercised in full, the unpurchased Underlying Shares which were subject thereto shall, unless the Plan shall theretofore have been terminated, again be available for issuance under the Plan. 4. Administration. -------------- (a) The Plan shall be administered by an option committee (the "Option Committee" or the "Committee") appointed by the Board and consisting of two or more members of the Board; the Board, in its absolute discretion, may select persons to serve on the Committee who would be "disinterested persons". The term "disinterested person", as used in 3 this Plan, shall mean an administrator of the Plan who has not at any time within one year prior to his/her service as administrator of the Plan received, and who will not during the term of his/her service receive a discretionary grant or award of a stock option or stock appreciation rights under this Plan or any other plan or practice of the Company or any of its affiliates. Any such person shall otherwise comply with the requirements of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, as from time to time in effect. Any standing or other committee of the Board which otherwise satisfies the requirements of the Option Committee may be authorized by the Board to serve as the Option Committee, whether or not the name of such committee includes the term "Option Committee". (b) The Committee shall be authorized (but only to the extent not contrary to the express provisions of the Plan or to resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the recipients, form, and content of Options to be granted under the Plan, and to make other determinations which it deems necessary or appropriate for the proper administration of the Plan, and shall have and may exercise such other powers and authority as may be delegated to it by the Board from time to time. A majority of the entire Committee shall constitute a quorum, and the action of a majority of the Committee members present at any meeting at which a quorum is present shall be the action of the Committee. All decisions, determinations, and interpretations of the Committee shall be final and conclusive on all persons affected thereby and shall be consistent with Code Section 422A. (c) No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted thereunder. 4 (d) The President or such other officers of the Company as the Committee may designate, or a Secretary of the Committee designated by majority resolution of the Committee, shall execute such certificates, option agreements and other documents as may be necessary to evidence the decisions of the Committee and/or implement and carry out the Plan. The President or other officers of the Company, when so acting, shall be deemed to be acting solely in a ministerial capacity, and the acts of such officers of the Company shall not be construed as giving them any discretionary authority over the granting of Options or the administration of the Plan. 5. Eligibility. Options may be granted to any Employee who, in the ----------- opinion of the Committee, has or is expected to make key contributions to the success of the Company. An Employee who has been granted an Option or any other options or rights, under any other plan or otherwise, may, if otherwise eligi- ble, be granted additional Options. 6. Terms and Conditions of Options. Options granted pursuant to the ------------------------------- Plan shall be evidenced by written agreements in such form as the Committee from time to time shall determine, which agreements shall comply with and be subject to the following terms and conditions: (a) Option Price. The price per share at which any Incentive ------------ Stock Option granted under the Plan may be exercised shall not be less than the fair market value (determined in good faith by the Committee on a basis consis- tent with the provisions of Section 422A of the Code) of the Underlying Stock at the time such Option is granted. The exercise price of an Option granted to an Optionee who owns (within the meaning of Section 425(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the 5 Company, or of any of its Parent or Subsidiary corporations, at the time such Option is granted shall not be less than 110% of the fair market value of the Underlying Stock at the time the Option is granted. No Option may be granted at a price per share which is less than the par value of the Underlying Stock. (b) Option Term. The term of each Option shall be established ----------- by the Committee, but shall not in any event exceed seven (7) years from the date of grant of the Option. (c) Nontransferability of Options. Options shall by their terms ----------------------------- not be transferable except by will or by the laws of descent and distribution and shall be exercisable during an Optionee's lifetime only by the Optionee. (d) Time of Exercise. No option may be exercised until the ----------------- second (2nd) anniversary of the date of grant. Not more than 25% of the Underlying Stock may be purchased prior to the third (3rd) anniversary of the date of grant, and not more than 50% of the Underlying Stock (including Underly- ing Stock acquired prior to the 3rd anniversary) may be acquired prior to the fourth (4th) anniversary of the date of grant. (e) Other Provisions. The Option agreements authorized under ----------------- the Plan shall contain such other provisions not inconsistent with the terms of the Plan, including, without limitation, restrictions upon the exercise of the Option, as the Committee shall deem advisable. Options may contain other terms or restrictions as determined by the Committee in its discretion. 7. Exercise of Options. ------------------- (a) Procedure for Exercise. Options may be exercised in whole ----------------------- or in part by written notice, delivered by hand or mailed by prepaid registered or certified mail, 6 addressed to the President or Secretary of the Company or the Secretary of the Committee, at the Company's executive offices, which notice shall specify the date the Option to be exercised was granted and the number of whole Shares to which such exercise applies. No Option may be exercised to any extent until all conditions set forth in the Plan and in such Option shall have been satisfied. (b) Payment. Payment for all Shares purchased by the exercise ------- of an Option shall be made in cash or by delivery of Shares owned by the Optionee having an aggregate fair market value on the date of exercise equal to the aggregate exercise price of the portion of the Option being exercised. Payment shall be made at the time that an Option or any part thereof is exer- cised, and no Shares shall be issued until full payment therefor has been made. No Optionee shall, as such, have any rights as a stockholder of the Company. (c) Holding Period of Shares Acquired Under Incentive Stock ------------------------------------------------------------ Options. The Committee shall advise each holder of an Option that (i) in order - ------- for such Option to be treated as an incentive stock option under the Code, the Shares acquired upon exercise of such Option must not be disposed of until a date which is at least two years after the date such Option was granted and at least one year after the date such Shares were acquired by such Optionee, and that (ii) without written notice, delivered by hand or mailed by prepaid registered or certified mail, addressed to the President or Secretary of the Company or the Secretary of the Committee at the Company's executive offices, no Optionee may dispose of Shares acquired pursuant to the exercise of an Option within the aforesaid two or one-year periods. (d) Termination of Employment of an Optionee. ---------------------------------------- (i) Subject to the provisions of subparagraphs (ii) through (v) 7 of this paragraph 7(d), if an Optionee's employment with the Company or a Parent or Subsidiary terminates for any reason, with or without cause, any Option granted to him shall terminate on the date his employment terminates. (ii) Subject to the provisions of subparagraph (iv) of this paragraph 7(d), if an Optionee dies while in the employ of the Company or a Parent or Subsidiary, or on approved leave of absence, his Option may be exercised within three (3) months after his death by the executor or administrator of the estate of the Optionee or by the person to whom the Option shall pass by will or by the laws of descent and distribution, but only to the extent the Optionee was entitled to exercise the Option on the date of his death. The Company may require such executor or any other person claiming to be entitled to exercise the Option pursuant to this subparagraph to furnish such proof of his or her authority, including a bond or indemnity agreement, as the Company may reasonably require. The cost of any such bond shall be the responsibility of the persons seeking to exercise the Options. (iii) Subject to the provisions of subparagraph (iv) of this paragraph 7(d), if an Optionee's termination of employment with the Company and its Parent or Subsidiary shall be by reason of his perma- nent and total disability (within the meaning of Section 422A(c)(7) of the Code), any Option shall terminate upon the expiration of twelve (12) months after the date on which the Optionee's employment is terminated, and may be exercised by a conservator, guardian or other fiduciary ("Legal Representative") duly appointed to act on behalf of the 8 Optionee. The Company may require such Legal Representative to furnish such proof of his or her authority, including a bond or indemnity agreement, as the Company may reasonably require. The cost of any such bond shall be the responsibility of the persons seeking to exercise the Options. (iv) Notwithstanding the provisions of subparagraphs (ii) and (iii) of this paragraph 7(d) or any other provisions of this Plan, in no event may an Option be exercised by anyone after five (5) years from the date it was granted. (v) Nothing in the Plan or in any Option shall confer upon any Optionee the right to continue in the employ of the Company or any Parent or Subsidiary or interfere in any way with the right of the Company or such Parent or Subsidiary to terminate the employment of an Optionee at any time. The Committee's determination that an Optione- e's employment has terminated and the date thereof shall be final and conclusive on all persons affected thereby. 8. Changes in Capital. If the outstanding Common Stock subject to ------------------ the Plan shall at any time be changed or exchanged by declaration of a stock dividend, stock split, combination of shares, recapitalization, merger, consoli- dation or other corporate reorganization in which the Company is the surviving corporation, the number and kind of shares subject to this Plan and the option prices shall be appropriately and equitably adjusted so as to maintain the option price thereof. In the event of a dissolution or liquidation of the Company or a merger, consolidation, sale of all or substantially all of its assets, or other corporate reorganization in which the Company is not the surviving corporation, or any merger in which the Company is the surviving corporation but the holders of the Common Stock receive securities of another 9 corporation, any outstanding options hereunder shall terminate, provided that each Optionee shall, in such event, if no provision has been made for a substi- tution pursuant to the following sentence, have the right immediately prior to such dissolution, liquidation, merger, consolidation, sale of assets or reorga- nization in which the Company is the surviving corporation but the holders of its Common Stock receive securities of another corporation, to exercise any unexpired option in whole or in part without regard to the date on which the option otherwise would be first exercisable. Nothing herein contained shall prevent the substitution of a new option by the surviving corporation. The existence of the Plan or options hereunder shall not in any way prevent any transaction described herein and no holder of an option shall have the right to prevent any such transaction. 9. Time of Granting Options. The date of grant of an Option under ------------------------- the Plan shall, for all purposes, be the date specified in such grant. Notice shall be given to each Employee to whom an Option has been granted within a reasonable time after the date of such grant. 10. Effective Date, Approval of Stockholders. ---------------------------------------- (a) The Plan shall become effective immediately upon adoption by the Board, subject to the approval by the stockholders of the Company within 12 months after the adoption of the Plan by the Board. The Plan shall continue in effect for a term of 10 years from the date the Plan is adopted by the Board. (b) The 1991 amendment to paragraph 3 of the Plan shall become effective as of the date of stockholder approval and adoption of the Plan, as amended and restated, with the exception of the amendments contained in subpara- graph 4(a), which provisions 10 shall become effective as of September 1, 1992. 11. Modification of Options. At any time and from time to time the ----------------------- Board may authorize the Committee to direct execution of an instrument providing for the modification, extension, or renewal of any outstanding Option; provid- ed, however, that no such modification, extension, or renewal shall confer on the Optionee any right or benefit which could not then be conferred on him by the grant of a new Option nor shall it impair such Option without the consent of the Optionee. 12. Amendment and Termination of the Plan. The Board may alter, ---------------------------------------- suspend, or discontinue the Plan, except that no action of the Board may increase (other than as provided in paragraph 10 hereof) the maximum number of Shares subject to Options or available for the grant of Options under the Plan, reduce the applicable minimum exercise price, extend the maximum period within which Options may be exercised under the Plan, or change the designation of persons eligible to receive Options under the Plan, unless such action of the Board shall be subject to approval or ratification by the stockholders of the Company. No action of the Board shall, without the consent of the Optionee, impair any then outstanding Option. 13. Conditions Upon Issuance of Shares. No Shares shall be delivered ---------------------------------- pursuant to the exercise of any Option unless the delivery of such Shares shall comply (in the opinion of counsel to the Company) with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, any applicable state securi- ties laws, and the requirements of any stock exchange upon which the Common Stock may then be listed. As a condition to the exercise of an Option, the Company may require the exercising Optionee to make such written representations and 11 warranties as may be necessary to assure the availability of an exemption from any registration requirements of federal or state securities laws. Certifi- cates representing Shares issued upon the exercise of any Option may bear a legend restricting transfer of the Shares except in compliance with Federal and State securities statutes or an exemption therefrom, if available; failure of any certificates to contain such a legend shall not constitute a waiver by the Company of any such registration requirements. The Company, in its discretion, may require any Optionee to bear (i) his or her proportionate share of the Company's costs of the registration of his Underlying Shares under the Securi- ties Act of 1933, as amended (the "Act") or any other federal or state securi- ties laws, or (ii) the Company's cost of obtaining the opinion of its legal counsel (not in excess of $500 per transaction for sales effected prior to January 1, 1994, nor in excess of $1,000 per transaction thereafter) as to the availability of any exemption from the Act or any other applicable federal or state securities laws. The foregoing shall not be construed to obligate the Company to effect any registration under the Act or other securities laws. 14. Gender and Number. ----------------- (a) The use of any gender herein shall be construed to include all other genders, unless the context clearly indicates that less than all the genders is intended. (b) The use of the singular or of the plural herein shall be construed to include both the singular and the plural, unless the context clearly indicates that only the singular or only the plural is intended. 12 EX-21 12 EXHIBIT 21 LIST OF SUBSIDIARIES -------------------- CHEYENNE SOFTWARE INTERNATIONAL, INC. (a U.S. Virgin Islands corporation) CHEYENNE SOFTWARE KK (a Japanese corporation) CHEYENNE COMMUNICATIONS, INC. (a New York corporation) CHEYENNE SOFTWARE DEUTSCHLAND, GmbH (a German corporation) CHEYENNE SOFTWARE SARL (a French corporation) CSIC CORP. (a New York corporation) CHEYENNE SOFTWARE (UK) LIMITED (a UK corporation) CHEYENNE SOFTWARE CANADA, LTD. (a Canadian Corporation) CHEYENNE SOFTWARE LIMITADA (a Brazilian corporation) EX-23 13 Exhibit 23 [KPMG Peat Marwick LLP Letterhead] Independent Auditors' Consent ----------------------------- The Board of Directors Cheyenne Software, Inc. and Subsidiaries: We consent to incorporation by reference in the Registration Statements (No. 33-26340 and No. 33-43328) on Form S-3 and Registration Statement (No. 33-74612) on Form S-8/S-3 of Cheyenne Software, Inc. and subsidiaries of our report dated August 18, 1995, relating to the consolidated balance sheets of Cheyenne Software, Inc. and subsidiaries as of June 30, 1995 and 1994, and the related consolidated statements of earnings, shareholders' equity and cash flows and related schedule for each of the years in the three-year period ended June 30, 1995, which report appears in the June 30, 1995 annual report on Form 10-K of Cheyenne Software, Inc. and subsidiaries. Our report contains an explanatory paragraph that states that the Company is a defendant in a class action lawsuit. The ultimate outcome of the litigation cannot presently be determined. The consolidated financial statements and financial statement schedule do not include any adjustment that might result from the outcome of that uncertainty. KPMG PEAT MARWICK LLP Jericho, New York September 15, 1995 EX-27 14
5 1,000 YEAR JUN-30-1995 JUN-30-1995 15,592 55,610 32,503 1,302 0 69,499 23,682 7,171 129,394 11,713 0 393 0 0 115,917 129,394 118,799 127,927 21,690 21,690 16,425 0 0 62,674 24,255 0 0 0 0 38,504 0.97 0.00
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