-----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, Od7GAr4HBMfkrMxAPkrsZhpLksMl3pi6VhHkRiGat9KwKTxau1xT9D/WRdDWZyjn c0RTDlwoSLCbADvHpF05UA== 0000912057-96-002156.txt : 19960213 0000912057-96-002156.hdr.sgml : 19960213 ACCESSION NUMBER: 0000912057-96-002156 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951230 FILED AS OF DATE: 19960212 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMANTEC CORP CENTRAL INDEX KEY: 0000849399 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770181864 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17781 FILM NUMBER: 96515904 BUSINESS ADDRESS: STREET 1: 10201 TORRE AVE CITY: CUPERTINO STATE: CA ZIP: 95014 BUSINESS PHONE: 4082539600 MAIL ADDRESS: STREET 2: 10201 TORRE AVENUE CITY: CUPERTINO STATE: CA ZIP: 95014 10-Q 1 10-Q - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the -------- Securities Exchange Act of 1934 for the Quarterly Period Ended December 29, 1995. OR Transition Report Pursuant to Section 13 or 15(d) of the -------- Securities Exchange Act of 1934 for the Transition Period from _______ to _______. Commission File Number 0-17781 ---------------------- SYMANTEC CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 77-0181864 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 10201 TORRE AVENUE, CUPERTINO, CALIFORNIA 95014-2132 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (408) 253-9600 ---------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO ------------- -------------- Indicate the number of shares outstanding of each of the registrant's classes of common stock as of January 26, 1996: COMMON STOCK, PAR VALUE $0.01 PER SHARE 53,420,110 SHARES - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SYMANTEC CORPORATION FORM 10-Q QUARTERLY PERIOD ENDED DECEMBER 31, 1995 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION
Page ---- Item 1. Financial Statements Consolidated Balance Sheets as of December 31, 1995 and March 31, 1995. . . . . . . . . . . . . . . 3 Consolidated Statements of Operations for the three and nine months ended December 31, 1995 and 1994. . . . . 4 Consolidated Statements of Cash Flow for the nine months ended December 31, 1995 and 1994. . . . . . . . . . 5 Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 22 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . 23 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SYMANTEC CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, March 31, (In thousands; unaudited) 1995 1995 - --------------------------------------------------------------------- ------------ ---------- ASSETS Current assets: Cash and short-term investments $ 122,209 $ 131,795 Trade accounts receivable 78,467 81,261 Inventories 8,378 9,433 Deferred income taxes 13,417 11,869 Other 12,034 8,392 ----------- ---------- Total current assets 234,505 242,750 Equipment and leasehold improvements 47,763 39,379 Purchased intangibles 951 11,122 Other 9,779 16,381 ----------- ---------- $ 292,998 $ 309,632 ----------- ---------- ----------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 20,856 $ 21,516 Accrued compensation and benefits 13,677 14,617 Other accrued expenses 69,541 60,682 Income taxes payable 1,727 2,006 Current portion of long-term obligations 363 524 ----------- ---------- Total current liabilities 106,164 99,345 Convertible subordinated debentures 15,000 25,000 Long-term obligations 455 413 Commitments and contingencies Stockholders' equity: Preferred stock (authorized: 1,000 shares; issued and outstanding: none) -- -- Common stock (authorized: 70,000; issued and outstanding: 53,366 and 50,015 shares) 534 508 Capital in excess of par value 278,313 248,766 Notes receivable from stockholders (144) (144) Cumulative translation adjustment (5,879) (5,702) Accumulated deficit (101,445) (58,554) ----------- ---------- Total stockholders' equity 171,379 184,874 ----------- ---------- $ 292,998 $ 309,632 ----------- ---------- ----------- ---------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3 SYMANTEC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended December 31, December 31, -------------------------- -------------------------- (In thousands, except per share data; unaudited) 1995 1994 1995 1994 - ------------------------------------------------- ---------- ---------- --------- ---------- Net revenues $111,097 $110,561 $329,472 $322,964 Cost of revenues 31,070 23,017 88,378 68,949 ---------- ----------- --------- --------- Gross margin 80,027 87,544 241,094 254,015 Operating expenses: Research and development 26,334 17,679 70,202 51,354 Sales and marketing 60,159 48,461 172,818 138,057 General and administrative 6,275 7,014 27,163 20,471 Acquisition, restructuring and other expenses 25,688 -- 25,617 9,545 ---------- ----------- --------- --------- Total operating expenses 118,456 73,154 295,800 219,427 ---------- ----------- --------- --------- Operating income (loss) (38,429) 14,390 (54,706) 34,588 Interest income 1,745 1,520 5,929 3,656 Interest expense (338) (639) (1,121) (1,842) Other income (expense), net 216 494 (2,437) 2,169 ---------- ----------- --------- --------- Income (loss) before income taxes (36,806) 15,765 (52,335) 38,571 Provision (benefit) for income taxes -- 3,998 (4,609) 10,747 ---------- ----------- --------- --------- Net income (loss) $(36,806) $ 11,767 $(47,726) $ 27,824 ---------- ----------- --------- --------- ---------- ----------- --------- --------- Net income (loss) per share - primary $ (0.69) $ 0.23 $ (0.91) $ 0.55 ---------- ----------- --------- --------- ---------- ----------- --------- --------- Net income (loss) per share - fully diluted $ (0.69) $ 0.21 $ (0.91) $ 0.50 ---------- ----------- --------- --------- ---------- ----------- --------- --------- Shares used to compute net income (loss) per share - primary 53,107 52,170 52,391 51,611 ---------- ----------- --------- --------- ---------- ----------- --------- --------- Shares used to compute net income (loss) per share - fully diluted 53,107 56,142 52,391 56,132 ---------- ----------- --------- --------- ---------- ----------- --------- --------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4 SYMANTEC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOW
Nine Months Ended December 31, ----------------------- (In thousands; unaudited) 1995 1994 - ---------------------------- ---------- ----------- OPERATING ACTIVITIES: Net income (loss) $ (47,726) $ 27,824 Delrina net loss for the quarter ended June 30, 1995 4,835 -- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and write-off of equipment and leasehold improvements 19,856 12,854 Amortization and write-off of capitalized software costs 16,516 8,569 Deferred income taxes (1,487) 4,097 Net change in assets and liabilities: Trade accounts receivable 2,306 (7,761) Inventories 993 (144) Other current assets (3,840) 8,335 Other assets 2,067 (6,232) Accounts payable (429) (9,805) Accrued compensation and benefits (854) (3,561) Accrued other expenses 9,140 (8,035) Income taxes payable (188) (94) ---------- --------- Net cash provided by operating activities 1,189 26,047 ---------- --------- INVESTING ACTIVITIES: Capital expenditures (28,273) (14,336) Purchased intangibles (2,043) (9,184) Purchases of short-term investments (104,500) (80,377) Proceeds from sales of short-term investments 118,411 73,850 ---------- --------- Net cash used in investing activities (16,405) (30,047) ---------- --------- FINANCING ACTIVITIES: Principal payments on long-term obligations (119) (710) Borrowings under long-term obligations -- 579 Net proceeds from sales of common stock and other 19,573 13,621 ---------- --------- Net cash provided by financing activities 19,454 13,490 Effect of exchange rate fluctuations on cash and cash equivalents 87 (1,056) ---------- --------- Increase in cash and cash equivalents 4,325 8,434 Beginning cash and cash equivalents 30,192 47,877 ---------- --------- Ending cash and cash equivalents $ 34,517 $ 56,311 ---------- --------- ---------- --------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5 NOTE 1. BASIS OF PRESENTATION The consolidated financial statements of Symantec Corporation ("Symantec" or the "Company") as of December 31, 1995 and for the three and nine months ended December 31, 1995 and 1994 are unaudited and, in the opinion of management, contain all adjustments, consisting of only normal recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods. These consolidated financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in Symantec's Annual Report on Form 10-K, as amended, for the year ended March 31, 1995, and the Delrina Corporation Consolidated Financial Statements and the Symantec and Delrina Corporation Pro Forma Combined Balance Sheet and Combined Statement of Operations and notes thereto included on Symantec's Joint Management Information Circular and Proxy Statement. The results of operations for the three and nine months ended December 31, 1995 are not necessarily indicative of the results to be expected for the entire year. Symantec has a 52/53-week fiscal accounting year. Accordingly, all references as of and for the periods ended December 31, 1995, March 31, 1995 and December 31, 1994 reflect amounts as of and for the periods ended December 29, 1995, March 31, 1995 and December 30, 1994, respectively. During the December 1995 quarter, Symantec completed the acquisition of Delrina Corporation ("Delrina"). The acquisition of Delrina was accounted for as a pooling of interests and all financial information has been restated to reflect the combined operations of Delrina and Symantec. Due to differing fiscal year ends of Delrina and Symantec, financial information related to Delrina's fiscal years ended June 30, 1995 and 1994 has been combined with financial information related to Symantec's years ended March 31, 1995 and 1994, respectively. Accordingly, Delrina's results for the quarter ended June 30, 1995 were duplicated in the combined statements of operations for 1995 and 1994 and Delrina's net loss for the quarter ended June 30, 1995, was credited to stockholders' equity. The table below sets forth the composition of combined net revenues and net income (loss) for the pre-acquisition periods indicated. Information with respect to Delrina for the nine months ended December 31, 1995 reflects the six months ended September 30, 1995, prior to the Delrina acquisition.
Three Months Ended Nine Months Ended December 31, December 31, --------------------------- --------------------------- (In thousands; unaudited) 1995 1994 1995 1994 - ---------------------------- ----------- ----------- ----------- ----------- Net revenues: Symantec $111,097 $ 84,128 $304,053 $246,319 Delrina -- 26,433 25,419 76,645 ---------- --------- --------- --------- $111,097 $110,561 $329,472 $322,964 ---------- --------- --------- --------- ---------- --------- --------- --------- Net income (loss): Symantec $(36,806) $ 9,058 $(12,234) $ 18,081 Delrina -- 2,709 (35,492) 9,743 ---------- --------- --------- --------- $(36,806) $ 11,767 $(47,726) $ 27,824 ---------- --------- --------- --------- ---------- --------- --------- ---------
6 NOTE 2. BALANCE SHEET INFORMATION
December 31, March 31, (In thousands; unaudited) 1995 1995 - -------------------------- -------------- ----------- Cash and short-term investments: Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,065 $ 19,745 Cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,452 10,447 Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . 87,692 101,603 --------- --------- $122,209 $131,795 --------- --------- --------- --------- Trade accounts receivable: Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 83,606 $ 86,113 Less: allowance for doubtful accounts . . . . . . . . . . . . . . . . . . (5,139) (4,852) --------- --------- $ 78,467 $ 81,261 --------- --------- --------- --------- Inventories: Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,230 $ 2,684 Finished goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,148 6,749 --------- --------- $ 8,378 $ 9,433 --------- --------- --------- --------- Equipment and leasehold improvements: Computer equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,374 $ 59,818 Office furniture and equipment. . . . . . . . . . . . . . . . . . . . . . 24,804 23,614 Leasehold improvements. . . . . . . . . . . . . . . . . . . . . . . . . . 10,999 9,609 -------- -------- 109,177 93,041 Less: accumulated depreciation and amortization . . . . . . . . . . . . . (61,414) (53,662) --------- --------- $ 47,763 $ 39,379 --------- --------- --------- --------- Purchased intangibles: Product rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,880 $ 49,439 Less: accumulated amortization . . . . . . . . . . . . . . . . . . . . . (36,929) (38,317) --------- --------- $ 951 $ 11,122 --------- --------- --------- --------- Other accrued expenses: Acquisition, restructuring and other expenses . . . . . . . . . . . . . . $ 14,059 $ 8,614 Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,057 22,892 Marketing development funds . . . . . . . . . . . . . . . . . . . . . . . 10,668 7,706 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,757 21,470 --------- --------- $ 69,541 $ 60,682 --------- --------- --------- ---------
NOTE 3. LINE OF CREDIT Symantec has a $10.0 million bank line of credit that originally expired in October 1995 and was extended until February 28, 1996. The line of credit is available for general corporate purposes and bears interest at the bank's reference (prime) interest rate (8.50% at December 31, 1995), the U.S. offshore rate plus 1.5%, a CD rate plus 1.5% or LIBOR plus 1.5%, at the Company's discretion. The line of credit requires bank approval for the payment of cash dividends. Borrowings under this line are unsecured and are subject to the Company maintaining certain financial ratios and profits. During the quarter ended December 31, 1995, the Company was in default of the covenant related to its profitability, which resulted from the acquisition of Delrina Corporation. Symantec has obtained a waiver in relation to the covenant default. At December 31, 1995, there was approximately $0.4 million of standby letters of credit outstanding under this line of credit. There were no borrowings outstanding under this line at December 31, 1995. 7 NOTE 4. ACQUISITION, RESTRUCTURING AND OTHER EXPENSES Acquisition, restructuring and other expenses consisted of the following:
Three Months Ended Nine Months Ended December 31, December 31, ------------------------- --------------------------- (In thousands) 1995 1994 1995 1994 - ------------------ --------- --------- -------- -------- Delrina acquisition expenses $22,000 $-- $22,000 $ -- Loss on sale of Time Line Solutions Corporation assets 2,653 -- 2,653 -- Relocation of certain research and development activities -- -- 2,229 -- Central Point acquisition expenses -- -- (2,300) 9,000 SLR acquisition expenses -- -- -- 545 Other 1,035 -- 1,035 -- -------- ------- -------- ------- Total acquisition, restructuring and other expenses $25,688 $-- $25,617 $9,545 -------- ------- -------- ------- -------- ------- -------- -------
During November 1995, Symantec completed its acquisition of Delrina Corporation ("Delrina"). Symantec recorded total acquisition charges of $22.0 million, which included $8.8 million for legal, accounting and financial advisory services, $6.4 million for the elimination of duplicate and excess facilities and equipment, $3.7 million for personnel severance and outplacement expenses, and $3.1 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. During November 1995, Symantec sold the assets of Time Line Solutions Corporation to a group comprised of Time Line Solution Corporation's management and incurred a $2.7 million loss on the sale. During the December 1995 quarter, Symantec incurred $1.0 million which included a loss on the sale of certain assets and liabilities of a subsidiary and other expenses. During February 1995, Symantec announced a plan to consolidate certain research and development activities. This plan is designed to gain greater synergy between the Company's Third Generation Language and Fourth Generation Language development groups. During the quarter ended June 30, 1995, the Company incurred $2.2 million for the relocation costs of moving equipment and personnel. In connection with the acquisitions of Central Point Software, Inc. ("Central Point") and SLR Systems, Inc. ("SLR"), Symantec recorded total acquisition charges of $9.5 million in the quarter ended June 30, 1994. The charges included $3.2 million for legal, accounting and financial advisory services, $1.0 million for the write-off of duplicative product-related expenses and modification of certain development contracts, $0.9 million for the elimination of duplicative and excess facilities, $3.1 million for personnel severance and outplacement expenses, and $1.3 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. During fiscal 1994, Central Point incurred $16.0 million of expenses related to the restructuring of its operations. In the quarter ended June 30, 1994, Symantec incurred $9.0 million of expenses related to the acquisition of Central Point. In the quarter ended June 30, 1995, the Company recognized a reduction in accrued acquisition, restructuring and other expenses of $2.3 million as actual costs incurred were less than costs previously accrued by the companies. 8 As of December 31, 1995, total cash related accrued acquisition, restructuring and other expenses were $14.1 million and included $3.4 million for legal, accounting and financial advisory services, $0.7 million for the modification of certain development contracts, $4.3 million for the elimination of duplicate and excess facilities, $1.6 million for personnel severance and outplacement expenses, and $4.1 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. NOTE 5. INCOME TAXES Income taxes are computed in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Symantec provides for income taxes during interim reporting periods based upon an estimate of its annual effective tax rate. This estimate reflects U.S. federal, state and foreign income taxes. NOTE 6. NET INCOME (LOSS) PER SHARE Net income per share is calculated using the treasury stock or the modified treasury stock method, as applicable. Common stock equivalents are attributable to outstanding stock options. Fully diluted earnings per share includes the assumed conversion of all of the outstanding convertible subordinated debentures. NOTE 7. LITIGATION On May 19, 1995, Personal Computer Peripherals Corporation ("PCPC") filed a lawsuit in the U.S. District Court for the District of Delaware against Symantec and five other companies, alleging that the defendants' products for backing up data on a computer network infringe a patent held by PCPC. The complaint seeks unspecified damages and an injunction preventing the sale of infringing products. Symantec believes that the complaint has no merit. On December 30, 1994, Software Engineering Carmel ("Carmel") filed a lawsuit in the U.S. District Court for the District of Oregon against Central Point, a wholly owned subsidiary of the Company. Carmel developed and maintains the anti-virus program distributed by Central Point. The complaint alleges that Central Point breached its contract with Carmel by not fulfilling an implied obligation under the contract to use its best efforts or, alternatively, its reasonable efforts to market the anti-virus program developed by Carmel. The complaint also alleges that Central Point violated the non-competition provision in its agreement by selling a competing anti-virus program, apparently based on Symantec's sale of its own anti-virus product. The complaint seeks damages in the amount of $6.75 million and a release of Carmel from its obligation not to sell competing products. Symantec believes the complaint has no merit. On September 3, 1992, Borland International, Inc. ("Borland") filed a lawsuit in the Superior Court for Santa Cruz County, California against Symantec, Gordon E. Eubanks, Jr. (Symantec's President and Chief Executive Officer) and Eugene Wang (a former Executive Vice President of Symantec who was also a former employee of Borland). The complaint, as amended, alleges misappropriation of trade secrets, unfair competition, inducing breach of contract, interference with prospective economic advantage and unjust enrichment. Borland alleged that prior to joining Symantec, Mr. Wang transmitted to Mr. Eubanks confidential information concerning Borland's product and marketing plans. Borland claims damages in an unspecified amount. Symantec has denied the allegations of Borland's complaint and contends that Borland has suffered no damages from the alleged actions. Borland obtained a temporary restraining order and a preliminary injunction prohibiting the defendants from using, disseminating or destroying any Borland proprietary information or trade secrets. Symantec filed a cross complaint against Borland alleging that Borland had committed abuse of process and defamation in publishing statements that Symantec had acted in contempt of a temporary restraining order. The case is not being actively prosecuted at this time pending the outcome of the criminal proceedings, discussed below. Symantec believes that Borland's claims have no merit. On September 2, 1992, the Scotts Valley, California police department, operating with search warrants for Borland proprietary and trade secret information, searched Symantec's offices and the homes of Messrs. Eubanks and Wang and removed documents and other materials. On February 26, 1993, criminal indictments were filed against Messrs. Eubanks and Wang for allegedly violating various California Penal Code Sections relating to the misappropriation 9 of trade secrets and unauthorized access to a computer system. On August 23, 1993, the Court recused the District Attorney's Office from prosecution of the action. On October 5, 1993, the State Attorney General and the District Attorney's Office filed a Notice of Appeal of the Order, and that appeal was argued on July 11, 1995. On September 8, 1995, the Court of Appeals reversed the recusal order. A petition for review of this decision by the California Supreme Court was granted on December 14, 1995. Symantec believes the criminal charges against Messrs. Eubanks and Wang have no merit. On June 11, 1992, Dynamic Microprocessor Associates, Inc. ("DMA"), a wholly-owned subsidiary of Symantec, commenced an action against EKD Computer Sales & Supplies Corporation ("EKD"), a former licensee of DMA, and Thomas Green, a principal of EKD, for copyright infringement, violations of the Lanham Act, trademark infringement, misappropriation, deceptive acts and practices and unfair competition and breach of contract. On July 14, 1992, the Suffolk County sheriff's department conducted a search of EKD's premises and seized and impounded thousands of infringing articles. On July 21, 1992, the Court issued a preliminary injunction against EKD and Mr. Green, enjoining them from manufacturing, marketing, distributing, copying or purporting to license DMA's pcANYWHERE III or using DMA's marks. On July 20, 1992 and in a subsequent amendment, EKD and Mr. Green answered Symantec's complaint denying all liability and asserting counterclaims against Symantec and Lee Rautenberg, a former principal of DMA. In May 1993, EKD and Mr. Green were granted permission to file a Second Amended Answer and counterclaims that dropped every previously raised claim and now allege that DMA obtained the temporary restraining order and preliminary injunction in bad faith and that DMA, Symantec and Mr. Rautenberg breached certain license agreements and violated certain federal and New York State antitrust laws. In February 1995, DMA was granted leave to file an Amended Complaint, which EKD subsequently responded to by a Third Amended Answer and Counterclaims virtually identical to EKD's Second Amended pleading. Symantec believes that the claims asserted by EKD and Mr. Green have no merit. Subsequent to the acquisition of DMA by Symantec, Peter Byer, a former sales and marketing employee of DMA filed a lawsuit in the Supreme Court of the State of New York against DMA, Symantec and Lee Rautenberg (who was formerly President of DMA). The lawsuit alleges that Peter Byer was orally promised an 8% equity interest in DMA in connection with his performance of services, that he was underpaid commissions under DMA's commission plan and that DMA was unjustly enriched because it paid Mr. Byer less than the fair value of his services. The lawsuit seeks damages of at least $5.3 million. The Court has issued an order to dismiss the material claims included in this action. Furthermore, Mr. Rautenberg and the other stockholders of DMA have an obligation to indemnify Symantec for any liabilities resulting from this action. Symantec is involved in a number of other judicial and administrative proceedings incidental to its business. The Company intends to defend all of the aforementioned pending lawsuits vigorously and although adverse decisions (or settlements) may occur in one or more of the cases, the final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on the financial position of the Company. However, depending on the amount and timing of an unfavorable resolution of these lawsuits, it is possible that the Company's future results of operations or cash flows could be materially adversely affected in a particular period. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains forward-looking statements. There are certain important factors that could cause results to differ materially from those in the forward-looking statements contained in the following discussion. Among such important factors are (i) the competitive environment of the software industry, (ii) Symantec's dependence on Windows 95, (iii) losses incurred by Symantec and Delrina in recent quarters, (iv) Symantec's dependence on its distributors, concentration of and access to distribution channels, (v) importance of developing, marketing, supporting and acquiring new products, (vi) the effect of international operations on Symantec, (vii) variations in operating results, (viii) volatility of Symantec's stock price, (ix) acquisition risks, including increased costs, uncertain benefits and risks of integration, management and personnel changes, (x) proprietary rights, and (xi) potential and existing litigation. Further information concerning the aforementioned factors that could cause actual results to differ materially from those in the forward-looking statement is contained in the risk factors section of Symantec's Joint Management Information Circular and Proxy Statement, dated October 17, 1995. OVERVIEW The following discussion should be read in conjunction with the unaudited consolidated financial statements included elsewhere herein. Due to a number of factors and risks, including the rapid change in hardware and software technology, market conditions, seasonality in the retail software market, the timing of product announcements, the release of new or enhanced products, the introduction of competitive products by existing or new competitors and the significant risks associated with acquisitions of companies, technology and software product rights, historical results and percentage relationships will not necessarily be indicative of the operating results of any future period. The recent release of the new operating system ("Windows 95") by Microsoft has been a particularly important event that increases the uncertainty and will likely increase the volatility of Symantec's future operating results. Symantec's earnings and stock price have been and may continue to be subject to significant volatility, particularly on a quarterly basis. Symantec has recently experienced shortfalls in revenue and earnings from levels expected by securities analysts, which had an immediate and significant adverse effect on the trading price of Symantec's common stock. This may occur again in the future. Additionally, as a significant percentage of Symantec's revenues are generated from enterprise software products, which are frequently sold through site licenses and which often occur late in the quarter, Symantec may not learn of revenue shortfalls until late in the fiscal quarter, which could result in an even more immediate and adverse effect on the trading price of Symantec's common stock. Furthermore, Symantec participates in a highly dynamic industry, which often results in significant volatility of Symantec's common stock price. In particular, investors' assessment of the impact of Microsoft's new Windows 95 operating system on Symantec's business may result in a significant increase in the volatility of Symantec's stock price during the first year after the introduction of Windows 95. Net income (loss) per share is calculated using the treasury stock or the modified treasury stock method (see Note 6 of Notes to Consolidated Financial Statements), as applicable. Increases in the price of Symantec's common stock can have an adverse impact on the calculation of fully-diluted net income per share in that period. 11 During the nine months ended December 31, 1995 and 1994, Symantec completed acquisitions of the following companies which were accounted for as poolings of interest:
Acquired Shares of Company Symantec Stock Common Options Companies Acquired Date Acquired Stock Issued Assumed - ----------------------- ------------------ -------------- -------------- Delrina Corporation ("Delrina") November 22, 1995 13,684,174* 1,271,677 Intec Software Corporation ("Intec") August 31, 1994 133,332 -- Central Point Software, Inc. ("Central Point") June 1, 1994 4,029,429 707,452 SLR Systems, Inc. ("SLR") May 31, 1994 170,093 --
* Includes Delrina Exchangeable stock. Delrina stockholders received Delrina exchangeable stock in exchange for Delrina common shares at a rate of 0.61 per share. Delrina exchangeable stock may be converted into Symantec common stock on a one-for-one basis at the stockholders' option. 12 RESULTS OF OPERATIONS The following table sets forth each item from the consolidated statements of operations as a percentage of net revenues and the percentage change in the total amount of each item for the periods indicated.
Three Months Nine Months Ended Percent Ended Percent December 31, Change December 31 Change --------------- in Dollar ---------------- in Dollar 1995 1994 Amounts 1995 1994 Amounts ---- ---- ------- ---- ---- ------- Net revenues . . . . . . . . . . . . . . . . 100% 100% 0% 100% 100% 2% Cost of revenues . . . . . . . . . . . . . . 28 21 35 27 21 28 ---- ---- ---- ---- Gross margin. . . . . . . . . . . . . 72 79 (9) 73 79 (5) Operating expenses: Research and development. . . . . . . . 24 16 49 21 16 37 Sales and marketing . . . . . . . . . . 54 44 24 53 43 25 General and administrative. . . . . . . 6 6 (11) 8 6 33 Acquisition, restructuring and other expenses. . . . . . . . . . . . 23 -- * 8 3 168 ---- ---- ---- ---- Total operating expenses. . . . . . . 107 66 62 90 68 35 ---- ---- ---- ---- Operating income (loss). . . . . . . . . . . (35) 13 * (17) 11 * Interest income. . . . . . . . . . . . . . . 2 1 15 2 1 62 Interest expense . . . . . . . . . . . . . . 0 (1) (47) 0 (1) (39) Other income (expense), net. . . . . . . . . 0 1 (56) (1) 1 * ---- ---- ---- ---- Income (loss) before income taxes. . . . . . (33) 14 * (16) 12 * Provision (benefit) for income taxes . . . . 0 3 * (2) 3 * ---- ---- ---- ---- Net income (loss). . . . . . . . . . . . . . (33)% 11% * (14)% 9% * ---- ---- ---- ---- ---- ---- ---- ----
* percentage change is not meaningful. 13 NET REVENUES. Net revenues were $111.1 million in the quarter ended December 31, 1995, increasing slightly from net revenues of $110.6 million in the quarter ended December 31, 1994. During the December 1995 quarter, Symantec experienced increased net revenues from its Networking and Communications Utility and Security Utility products, offset by decreased revenues from its Advanced Utility products compared to the December 1994 quarter. In addition, Symantec experienced an increase in revenue due to the introduction of its Windows 95 products, but this increase was substantially offset by a decrease in revenue related to Windows 3.1 and DOS products during the December 1995 quarter. Enterprise revenue increased from 31% of net revenues in the December 1994 quarter to 35% of net revenues in the December 1995 quarter. Net revenues for the nine months ended December 31, 1995 were $329.5 million compared to $323.0 million for the nine months ended December 31, 1994. During the December 1995 quarter, Symantec released various new products including WinFax Pro for Windows 95 v. 7.0, CyberJack v. 7.0, CommSuite 95 v. 1.0, pcANYWHERE 32 v. 7.0, Symantec C++ PowerMac v. 8.0, Norton Utilities Mac v. 3.2, Symantec Enterprise Developer v. 2.5, Norton DiskLock, Norton DiskLock Administrator Version v. 4.0 for PowerMac, and Q&A v. 5.0 for DOS. Net revenues for the nine months ended December 31, 1995 include $7.2 million of international net revenue previously deferred by Central Point. In March 1994, due to the market's concerns regarding Central Point's long-term viability and the announced acquisition of Central Point by Symantec, Central Point was unable to reasonably estimate future product returns from its distributors and resellers. In addition, there were high levels of inventory in the distribution channel, which had been shipped into the channel prior to the acquisition. Central Point believed that there was a high risk of this inventory being returned. In accordance with Statement of Financial Accounting Standards No. 48, Central Point revenue and the related cost of revenue for fiscal 1994 for software shipments to Central Point's distributors and resellers was deferred until sold by the distributors or resellers to the end user. Since the acquisition, Symantec has analyzed sell-through and product return information related to the Central Point products to determine when such products were being sold through, and Symantec believes its marketing and sales programs were successful in moving the remaining deferred channel inventory through to end users. Accordingly, in the quarter ended June 30, 1995, Symantec was able to estimate the remaining Central Point product returns in the international distribution channel and as a result recognized approximately $7.2 million of international net revenue and $1.7 million of international cost of revenues previously deferred by Central Point. Net revenues from international sales were $38.4 million and $38.6 million and represented 35% of total net revenues in the quarters ended December 31, 1995 and 1994, respectively. Net revenues from international sales were $120.5 million and $103.5 million and represented 37% and 32% of total net revenues for the nine months ended December 31, 1995 and December 31, 1994, respectively. Enhanced product releases typically result in net revenue increases during the first three to nine months following their introduction due to purchases by existing users, usually at discounted prices, and initial inventory purchases by Symantec's distributors. In addition, between the date Symantec announces a new version or new product and the date of release, distributors, dealers and end users often delay purchases, cancel orders or return products in anticipation of the availability of the new version or new product. Symantec's pattern of revenues and earnings may also be affected by a phenomenon known as "channel fill." Channel fill occurs following the introduction of a new product or a new version of a product as distributors buy significant quantities of the new product or new version in anticipation of sales of such product or version. Following such purchases, the rate of distributors' purchases often declines in a material amount, depending on the rates of purchases by end users or "sell-through." During the quarter ended December 31, 1995, Symantec released several new Windows 95 products into the distribution channel and accordingly, provided for sales returns. In addition, Symantec deferred revenue associated with estimated excess inventories in the distribution channel. As a 14 result, the effect of channel fill relating to these new Windows 95 products was somewhat mitigated during the quarter ended December 31, 1995. The phenomenon of channel fill also may occur in anticipation of price increases or in response to sales promotions or incentives, some of which may be designed to encourage customers to accelerate purchases that might otherwise occur in later periods. Channels also may become filled simply because the distributors are unable to, or do not, sell their inventories to retail distribution or end users as anticipated. If sell-through does not occur at a sufficient rate, distributors will delay purchases or cancel orders in later periods or return prior purchases in order to reduce their inventories. Such order delays or cancellations can cause material fluctuations in revenues from one quarter to the next. The impact is somewhat mitigated by Symantec's deferral of revenue associated with inventories estimated to be in excess of levels deemed appropriate in the distribution channel; however, net revenues may still be materially affected favorably or adversely by the effects of channel fill. Channel fill may have a material impact in future periods, especially in periods where a large number of new products are introduced. Symantec believes that many of its customers are moving toward an enterprise-wide computing oriented environment where more desktop personal computers will be interconnected into large local-area and wide-area networks administered by corporate MIS departments. Symantec's entry into the enterprise software market is relatively new and as a result, Symantec is beginning to compete with companies with which it has not previously competed. As a result, there is uncertainty regarding customer acceptance of Symantec's products because Symantec has not been a major supplier in the enterprise market. These factors increase the uncertainty of forecasting financial results. While Symantec expects the market's shift toward enterprise products to continue, there can be no assurance that Symantec's enterprise products will be successful or will gain customer acceptance. With the expansion to enterprise-wide computing systems markets, Symantec believes that it must continue to develop relationships with and rely on systems integrators and other third-party vendors that provide consulting and integration services to customers and deliver products developed for this market segment. Furthermore, the length of the sales cycle with respect to enterprise products is longer, and customers of enterprise products may take delivery of a product subject to integration and acceptance by the customer. In addition, a very high proportion of enterprise product sales are completed in the last few days of each quarter, in part because customers are able, or believe that they are able, to negotiate lower prices and more favorable terms. Each of these factors increases the risk that forecasts of quarterly financial results will not be achieved. Symantec's products include enterprise products, which are frequently offered through site licenses where a license for multiple workstations is provided to a customer at a negotiated price, and desktop software products, which are generally offered through the distribution channel or directly to end-users. Enterprise product revenues are typically comprised of lower volume, high dollar site license transactions compared to desktop product revenues which are typically comprised of higher volume, low dollar pre-packaged product sales. The prices of site licenses tend to vary based upon the individual products licensed, the number of units licensed and the number of desktop computers at the customer's site. Price competition is significant in the microcomputer business software market and may continue to increase and become even more significant in the future, resulting in reduced profit margins. Should competitive pressures in the industry continue to increase, Symantec may be required to reduce software prices and/or increase its spending on sales, marketing and research and development as a percentage of net revenues, resulting in lower profit margins. In addition, aggressive pricing strategies of competitors in other software markets, some of whom have significant financial resources, may further cause Symantec to reduce software prices and/or increase sales and marketing expenses on a number of Symantec's products. There was no material impact to net revenues resulting from changes in product pricing in the three and nine months ended December 31, 1995 as compared to the three and nine months ended December 31, 1994. 15 A significant portion of Symantec's revenues are from sales to two large distributors. These customers tend to make the great majority of their purchases at the end of the fiscal quarter, in part because they are able, or believe that they are able, to negotiate lower prices and more favorable terms. This end-of-period buying pattern means that forecasts of quarterly and annual financial results are particularly vulnerable to the risk that they will not be achieved, either because expected sales do not occur or because they occur at lower prices or on less favorable terms to Symantec. Symantec's distribution customers also carry the products of Symantec's competitors, some of which have significant financial resources. The distributors have limited capital to invest in inventory and their decisions to purchase Symantec's products is partly a function of pricing, terms and special promotions offered by Symantec as well as by its competitors over which Symantec has no control and which it cannot predict. While Symantec's diverse product line has tended to lessen fluctuations in quarterly net revenues, these fluctuations have occurred recently and are likely to occur in the future. A number of factors, including the timing of announcements and releases of new or enhanced versions of its products, product upgrades, the introduction of competitive products by existing or new competitors, reduced demand for any given product, the market's transition between operating systems and the transition from a desktop PC environment to an enterprise-wide environment may cause significant fluctuations in net revenues and, accordingly, operating results. Symantec is devoting substantial efforts to the development of software products that are designed to operate on Microsoft's new Windows 95 operating system. Microsoft has incorporated advanced utilities, including telecommunications, facsimile and data recovery utilities, in Windows 95, and may include additional product features in future releases of Windows 95, that may decrease the demand for certain of the Company's products, including those currently under development. Symantec has begun development efforts on several products and may consider developing a number of new products designed to operate on Microsoft's operating system ""Windows NT.'' Further, should Windows 95 or NT not achieve timely market acceptance, or should Symantec be unable to successfully or timely develop products that operate under these operating systems, Symantec's future revenues and, accordingly, profitability would be immediately and significantly adversely affected. In addition, as the timing of delivery and adoption of many of Symantec's products is dependent on the adoption rate of these operating systems, which Symantec and securities analysts are unable to predict, the ability of Symantec and securities analysts to forecast Symantec's revenues is being adversely impacted. As a result, there is a heightened risk that revenues and profits will not be in line with analysts' expectations in the periods following the introduction of Windows 95, which was shipped by Microsoft in August 1995, and the adoption of Window NT. The length of Symantec's product development cycle has generally been greater than Symantec originally expected. Although such delays have undoubtedly had a material adverse effect on Symantec's business, Symantec is not able to quantify the magnitude of revenues that were deferred or lost as a result of any particular delay because Symantec is not able to predict the amount of revenues that would have been obtained had the original development expectations been met. Delays in product development, including products being developed for Windows 95, are likely to occur in the future and could have a material adverse effect on the amount and timing of future revenues. In addition, there can be no assurance that any products currently being developed by Symantec, including products being developed for Windows 95 and Windows NT, will be technologically successful, that any resulting products will achieve market acceptance or that Symantec's products will be effective in competing with products either currently in the market or introduced in the future. During fiscal 1993, Symantec believes that its net revenues were adversely affected by an unexpected substantial price reduction in 486-based personal computers that caused a shift in customer spending from software to personal computer hardware. Symantec also believes that the shift was caused by the introduction of Windows 3.1, which required more computing capability and computer memory. If the next class of personal computers, including those based on Intel's P6/Pentium Pro microprocessor or Motorola's Power-PC, are also rapidly reduced in price, there may be another unexpected shift in customer buying away from software and Symantec's products. In addition, Windows 95 requires significantly more computer memory and hard disk space than Windows 3.1 and if there is a 16 shift from software to hardware spending and/or a shortage of computer memory components, there could be an adverse effect on the sales of computer hardware and software. Either of these events could result in significantly reduced revenues and a material adverse effect on Symantec's operating results. Symantec has noted that Pentium processors have been reduced in price and are being marketed aggressively by Intel. Symantec estimates and maintains reserves for product returns. Increased product returns occur when Symantec introduces product upgrades and new products and discontinues certain software products. In addition, competitive factors require Symantec to offer increased rights of return for products that distributors or retail stores are unable to sell. Symantec has set its reserves for returns in accordance with historical product return experience. Setting reserves involves making significant judgments about future competitive conditions and product life cycles. Those judgments involve evaluating information that often is incomplete, unclear and in conflict. Symantec prepares detailed analyses of historical return rate experiences in its estimation of reserves for product returns. In addition to detailed historical return rates, Symantec's estimation of return reserves takes into consideration upcoming product upgrades, current market conditions, distributor and "superstore" inventory balances, sell-through volume and any other known factors that may impact anticipated product returns. Based upon returns experienced, Symantec's estimates have been materially accurate. However, there can be no assurance that historical experience will be an accurate guide for the future because the rate of returns is primarily a function of the competitive state of the market in the future and thus, in large part, is a function of the actions of Symantec's competitors, which Symantec cannot accurately anticipate. Symantec's product return reserve balances typically fluctuate from period to period based upon the level and timing of product upgrade releases. Product return reserve balances at December 31, 1995 were substantially higher than reserve balances at December 31, 1994. The increase in the product return reserve balance is primarily related to the introduction of Symantec's Windows 95 products during the quarters ending September 30, 1995 and December 31, 1995 which had high sell-in volumes. The level of actual product returns and related product return reserves is largely a factor of the level of product sell-in (gross revenue) from normal sales activity and the replacement of obsolete quantities with the current version of the Company's product. As a result, gross revenues generally move in the same direction as product returns. Changes in the levels of product returns and related product return reserves are generally offset by changing levels of gross revenue and, therefore, do not typically have a material impact on reported net revenues. Symantec operates with relatively little backlog; therefore, if near-term demand for Symantec's products weakens in a given quarter, there could be a material adverse effect on revenues and on Symantec's operating results. Symantec maintains a research and development facility in Santa Monica, California that was damaged during the January 1994 earthquake in Southern California. Much of Symantec's administration, sales and marketing, manufacturing facilities and research and development efforts are located on the west coast of the United States. Future earthquakes or other natural disasters could cause a significant disruption to Symantec's operations and may cause delays in product development that could adversely impact future revenues of Symantec. Also, Symantec's order entry department is located in Oregon, with shipments being made from a warehouse in California. Order entry and shipping is similarly physically separated in Europe. A disruption in communications between these facilities, particularly at the end of a fiscal quarter, would likely result in an unexpected shortfall in revenues and could result in an adverse impact on operating results. Symantec provides a wide variety of free and fee-based technical support services to its customers. Symantec provides its customers with free support via electronic and automated services as well as 90 days free telephone start-up support for certain of Symantec's products. In addition, Symantec offers both individual users and corporate customers a variety of fee-based support options for certain of Symantec's products, designed to meet their individual technical support requirements. Fee-based technical support services did not generate significant 17 net revenues in the three and nine months ended December 31, 1995 and 1994 and are not expected to generate material net revenues in the near future. GROSS MARGIN. Gross margin represents net revenues less cost of revenues. Cost of revenues consists primarily of manufacturing expenses, manuals, packaging, royalties paid to third parties under publishing contracts and amortization and write-off of capitalized software. Amortization of capitalized software, including amortization and the write-off of both purchased product rights and capitalized software development expenses, totaled $9.3 million and $0.9 million for the quarters ended December 31, 1995 and 1994 and $16.5 million and $8.6 million for the nine months ended December 31, 1995 and 1994, respectively. The significant increase in amortization and write-off of purchased product rights and capitalized software development expenses for the quarter and nine months ended December 31, 1995 over the 1994 periods is due to Symantec's decision to de-emphasize its continued development and marketing efforts related to certain products and Delrina's write-off of previously capitalized software development costs of software designed to operate on Windows 3.1. Gross margins decreased to 72% of net revenues in the quarter ended December 31, 1995 from 79% in the quarter ended December 31, 1994. Gross margin decreased to 73% of net revenues in the nine months ended December 31, 1995 from 79% of net revenues in the nine months ended December 31, 1994. The decline in the gross margin percentage was due to a write-off of approximately $10.2 million of certain purchased intangibles resulting from the Company's decision to de-emphasize its continued development and marketing efforts related to certain products and in the nine-month period, Delrina's increased reserves related to its products designed to operation on Windows 3.1. Symantec believes that the gross margin percentage may increase in the near term unless there is a significant decline in Symantec's net revenues or unless Symantec incurs future significant capitalized software write-offs and/or a significant increase in required inventory reserves. The microcomputer business software market has been subject to rapid changes that can be expected to continue. The release of Windows 95 and future technology or market changes may cause certain products to become obsolete more quickly than expected and thus may result in capitalized software write-offs and an increase in required inventory reserves and, therefore, reduced gross margins and net income. In addition, the modifications to computer software, including the correction of software bugs, may result in significant inventory rework costs, including the cost of replacing inventory in the distribution channel. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased 49% to $26.3 million or 24% of net revenues in the quarter ended December 31, 1995 from $17.7 million or 16% of net revenues in the quarter ended December 31, 1994. Research and development expenses for the nine months ended December 31, 1995 increased 37% to $70.2 million or 21% of net revenues from $51.4 million or 16% of net revenues for the comparable 1994 period. The increase in research and development expenses is principally due to increased product development efforts associated with Symantec's development of new Windows 95 products including those from Delrina. Symantec believes increased research and development expenditures will be necessary in order to remain competitive and expects future research and development expenses to increase in dollar amount, but may decline as a percentage of net revenues should net revenues increase. Research and development expenditures are charged to operations as incurred. Financial accounting rules requiring capitalization of certain internal software development costs are not expected to materially affect Symantec in any future periods. SALES AND MARKETING EXPENSES. Sales and marketing expenses increased 24% to $60.2 million or 54% of net revenues in the quarter ended December 31, 1995 from $48.5 million or 44% of net revenues in the prior year's comparable quarter. Sales and 18 marketing expenses were $172.8 million and $138.1 million and represented 53% and 43% of net revenues for the nine months ended December 31, 1995 and 1994, respectively. The increase in sales and marketing expenses was principally due to an increase in marketing development expenses and an increase in sales and marketing expenses primarily associated with the release of Symantec's Windows 95 products. Symantec believes substantial sales and marketing efforts are essential to achieve revenue growth and to maintain and enhance Symantec's competitive position. Accordingly, with the introduction of new and upgraded products, and products currently being developed for Windows 95, Symantec expects the expenses associated with these efforts may increase in dollar amount and will continue to constitute Symantec's most significant operating expense. There can be no assurance that these increased sales and marketing efforts will be successful. Symantec believes that the Company's sales and marketing expenses may decrease as a percentage of net revenues in the near term following the high expenses associated with the launch of Windows 95 products. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses decreased 11% from $7.0 million or 6% of net revenues in the quarter ended December 31, 1994 to $6.3 million or 6% of net revenues in the quarter ended December 31, 1995. The decrease in general and administrative expenses is primarily due to the elimination of duplicate administrative activities after the acquisition of Delrina. General and administrative expenses increased 33% from $20.5 million or 6% of net revenues for the nine months ended December 31, 1994 to $27.2 million or 8% of net revenues for the nine months ended December 31, 1995. The increase in general and administrative expenses for these nine month periods was principally due to significant general and administrative expenses incurred by Delrina during the second quarter of 1995 and certain legal fees incurred by Delrina for litigation. ACQUISITION, RESTRUCTURING AND OTHER EXPENSES. ACQUISITION EXPENSES. During November 1995, Symantec completed its acquisition of Delrina and recorded total acquisition charges of $22.0 million during the quarter ending December 31, 1995. The charges included $8.8 million for legal, accounting and financial advisory services, $6.4 million for the elimination of duplicate and excess facilities, $3.7 million for personnel severance and outplacement expenses and $3.1 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. The acquisition has been accounted for as a pooling of interests. In connection with the acquisitions of Central Point and SLR, Symantec recorded total acquisition charges of $9.5 million in fiscal 1995. The charges included $3.2 million for legal, accounting and financial advisory services, $1.0 million for the write-off of duplicate product-related expenses and modification of certain development contracts, $0.9 million for the elimination of duplicative and excess facilities, $3.1 million for personnel severance and outplacement expenses, and $1.3 million for the consolidation and discontinuance of certain operational activities and other acquisition-related expenses. During fiscal 1994, Central Point incurred $16.0 million of expenses related to the restructuring of its operations. In the quarter ended June 30, 1994, Symantec incurred $9.0 million of expenses related to the acquisition of Central Point. In the quarter ended June 30, 1995, the Company recognized a reduction in accrued acquisition and restructuring expenses of $2.3 million as actual costs incurred were less than costs previously accrued by the companies. Symantec has acquired a number of companies in the past and may make additional acquisitions in the future. Company acquisitions involve a number of special risks, including the successful combination of the companies in an efficient and timely manner, the coordination of research and development and sales efforts, the retention of key personnel, the integration of the acquired products, the diversion of management's attention to assimilation of the operations and personnel of the acquired companies, the loss of key employees and the difficulty of presenting a unified corporate image. Symantec has lost certain employees of acquired companies whom it desired to retain, 19 and, in some cases, the assimilation of the operations of acquired companies took longer than initially anticipated by Symantec. In addition, because the employees of acquired companies have frequently remained in their existing, geographically diverse facilities, Symantec has not realized certain economies of scale that might otherwise have been achieved. There can be no assurance that these same problems will not occur in the acquisition of Delrina and in connection with any future acquisitions undertaken by Symantec. Symantec typically incurs significant acquisition expenses for legal, accounting and financial advisory services, the write-off of duplicative technology and other expenses related to the combination of Symantec and an acquired company. These expenses may have a significant adverse impact on Symantec's future profitability and financial resources. RESTRUCTURING AND OTHER EXPENSES. During November 1995, Symantec sold the assets of Time Line Solutions Corporation to a group comprised of Time Line Solutions Corporation's management and incurred a loss of $2.7 million on the sale. During the December 1995 quarter, Symantec incurred $1.0 million which included a loss on the sale of certain assets and liabilities of a subsidiary and other expenses. During February 1995, Symantec announced a plan to consolidate certain research and development activities. This plan is designed to gain greater synergy between Symantec's Third Generation Language and Fourth Generation Language development groups. As of the end of the June 1995 quarter the Company incurred $2.2 million of the relocation costs for moving equipment and personnel. As of December 31, 1995, total accrued acquisition and restructuring expenses were $14.1 million and included $3.4 million for legal, accounting and financial advisory services, $0.7 million for the modification of certain development contracts, $4.3 million for the elimination of duplicate and excess facilities, $1.6 million for personnel severance and outplacement expenses, and $4.1 million for the consolidation and discontinuance of certain operational activities and other acquisition related expenses. INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE). Interest income was $1.7 million and $1.5 million for the three months ended December 31, 1995 and 1994, respectively. Interest income was $5.9 million and $3.7 million for the nine months ended December 31, 1995 and 1994, respectively. The increase in interest income is due to higher average invested cash balances. Interest expense was $0.3 million and $0.6 million for the three months ended December 1995 and 1994, respectively, and $1.1 million and $1.8 million for the nine months ended December 31, 1995 and 1994, respectively. The decrease in interest expense is principally due to the conversion of $10.0 million of convertible subordinated debentures into 833,333 shares of Symantec common stock on April 26, 1995. Other income (expense) is primarily comprised of foreign currency exchange gains and losses from fluctuations in foreign currency exchange rates. Symantec conducts business in various foreign currencies and is therefore subject to the transaction exposures that arise from foreign exchange rate movements between the dates that foreign currency transactions are recorded and the dates that they are settled. Symantec utilizes some natural hedging to mitigate Symantec's transaction exposures and, effective December 31, 1993, Symantec commenced hedging some residual transaction exposures through the use of 30-day forward contracts. At December 31, 1995, there was a total of approximately $34.6 million of outstanding forward exchange contracts. The net liability of forward contracts was approximately $27.4 million at December 31, 1995. There have been no significant gains or losses to date with respect to these activities. Gains or losses would occur on 30-day forward contracts held by Symantec when changes in foreign currency exchange rates occur and are purchased in the expectation that they will offset the transaction gains and losses resulting from foreign currency denominated cash, accounts receivable, intercompany balances and trade payables. There can be 20 no assurance that these strategies will continue to be effective or that transaction gains or losses can be minimized or forecasted accurately. Symantec does not hedge its translation risk. INCOME TAX PROVISION. The effective tax benefit for the nine months ended December 31, 1995 was 9%, which compared to an effective income tax rate of 27% in the prior year's comparable period. The lower tax benefit for the nine months ended December 31, 1995 was primarily attributable to unbenefitted pre-acquisition losses from Delrina. LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments decreased $9.6 million from $131.8 million at March 31, 1995 to $122.2 million at December 29, 1995, largely due to cash outflow related to expenses associated with the Delrina acquisition. Net cash provided by operating activities was $1.2 million and was comprised of the Company's net loss of $47.7 million offset by non-cash related expenses of $34.9 million, a net increase of $9.2 million in current assets and current liabilities, and a $4.8 million adjustment for Delrina's net loss for the quarter ended June 30, 1995. Net trade accounts receivable decreased $2.8 million from $81.3 million at March 31, 1995 to $78.5 million at December 31, 1995 primarily due to a substantially higher product return reserve balance at December 31, 1995. Net inventories decreased $1.0 million from $9.4 million at March 31, 1995 to $8.4 million at December 31, 1995 due to a higher level of inventory reserves at December 31, 1995. Symantec has a $10.0 million bank line of credit that originally expired in October 1995 and was extended until February 28, 1996. Symantec is currently in the process of extending its $10.0 million line of credit for an additional two years beginning February 28, 1996. The line of credit is available for general corporate purposes and bears interest at the bank's reference (prime) interest rate (8.50% at December 31, 1995), the U.S. offshore rate plus 1.5%, a CD rate plus 1.5% or LIBOR plus 1.5%, at Symantec's discretion. The line of credit requires bank approval for the payment of cash dividends. Borrowings under this line are unsecured and are subject to Symantec maintaining certain financial ratios and profits. During the quarter ended December 31, 1995, Symantec was in default of its profitability covenant which resulted from the acquisition of Delrina. Symantec has obtained a waiver from its bank in relation to the default. At December 31, 1995, there was approximately $0.4 million of standby letters of credit outstanding under this line of credit. There were no borrowings outstanding under this line at December 31, 1995. Company acquisitions in the future, may cause Symantec to be in violation of the line of credit covenants; however, Symantec believes that if the line of credit were canceled or amounts were not available under the line, there would not be a material adverse impact on the financial results, liquidity or capital resources of Symantec. Symantec may utilize significant amounts of cash in connection with the potential acquisition of additional companies, and software product rights in the future. Should Symantec sustain significant losses, there can be no assurances that the bank line of credit, which is available through February 1996, would remain available. Additionally, Symantec could be required to reduce operating expenses, which could result in further product delays; reassess acquisition opportunities, which could negatively impact Symantec's growth objectives; and/or pursue further financing options. Symantec believes existing cash and short-term investments will be sufficient to fund operations for the next year. 21 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Information with respect to this item is incorporated by reference to Note 7 of Notes to Consolidated Financial Statements included herein on page 9 of this Form 10-Q. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) An annual meeting of stockholders of Symantec was held on November 20, 1995. (b) Matters voted on at the meeting and votes cast on each were as follows:
Total Vote Authority Total Vote Withheld Withheld For Each From Each From All Director Director Nominees ----------- ---------- ---------- 1. To elect six directors to Symantec's Board of Directors, each to hold office until his successor is elected and qualified or until his earlier resignation or removal. Charles M. Boesenberg . . . . . . . 34,443,303 150,927 18,345 Walter W. Bregman . . . . . . . . . 34,443,138 151,092 18,345 Carl D. Carman. . . . . . . . . . . 34,452,453 141,777 18,345 Gordon E. Eubanks, Jr.. . . . . . . 34,434,108 160,122 18,345 Robert S. Miller. . . . . . . . . . 34,452,453 141,777 18,345 Leslie L. Vadasz. . . . . . . . . . 34,451,753 142,477 18,345 Broker For Against Abstain "Non-Votes" ----------- ---------- ---------- ---------- 2. To consider and act upon a proposal 28,495,481 604,444 76,716 5,417,588 to approve the Combination Agreement dated as of July 5, 1995 between Symantec and Delrina Corporation and the transactions contemplated thereby, including the issuance of shares of Symantec Common Stock as contemplated by such Combination Agreement. 3. To consider and act upon a proposal 33,537,796 597,173 76,171 383,090 to amend Symantec's Certificate of Incorporation to (a) increase by 30,000,000 (from 70,000,000 to 100,000,000) the number of shares of Common Stock authorized for issuance; and (b) create a new class of stock, designated Special Voting Stock, par value $1.00 per share, and to authorize one share for issuance thereunder. 4. To consider and act upon a proposal 32,333,766 2,183,931 76,533 -- to amend the 1989 Employee Stock Purchase Plan to increase the number of shares authorized for issuance by 500,000 to 2,000,000.
22
Broker For Against Abstain Non-Votes ----------- ---------- ---------- ---------- 5. To consider and act upon a proposal to 20,578,293 13,940,470 75,467 -- amend the 1988 Employees Stock Option Plan to increase the number of shares authorized for issuance by 1,000,000 to 13,700,000. 6. To consider and act upon a proposal to 34,475,996 36,820 81,414 -- ratify the Board of Director's selection of Ernst & Young as Symantec's independent auditors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this Form 10-Q: 10.01 Office building lease, as amended, dated as of December 1, 1995 between Delrina (Canada) Corporation and Sherway Centre Limited regarding property located in Toronto, Canada. 10.02 Employment and Non-competition Agreement between Symantec Corporation and Dennis Bennie. 11.01 Computation of Net Income Per Share. 27.01 Financial Data Schedule. (b) Reports on Form 8-K None ITEMS 2, 3, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 9, 1996 SYMANTEC CORPORATION By /s/ Robert R. B. Dykes ---------------------- Robert R. B. Dykes Executive Vice President/Worldwide Operations and Chief Financial Officer (duly authorized officer) /s/ Howard A. Bain III ------------------------- Howard A. Bain III Vice President Finance and Chief Accounting Officer 24 EX-10.01 2 EXHIBIT 10.01 LEASE AMENDING AGREEMENT This Agreement, made this 1ST DAY OF DECEMBER, 1995, between: SHERWAY CENTRE LIMITED (hereinafter called the "Landlord") OF THE FIRST PART - and - DELRINA (CANADA) CORPORATION (hereinafter called the "Tenant") OF THE SECOND PART WHEREAS, by a certain lease dated the 31ST DAY OF JULY, 1995 (the "Lease") the Landlord leased to the Tenant certain premises (the "Initial Premises") of said lease, containing approximately 74,174 square feet and comprising all of the 5th and 6th floors of One Park Centre and all of the 3rd, 4th and 5th floors of Two Park Centre, 895 Don Mills Road, Don Mills, Ontario, for a term of TEN (10) years commencing on the 1ST DAY OF AUGUST, 1995 and from thenceforth next ensuing and fully to be completed and ended on the 31ST DAY OF JULY, 2005 (the "Term"); AND WHEREAS, the Tenant is desirous of leasing certain additional space from the Landlord; AND WHEREAS, the Landlord and Tenant have agreed to amend the Lease effective as of the 1ST DAY OF JANUARY, 1996, in accordance with the terms and conditions hereinafter set forth; NOW THEREFORE WITNESSETH that in consideration of the premises and mutual covenants and agreements herein contained and the sum of One Dollar ($1.00), paid by each of the parties to the other, the receipt and sufficiency whereof is hereby acknowledged, the parties hereto mutually covenant and agree with each other as follows: 1. The Premises as described in Section 2.1 of the Lease is hereby altered to include that area on the ground floor of One Park Centre comprising 4,856 square feet of space (the "Conference Premises") as outlined in red on Schedule "A" attached hereto. Effective JANUARY 1, 1996, the Premises comprise the Initial Premises of 74,174 square feet and the Conference Premises of 4,856 square feet. 2. Section 6.1(a) of the Lease is hereby amended by adding at the end thereof the following paragraph: "Fixed Rent for the Conference Premises in the following amounts: (iii) for the period from January 1, 1996 to July 31, 2000, $19,424.00 per annum, in equal monthly instalments of $1,618.67 each, calculated at the rate of $4.00 per square foot of Rentable Space per annum; and (iv) for the period from August 1, 2000 to July 31, 2005, $29,378.80 per annum, in equal monthly instalments of $2,448.23 each, calculated at the rate of $6.05 per square foot of Rentable Space per annum." 3. The Landlord and Tenant acknowledge and agree that the Conference Premises is being leased in its "AS IS" condition save and except that the Landlord shall, at its expense, perform the following work ("Landlord's Work"): (a) Remove and clear out the existing conduit. (b) Prepare and make good the marble in the building lobby and remove glass from the IBM "Security Room" window. (c) Steam-clean carpets within the Conference Premises. (d) Replace broken ceiling tiles within the Conference premises. (e) H.V.A.C. to be serviced and repaired if necessary to a standard consistent with Base Building. (f) Remove and clean out all piping and conduit from existing IBM "Security Room". (g) Wax tile floors in "Security Room". The Landlord's Work with the exception of the work described in paragraph 3(b) above shall be completed by no later than December 15, 1995. The work described in paragraph 3(b) above shall be completed by no later than March 1, 1996. 4. Notwithstanding anything else contained herein, the Landlord and Tenant mutually agree that the Tenant may have occupancy of the Conference Premises as of December 1, 1995, provided it shall in no way interfere with or hinder the Landlord in the performance of the Landlord's Work referred to in paragraph 3 hereof and with the express understanding and agreement that such possession is subject to all the terms and conditions of this Lease, except that the Tenant shall not be required to commence paying Fixed Rent and Operating Costs and Taxes on the Conference Premises until July 1, 1996. 5. Schedule "C" of the Lease is hereby amended by adding at the end thereof the following: 13. RELOCATION (a) (i) If, at any time during the Term or any renewal of the Term, the Landlord requires possession of all or any portion of the Conference Premises for any purpose whatsoever, the Landlord may, on no less than three (3) months' prior Notice to the Tenant (the "Relocation Notice"), require the Tenant to vacate all or any portion of the Conference Premises as specified in the Relocation Notice (the "Vacated Space") on the date specified in the Relocation Notice (the "Relocation Date") and relocate into other premises in Two Park Centre (the "Relocated Premises"). If a Relocation Notice is given, this Lease, insofar as it relates to the Vacated Space, shall terminate on the Relocation Date, but only if the Landlord has completed the Relocated Premises in accordance with its obligations set out in paragraph 13 (a) (ii); (ii) The Relocated Premises shall be comparable in all reasonably material respects to the Conference Premises except for the ceiling height and shall be fully fixtured (not including the Tenant's trade fixtures) and in "turn-key" condition built with the same number of usable rooms with similar dimensions, and available for the Tenant's occupancy on the Relocation Date, the Landlord being fully responsible for performing all work required to make the Relocated Premises so available. If in the event that the current Cafeteria Premises located on the ground floor of One Park Centre are leased to another party other than the Tenant at the time of the Relocation Notice then the Relocated Premises will be fixtured and built by the Landlord with a kitchen of a size not exceeding 250 square feet and containing therein a sink, cabinetry, counters and electrical outlets as would normally be found within an office premise of similar size as the Relocated Premises. (iii) The Landlord shall pay all direct costs of preparing the Relocated Premises for occupation by the Tenant (which costs shall include, without limitation, all costs in wiring the Relocated Premises for the Tenant's use) and of relocating the Tenant and all of the Tenant's property, fixtures and furniture therein. The Landlord shall not be liable for any other or consequential costs, damages or losses to or of the Tenant as a result of such relocation. (iv) To the extent that the Rentable Space of the Relocated Premises is not identical in square footage to that of the Vacated Space, the Fixed Rent shall be adjusted upwards or downwards, as the case may be, at the same rate per annum as was payable with respect to the Vacated Space, but Fixed Rent may be increased only to the extent that the Rentable Space of the Relocated Premises is no greater than 5,208 square feet. (v) The parties enter into such lease amending agreements as necessary to effect the foregoing. (b) The Landlord's herein right of relocation with respect to the Conference Premises shall terminate and be of no force or effect in the event that the Tenant exercises its right of Offer with respect to the Cafeteria Premises in accordance with Section 6 of Schedule "C" of the Lease. In no event shall the LandLord have the right to relocate the Tenant from the Conference Premises prior to April 1, 1996. For further clarification and certainty it is further understood and agreed that the Landlord may not provide a Relocation Notice to the Tenant with respect to the Conference Premises prior to April 1, 1996. 6. The parties confirm that in all other respects, the terms, covenants and conditions of the Lease remain unchanged and in full force and effect, except as modified by this Agreement. 7. This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns where permitted by the Lease. IN WITNESS WHEREOF the parties have executed this Agreement under their respective seals. SIGNED, SEALED AND DELIVERED DELRINA (CANADA) CORPORATION In the presence of: /s/ Denice McCullough Per: /s/ Derek Witte - ---------------------------- ------------------------------- Witness Title /s/ Denice McCullough Per: /s/ Robert Dykes - ---------------------------- ------------------------------ Witness Title SHERWAY CENTRE LIMITED Per: Employee ------------------------------- Title Asst. Secretary Per: Employee ------------------------------ Title Asst. Secretary The Tenant, if a corporation, must execute this Agreement under its corporate seal and indicate the capacity of the signing officers, and if a partnership, must execute by signatures of the general partners under the seal, and if an individual, must execute by the individual's signature. Except in the case of corporation, all signatures must be witnessed. SCHEDULE "A" ADASON PROPERTIES LIMITED [LOGO] ---------------------- PARK CENTRE 895 DON MILLS ROAD NORTH YORK, ONTARIO BUILDING # 1 SUITE 100 ---------------------- SCALE 1" = 20' 0" [FLOOR PLAN] RENTABLE [LOGO] 1 1,131 sq.ft. JUNE 15/95 *2 711 sq.ft. (TS) TR RM 3 474 sq.ft. 4 897 sq.ft. ENTIRE FLOOR USEABLE RENTABLE 12,359 4,609.00 4,856.05 [895 DON MILLS ROAD, BUILDING #, SUITE 100 FLOORPLAN] THIS LEASE made as of July 31, 1995 between: SHERWAY CENTRE LIMITED (the Landlord) of the first part, - a n d - DELRINA (CANADA) CORPORATION (the Tenant) of the second part, whereby the parties agree as follows: ARTICLE I INTERPRETATION 1.1 DEFINED TERMS - GENERAL. In this lease: "Building" means the buildings known as One Park Centre and Two Park Centre, 895 Don Mills Road, Toronto, Ontario in which the Premises are located; "Cafeteria Premises" shall have the meaning given that term in paragraph 6 of Schedule "C"; "Capital Tax" means any tax payable by the Landlord on account of its capital under the CORPORATIONS TAX ACT (ONTARIO) or any successor legislation, except any such tax levied, assessed or payable in lieu of or in substitution for Property Taxes; "Common Areas" means those parts of the Project designated by the Landlord for common use by the Landlord and the tenants of the Project, including the underground pedestrian walkway connecting the Building and the Garage, the landscaped portions of the Project, the public sidewalks and the landscaped portions of the streets adjacent to the Land and the Delivery Facilities; "Common Service Areas" means those parts of the Project, whether or not within the Building, designated by the Landlord which provide services to the Project; "Consumer Price Index or C.P.I." means (a) the Consumer Price Index (All Items for Regional Cities, base year 1981 - 100) for the Municipality of Metropolitan Toronto, or if there is no Consumer Price Index for that city, for the city in Canada nearest the Building for which there is a Consumer Price Index published by Statistics Canada (or by a successor or other governmental agency, including a provincial agency), or (b) if the Consumer Price Index is no longer published, an index published in substitution for the Consumer Price Index or any replacement index designated by the Landlord. If a substitution is required, the Landlord will make the necessary conversion. If the base year for the Consumer Price Index (or the substituted or replacement index) is changed by Statistics Canada (or by its successor or other governmental agency) the Landlord will make the necessary conversion. - 2 - "Control" will have the meaning attributed to it in Section 2(3) of the CANADA BUSINESS CORPORATIONS ACT in force as of the date of this lease and "Controls" and "Controlled" shall have a corresponding meaning; "Cost of Utilities" means the cost of electricity and other utilities supplied to tenants of premises in the Building as determined by the Landlord who in making its determination shall take into account the readings of existing electrical check meters; "Delivery Facilities" means those portions of the Project designated by the Landlord as facilities for common use by the Landlord and tenants of the Project for deliveries; "Eligible Corporation" means a corporation which Controls, is Controlled by or is under common Control with the Tenant; "Expert" means any independent, third party architect, engineer, land surveyor or other professional consultant, as the case may be, appointed by the Landlord and qualified in the opinion of the Landlord to perform the particular function; "Expiration of the Term" means the termination of this lease by either effluxion of time or operation of any of its provisions; "First Expansion Premises" shall have the meaning given that term in subparagraph 3(b) of Schedule "C"; "Fixed Rent" means the amount payable under section 6.1(a); "Garage" means those portions of the Project designated by the Landlord for parking; "Initial Premises" means those portions of the Building, excluding its exterior, initially leased to the Tenant under this lease and shown outlined in red on the floor plans attached as Schedule "A". Such premises comprise all of the 5th and 6th floors of One Park Centre and all of the 3rd, 4th and 5th floors of Two Park Centre. The Rentable Space of the Initial Premises is 74,174 square feet; "Insurance" means coverage with respect to the following risks in amounts equal, in the case of the Landlord, to those maintained by prudent owners of like buildings and, in the case of the Tenant, to those maintained by prudent tenants of like premises: (a) comprehensive general liability; (b) all risks coverage; (c) In the case of the Landlord: (i) boiler and machinery; and (ii) loss of rental income by reason of damage; and (d) In the case of the Tenant, legal liability; and in the case of the Landlord, such other coverage as the Landlord may determine to maintain and in the case of the Tenant, such other coverage as the Landlord may require, in each case having regard to the risks which are customarily insured against by prudent landlords and tenants of like premises; - 3 - "Land" means the land entered as Parcel 2-8 in the Register for Section Y-15 in the Land Registry Office for the Land Titles Division of Metropolitan Toronto and any adjacent lands owned by the Landlord; "Landlord's Cost" means with respect to any cost incurred by the Landlord the actual amount thereof and 15% thereof on account of management and overhead; "Leasehold improvements" means the fixtures and improvements made by or on behalf of the Tenant in the Premises; "Mortgage" means any encumbrance of the Building; "Mortgagee" means the holder of any Mortgage; "Notice" has the meaning set forth in section 15.3; "Permitted Tenant" means Delrina (Canada) Corporation, its parent company, any affiliate of such parent company or an Eligible Corporation; "Premises" means the Initial Premises and, if the Tenant exercises its right to lease such additional premises in accordance with the terms of this lease, the Swing Space, the First Expansion Premises, the Second Expansion Premises and the Cafeteria Premises; "Prime" means the rate of interest from time to time announced by The Bank of Nova Scotia as its prime rate; "Project" means the improvements constructed on the Land including the Building, the Common Areas, the Garage and any other office buildings; "Rent" means the amounts payable by the Tenant to the Landlord under this lease; "Second Expansion Premises" shall have the meaning given that term in subparagraph 3(c) of Schedule "C"; "Structural Elements" means the structural components of the Building or Premises as determined by an Expert; "Swing Space" shall have the meaning given that term in subparagraph 4(a) of Schedule "C"; "Term" means the term of this lease as specified in section 2.3 and any permitted overholding; and "Unavoidable Delay" means any event, except financial inability, beyond the control of the party affected thereby which prevents the fulfilment by such party of any obligation hereunder and not caused by such party and not avoidable by the exercise of reasonable effort or foresight by such party. 1.2 DEFINED TERMS - OPERATING COSTS AND TAXES. For the purpose of calculating the Proportionate Share of Operating Cost and Taxes: "Fiscal Year" means a calendar year provided that the Landlord may by Notice specify an annual date upon which each subsequent Fiscal Year is to begin, in which event the Fiscal Year which would otherwise be current when such annual date first occurs thereafter shall terminate on the preceding day; "Operating Cost and Taxes" means for a Fiscal Year the aggregate costs paid or payable by the Landlord and established in accordance with good accounting practice applied in - 4 - the real estate development industry on account of Property Taxes, Insurance and the operation, management, maintenance and repair of: (a) the Building and, in the case of Property Taxes, the portion of the Land attributable thereto; and (b) on a proportionate basis as hereinafter provided, the Common Areas and the Common Service Areas; and a charge on account of management and overhead equal to 15% of such costs (exclusive of the Property Taxes component thereof); provided that: (i) the following shall be excluded: (A) costs recoverable from tenants other than Operating Cost and Taxes or Insurers; (B) debt service, depreciation and costs of a capital nature and interest on any of the foregoing, except as hereinafter provided; (C) costs of procuring any lease; (D) income, corporate and other taxes of a personal nature of the Landlord to the extent not imposed in lieu of Property Taxes; (E) Capital Tax levied against the Landlord, unless levied, assessed or payable in lieu of or in substitution for Property Taxes; (F) costs incurred by the Landlord in making structural repairs to the Building or for the repair and maintenance of Structural Elements unless the need for any of such repairs is caused by or contributed to by the Tenant, in which case the Tenant shall be wholly responsible for the costs so incurred or for the portion of such costs attributable to its act, omission or negligence; (G) any costs or expenses incurred by the Landlord in developing or constructing any additional building or buildings otherwise expanding the Project; and (H) any cleaning costs with respect to the Building or the Common Areas other than those normally contracted for by the Landlord except to the extent that the Landlord incurs actual and verifiable additional cleaning costs directly attributable to the Tenant's use or occupancy of the Premises, in which case the Tenant shall be solely responsible for such additional cleaning costs attributable to the Tenant's use and occupancy of the Premises. (ii) there shall be included the cost amortized at Prime of all capital improvements made after the Building is substantially completed which have the effect of reducing the costs which would otherwise be included in Operating Cost and Taxes; (iii) the proportion of Operating Cost and Taxes of the Common Areas and the Common Service Areas shall be allocated equitably by the Landlord between the Building and any one or more of the other office buildings forming part of the Project and be based to the extent possible on the respective aggregate areas of Rentable Space of the Building and such other building or buildings; and - 5 - (iv) if there are unoccupied premises in the building, the Landlord may make an equitable adjustment of the amount of Operating Cost and Taxes by reason of the fact that unoccupied premises occasion lower costs to the end that the tenants of the occupied premises will bear the actual amount of the Operating Cost and Taxes attributable to their premises; "Property Taxes" means all taxes and other charges imposed by any lawful authority against land and any fixed improvements thereon or upon the Landlord in respect thereof and all costs relating to any appeal thereof; "Proportionate Share" means the ratio, the numerator of which is the Rentable Space of the Premises and the denominator of which is the aggregate Rentable Space of the Building (exclusive of any storage areas); "Rentable Space" means: (a) with respect to premises on a single tenancy floor occupiable space; (b) with respect to premises on a multiple tenancy floor occupiable space and a proportion of all shared areas on such floor, such proportion being a fraction, the numerator of which is the occupiable space of the Premises and the denominator of which is the total occupiable space on such floor; and (c) for the purpose of this definition: (i) "occupiable space" means: (A) with respect to a single tenancy floor, the area of the floor measured from the inside surface of the exterior walls, excluding, where applicable, elevators, stairwells, duct shafts, Delivery Facilities, Common Service Areas, the Building lobby, other like areas and their enclosing walls; and (B) with respect to a multiple tenancy floor, the area of the Premises measured from the inside surface of the exterior walls and from the inside surface of all demising walls except those separating the Premises from adjoining premises which shall be measured from the centre lines of such walls; (ii) "shared areas" means from time to time the areas included in the measurement made pursuant to part (A) of the term "occupiable space" less the areas included in the measurement of the Premises and all other premises on the same floor made pursuant to part (B) of such term; and (iii) in the event of any uncertainty as to the principles of measurement of occupiable space reference should be made to American National Standard Z65.1 - 1980 (Building Owners and Managers Association International standard). 1.3 NUMBER, GENDER AND JOINT LIABILITY. The necessary grammatical changes required to make the provisions of this lease apply in the plural sense where the Tenant comprises more than one entity and to corporations, associations, partnerships or individuals, male or female, shall be assumed as though in each case fully expressed. If the Tenant is more than one person or entity its liability shall be joint and several. If the Tenant is a partnership each person who is or becomes a member of the partnership or any successor partnership shall be jointly and severally liable. 1.4 PROCEDURE FOR APPROVAL. Any request for approval shall be requested by Notice and in the absence of reply given by Notice not later than 15 days after Notice of the request has been given, or such other period of time as is otherwise expressly provided in - 6 - this lease, the approval shall be deemed to have been given unless the approval may by the terms of this lease be withheld in the discretion of the party whose approval is requested. Each approval shall be in writing unless by operation of the preceding sentence it is deemed to have been given. If either party withholds its approval it shall give Notice of its reason unless the approval may by the terms of this lease be withheld in its discretion. 1.5 DIVISIONS. All references in this lease to articles, sections and other subdivisions are to those in this lease. 1.6 ENTIRE AGREEMENT. This lease and the restrictions and regulations imposed by the Landlord pursuant to sections 3.2 and 4.1 respectively constitute the entire agreement between the Landlord and the Tenant concerning the subject matter of this lease. This lease may only be amended by an agreement in writing signed by the parties hereto. 1.7 REASONABLENESS. The Landlord and the Tenant shall, except as otherwise expressly provided in this lease, each act reasonably, having regard to the fact that they are the owner and a tenant, respectively, of a good quality office building in the Don Mills district of the City of North York, in the exercise and the enforcement of their respective rights under this lease. 1.8 BUILDING STANDARD. The Landlord and the Tenant shall perform their respective obligations under this lease having regard to the general standard of the Building as at August 1, 1995 and subject to the limitations occasioned by the design of the Building and its basic systems. 1.9 NATURE OF THE LEASE. This lease is a completely net lease to the Landlord and accordingly, except as otherwise expressly provided in this lease, the Landlord has no obligations with respect to either the Premises, the Building, the Common Areas, the Common Service Areas, the Garage or the Project. ARTICLE II DEMISE AND TERM 2.1 DEMISE - PREMISES. The Landlord hereby leases the Premises to the Tenant and the Tenant hereby leases and accepts the Premises from the Landlord to have and to hold during the Term, subject to the terms of this lease. As at the commencement of the Term, the Premises comprise only the Initial Premises. 2.2 LICENCES. The Landlord hereby grants to the Tenant a non-exclusive licence throughout the Term and subject to control by the Landlord: (a) parking, subject to the terms of paragraph 11 on Schedule "C"; (b) to use those parts of the Common Areas giving access to the Premises and the Garage; (c) to have its name displayed on the main lobby directory board for the Building, on the floor lobby directory board on each floor on which the Premises are located and on the main door to the Premises, all such signs to be under the exclusive control of the Landlord and to conform to the uniform pattern of identification signs for tenants of the Building prescribed by the Landlord; and (d) if the Premises constitute one or more full floors of the Building, to have a sign displaying the name of the Tenant in the elevator lobby of each such floor provided that the design of the sign has been approved by the Landlord. - 7 - 2.3 TERM. The Term shall be ten (10) years beginning August 1, 1995 (the "Commencement Date") and ending the last day of July, 2005. 2.4 SURRENDER. The Tenant shall surrender possession of the Premises by not later than the Expiration of the Term. 2.5 OVERHOLDING. The Tenant may remain in possession of the Premises after the Expiration of the Term with the approval of the Landlord which may be withheld in its discretion. In that event the Tenant shall be a monthly tenant at the rent stipulated in such approval and otherwise upon the terms of this lease. ARTICLE III USE OF PREMISES 3.1 USE. The Premises shall be used for general administrative office purposes only to a standard in keeping with the quality and character of the Building. The Tenant shall not permit any part of the Premises to be occupied by any person other than the Tenant and its employees and any subtenant permitted under Article XI and the employees of such subtenant. 3.2 TERRACE. If there is a terrace immediately adjacent to the Premises to which the Tenant has access from the Premises any use thereof by the Tenant shall be subject to whatever restrictions the Landlord, in its discretion, may by Notice impose. If the Tenant fails to observe such restrictions the Landlord may prohibit such access. 3.3 WASTE AND NUISANCE. The Tenant shall not commit or permit any waste or damage to the Premises or any manner of use causing nuisance to other tenants of the Project. 3.4 EXTRAORDINARY EQUIPMENT. The Tenant shall not install any equipment which might affect the capacity of either the structure or the basic systems of the Building. 3.5 FIRE PREVENTION AND ENERGY CONSERVATION. The Tenant shall comply with the requirements of the Landlord with respect to life safety and, with respect to the Premises, energy conservation provided such energy conservation measures do not materially adversely affect the Tenant's lighting, heating and air- conditioning needs or the use of the Premises after regular business hours or on weekends. 3.6 EXTERIOR APPEARANCE OF PREMISES. The Tenant shall keep the exterior appearance of the Premises tidy and business-like and shall not erect any sign or other like object within the Premises which is visible from the exterior of the Premises, except as herein provided. ARTICLE IV REGULATIONS 4.1 PURPOSE. The Landlord may by Notice impose regulations for the orderly operation of the Building, the Common Areas and the Garage so long as these do not materially adversely affect the rights and licences otherwise granted to the Tenant by this lease. The present regulations are attached to this lease. 4.2 OBSERVANCE. The Tenant shall observe and shall cause those for whom it is responsible to observe the regulations. 4.3 ENFORCEMENT. The Landlord shall enforce the regulations against all occupants of the Building but in so doing need not institute any legal action unless the character or quality of the Building is materially adversely affected. - 8 - ARTICLE V LIMITATION OF LIABILITIES 5.1 LIMITATION OF TENANT'S LIABILITY. If and to the extent that the Tenant shall be prevented or delayed by reason of Unavoidable Delay in the fulfilment of any obligation hereunder other than the payment of Rent, the Tenant shall not be in default and the period for the fulfilment of such obligation shall be extended accordingly. 5.2 LIMITATION OF LANDLORD'S LIABILITY. If and to the extent that the Landlord shall be prevented or delayed by reason of Unavoidable Delay in the performance of any obligation here-under the Landlord shall not be in default and the period for the fulfilment of such obligation shall be extended accordingly. The Landlord shall only be liable for any personal injury or death suffered by the Tenant or any other person who may be upon the Premises or for the loss or any damage to any property of the Tenant or of any such other person if caused by the actual fault or negligence of the Landlord or those for whom it is in law responsible, or if the harm or damage arises due to a breach of this lease by the Landlord or those for whom it is in law responsible. 5.3 INDEMNITY. The Tenant shall indemnify and save the Landlord harmless in respect of: (a) all claims and liabilities arising from any act or omission of the Tenant or any person for whose conduct the Tenant is responsible and the costs incurred by the Landlord in connection with any action pertaining thereto; and (b) any damage suffered by the Landlord by reason of the breach by the Tenant of any of its obligations under this lease and the costs incurred by the Landlord in connection with any action pertaining thereto. The Landlord shall indemnify and save the Tenant harmless in respect of: (a) all claims and liabilities arising from any act or omission of the Landlord or any person for whose conduct the Landlord is responsible and the costs incurred by the Tenant in connection with any action pertaining thereto; and (b) any damage suffered by the Tenant by reason of the breach by the Landlord of any of its obligations under this lease and the costs incurred by the Tenant in connection with any action pertaining thereto. ARTICLE VI RENT 6.1 ITEMS OF RENT. The Tenant shall pay to the Landlord: (a) Fixed Rent for the Initial Premises in the following amounts: (i) for the portion of the Initial Premises located in One Park Centre, and comprising 29,383 square feet of Rentable Space, $177,767.15 per annum, in equal monthly instalments of $14,813.93 each, calculated at the rate of $6.05 per square foot of such Rentable Space per annum; and (ii) for the portion of the Initial Premises located in Two Park Centre, and comprising 44,791 square feet of Rentable Space, $235,152.75 per annum, in equal monthly instalments of $19,596.06 each, - 9 - calculated at the rate of $5.25 per square foot of such Rentable Space per annum; Fixed Rent with respect to the Swing Space, First Expansion Premises, Second Expansion Premises and the Cafeteria Premises, if the Tenant elects to exercise its rights with respect thereto, shall be calculated and paid in the amounts provided in this lease. Fixed Rent payable by the Tenant with respect to any Renewal Term provided for in this lease shall be determined in the manner required by this lease. Notwithstanding the foregoing, the Tenant shall not be required to pay the Fixed Rent of $14,813.93 per month as provided in subparagraph 6.1(a)(i) nor additional rent (including, without limitation, Operating Costs and Taxes) attributable to that portion of the Initial Premises located in One Park Centre and comprising 29,383 square feet of Rentable Space (except for Tenant's hydro charges) in and for the period commencing March 1, 1996 and ending April 30, 1996. The foregoing represents the only rent-free period applicable to any portion of the Premises. For clarity, there shall be no rent free period or abatement with respect to any monthly parking fees payable under this lease, nor with respect to the repayment of leasehold improvement allowances pursuant to paragraph 2 of Schedule "C". (b) the Tenant's share of Operating Cost and Taxes (exclusive of Property Taxes, Tenant hydro and Operating Cost not within the control of the Landlord) which shall be the lesser of (i) the Tenant's Proportionate Share of the actual amount of Operating Cost and Taxes (exclusive of Property Taxes, Tenant hydro and Operating Cost not within the control of the Landlord); and (ii) the amount obtained by multiplying the prior year's Operating Cost and Taxes (exclusive of Property Taxes, Tenant hydro and Operating Cost not within the control of the Landlord) payable by the Tenant by the percentage increase in the Consumer Price Index (C.P.I.); (c) the Tenant's Proportionate Share of Property Taxes and Operating Cost not within the control of the Landlord; (d) the Cost of Utilities supplied to the Premises, including all Tenant hydro charges; (e) the Landlord's Cost on account of the following: (i) the replacement of tubes and ballasts in the Premises; (ii) the installation and any change of the name of the Tenant on the main lobby directory board for the Building, on each floor lobby directory board on which the Tenant has its name and on the main door to the Premises; (iii) any additional services and equipment agreed to be provided by the Landlord at the request of the Tenant (f) the monthly fee charged by the Landlord for parking in accordance with Schedule "C"; and (g) the amount, if any, by which the Operating Cost and Taxes attributed to the Premises by the Landlord exceeds the Proportionate Share of Operating Cost and Taxes if such excess is occasioned by the use or improvement of the Premises. - 10 - 6.2 GENERAL. All amounts payable by the Tenant to the Landlord under this lease shall be deemed to be rent. The Tenant shall pay Rent without abatement, or deduction and set-off, except as expressly provided, in lawful money of Canada to such person and at such address as the Landlord may advise. The Tenant shall pay items of Rent of a recurring nature, including Fixed Rent, in advance on the first day of each month of the Term and shall pay other items of Rent within 30 days of the delivery of an invoice therefor. The Landlord shall estimate and may re-estimate, items of Rent of a recurring and variable nature for each Fiscal Year and advise the Tenant thereof. If the Commencement Date is not the first day of a month or if the Expiration of the Term does not occur on the last day of a month, Rent for the broken period shall be pro-rated. 6.3 FINAL DETERMINATION OF CERTAIN ITEMS OF RENT. The Landlord shall within 120 days after the end of each Fiscal Year provide to the Tenant a statement (the "Statement") setting out in detail the method of calculation of each item of, and the actual amount of the Proportionate Share of Operating Cost and Taxes and such other items of Rent of a recurring and variable nature for such Fiscal Year. If the aggregate monthly instalments on account thereof paid during such Fiscal Year differ from the actual amount thereof set forth in the Statement, the Tenant shall pay or the Landlord shall refund the difference within 30 days after the Statement is provided. If the aggregate of such instalments exceeds by more than 3% the actual amount thereof, the Landlord shall pay to the Tenant interest on the amount of the excess at a rate equal to Prime and 1% per annum calculated from the date of such overpayment being the date, prorated on a per diem basis, when the aggregate of such instalments equals the Tenant's actual Proportionate Share of Operating Cost and Taxes. If the aggregate of such instalments is less than the actual amount thereof by more than 3%, the Tenant shall pay to the Landlord interest on the amount of the short payment at a rate equal to Prime and 1% per annum calculated from the date of such underpayment being the first day of the last month for such Fiscal Year. The Tenant may within the 120 day period after the Statement is provided examine the books and records of the Landlord relating to the Project. The Tenant may by Notice given within such 120 day period but not otherwise dispute the Statement whereupon the matter shall be finally resolved by an Expert. If the Expert determines that the amount payable by the Tenant has been overstated by more than 3% the Landlord shall pay the fee of the Expert. If the Expert determines that the amount payable by the Tenant has not been overstated by three (3%) per cent or more the Tenant shall pay such fee. Any adjustment required to any previous payment made by the Tenant or the Landlord by reason of any such determination shall be made forthwith and shall bear interest at a rate equal to Prime and 1% per annum from the date of such over or under payment as previously described. The Landlord or Tenant may claim a readjustment of the Proportionate Share of Operating Cost and Taxes or of any other item of Rent based upon any error of computation or allocation by Notice given within 180 days after the Statement is provided but not otherwise. ARTICLE VII TAXES 7.1 LANDLORD'S TAXES. The Landlord shall pay before delinquency the Property Taxes relating to the Building. 7.2 TENANTS TAXES. The Tenant shall pay before delinquency all taxes and other charges imposed by any lawful authority against the Tenant or any sub- tenant, licensee or occupant of the Premises which if not paid would constitute either a lien on either the Land or the Building or a liability of the Landlord. 7.3 ASSESSMENT APPEALS. The Tenant may conduct any appeal from any governmental assessment or determination of the value of the Land, the Building or the Premises provided the Tenant does not delay or withhold payment of Property Taxes. - 11 - ARTICLE VIII INSURANCE 8.1 LANDLORDS INSURANCE. The Landlord shall maintain Insurance with respect to its interest in the Building, the Common Areas and the Garage. Such insurance shall include, if available, a waiver of any right of subrogation against the Tenant. 8.2 TENANTS INSURANCE. The Tenant shall maintain Insurance with respect to its interest in the Premises, the Leasehold Improvements and all operations of the Tenant in and from the Premises. The Tenant shall at the request of the Landlord provide the Landlord with certificates of such insurance. If both the Landlord and the Tenant have claims to be indemnified under any such insurance, the indemnity shall be applied first to the settlement of the claim of the Landlord and the balance to the settlement of the claim of the Tenant. Such insurance shall include the Landlord and any Mortgagee designated by Notice by the Landlord as named insureds as their interests may appear and, if available, shall contain a cross-liability clause protecting the Landlord in respect of claims by the Tenant as if the Landlord were separately insured and a provision prohibiting the insurer from materially altering or cancelling the coverage without first giving the Landlord at least 30 days prior written notice thereof. ARTICLE IX OPERATION, SERVICES, MAINTENANCE, REPAIR AND ACCESS BY LANDLORD 9.1 STANDARD OF OPERATION. The Landlord shall operate and manage the Building, the Common Areas, the Common Service Areas and the Garage to the general standard as exists in the Building and such areas as at August 1, 1995. 9.2 SERVICES TO PREMISES. The Landlord shall provide the following services to the Premises: (a) heat, ventilation and air conditioning as required for the comfortable use and occupancy of the Premises during normal business hours as determined by the Landlord (and being, at the date of this lease, 8:00 a.m. to 6:00 p.m. Monday to Friday except on legal or statutory holidays); (b) electrical power for lighting and office equipment; (c) replacement of tubes and ballasts; (d) janitorial services; and (e) telecommunication conduits. 9.3 SERVICES TO BUILDING. The Landlord shall provide for the Tenant and others the following services: (a) elevators; (b) washroom facilities and a drinking fountain on each floor of the Building on which the Premises are located; (c) heat, ventilation, air conditioning, lighting, and janitorial service in the appropriate interior portions of the Common Areas; (d) snow removal and landscape maintenance for the appropriate exterior portions of the Common Areas; (e) exterior window washing; - 12 - (f) garbage removal; (g) janitorial services for the appropriate interior portions of the Common Areas; and (h) Building security system exclusive of additional security required by the Tenant. 9.4 MAINTENANCE AND REPAIR. The Landlord shall maintain and repair the following: (a) the Building (but not the Premises or the premises of other tenants) and its basic systems meaning the heating, ventilating and air-conditioning systems, plumbing and electrical systems serving the Building but not the Premises or the premises of other tenants; (b) the Structural Elements of the Premises; and (c) the Common Areas, the Common Service Areas and the Garage. 9.5 ACCESS BY LANDLORD. The Landlord may enter the Premises in order: (a) to perform its obligations hereunder; (b) to install, maintain and repair equipment within or about the Premises for the supply of services to other premises in the Building; (c) to make repairs or alterations to the Building; (d) to take such steps as the Landlord may deem necessary for the safety or preservation of the Project; and (e) to inspect the state of repair of the Premises. Prior to the exercise of this right the Landlord whenever possible shall consult with the Tenant in order to minimize inconvenience to the Tenant and the Tenant's business and in its exercise of this right shall observe the security requirements of the Tenant. ARTICLE X MAINTENANCE, REPAIR AND IMPROVEMENTS BY TENANT 10.1 MAINTENANCE OF PREMISES. The Tenant shall maintain and repair the Premises (excluding the Structural Elements thereof) and the Leasehold Improvements. 10.2 LEASEHOLD IMPROVEMENTS. The Tenant may make Leasehold Improvements provided that: (a) the Tenant shall furnish the Landlord with professionally prepared plans and specifications therefor; (b) if any proposed Leasehold Improvements affect the structure, the walls, the systems or the exterior appearance of the Building, such plans and specifications shall be approved by the Landlord and, at its election, any Expert; (c) the Tenant shall advise the Landlord of the identity of its contractors and tradesmen and their respective labour affiliations; (d) the Landlord shall either approve any contractors proposed by the Tenant to perform any work which may affect the structure, the walls or the - 13 - systems of the Building or, upon provision of detailed reasonable grounds, require that any such work be performed by either the Landlord or its contractors in which case the Tenant shall pay the Landlord's Cost on account thereof; the Landlord may refuse to allow the contractors and tradesmen of the Tenant access to the Building if their labour affiliations may conflict with those of the Landlord or those employed by it or if they are not competent; (e) the Tenant shall produce evidence satisfactory to the Landlord as to the existence of all necessary permits and sufficient insurance coverage; (f) the Tenant shall pay the Landlord's Cost on account of the fees of any Expert appointed to review the plans and specifications whether or not the work proceeds; (g) construction of the Leasehold Improvements shall be performed in accordance with the plans and specifications submitted to the Landlord and, where applicable, approved by the Landlord, subject to any conditions or regulations imposed by the Landlord and in a good and workmanlike and expeditious manner using good quality materials; (h) the Landlord may inspect construction as it proceeds (the onus being on the Tenant to advise the Landlord whenever any phase has been completed so that an inspection can be made); (i) if the Tenant fails to observe any of the requirements of this section the Landlord may require that construction stop and that the Premises be restored to their prior condition failing which the Landlord may do so and the Tenant shall pay the Landlord's Cost on account thereof; and (j) notwithstanding any other provision of this lease, the Tenant shall pay only the Landlord's out-of-pocket costs for the supervision of construction and review of Tenant's drawings relating to its construction, from time to time, of Leasehold Improvements for the Premises. 10.3 LIENS. If any lien under the Construction Lien Act, 1983 or any successor statute is registered against the title to the Building and such lien relates to material, labour or any service alleged to have been provided to the Tenant, the Tenant shall upon Notice by the Landlord cause such lien to be discharged within 5 days after such Notice has been given. 10.4 REMOVAL OF LEASEHOLD IMPROVEMENTS - TERM. The Tenant may remove Leasehold Improvements either upon the exercise of its rights under, and upon the terms of, section 10.2 or with the approval of the Landlord which may be withheld in its discretion. 10.5 REMOVAL OF LEASEHOLD IMPROVEMENTS - EXPIRATION OF TERM. Subject to the provisions set out below, the Tenant shall be under no obligation to remove its Leasehold Improvements upon the Expiration of the Term. The Landlord may, however, upon not less than 30 days Notice (except in the case of default and re-entry in which case no prior Notice need be given) require the Tenant before the Expiration of the Term to remove all Leasehold Improvements which are not considered improvements for general office use and which were installed for the specific use of the Tenant (including, without limitation, installations made in, or improvements made to, the Cafeteria Space (if such space is leased by the Tenant pursuant to the terms of this lease), computer room, and all raised flooring, halon fire protection system and additional heating, ventilation and air conditioning equipment installed by the Tenant) and restore the Premises to their original condition. Upon the Expiration of the Term, all Leasehold Improvements (including carpeting and light fixtures) and all personal property of the Tenant remaining in the Premises shall become the property of the Landlord. - 14 - ARTICLE XI TRANSFERS BY TENANT 11.1 ASSIGNMENT OR SUBLETTING. The Tenant shall be entitled to assign this lease or sublet or part with possession of all or part of the Premises or mortgage or encumber the lease (collectively, a "Transfer"), but only if it first obtains the prior written consent of the Landlord, which consent shall not be unreasonably withheld or delayed. At the time of requesting the Landlord's consent, the Tenant shall provide the Landlord with: (a) a true copy of the bona fide written offer or agreement respecting the Transfer in connection with which the Landlord's consent is being sought; and (b) adequate information regarding the creditworthiness, reputation and business experience of the proposed assignee or subtenant, except that the Tenant shall not have to provide such information where the Transfer involves the mortgaging or encumbrancing of the lease. 11.2 CHANGE IN CONTROL. The Tenant shall obtain the approval of the Landlord to any change in the effective control of the Tenant. Provided, however, that this section 11.2 shall not apply to the Tenant if at such time: (i) the Tenant is a public corporation whose shares are traded and listed on any recognized security exchange in Canada or the United Sates; or (ii) the Tenant is a private corporation but is controlled by a public corporation defined as aforesaid, so long as in either of the foregoing provisos, notwithstanding any such sale of controlling shares there will continue to be a continuity of management, business practices and policies. 11.3 ADVERTISING OF PREMISES. The Tenant shall not advertise the rental rates, inducements or other financial terms and conditions with respect to the whole or any part of the Premises which may be available for Transfer and shall not permit any broker to do so. If the Rent, additional rent or comparable consideration to be paid by any subtenant or assignee exceeds the Fixed Rent and additional rent then payable by the Tenant with respect to the whole or such part of the Premises which are the subject of the Transfer, the amount of the excess shall be paid to the Landlord forthwith by the Tenant following the Tenant receiving such excess. The Tenant shall be entitled to deduct any brokerage fees, leasehold improvement allowances or tenant inducements actually paid by it in connection with any such Transfer in determining whether the rent and additional rent payable by the subtenant or assignee exceeds that payable by the Tenant. ARTICLE XII TRANSFER BY LANDLORD, SUBORDINATION AND ATTORNMENT 12.1 TRANSFER BY LANDLORD. This lease shall enure to the benefit of and be binding upon the successors and assigns of the Landlord. If the Landlord transfers or leases the Project, or any part thereof, and to the extent that the transferee or lessee becomes liable to perform the obligations of the Landlord here-under, the Landlord shall thereupon no longer be liable. 12.2 SUBORDINATION AND ATTORNMENT. The Tenant shall upon Notice: (a) subordinate this lease to any Mortgage to the intent that this lease and all the interest of the Tenant in the Premises shall be subject thereto as fully as if such Mortgage had been executed and registered and the money thereby secured had been advanced before the execution and delivery of this lease; and (b) agree to attorn to any Mortgagee; - 15 - provided that the Tenant receives a non-disturbance agreement in form and content acceptable to the Tenant acting reasonably from any Mortgagee so long as the Tenant is not in default of the terms of this lease subject to the provisions of section 14.1. 12.3 STATUS CERTIFICATES. The Tenant shall certify in writing to the Landlord or as it may direct that this lease is unmodified and in full force and effect (or if modified, stating the modifications and that this lease is in full force and effect as modified), the dates to which Rent has been paid, whether or not there is any existing default on the part of the Landlord of which the Tenant has notice and any other requested information pertaining to the performance by the Landlord and the Tenant of their respective obligations hereunder. Such statement may be requested by the Landlord upon not less than 10 days' Notice. Any such statement may be conclusively relied upon by any purchaser of the Building or any Mortgagee. ARTICLE XII TERMINATION AND RENT ABATEMENT 13.1 TERMINATION BY TENANT. If the Premises or any other part of the Building, the Garage, the Common Areas or the Common Service Areas are damaged and the Landlord is thereby unable to fulfil its obligations to the Tenant and if in the opinion of an Expert, which shall be given not more than 5 days after the date of such damage, the damage cannot be repaired within a 180 day period (employing normal construction methods without overtime or other premium unless the Landlord otherwise instructs the Expert) then the Tenant may by Notice given not more than 15 days after receipt by the Tenant of the opinion of the Expert (whose fee shall be payable by the Tenant) terminate this lease with effect as of the date on which such Notice is given. 13.2 TERMINATION BY LANDLORD. If any part of the Building, the Garage, the Common Areas or the Common Service Areas is damaged and the Landlord is thereby unable to fulfil its obligations to the Tenant or to any other tenant of the Project and if in the opinion of an Expert, which shall be given not more than 45 days after the date of the damage, the damage cannot be repaired within a 180 day period (employing normal construction methods without overtime or other premium), then the Landlord may by Notice given not more than 15 days after receipt by the Landlord of the opinion of the Expert terminate this lease with effect either as of the date on which such Notice is given, if the Premises have been materially damaged, or if the Premises have not been so damaged, then as of the date stipulated by the Landlord in its Notice which shall be not less than 60 days after the date on which it is given. 13.3 ABATEMENT OF RENT. If the Premises are damaged to the extent that they are incapable, notwithstanding a reasonable amount of inconvenience to the Tenant, of being used by the Tenant for their intended purpose and if the damage has not been caused by any act or omission of either the Tenant or those for whom it is responsible Rent shall abate with effect as of the date of the damage in proportion to the area of the Premises so damaged until either: (a) the Landlord and the Tenant, each acting diligently, have completed their respective obligations to repair; or (b) the proceeds of any loss of rental income insurance attributable to the damage are no longer available for application on account of the abatement of the Rent payable under this lease and the rent payable under any other leases of premises in the Project affected by the same event of damage or the period of time during which such proceeds would have been available if the Landlord had performed its obligation to maintain the coverage described in part (c)(ii) of the definition of Insurance has expired, whichever is the first to occur. - 16 - ARTICLE XIV LANDLORDS REMEDIES 14.1 DEFAULT AND RE-ENTRY. If any item of Rent remains unpaid 15 days after written Notice is given by the Landlord or if the Tenant fails to observe or perform any of its other obligations hereunder after Notice specifying the default and a 15 day period to cure has been given or if the Tenant fails within said curative period to commence to cure such default and proceed diligently to cure same, the Tenant shall be deemed to be in default and the Landlord may at any time thereafter re-enter the Premises and terminate this lease. 14.2 RIGHT OF LANDLORD TO REMEDY. If the Tenant defaults hereunder and such default continues beyond the curative periods provided in section 14.1, the Landlord may proceed to remedy the default, including the making of any payments due or alleged to be due by the Tenant to third parties, and the Tenant shall pay on demand the Landlord's Cost on account thereof. 14.3 BANKRUPTCY OF TENANT. If the Term or a substantial portion of the property of the Tenant on the Premises is seized or taken in execution or attachment by a creditor of the Tenant or if the Tenant makes an assignment for the benefit of creditors or if a receiver-manager is appointed to control the conduct of the business on or from the Premises or if the Tenant becomes bankrupt or insolvent or takes the benefit of any act now or hereafter in force for bankrupt or insolvent debtors or if an order is made for the winding-up of the Tenant the next ensuing 3 months rent immediately will become due and payable as accelerated rent and the Landlord may re-enter and take possession of the Premises as if the Tenant were holding over and this lease shall forthwith be terminated upon Notice by the Land-lord to this effect. Accelerated rent will be recoverable by the Landlord in the same manner as the Rent hereby reserved. 14.4 INTEREST. The Tenant shall pay to the Landlord interest at a rate equal to Prime and 5% per annum on all arrears of Rent. 14.5 COSTS. If legal action is brought by reason of any default by either party hereunder and a default is established, the defaulting party shall pay to the other party all costs incurred therefor, including legal fees (on a solicitor and client basis). ARTICLE XV MISCELLANEOUS 15.1 EXHIBITION PREMISES. The Landlord may upon reasonable notice to the Tenant and in a manner that will not materially adversely affect the operation of the Tenant's business exhibit the Premises to prospective purchasers, prospective Mortgagees and, during the last 6 months of the Term, prospective tenants. 15.2 NAME OF BUILDING. The Landlord may designate the name of the Building and the Project and upon not less than 30 days Notice may change the name of either the Building or the Project. The Tenant shall only refer to the Building and the Project by their designated names and shall only use such names as its business address. 15.3 NOTICE. Any Notice to be given pursuant to this lease shall be in writing and shall be deemed to have been given if signed by or on behalf of the party giving Notice and delivered or mailed by registered prepaid post to the other party as follows: (a) to the Landlord at: Adason Properties Limited Suite 2000 181 University Avenue Toronto, Ontario M5H 3M7; and - 17 - (b) to the Tenant at the Premises. Any Notice so given shall be deemed to have been given, if delivered, on the first business day following the date of such delivery or, if mailed, on the fifth business day following the date of such mailing. Ether party may by Notice change its address. During any interruption, threatened interruption or substantial delay in postal services, all Notices shall be delivered. 15.4 COMPLIANCE WITH LAWS, ETC. The Landlord and the Tenant shall at all times in the performance of their respective obligations under this lease comply with all laws, bylaws, regulations and orders of any competent authority and with the requirements of any insurer of the interest of the Landlord in the Project. 15.5 REGISTRATION. The Tenant may register this lease with the approval of the Landlord which may in its discretion be withheld in which case the Landlord and the Tenant shall enter into a short form of lease prepared by the Landlord and the Tenant shall pay the Landlord's Cost on account thereof. Such short form shall be for the purpose only of enabling notice of this lease to be registered and shall not affect the respective rights and obligations of the parties hereunder. 15.6 QUIET ENJOYMENT. The Landlord covenants with the Tenant for quiet enjoyment. 15.7 SUCCESSORS TO LANDLORD AND TENANT. This lease shall enure to the benefit of and be binding upon the executors, administrators, successors and assigns of the Landlord and Tenant. 15.8 INDEMNITY This lease shall be effective only when the indemnity agreement in the form attached as Schedule "E" has been executed and delivered by Delrina Corporation. 15.9 SCHEDULES The following Schedules attached hereto are incorporated by reference into this lease and form part of it: Schedule "A" Floor Plans Schedule "B" Option to Renew Schedule "C" Special Provisions Schedule "D" Regulations Schedule "E" Indemnity Agreement IN WITNESS WHEREOF the Landlord and the Tenant have executed this lease under their respective seals. SHERWAY CENTRE LIMITED /s/ Wendy White ------------------------------ Wendy White, Vice President Seal /s/ Michael McKiee ------------------------------ Michael McKiee, Vice President and Treasurer DELRINA (CANADA) CORPORATION /s/ Dennis Bennie A.S.O. -------------------------------- Assistant Secretary Seal /s/ Micheal Cooperman A.S.O. -------------------------------- Assistant Secretary /s/ Paul Beesley -------------------------------- Witness SCHEDULE "A" [895 DON MILLS ROAD, BUILDING #, SUITE 100 FLOORPLAN] SCHEDULE "A" ---------------------- [ADASON LOGO] PARK CENTRE 895 DON MILLS ROAD NORTH YORK, ONTARIO BUILDING # 1 SUITE 100 ---------------------- SCALE 1" = 20' 0" [FLOOR PLAN] Cafeteria Space [MEASURE MASTERS LOGO] Approximately 7,000 Sq.Ft. JUNE 15/95 SCHEDULE "A" ---------------------- [ADASON LOGO] PARK CENTRE 895 DON MILLS ROAD NORTH YORK, ONTARIO BUILDING # 1 SUITE 500 ---------------------- SCALE 1" = 20' 0" [FLOOR PLAN] Rentable (Sq.Ft.) 14,949 [MEASURE MASTERS LOGO] JUNE 15/95 SCHEDULE "A" ---------------------- [ADASON LOGO] PARK CENTRE 895 DON MILLS ROAD NORTH YORK, ONTARIO BUILDING # 1 SUITE 600 ---------------------- SCALE 1" = 20' 0" [FLOOR PLAN] Rentable (Sq.Ft.) 14,434 [LOGO] JUNE 15/95 SCHEDULE "A" ---------------------- [ADASON LOGO] PARK CENTRE 895 DON MILLS ROAD NORTH YORK, ONTARIO BUILDING # 1 SUITE 300 ---------------------- SCALE 1" = 20' 0" [FLOOR PLAN] Rentable (Sq.Ft.) 14,921 [MEASURE MASTERS LOGO] JUNE 15/95 SCHEDULE "A" ---------------------- [ADASON LOGO] PARK CENTRE 895 DON MILLS ROAD NORTH YORK, ONTARIO BUILDING # 2 SUITE 400 ---------------------- SCALE 1" = 20' 0" [FLOOR PLAN] Rentable (Sq.Ft.) 14,921 [MEASURE MASTERS LOGO] JUNE 15/95 SCHEDULE "A" ---------------------- [ADASON LOGO] PARK CENTRE 895 DON MILLS ROAD NORTH YORK, ONTARIO BUILDING # 2 SUITE 500 ---------------------- SCALE 1" = 20' 0" [FLOOR PLAN] Rentable (Sq.Ft.) 14,949 [MEASURE MASTERS LOGO] JUNE 15/95 SCHEDULE "B" OPTION TO RENEW (a) The Tenant may renew this lease for 2 successive periods of 5 years (each such period being called a "Renewal Term"), commencing on the day following the date of expiration of the initial Term or the first 5 year Renewal Term, as the case may be, provided that the Tenant shall only be entitled to renew this lease if it: (i) has not been notified of a default in the performance of its obligations under this lease which it has failed to cure within the times required by this lease, and, subject to such notice but irrespective of cure, has not otherwise been in persistent default during the Term or a Renewal Term; (ii) is in possession and occupancy of and is using at least 45,000 square feet of Rentable Space in the Building in accordance with the terms of this lease; and (iii) gives Notice to the Landlord that it wishes to renew this lease not less than 6 months prior to the expiration of the Term or the then current Renewal Term, as the case may be, failing which this right of renewal shall be rendered null and void. (b) If the Tenant exercises its right of renewal in accordance with the foregoing, this lease shall be renewed upon the same terms and conditions contained in this Lease, save and except as follows: (i) the Tenant shall only be entitled to a total aggregate number of renewals equal to the number of successive periods referred to above so that there will be no further right of renewal following the exercise of the second right of renewal. For greater certainty, if the Tenant exercises both of the within rights of renewal in accordance with this lease, the Tenant shall be entitled to lease the Premises for a total of 10 years following the expiration of the original Term of this lease, unless this lease is sooner terminated; (ii) the provisions of paragraphs 1, 2, 3, 4 (other than subparagraph 4(j)), 5, 6, 7 and 11 of Schedule "C" and any other provision of this lease which by its terms is applicable only to the initial Term shall not apply; (iii) the Tenant shall not be entitled to the benefit of the rent free period described in paragraph 6.1(a); (iv) the Fixed Rent shall be the then current fair market rental value of the Premises then being leased by the Tenant (the "Renewed Premises"), as established by the mutual agreement of the Landlord and the Tenant. For the purpose of this Schedule, the "current fair market rental value" of the Renewed Premises means the annual amount of Fixed Rent which could reasonably be obtained by the Landlord for the Renewed Premises from a willing tenant or willing tenants dealing at arms' length with the Landlord in the market prevailing, having regard to all relevant circumstances including the size and location of the Renewed Premises, the facilities afforded, the condition of the Renewed Premises and the value of the improvements (disregarding the value of the Tenant's trade fixtures and also disregarding any deficiencies in the condition and state of repair of the Renewed Premises as a result of the Tenant's failure to comply with its repair obligations under this lease) and having regard to rentals currently being obtained for space in the Building itself and for comparable space in other buildings comparably located. -i- If the Fixed Rent to be applicable during a Renewal Term has not been mutually agreed upon by the Landlord and the Tenant at least 4 months prior to the expiry of the Term or the then current Renewal Term, as the case may be, the Fixed Rent applicable during such Renewal Term shall be determined by the award of 3 arbitrators or a majority of them. At least 45 days prior to the expiry of the Term or the then current Renewal Term, as the case may be, the Landlord and Tenant shall each name and appoint one arbitrator. These appointed arbitrators shall forthwith appoint a third arbitrator. The award of such arbitrators or majority of them shall be made prior to the expiration of the Term of this lease, but if it is not so made, the Tenant shall continue to pay the Fixed Rent which it was paying during the last year of the Term or the Renewal Term, as the case may be, until such time as the award is made and the parties shall promptly make all necessary adjustments regarding any over or underpayment of Fixed Rent effective the first day of the relevant Renewal Term. Each party shall pay the fees of the arbitrator named by it and the fees of the third (3rd) arbitrator and any other expenses under the said arbitration shall be borne equally by the Landlord and the Tenant. If the Landlord or Tenant neglect or refuse to name an arbitrator within the time hereinbefore limited, or to proceed with the arbitration, the arbitrator named by the Landlord or Tenant as the case may be, shall proceed and fix the Fixed Rent for the Renewal Term and his award shall be final. The provisions of the Arbitrations Act (Ontario) shall govern the arbitration. All documents and proceedings with respect to the arbitration are to be kept confidential by each of the parties. -ii- SCHEDULE "C" SPECIAL PROVISIONS 1. SIGNING BONUS AND LETTER OF CREDIT The Tenant acknowledges that in connection with a lease dated January 8, 1992 (the "5th Floor Lease") between it and the Landlord with respect to premises on the 5th floor of Two Park Centre, the Landlord paid the Tenant a bonus for signing such lease in the amount of $296,940.00. The Tenant agrees to provide an irrevocable, unconditional bank letter of credit to the Landlord in the amount of $296,940.00, having a term of two (2) years, from August 1, 1995 (with interest accruing thereunder to be for the credit of the Tenant), which letter of credit can be drawn on by the Landlord in the event of default by the Tenant, subject to the default provisions contained in section 14.1, and applied against the damages the Landlord actually suffers as a result of such default. The Tenant confirms that its obligation to deliver such letter of credit shall continue notwithstanding the surrender and termination of the 5th Floor Lease. 2. PREMISES "AS IS"/LEASEHOLD IMPROVEMENT ALLOWANCE Except for the Landlord's obligation to remove existing leasehold improvements in the Swing Space, First Expansion Premises and Second Expansion Premises in accordance with paragraphs 3 and 4 of this Schedule "C", the Tenant acknowledges and confirms that all of the Premises are leased to the Tenant on an absolutely "as is" basis and that the Landlord has no obligations to construct improvements or make repairs therein as at the commencement of the Term or as additional premises may be added to and become part of the Premises. The Landlord agrees that on Notice from the Tenant, it will provide to the Tenant a leasehold improvement allowance of up to $10.00 per square foot of Rentable Space of the Initial Premises, the First Expansion Space, the Second Expansion Space and the Swing Space subject to the following conditions: (a) no part of such allowance shall be paid in respect of the Rentable Space of the First Expansion Space, the Second Expansion Space or the Swing Space unless the Tenant has exercised its right to lease such space in accordance with the provisions of this Lease; (b) the Tenant shall be a Permitted Tenant; (c) the Tenant has not been notified of a default in the performance of its obligations under this lease which it has failed to cure within the times required by this lease, and, subject to such notice but irrespective of cure, has not otherwise been in persistent default of its obligations under this lease; (d) the Landlord's obligations to make any such payments shall not commence until January 1, 1996; (e) such allowance shall be used only for the construction or installation of Leasehold Improvements by or for the Tenant on its own account and not for any other party; (f) all work of construction or installation of Leasehold Improvements with respect to which such allowance is to be advanced shall have been approved by the Landlord in accordance with section 10.2; (g) all advances of such allowance will be made in monthly instalment payments directly to the Tenant's contractors and suppliers subject to -i- statutory holdbacks as required by law, against detailed invoices from such contractors and suppliers and such statutory declarations and certificates of completion from contractors, subcontractors and architects as reasonably required by the Landlord. Notwithstanding the foregoing provisions, the sole obligation for contracting for the construction of Leasehold Improvements or other work to be performed in the Premises and for payment of all suppliers, contractors, subcontractors, architects and engineers in connection therewith shall be and remain with the Tenant and the Tenant shall indemnify the Landlord with respect to all costs, expenses and liability with respect thereto, provided that the Landlord pays the allowance in accordance with the foregoing provisions. The Tenant confirms that no part of the leasehold improvement allowance described in this section will be used for the construction of Leasehold Improvements or for the performance of any other construction for any subtenant or to provide an inducement or allowance to any subtenant. The total amount of any leasehold improvement allowance advanced pursuant to this section shall be repaid by the Tenant in equal blended monthly installments of principal and interest fully amortized over the remaining Initial Term of the lease from the date on which each advance of such allowance by the Landlord has been made, utilizing an interest rate of 10% per annum calculated monthly on the unamortized portion of such allowance. Such payments of principal and interest shall be added to the Fixed Rent otherwise payable with respect to the Premises and paid to the Landlord as additional rent on the first day of each month during the Initial Term until fully paid. If the aggregate amount of leasehold improvement allowances advanced by the Landlord to the Tenant with respect to the Initial Premises, Swing Space, First Expansion Premises, Second Expansion Premises or otherwise exceeds or will exceed $1,000,000.00 then the Landlord at its option, prior to the advance of any allowances in excess of $1,000,000.00, shall be entitled to require that the Tenant deliver an irrevocable, unconditional bank letter of credit in favour of the Landlord for such amount in excess of $1,000,000.00 and to secure the repayment thereof in accordance with the preceding provisions. Such letter of credit shall be renewed annually and remain in place until the unamortized balance of the aggregate of all leasehold improvement allowances advanced by the Landlord to or on behalf of the Tenant is less than $1,000,000.00. 3. EXPANSION PREMISES (a) Provided that: (i) the Tenant is a Permitted Tenant; (ii) the Tenant has not been notified of a default in the performance of its obligations under this lease which it has failed to cure within the times required by this lease and, subject to such notice but irrespective of cure, has not otherwise been in persistent default of its obligations under this lease; and (iii) with respect to the Second Expansion Premises, the Tenant has been and remains in continuous actual possession, occupancy and use of no less than 74,171 square feet of Rentable Space in the Building from the commencement of the Term until February 1, 1997, then the tenant shall be entitled to lease the First Expansion Premises and the Second Expansion Premises in accordance with this paragraph 3. (b) The first of such additional premises (the "First Expansion Premises") shall comprise one full floor of no less than 9,100 square feet of Rentable Space and no -ii- more than 15,000 square feet of Rentable Space within either One Park Centre or Two Park Centre. (c) The second of such additional premises (the "Second Expansion Premises") shall comprise one full floor of no less than 9,100 square feet of Rentable Space and no more than 15,000 square feet of Rentable Space within either One Park Centre or Two Park Centre; (d) In order to exercise its right to lease the First Expansion Premises, the Tenant must provide Notice to the Landlord (the "First Notice") electing to lease the First Expansion Premises on or before April 30, 1996. Within fifteen (15) business days of receipt of the First Notice the Landlord shall give the Tenant Notice (the "First Response") of the possible space within the Building which could constitute the First Expansion Premises, and the area of each such space and the Tenant shall have five (5) business days from its receipt of the First Response to elect which particular space identified in the First Response it wishes to designate as the First Expansion Premises. If the Tenant exercises its rights with respect to the First Expansion Premises, then the space so designated by it from the space identified in the First Response shall be leased to the Tenant as the First Expansion Premise, and the Fixed Rent payable by the Tenant with respect thereto shall be calculated at the rate of $3.40 per square foot per annum of the actual Rentable Space comprising the First Expansion Premises, which shall be payable in equal monthly installments, in advance, in the same manner as the Fixed Rent for the Initial Premises. (e) In order to exercise its right to lease the Second Expansion Premises, the Tenant must provide Notice to the Landlord (the "Second Notice") electing to lease the Second Expansion Premises on or before February 1, 1997. Within fifteen (15) business days of receipt of the Second Notice the Landlord shall give the Tenant Notice (the "Second Response") of the possible space within the Building which could constitute the Second Expansion Premises, and the area of each such space and the Tenant shall have five (5) business days from its receipt of the Second Response to select which particular space identified in the Second Response it wishes to designate as the Second Expansion Premises. If the Tenant exercises its rights with respect to the Second Expansion Premises, then the space so designated by it from the space identified in the Second Response shall be leased to the Tenant as the Second Expansion Premise, and the Fixed Rent payable by the Tenant with respect thereto shall be calculated at the rate of $3.60 per square foot per annum of the actual Rentable Space comprising the Second Expansion Premises, which shall be payable in equal monthly installments, in advance, in the same manner as the Fixed Rent for the Initial Premises. (f) The following additional terms and conditions shall apply to the First Expansion Premises and the Second Expansion Premises: (i) the expiry date of the Tenant's term of occupancy of the First Expansion Premises or Second Expansion Premises will be co- terminus with the Expiration of the Term; (ii) if the Tenant fails to give written notice to the Landlord exercising its rights with respect to the First Expansion Premises prior to April 30, 1996 or with respect to the Second Expansion Premises prior to February 1, 1997, the rights of the Tenant with respect hereto shall be null and void and of no further effect and the Landlord will be entitled to market the space which would otherwise have comprised such expansion premises to unrelated third party tenants; (iii) if the Tenant exercises its rights for the First Expansion Premises or the Second Expansion Premises, such premises shall become part of the Premises no earlier than sixty (60) days and no later than one hundred and eighty (180) days (to be determined by the Landlord acting reasonably) after the Landlord receives the First Notice or the Second Notice, as the -iii- case may be. The First Response and the Second Response shall specify the date on which the First Expansion Premises and the Second Expansion Premises, respectively will become part of the Premises; (iv) the Tenant shall be granted a thirty (30) day fixturing period immediately prior to each of the First Expansion Premises and Second Expansion Premises becoming part of the Premises during which time the Tenant will be given occupancy of such premises for the purposes of preparing same for its use without the payment of Fixed Rent or additional rent (including, without limitation, Operating Cost and Taxes), except for the cost of utilities consumed by it in the First Expansion Premises or Second Expansion Premises, as the case may be; (v) the Landlord shall, at the Tenant's request by Notice and prior to the commencement of the fixturing period for the First Expansion Premises and Second Expansion Premises, as the case may be, remove all existing leasehold improvements in such expansion premises, at the Landlord's sole cost and expense. Apart from the removal of those leasehold improvements which the Tenant requires the Landlord to remove, the Landlord shall have no other obligations to make repairs or other improvements in the First Expansion Premises or Second Expansion Premises and the Tenant acknowledges that it will take the First Expansion Premises or Second Expansion Premises in absolutely "as is" condition; and (vi) the Landlord agrees that the aggregate Rentable Space of the First Expansion Premises and Second Expansion Premises offered to the Tenant shall not be less than 23,000 square feet of Rentable Space. By way of example, if the First Expansion Premises offered by the Landlord comprise 10,000 square feet of Rentable Space, the premises offered by it as the Second Expansion Premises would comprise no less than 13,000 square feet of Rentable Space. (g) Except as set out in this paragraph 3, or as otherwise provided in this lease, the terms and conditions of this lease shall apply to both the First Expansion Premises and the Second Expansion Premises but for purposes of clarity there shall be no rent-free periods provided for by the Landlord with respect to either the First Expansion Premises or Second Expansion Premises. The parties will enter into an appropriate lease amending agreement to include such expansion premises within the Premises and to amend the provisions relating to Fixed Rent accordingly. 4. SWING SPACE (a) Provided that: (i) the Tenant is a Permitted Tenant; and (ii) the Tenant has not been notified of a default in the performance of its obligations under this lease which it has failed to cure within the times required by this lease, and, subject to such notice but irrespective of cure, has not otherwise been in persistent default of its obligations under this lease, the Tenant shall have the right and option, until August 1, 1996, on not less than thirty (30) days' prior Notice to the Landlord (the "Swing Notice"), to elect to lease additional premises of not less than 10,200 square feet of Rentable Space and no more than 13,000 square feet of Rentable Space, subject to availability, anywhere in the Building with the exception of the second floor in One Park Centre (such additional premises being called the "Swing Space"). (b) In order to exercise such right and option, the Tenant must: -iv- (i) provide the Landlord with the Swing Notice on or prior to August 1, 1996; and (ii) specify in the Swing Notice the actual number of square feet of Rentable Space required by it in the Swing Space, failing which the Tenant's rights to lease the Swing Space shall be null and void and of no further effect. (c) The Landlord shall within fifteen (15) business days of receiving the Swing Notice give the Tenant Notice (the "Swing Response") of the possible locations within the Building that will satisfy the Tenant's space requirements for the Swing Space as specified in the Swing Notice. Within five (5) business days of the Tenant receiving the Swing Response, the Tenant shall by further Notice to the Landlord (the "Selection Notice") elect which particular space offered to it by the Landlord it wishes to select to constitute the Swing Space. (d) The Swing Space shall become part of the Premises sixty (60) days following the date of the Selection Notice and the expiry date of the Tenant's term of occupancy of the Swing Space will be co-terminus with the Expiration of the Term. The parties will enter into an appropriate lease amending agreement to include the Swing Space within the Premises and to amend the provisions relating to Fixed Rent accordingly. (e) The Tenant shall have a 30 day fixturing period immediately prior to the date on which the Swing Space becomes part of the Premises, during which fixturing period the Tenant will not be required to pay Fixed Rent or additional rent (including, without limitations Operating Cost and Taxes), except for the cost of utilities consumed in the Swing Space. (f) The annual rate per square foot of Fixed Rent for the Swing Space shall be calculated in accordance with the following formula: $3.00 + [$0.40 x A .DIVIDED BY B], where: A = the number of days between August 1, 1995, and the date on which the Tenant's Notice for the Swing Space is given to the Landlord, both dates inclusive. B = 366. Fixed Rent calculated at such annual rate per square foot shall be payable in equal monthly instalments in advance on the first day of each month so long as the Swing Space forms part of the Premises during the Term. (g) The Landlord shall, at the Tenant's request by Notice and prior to the commencement of the fixturing period for the Swing Space, remove all existing leasehold improvements in the Swing Space, at the Landlord's sole cost and expense. Apart from the removal of those leasehold improvements which the Tenant requires to be removed, the Landlord shall have no other obligations to make repairs or other improvements in the Swing Space and the Tenant acknowledges that it will take the Swing Space in absolutely "as is" condition. (h) Except as set out in this paragraph or as otherwise provided in this lease, the terms and conditions of this lease shall apply to the Swing Space but for the purposes of clarity there shall be no rent-free periods or other financial inducements (other than the leasehold improvement allowance referred to in paragraph 2 of this Schedule "C") provided for by the Landlord with respect to the Swing Space. (i) If the Tenant elects to terminate the lease with respect to the Swing Space as provided in subparagraph 4(j), it shall pay to the Landlord the complete -v- unamortized balance (calculated using the 10% per annum interest factor described in paragraph 2 of this Schedule "C") of any leasehold improvement allowance paid by the Landlord to the Tenant in respect of the Swing Space, together with all real estate commissions and fees incurred by the Landlord with respect to the Swing Space, also with interest thereon at the rate of 10% per annum from the date on which originally paid by the Landlord to the date of repayment by the Tenant, such payments to be made by the Tenant to the Landlord by certified cheque or bank draft on the date of termination of the lease with respect to the Swing Space. (j) If: (i) the Tenant is a Permitted Tenant; (ii) the Tenant has not been notified of a default in the performance of its obligations under this lease which it has failed to cure within the times required by this lease, and, subject to such notice but irrespective of cure, has not otherwise been in persistent default of its obligations under this lease; and (iii) the Tenant is itself in actual possession, occupancy and use of at least 45,000 square feet of Rentable Space in the Building at such time, the Tenant may during the Initial Term (but not thereafter) terminate the lease with respect to the Swing Space by giving the landlord not less than nine (9) months' prior written notice of such termination. If such notice is given, the lease, to the extent applicable to the Swing Space, shall be terminated effective the date set out in the said notice for termination, subject to payment by the Tenant of the amount described in subparagraph 4(i), and the lease shall be deemed to be amended accordingly on such date. 5. TERMINATION RIGHTS (a) If: (i) the Tenant is a Permitted Tenant; (ii) the Tenant has not been notified of a default in the performance of its obligations under this lease which it has failed to cure within the times required by this lease, and, subject to such notice but irrespective of cure, has not otherwise been in persistent default of its obligations under this lease; and (iii) the Tenant is itself in actual possession, occupancy and use of at least 45,000 square feet of Rentable Space in the Building at the time it elects to exercise the within option, the Tenant shall have the one time right and option to terminate this lease with respect to the Initial Premises and, if the Tenant has exercised its rights in this Lease to lease such space, the Cafeteria Premises, the First Expansion Premises and the Second Expansion Premises (collectively, the "Terminated Space"), effective July 31, 2000 (the "Termination Date"). (b) In order to exercise such right the Tenant shall give Notice to the Landlord to that effect by no later than July 31, 1999, failing which the Tenant's right to so terminate shall be null and void and of no further effect. (c) Such termination, if exercised, shall be effective only if, on the Termination Date, the Tenant pays to the Landlord, by certified cheque or bank draft, a sum equal to the aggregate of: -vi- (i) $839,662.00 (representing the Landlord's lease restructuring costs and real estate fees with respect to the Initial Premises); (ii) an amount equal to the unamortized balance of all leasehold improvement allowances paid by the Landlord with respect to the Terminated Space and all real estate brokerage fees and commissions incurred or paid by the Landlord with respect to either the Cafeteria Premises, the First Expansion Premises or the Second Expansion Premises, together with interest at the rate of ten per cent (10%) per annum, calculated monthly to the date of payment on such unamortized balance, leasehold allowances, real estate fees and lease restructuring costs. Failure to make all of such payments on the Termination Date shall render the Tenant's exercise of such option to terminate ineffective, and the lease shall continue on in full force and effect as if never terminated. 6. OPTION TO LEASE THE CAFETERIA PREMISES (a) At the written request of the Tenant by Notice, to be given no later than September 30, 1995, the Tenant may elect to include the existing ground floor cafeteria space of up to 7,000 square feet of Rentable Space (approximately) in One Park Centre as shown cross-hatched on the plan of such floor forming part of Schedule "A" (the "Cafeteria Premises") as part of the Premises. If the Tenant elects to include such Cafeteria Premises within the Premises they shall be leased on the same terms and conditions, and at the same rates of Fixed Rent per square foot per annum as that part of the Initial Premises located in One Park Centre (namely, $6.05 per square foot) and the Cafeteria Premises shall become part of the Premises on the tenth business day following the date that the Tenant advises the Landlord of its election. (b) The parties will enter into an appropriate lease amending agreement to include such Cafeteria Premises within the Premises and to amend the provisions relating to Fixed Rent accordingly. (c) If the Tenant exercises such right to acquire the Cafeteria Premises, the Landlord agrees that it will use its reasonable best efforts to assist the Tenant to acquire the existing cafeteria equipment located in the Cafeteria Premises from the owner thereof at a price acceptable to the Tenant, but the Landlord shall not be obliged to incur any financial cost or expense whatsoever with respect to the acquisition of such equipment. (d) If the Tenant does not exercise its right to include such Cafeteria Premises within the Premises by September 30, 1995 then, after such date, the Tenant will have the right of first offer on such Cafeteria Premises until March 31, 1996. In the period from October 1, 1995 to March 31, 1996 the Landlord shall advise the Tenant of any serious interest expressed by any third party in leasing the Cafeteria Premises and the Tenant may elect to submit an offer to lease the Cafeteria Premises as a result of Landlord's advice. If the Tenant elects to do so, the Landlord shall be free to accept or reject the Tenant's offer, it being understood and agreed that the Landlord has no obligation to accept the Tenant's offer or to lease such Cafeteria Premises to the Tenant, whether pursuant to such offer or otherwise. 7. ADDITIONAL CONDUIT Within sixty (60) days following commencement of the Term, the Landlord will provide the Tenant with sufficient additional conduit between the portions of the Premises in One Park Centre and Two Park Centre in order to connect the Tenant's cabling requirements between such portions of the Premises. The amount of conduit required and its type and location shall be as mutually agreed between the Landlord and Tenant, acting reasonably. -vii- 8. STORAGE (a) The Tenant shall have the right, by Notice given to the Landlord by no later than February 1, 1996, to elect to lease up to 8,000 square feet of storage space in the basement level of the Building. The Tenant's Notice shall specify the amount of storage space required by the Tenant. If the Tenant exercises such right, the actual location of the storage space shall be determined by the Landlord, acting reasonably, in good faith and in accordance with the requirements stipulated by the Tenant in its Notice. The Landlord shall advise the Tenant of the location of the Storage Space to be leased to the Tenant within 15 business days of receiving the Tenant's Notice and the commencement date for the lease of the Storage Space shall commence on the tenth business day following the date that the Landlord so advises the Tenant. (b) The Tenant shall pay a gross rental of $6.50 per square foot per annum of the area of such storage space until the expiry of the first five (5) years of the Term and a gross rental of $8.50 per square foot per annum of the area of such storage space for the last five (5) years of the Term of this lease, all of which shall be paid in equal monthly instalments in advance. If the Tenant elects to retain such storage space during any renewal term of this lease, the gross rent payable by the Tenant during such period or periods shall be at then current market rates applicable for comparable storage space as agreed upon by the Landlord and the Tenant. Failing agreement, the gross rent shall be determined in accordance with the arbitration regime set out in Schedule "C" to this lease. (c) If the Tenant does not exercise its right to lease such storage space by February 1, 1996, the Tenant's rights to lease storage space in the basement of the Building shall be subject to availability of such space from time to time thereafter. To the extent storage space is available, it will be leased to the Tenant at the same gross rental and on the same terms as set out above. 9. SIGNAGE If and only so long as: (i) the Tenant is a Permitted Tenant; (ii) the Tenant has not been notified of a default in the performance of its obligations under this lease which it has failed to cure within the times required by this lease, and, subject to such notice but irrespective of cure, has not otherwise been in persistent default of its obligations under this lease; and (iii) the Tenant is and remains throughout the Term in continuous actual possession and occupancy and use of no less than 45,000 square feet of Rentable Space in the Building, the Tenant will be entitled to install and maintain signage on the top floor exterior fascia of Two Park Centre, subject to the following terms: (a) the Tenant shall have the right to install a sign on two sides of the top floor exterior fascia of Two Park Centre; (b) the cost of installation, maintenance and repair of such signage and the cost of all necessary permits and municipal and other governmental approvals necessary to install and maintain such signage shall be paid for by the Tenant; (c) the Tenant shall have the sole obligation to obtain all necessary permits, licences and other approvals necessary for such signage; -viii- (d) all of such signage (and any changes to such signage) shall be subject to the Landlord's prior approval, not to be unreasonably withheld or delayed, to ensure that such signage complements the architectural integrity of the Building and the overall building complex; (e) the Tenant shall, on the expiration or termination of this lease, promptly cause such signage to be removed and shall repair and restore any damage caused to the Building resulting from either the installation, maintenance or removal of such signage. If the Tenant fails to do so, the Landlord may remove such signage and the Tenant shall forthwith pay to the Landlord on demand all of the Landlord's costs incurred for such removal and for the repair and restoration of any such damage. Such signage shall also be forthwith removed by the Tenant if at any time during the Term or any renewal thereof the preconditions to the installation and maintenance of such signage, as recited in this section, are no longer met. 10. RELOCATION (a) If, at any time during the Term or any renewal of the Term, the Landlord requires possession of all or any portion of the Premises located from to time in One Park Centre for any purpose whatsoever, the Landlord may, on no less than three (3) months' prior Notice to the Tenant (the "Relocation Notice"), require the Tenant to vacate all or any portion of the Premises located in One Park Centre as specified in the Relocation Notice (the "Vacated Space") on the date specified in the Relocation Notice (the "Relocation Date") and relocate into other premises in Two Park Centre (the "Relocated Premises"). If a Relocation Notice is given, this lease, insofar as it relates to the Vacated Space, shall terminate on the Relocation Date, but only if the Landlord has completed the Relocated Premises in accordance with its obligations set out in paragraph 10(b); (b) The Relocated Premises shall be comparable in all material respects to the Vacated Premises and shall be fully fixtured (not including the Tenant's trade fixtures) and in "turn-key" condition and available for the Tenant's occupancy on the Relocation Date, the Landlord being fully responsible for performing all work required to make the Relocated Premises so available. (c) The Landlord shall pay all direct costs of preparing the Relocated Premises for occupation by the Tenant (which costs shall include, without limitation, all costs in wiring the Relocated Premises for the Tenant's use) and of relocating the Tenant and all of the Tenant's property, fixtures and furniture therein. The Landlord shall not be liable for any other or consequential costs, damages or losses to or of the Tenant as a result of such relocation. (d) To the extent that the Rentable Space of the Relocated Premises is not identical to that of the Vacated Premises, the Fixed Rent shall be adjusted upwards or downwards, as the case may be, at the same rate per square foot per annum as was payable with respect to the Vacated Premises, but Fixed Rent may be increased only to the extent that the Rentable Space of the Relocated Premises is no more than 2% greater than the Rentable Space of the Vacated Premises (the "Allowable Increase"). If the Rentable Space of the Relocated Premises exceeds the Rentable Space of the Vacated Premises by more than the Allowable Increase, no Fixed Rent shall be payable by the Tenant for the increased area of the Relocated Premises in excess of the Allowable Increase. The parties agree that in no circumstances shall the Relocated Premises have a Rentable Space more than 10% greater or less than the Rentable Space of the Vacated Premises. (e) The parties shall enter into such lease amending agreements as necessary to effect the foregoing. -ix- 11. PARKING (a) The Landlord shall make available to the Tenant throughout the initial Term (but not any Renewal Term), 3.3 covered parking stalls in the Garage per 1,000 square feet of Rentable Space of the Premises from time to time (the "Base Stalls"). In addition, the Landlord will, subject to availability of parking stalls and at the Tenant's request, provide the Tenant with additional covered parking on a month to month basis at a ratio of 1 stall per 1,000 square feet of Rentable Space of the Premises from time to time (the "Monthly Stalls"). (b) The Tenant shall pay for the Base Stalls and Monthly Stalls allocated to it in each month during the first 3 years of Term a monthly charge of $15.00 per stall per month. Thereafter, the monthly fee payable by the Tenant for the Base Stalls and Monthly Stalls allocated to the Tenant in each month shall be based on the fair market monthly rates for comparable parking facilities in the general geographic area in North York/Don Mills in which the Building is located. For greater certainty, in determining the parking rates, the parties shall not take into account parking rates in buildings located on or near a subway line. (c) The Tenant shall pay the basic monthly charge for Base Stalls and Monthly Stalls allocated to it in any month irrespective of the Tenant's use of such stalls. (d) If, in any month, the Tenant utilizes parking stalls in excess of the Base Stalls and Monthly Stalls allocated to it in such month, the Tenant shall pay for such stalls, apart from the Excess Stall Charge set out in subparagraph 11(f), a daily charge for each business day in which such stalls are utilized calculated pro rata based upon the then current monthly charge payable by the Tenant for Base Stalls and Monthly Stalls and the number of business days in such month. The Landlord shall invoice the Tenant monthly for any parking stalls to which the foregoing charges apply. (e) The Landlord will provide the Tenant with additional parking access cards with respect to the Garage for the Tenant's employees. The Tenant shall pay a deposit of $10.00 per parking access card to the Landlord. (f) While the Tenant will be invoiced for excess parking stall usage in accordance with subparagraph 11(d), the Tenant shall not under any circumstances allow its directors, officers or employees to utilize more than 5 parking stalls per 1,000 square feet of Rentable Space at the Premises at any time and the Landlord shall be entitled to take such steps as reasonably necessary to prevent such excess use. To the extent that the Tenant utilizes more than 4.3 parking stalls per 1,000 square feet of Rentable Space at any time the Landlord, in addition to the charges under subparagraph (d), shall be entitled to levy an additional charge of $2.50 per excess stall per day (the "Excess Stall Charge") for each day or part thereof in which excess parking stalls are utilized and the Tenant shall pay all amounts so charged by the Landlord forthwith on demand as additional rent. (g) The Landlord shall have the right to reduce or cancel the Tenant's rights to the Monthly Stalls on the basis of lack of availability or the need to provide such parking to other tenants of the Building, in which event the maximum utilization of parking stalls permitted to the Tenant and its employees, and for which an Excess Stall Charge will be made shall be 4 parking stalls per 1,000 square feet of Rentable Space of the Premises. (h) 7 of the Tenant's parking stalls located within the Garage shall be designated as reserved stalls and may be marked by the Tenant at its own expense as being so reserved for its use. The Landlord shall have no obligations to police the exclusive use of such reserved stalls by the Tenant and shall not be liable in any way to the Tenant if persons unauthorized to use same park vehicles in such reserved stalls. -x- (i) In order to determine excess use of parking stalls, the Landlord agrees to install and maintain a system which shall provide reporting of the actual number of motor vehicles of the Tenant and its employees occupying the Garage on each day. The Landlord shall provide a monthly report outlining the number of parking stalls occupied each day by the Tenant and its employees, the number of days on which the Tenant's maximum parking stall allocation was exceeded and by how many stalls the allocation was exceeded. The Landlord's invoicing of the Tenant for use of excess stalls as set out above shall be based on such monthly report. 12. TERMINATION OF EXISTING LEASES (a) Effective at 11:59 p.m. July 31, 1995 (the "Termination Date"), the parties acknowledge and agree that all leases, agreements and lease obligations between them in respect of the Building (collectively, the "Existing Leases") including, without limitation, the Tenant's leases of the ground floor, the third floor, the fourth floor, the fifth floor and a portion of the seventh floor in Two Park Centre and the Tenant's lease commitments on the fifth and sixth floors of One Park Centre and with respect to storage space and parking shall be null and void and replaced by this lease (except to the extent described in paragraph I of Schedule "C" and as set out below) and the parties hereby release one another from any and all claims, losses, damages (direct, indirect, consequential or otherwise), suits, judgments, causes of action, legal proceedings, demands, penalties or other sanctions of every nature and kind whatsoever which they may have against the other in respect of the Existing Leases; provided that nothing in this paragraph shall release the Tenant from the payment of those sums, or the performance of those obligations, required to be performed pursuant to subparagraph 12(b). (b) The Tenant agrees to pay all rent, additional rent (including, without limitation, operating costs, property taxes, utilities, parking and storage charges and insurance premiums) and all other costs, charges and expenses reserved under the Existing Leases to and including July 31, 1995. If such amounts have not been calculated as of the date hereof, the Tenant shall pay such amounts as and when calculated forthwith on demand. The Tenant shall also fully perform all of its obligations under the Existing Leases until the Termination Date and the termination of the Existing Leases shall not extinguish such obligations, unless inconsistent with this lease. (c) This paragraph 12 constitutes a full surrender of the Existing Leases by the Tenant, so that the term or terms of years granted by the Existing Leases will merge and be extinguished in the Landlord's reversion thereunder on the Termination Date. The Tenant covenants with the Landlord that it has full power and right to surrender the Existing Leases, and that it has done no act by which the unexpired residue of the term or terms of the Existing Leases are or may be charged or encumbered. -xi- SCHEDULE "D" REGULATIONS Pursuant to section 4.1 of the Office Premises Lease the Landlord hereby imposes the following regulations: 1. Deliveries of building materials, major pieces of equipment and furniture and bulky goods shall only be made by prior arrangement with the Building management and through the Delivery Facilities and underground passages. 2. The Tenant shall only use the Building key system and shall obtain all keys and cards providing access to the Building, the Garage and the Premises from the Landlord. No additional locks shall be installed on the doors to the Premises. 3. No bicycles or other vehicles shall be brought into the Building. 4. No inflammable oils or other dangerous materials shall be kept in the Building. 5. The Common Areas shall not be obstructed. 6. The Tenant shall provide the Landlord with the names of all persons entitled to enter the Premises outside normal business hours. The Landlord shall only be required to allow access to the Premises by such persons. 7. The Tenant shall not install any power or water consuming machinery and equipment, except normal office equipment, without the approval of the Landlord and, if required by the Landlord, shall connect such machinery and equipment to separate meters. 8. If required by the Landlord, the Tenant shall arrange for pest control. 9. The Tenant shall not remove or alter the Building standard window coverings or except with the approval of the Landlord install any additional window coverings. 10. The Tenant shall keep all window blinds down so as to prevent direct sunlight from penetrating the Premises. 11. The Landlord may restrict canvassing or peddling in the Building. 12. The Tenant shall maintain with the Landlord current lists of the names and licence plate numbers of each employee using the Garage and shall cause its employees to affix to their automobiles whatever manner of identification the Landlord may require. 13. The Tenant shall observe the directions of the Landlord as to parking locations in the Garage according to automobile size. 14. The Tenant shall leave the Premises in a condition suitable for the performance by the Landlord of its janitorial services. SCHEDULE "E" INDEMNITY In order to induce SHERWAY CENTRE LIMITED ("Landlord") to enter into the lease made as of July 31, 1995 ("Lease") with DELRINA (CANADA) CORPORATION ("Tenant") for premises initially comprising 74,171 square feet in One Park Centre and Two Park Centre, 895 Don Mills Road, Toronto, Ontario, DELRINA CORPORATION ("Indemnifier") agrees with the Landlord as follows: 1. To pay on their due dates all rent, additional rent, operating costs, taxes and other amounts from time to time payable by the Tenant under the Lease during its term and any renewals; to perform all of the obligations of the Tenant contained in the Lease; and to indemnify the Landlord from any loss, costs or damages arising out of any failure of the Tenant to pay rent or any other amounts under the Lease or the failure of the Tenant to perform any of its obligations contained in the Lease. Without limitation, this indemnity applies to the Lease as from time to time amended or renewed, to the premises from time to time demised thereunder and to the rent and all other amounts payable from time to time thereunder, it being acknowledged by the Indemnifier that the Lease contains provisions for the expansion and contraction of the premises demised by the Lease and for the adjustment of rent and other amounts payable by the Tenant under it. 2. This indemnity is absolute, unconditional and irrevocable and the obligations of the Indemnifier will not be released or affected by any extensions of time, indulgences or modifications which the Landlord may extend to or make with the Tenant under the Lease or any waiver by or failure of the Landlord to enforce any provision of the Lease, or any assignment of the Lease by the Tenant or by any trustee, receiver or liquidator; or by any consent which the Landlord may give to any assignment; or by the expiration or termination of the term of the Lease. 3. The Indemnifier waives any right to require the Landlord to proceed against the Tenant or pursue any rights or remedies under the Lease, or to proceed against any security of the Tenant held by the Landlord or to pursue any other remedy within the power of the Landlord. 4. The Indemnifier waives notice of the acceptance of this indemnity and any notice of non-performance, non-payment or non-observance on the part of the Tenant of any of the terms of the Lease. 5. The liability of the Indemnifier will not be waived or released by reason of the release or discharge of the Tenant under the Lease in any receivership, bankruptcy, winding-up or other creditors' proceedings or the rejection, repudiation or disclaimer of the Lease in any proceeding or otherwise, and this indemnity shall continue for the entire term and any renewals or extensions of the Lease, including, without limitation, any overholding by the Tenant after the expiration of the term of the Lease or any renewal or extension thereof. The liability of the Indemnifier shall not be affected by any repossession of the premises demised by the Lease by the Landlord. 6. No action brought under this indemnity and no recovery under this indemnity shall act as a bar or defence to any further action which might be brought under this indemnity by reason of any further default under the terms of the Lease. 7. This indemnity contains the entire agreement between the Indemnifier and the Landlord concerning this indemnity. No modification of this indemnity shall be effective unless made in writing, executed by the Indemnifier and the Landlord. 8. The Indemnifier shall be bound by this indemnity in the same manner as though the Indemnifier were the tenant named in the Lease. Notwithstanding the foregoing, or any performance in whole or in part by the Indemnifier of any obligations under this indemnity or of the tenant under the Lease, the Indemnifier shall not have any entitlement -i- to occupy the premises demised by the Lease or otherwise enjoy any of the benefits to which the Tenant is entitled under the Lease, and the Indemnifier shall not be entitled to be subrogated to any rights of the Landlord whatsoever. 9. In the event of the termination of the Lease or in the event of surrender, whether or not accepted by the Landlord, or disclaimer or repudiation of the Lease pursuant to any statute or otherwise, then, in either case at the sole option of the Landlord exercisable at any time within six (6) months of such termination, surrender, disclaimer or repudiation, as the case may be, the Indemnifier shall enter into and agrees to execute and deliver a written lease for the premises then demised by the Lease with the Landlord, as landlord and the Indemnifier, as tenant for a term commencing on the date of such termination, surrender, disclaimer or repudiation and expiring on the date on which the Lease would have expired if it had run its full term without default by the Tenant and without such termination, surrender, disclaimer or repudiation. Such lease shall contain the same terms as are contained in the Lease which would apply to and be in force for that portion of the term of the Lease which by the original terms of the Lease would have remained unexpired at the date of such termination, surrender, disclaimer or repudiation. 12. All of the terms of this indemnity shall extend to and be binding on the Indemnifier, its successors and assigns and shall enure to the benefit of and may be enforced by the Landlord and its successors and assigns, including, without limitation, any mortgagee, chargee, trustee under a deed of trust or other encumbrancer of all or any part of the lands and premises of which the premises demised by the Lease form part. The Indemnifier has full power and authority to enter into this indemnity and to perform its obligations under this indemnity. 13. The obligations of the Indemnifier shall be assignable by the Landlord and an assignment of the Lease by the Landlord shall constitute an assignment of the obligations of the Indemnifier and the benefit of this indemnity. 15. The Indemnifier shall be bound by any account settled between the Landlord and the Tenant. 17. If any provision of this indemnity is determined to be illegal or unenforceable, such provision shall be severable from this indemnity and all other provisions of it shall remain effective. 18. The Indemnifier acknowledges receiving a fully executed copy of the Lease. 19. This indemnity shall be governed by and construed in accordance with the laws of Ontario. IN WITNESS of which the Indemnifier has executed this indemnity as of and effective from July 31, 1995. DELRINA CORPORATION By: /s/ Dennis Bennie A.S.O. ----------------------------------- By: /s/ Michael Cooperman A.S.O. ----------------------------------- /s/ Paul Beesley A.S.O. ----------------------------------- Witness -ii- EX-10.02 3 EXHIBIT 10.02 EMPLOYMENT AND NONCOMPETITION AGREEMENT This EMPLOYMENT AND NONCOMPETITION AGREEMENT (this "AGREEMENT") is made as of the Effective Date indicated below by and between SYMANTEC CORPORATION, a Delaware corporation ("SYMANTEC"), and Dennis Bennie ("EMPLOYEE"). BACKGROUND This Agreement is entered into in connection with a Combination Agreement dated as of July 5, 1995 (the "COMBINATION AGREEMENT") between Green and Blue Symantec and Delrina Corporation, a corporation organized under the laws of Ontario ("DELRINA"). The Combination Agreement provides for the recapitalization of Delrina pursuant to which Delrina will become a subsidiary of Symantec and all the voting power of Delrina will be owned by Symantec (the "ARRANGEMENT"). The date on which the Arrangement becomes effective will be the effective date of this Agreement (the "EFFECTIVE DATE"). Employee is the Chief Executive Officer of Delrina and has been actively involved in the development and marketing of Delrina's products. To preserve and protect the assets of Delrina, including Delrina's goodwill, customers and trade secrets of which Employee has and will have knowledge, and in consideration for Symantec's entering into and performing under the Combination Agreement, Employee has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements of the parties contained herein, and Employee hereby agree as follows: 1. EMPLOYMENT. Symantec will employ Employee and Employee accepts employment with Symantec commencing on the Effective Date. Symantec may terminate the employment of Employee on providing such notice or severance as required by applicable Ontario law. Symantec guarantees that all payments made to the Employee shall not be less than what is required to be paid pursuant to by applicable Ontario law. For purposes of calculating any amounts payable to Employee under applicable Ontario law upon the termination of Employee's employment, the parties agree that Employee's years as an employee of Delrina shall be considered part of such employment. 2. DUTIES. Employee will be employed as a full-time employee of Symantec and will serve as an Executive Vice President responsible for communications products and reporting to Gordon Eubanks or his successor. At Symantec's option, it will be entitled to reasonable use of Employee's name in promotional, advertising and other materials used in the ordinary course of business. 3. FULL-TIME EMPLOYMENT. Employee's employment will be on a full- time basis. Employee will not engage in any other business or render any commercial or professional services, directly or indirectly, to any other person or organization, whether for compensation or otherwise that would violate the provisions of Section 8. Notwithstanding the foregoing, it will not be deemed a violation of Section 8 for Employee to make personal investments in publicly traded corporations regardless of the business they are engaged in, provided that Employee does not at any time own in excess of l0% of the issued and outstanding stock of any such corporation. 4. SALARY. Employee's salary for the period commencing on the Effective Date will be no less than (Can.)$356,400 per year, payable semi- monthly, less required withholdings. Employee will be entitled to receive annual compensation reviews on the same basis as other Symantec employees. 5. EMPLOYEE BENEFITS. Employee will be entitled to insurance, vacation and other benefits commensurate with his position in accordance with Symantec's standard policies in effect from time to time, including participation in Symantec's management bonus program under which Employee will be eligible to receive a bonus payable quarterly on Employee's performance of his objectives for the prior quarter, which bonus will be based on a target amount equal to 40% of Employee's base salary paid during such prior quarter. 6. REIMBURSEMENT OF BUSINESS EXPENSES. Symantec will, in accordance with Symantec's policies in effect from time to time, reimburse Employee for all reasonable business expenses incurred by Employee in connection with the performance of his duties under this Agreement, including, without limitation, reasonable expenditures for business entertainment and travel, upon submission of the required documentation required pursuant to Symantec's standard policies and record keeping procedures. 7. CONFIDENTIALITY. Simultaneously with the execution of this Agreement, Employee is executing and delivering and hereby adopts and agrees to be bound by Symantec's standard Assignment of Inventions and Confidentiality Agreement, a copy of which is attached to this Agreement as EXHIBIT A (the "ASSIGNMENT OF INVENTIONS AND CONFIDENTIALITY AGREEMENT"). 8. AGREEMENT NOT TO COMPETE. (a) For the two-year period (reduced to one year if Employee's employment is terminated by Symantec) following the Effective Date and for so long thereafter as Employee is employed by Symantec or a subsidiary of Symantec, Employee shall not, directly or indirectly, individually or as an employee, partner, officer, director or shareholder (except to the extent permitted in Section 3 above) or in any other capacity whatsoever of or for any person, firm, partnership, company or corporation other than Symantec or its subsidiaries: (i) Own, manage, operate, sell, control or participate in the ownership, management, operation, sales or control of or be connected in any manner with any business engaged, in the geographical areas referred to in Section 8(b) below, in the design, research, development, marketing, sale (excluding licensing or sales of multiple kinds and brands of software as part of the management of a reseller or distributor), or licensing of computer software that is substantially similar to or competitive with any fax, communications (for the purposes of this Section 8, the term "communications" as applied to software will be defined to be limited to Internet, datacom, voice or paging software) or forms software products created, distributed or known by him to be under development by Delrina or any of its subsidiaries prior to the Effective Date; (ii) To Employee's knowledge, directly or indirectly develop computer software that is substantially similar to or competitive with any other fax, communications or forms computer program or products the creation or development of which Employee participated in prior to the termination of Employee's employment with Symantec for any one or more of the following or any of their affiliates: Microsoft, McAfee, Stack, Attachmate, Wall Data, DataStorm (Procomm), Global Village and Xpedite. (iii) Recruit, attempt to hire, solicit, assist others in recruiting or hiring, or refer to others concerning employment, in or with respect to the geographical areas referred to in Section 8(b) below, any person who is an employee of Delrina or Symantec or any of their subsidiaries or induce or attempt to induce any such employee to terminate his employment with Symantec, Delrina or any of their subsidiaries. (b) The geographical areas in which the restrictions provided for in this Section 8 apply include all cities, counties, provinces and states of the United States and Canada. Employee acknowledges that the scope and period of restrictions and the geographical area to which the restrictions imposed in this Section 8 applies are fair and reasonable and are reasonably required for the protection of Symantec and that this Agreement accurately describes the business to which the restrictions are intended to apply. (c) It is the intent of the parties that the provisions of this Section 8 will be enforced to the fullest extent permissible under applicable law. If any particular provision or portion of this Section is adjudicated to be invalid or unenforceable, this Agreement will be deemed amended to revise that provision or portion to the minimum extent necessary to render it enforceable. Such amendment will apply only with respect to the operation of this paragraph in the particular jurisdiction in which such adjudication was made. (d) Employee acknowledges that any material breach of the covenants of this Section 8 will result in immediate and irreparable injury to Symantec and, accordingly, consents to the application of injunctive relief and such other equitable remedies for the benefit of Symantec as may be appropriate in the event such a breach occurs or is threatened. The foregoing remedies will be in addition to all other legal remedies to which Symantec may be entitled hereunder, including, without limitation, monetary damages. 9. TERMINATION (e)9. SURVIVAL. Employee's and Symantec's obligations under Sections 5, 6, 7, 8, 9, and 10 (i) of this Agreement will survive the termination of Employee's employment by Symantec. 10. MISCELLANEOUS. (a) NOTICES. Any and all notices permitted or required to be given under this Agreement must be in writing. Notices will be deemed given (i) when personally received or when sent by facsimile transmission (to the receiving party's facsimile number), (ii) on the first business day after having been sent by commercial overnight courier with written verification of receipt, or (iii) on the third business day after having been sent by registered or certified mail from a location on the United States mainland or Canada, return receipt requested, postage prepaid, whichever occurs first, at the address set forth below or at any new address, notice of which will have been given in accordance with this Section 10(a): If to Symantec: Attn. President Symantec Corporation 10201 Torre Avenue Cupertino, CA 95014 With a copy to: the General Counsel at the same address If to Employee: Tel: with a copy to: Attn: Tel: Fax: (b) AMENDMENTS. This Agreement, including Exhibit A hereto, contains the entire agreement and supersedes and replaces all prior agreements between Symantec and Employee or Delrina and Employee concerning Employee's employment. This Agreement may not be changed or modified in whole or in part except by a writing signed by the party against whom enforcement of the change or modification is sought. (c) SUCCESSORS AND ASSIGNS. This Agreement will not be assignable by either Employee or Symantec, except that the rights and obligations of Symantec under this Agreement may be assigned to a corporation which becomes the successor to Symantec as the result of a merger or other corporate reorganization and which continues the business of Symantec, or any other subsidiary of Symantec, provided that Symantec guarantees the performance by such assignee of Symantec's obligations hereunder. (d) GOVERNING LAW. This Agreement will be governed by and interpreted according to the substantive laws of the Province of Ontario without regard to such province's conflicts law. The parties agree that the courts in the city of Vancouver, British Columbia will be the exclusive venue for the adjudication of any disputes hereunder. (e) NO WAIVER. The failure of either party to insist on strict compliance with any of the terms of this Agreement in any instance or instances will not be deemed to be a waiver of any term of this Agreement or of that party's right to require strict compliance with the terms of this Agreement in any other instance. (f) SEVERABILITY. Employee and Symantec recognize that the limitations contained herein are reasonably and properly required for the adequate protection of the interests of Symantec. If for any reason a court of competent jurisdiction or binding arbitration proceeding finds any provision of this Agreement, or the application thereof, to be unenforceable, the remaining provisions of this Agreement will be interpreted so as best to reasonably effect the intent of the parties. The parties further agree to replace any such invalid or unenforceable provisions with valid and enforceable provisions designed to achieve, to the extent possible, the business purposes and intent of such unenforceable provisions. (g) COUNTERPARTS. This Agreement may be executed in counterparts which when taken together will constitute one instrument. Any copy of this Agreement with the original signatures of all parties appended will constitute an original. (h) EFFECT OF AGREEMENT. This Agreement will be void and have no effect if the Effective Date does not occur on or before December 31, 1995. (i) PAYMENT OF COSTS. The prevailing party in any action brought hereunder will be entitled to an award of attorneys' fees and costs, and all court fees, will be paid by the losing party, and the court will be authorized to make such determinations. IN WITNESS WHEREOF, this Agreement is made and effective as of the day and year first above written. SYMANTEC CORPORATION EMPLOYEE a Delaware corporation By: /s/ Derek Witte /s/ Dennis Bennie Vice President Exhibit A to Exhibit 4.5 ASSIGNMENT OF INVENTIONS AND CONFIDENTIALITY AGREEMENT This agreement is entered into as of _________ by and between ________ (hereinafter "Employee") and Symantec Corporation, a Delaware Corporation, having its principal place of business at _________________ (hereinafter "Symantec"). In consideration of his/her employment by Symantec and of the salary or wages and other benefits received by him/her during such employment, he/she agrees that the following terms and conditions shall govern his/her employment relationship with Symantec in regard to inventions and discoveries, works of authorship, and proprietary information, confidential information and trade secrets: 1. INVENTIONS AND DISCOVERIES A. Employee agrees that all inventions and discoveries, whether patentable or unpatentable, which are conceived or made by him/her during his/her employment, either solely or jointly with others, and which relate in any way to the products or business of Symantec, shall belong to Symantec. Employee agrees that he/she has been notified and understands that the provisions of this paragraph do not apply to any Invention that qualifies fully under the provisions of Section 2870 of the California Labor Code, which states as follows: ANY PROVISION IN ANY EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE SHALL ASSIGN OR OFFER TO ASSIGN ANY OF HIS OR HER RIGHTS IN AN INVENTION TO HIS OR HER EMPLOYER SHALL NOT APPLY TO AN INVENTION THAT THE EMPLOYEE DEVELOPED ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S EQUIPMENT, SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS THAT EITHER: (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYMENT RESEARCH OR DEVELOPMENT OF THE EMPLOYER, OR (2) RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. TO THE EXTENT A PROVISION IN AN EMPLOYMENT AGREEMENT PURPORTS TO REQUIRE AN EMPLOYEE TO ASSIGN AN INVENTION OTHERWISE EXCLUDED FROM BEING REQUIRED TO BE ASSIGNED UNDER CALIFORNIA LABOR CODE SECTION 1870 (A), THE PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS UNENFORCEABLE.] B. Employee agrees that he/she will disclose to Symantec in writing any inventions and discoveries covered by this Agreement. Employee further agrees that, without further remuneration, he/she will do any and all of the following acts at the request and expense of Symantec: (1) execute any assignments of Symantec or its nominee of the entire right, title, and interest in and to any such inventions and discoveries (2) execute any other proper instruments or documents necessary or desirable in applying for and obtaining patents on such inventions and discoveries in the United States and foreign countries; (3) to the extent that Employee fails to so execute such assignments or instruments, he/she hereby appoints the Secretary of Symantec as his/her attorney in fact to execute such assignments on such Employee's behalf; and (4) to cooperate in the prosecution or defense of any claims, lawsuits, or other proceedings involving such inventions and discoveries. 2. WORKS OF AUTHORSHIP A. Employee agrees that any works of authorship such as writings, computer programs, and the like which are authored or created by him/her during his/her employment, either solely or jointly with others, and which relate in any way to the business of Symantec shall belong to Symantec whether copyrightable or not. B. Employee further agrees that without further remuneration, he/she will do any and all of the following acts at the request and expense of Symantec: (1) execute any assignment to Symantec or its nominee of the entire right, title, and interest in and to any such works of authorship; (2) execute any other proper instruments or documents necessary or desirable in applying for and obtaining registration of copyrights on such works of authorship in Canada and foreign countries, including renewal papers when appropriate; and (3) cooperate in the prosecution or defense of any claims, lawsuits, or other proceedings involving such works or authorship. C. Employee hereby waives his/her right to enforce any moral or author's right which Employee may have in such works of authorship. 3. PROPRIETARY INFORMATION AND TRADE SECRETS A. Employee agrees that, in performing work for Symantec, he/she will not knowingly use any patented inventions, trade secrets, confidential information or proprietary information obtained from third parties, including any prior employer or any other organization or individual. B. Employee agrees that he/she will retain in confidence any and all proprietary information, confidential information and trade secrets belonging to Symantec, or belonging to a third party and in the possession of Symantec, which may come into his/her possession during his/her employment. Employee further agrees that he/she will refrain from doing any of the following acts with respect to such proprietary information, confidential information and trade secrets, both during his/her employment and thereafter, without first obtaining the consent in writing of an officer of Symantec: (1) communicate such proprietary information, confidential information or trade secret to any person outside Symantec or to any other firm, association, or corporation; and (2) use such proprietary information, confidential information or trade secret for the private benefit of himself/herself or for the benefit of any person outside or any other firm, association, or corporation. C. Employee understands and agrees that the proprietary information and trade secrets of Symantec shall include, but shall not be limited to, the following: (1) inventions, discoveries and computer programs not yet patented or published; (2) unpublished technical specifications, data, source codes, object codes, drawings and descriptions on the proprietary hardware, software, and combined hardware/software products and processes of Symantec; (3) current engineering, research, development, and design projects and research and development data; (4) manufacturing processes and methods and apparatus and equipment not generally available or known to the public; (5) non-public business information such as product costs, vendor and customer lists, lists of approved components and sources, price lists, production schedules, business plans and sales and profit and loss information not yet announced to or disclosed to the public; (6) any other information not generally available to the public. D. Employee further agrees that all source code printouts, computer programs on storage media, records, files, memoranda, reports, price lists, customer lists, plans, sketches, documents, equipment, prototypes, and the like, which relate to the business of Symantec and which he/she uses, prepares, or comes into contact with during his/her employment shall remain the sole property of Symantec and shall be returned to Symantec on termination of his/her employment. 4. MISCELLANEOUS A. Employee understands that this Agreement may not be changed or terminated orally, and no change, termination or waiver of any of the provisions thereof will be binding unless in writing and signed by an Officer of Symantec. B. Employee further understands that any agreement previously executed by him/her during his/her employment with Symantec shall continue in force and effect as to any subject matter to which it applied, but in all other respects is superseded by this Agreement. C. This Agreement is not a contract for or guarantee of employment. IN WITNESS WHEREOF, the parties have entered into this Agreement effective as of the date set forth above. SYMANTEC CORPORATION EMPLOYEE ____________________ ____________________ Vice President SIGNATURE PAGE TO ASSIGNMENT OF INVENTIONS AND CONFIDENTIALITY AGREEMENT EX-11.01 4 EXHIBIT 11.01 Exhibit 11.01 SYMANTEC CORPORATION COMPUTATION OF NET INCOME (LOSS) PER SHARE
Three Months Ended Nine Months Ended December 31, December 31, ------------------------ ------------------------- (In thousands, except per share data) 1995 1994 1995 1994 - -------------------------------------- ------ ------ ------ ------ PRIMARY NET INCOME PER SHARE Net income (loss) $(36,806) $ 11,767 $ (47,726) $27,824 Interest on short-term and long-term borrowings and U.S. government securities, net of income tax effect -- -- -- 482 --------- ---------- ---------- ---------- Net income (loss), as adjusted $(36,806) $ 11,767 $ (47,726) $28,306 --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Weighted average number of common shares outstanding during the period 53,107 49,575 52,391 48,985 Shares issuable from assumed exercise of options -- 9,829 -- 9,795 Shares assumed repurchased with proceeds, not to exceed 20% of total shares outstanding -- (7234) -- (7,169) --------- ---------- ---------- ---------- Common and common stock equivalent shares outstanding for purpose of calculating primary net income per share 53,107 52,170 52,391 51,611 --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Primary net income (loss) per share $ (0.69) $ 0.23 $ (0.91) $ 0.55 --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- FULLY DILUTED NET INCOME PER SHARE Net income (loss) $(36,806) $11,767 $ (47,726) $27,824 Interest on short-term and long-term borrowings and U.S. government securities, net of income tax effect -- 111 -- 412 --------- ---------- ---------- ---------- Net income (loss), as adjusted $(36,806) $ 11,878 $ (47,726) $28,236 --------- ---------- ---------- ---------- --------- ---------- ---------- ---------- Weighted average number of common shares outstanding during the period 53,107 49,575 52,391 48,985 Shares issuable from assumed exercise of options -- 9,829 -- 9,795 Shares issuable from assumed conversion of convertible subordinated debentures -- 2,083 -- 2,083 Shares assumed repurchased with proceeds, not to exceed 20% of total shares outstanding -- (5,345) -- (4,731) --------- ---------- --------- ---------- Total shares for purpose of calculating fully diluted net income per share 53,107 56,142 52,391 56,132 --------- ---------- --------- ---------- --------- ---------- --------- ---------- Fully diluted net income per share $ (0.69) $ 0.21 $ (0.91) $ 0.50 --------- ---------- --------- ----------
EX-27 5 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SYMANTEC CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31,1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAR-31-1996 APR-01-1995 DEC-29-1995 34,517 87,692 83,606 (5,139) 8,378 234,505 109,177 (61,414) 292,998 106,164 15,455 0 0 534 170,845 292,998 329,472 329,472 88,378 88,378 295,800 753 1,121 (52,335) (4,609) (47,726) 0 0 0 (47,726) (0.91) (0.91)
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