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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
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 0-27030
INFINIUM SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
MASSACHUSETTS 04-2734036
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25 COMMUNICATIONS WAY, HYANNIS, MA 02601
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 778-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, PAR VALUE $0.01
(TITLE OF CLASS)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant based upon the closing price of such stock as reported on the Nasdaq
National Market on December 15, 1999, was $68,257,111.
As of December 15, 1999, 12,606,745 shares of the registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Specifically identified information in the registrant's definitive proxy
statement for its Annual Meeting of Stockholders which is currently expected to
be held on February 11, 1999, to be filed pursuant to Regulation 14A is
incorporated by reference into Part III of this Form 10-K. Portions of the
registrant's 1999 Annual Report to Stockholders for the fiscal year ended
September 30, 1999 are incorporated by reference into Part II hereof.
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PART 1
ITEM 1. BUSINESS
All statements contained herein that are not historical facts, including
but not limited to, statements regarding anticipated future capital
requirements, the Company's future development plans, the Company's ability to
obtain debt, equity or other financing, and the Company's ability to generate
cash from operations, are based on current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties, as
more fully described under "Factors Affecting Future Performance", as more fully
described herein and under "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Actual results may differ materially.
OVERVIEW
Infinium Software, Inc. (the Company or Infinium) develops, markets and
supports enterprise-level business software applications for organizations with
revenues generally in the range of $25 million to $5 billion. The Company's
software products automate the financial management, human resource management
and materials management functions of organizations in a broad range of
industries worldwide. The Company also offers a specialized manufacturing system
designed to manage process-manufacturing operations. The Company offers products
that are designed for IBM's AS/400 Computers and for Microsoft Windows NT
servers. In addition to different operating systems, the Company's products can
be deployed in a number of different networking environments including Local
Area Networks, Wide Area Networks, intranets and the Internet. Infinium recently
announced its plans to host its products for customers as an Applications
Service Provider (ASP). These ASP offerings will be designed to enable
Infinium's customers to quickly and easily access Infinium's business critical
applications over the Internet or through a dedicated connection without the
associated costs of owning, managing and supporting the applications and their
back-office infrastructure.
The Company's revenue is derived from two sources: software license fees
and service revenue. Software license fees include revenue from software license
agreements entered into between the Company and its customers with respect to
both the Company's products and third-party products marketed and/or distributed
by the Company. The Company's service revenue is comprised of software
maintenance fees and fees for consulting and training services.
The Company's more than 1,800 customers include Abbott Laboratories, Circus
Circus Enterprises, Coca-Cola Enterprises, Mirage Resorts, and MCA/Universal
Studios.
PRODUCTS
Infinium offers enterprise-level business software applications designed to
automate back-office operations of its customers. The Company's products can
function as stand-alone applications or as integrated suites of applications and
may be integrated with products from other vendors. The Company's products are
designed to provide users significant functionality as well as the flexibility
and ease of use of network centric computing, while retaining low cost of
ownership.
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AS/400 PRODUCT LINE
The AS/400 product suites and included applications currently offered by
Infinium are as follows:
FINANCIAL MANAGEMENT
General Ledger
Payables Ledger
Accounts Receivable
Fixed Assets
Currency Management
Global Taxation
Project Accounting
MATERIALS MANAGEMENT
Purchase Management
Inventory Control
Order Processing
HUMAN RESOURCES/PAYROLL
Payroll
Human Resources
Flexible Benefits
Training Administration
Occupational Health
PROCESS MANUFACTURING
Regulatory Management
Formula Management
Advanced Planning
Manufacturing Control
Laboratory Analysis
The Company's Financial Management and Human Resources/Payroll products
provide icon-based user access to the underlying accounting, statistical and
performance data through graphical "drag and drop" operations. The Company's
primary Financial Management applications are currently available in English,
French, German, Dutch and Spanish versions for multi-national and international
businesses. While the Company offers versions of its Human Resources systems for
use around the world, the Payroll system is localized and currently available
for use in the United States, Canada, United Kingdom, Australia, New Zealand,
Spain, Sweden, Indonesia, Malaysia, Philippines, and Thailand.
The Company's Materials Management products are targeted mainly to
non-manufacturing businesses, such as service organizations, hospitals, hotels,
transportation companies and utilities. These products integrate closely with
the Financial Management product line, and are often considered an extension of
the core financial applications. The Company's Process Manufacturing products
cover a full range of formula-based process manufacturing operations. These
products are fully integrated with the Company's Financial Management product
line.
The Company's eBusiness extensions allow Infinium customers to extend
application functionality to their employees, customers, partners and suppliers
through the Internet or their internal intranet. For example, employees are
provided with secure access to their personnel information via the
Internet/intranet. Infinium eBusiness extensions utilize IBM's Lotus Domino
technology, running on the AS/400 or other supported Domino platforms, to extend
the functionality of Infinium business to connect employees, customers, partners
and suppliers to manage relationships, lower transaction costs and optimize
business practices.
NT PRODUCT LINE
The Company offers a comprehensive human resources management system (HRMS)
developed for Microsoft's Windows NT operating system called Infinium Advantage
HRMS. This product suite includes two applications, a payroll and a human
resources information system. The Infinium Advantage Payroll system is designed
to easily manage the most complex payroll requirements, including job-based pay,
cash and non-cash compensation processing, multi-state taxing issues,
retroactive pay, and non-standard pay cycles. The payroll system features
user-defined, rules based processing capabilities, allowing users to customize
the system for their unique requirements without the need for custom programming
or IS department support. The Infinium Advantage HRMS system is designed to be a
proactive personnel, benefits and applicant management tool. In addition to
industry standard functionality, the human resources application incorporates
many innovative and useful features such as date sensitive changes, user defined
events, flagging, benefits administration and COBRA administration.
The Infinium Advantage HRMS and Payroll systems can be utilized either as
separate applications or as an integrated suite. The systems utilize Microsoft
SQL server database management systems.
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In September 1999, the Company decided to discontinue development of other
systems developed for the Microsoft Windows NT operating system, Infinium
Financials and Infinium Human Resources. The Company plans to provide
maintenance and consulting services for these products to existing customers
until November 2000.
APPLICATION SERVICE PROVIDER
In November 1999, Infinium announced plans to become an application service
provider (ASP) commencing in the first calendar quarter of 2000. The ASP
offering is designed to enable Infinium's customers to quickly and easily access
Infinium's business applications over the Web or via a direct connection,
without the associated costs of owning, managing and supporting the applications
and their computing infrastructure. Additionally, Infinium plans to provide
other value-added services, such as application consulting and customization, to
its customers via the Web.
CUSTOMER SUPPORT AND PRODUCT MAINTENANCE
The Company believes that providing a high level of support to its
customers is a critical requirement for customer satisfaction and the long-term
success of the Company. The Company believes that it has established a strong
history of responsiveness to customer requirements and a high level of support,
which has resulted in a loyal customer base. As of September 30, 1999, the
Company had 82 employees in its customer support operations.
The Company provides product updates and enhancements and customer support
services under an annual maintenance agreement offered to its customers. Initial
maintenance fees are based on a percentage of the list price of the licensed
software products. The renewal rate for annual maintenance agreements with
customers for the Company's products has been in excess of 90% for each of the
previous three fiscal years.
The Company's primary customer support center is located at the Company's
headquarters in Hyannis, Massachusetts. The Company also maintains support
operations in Bend, Oregon, and in its United Kingdom and Singapore offices,
servicing customers outside North America. In November 1999, Infinium announced
the acquisition of iTsoft. Located in Malaysia, iTsoft has been marketing and
supporting Infinium's software applications since 1995. This operation, now
known as Infinium Malaysia, will augment Infinium's customer support
capabilities in the Pacific Rim.
Infinium also supports its customers in markets where it does not have a
direct presence, such as Argentina and Thailand, through authorized
distributors.
In addition to telephone support, the Company also offers an electronic
support capability, called "Web Link," which is accessible over the Internet. It
allows customers to have 24 hour, 7 day per week access to product release
information, product bulletins and updates, and tip and technique information as
well as to pursue ordinary customer support dialogues.
CONSULTING AND EDUCATION SERVICES
Infinium's consulting services organization provides fee-based services,
including implementation assistance, project management, application extension
or customization, integration with existing customer applications and similar
services to the Company's customers. The Company also trains and certifies
third-party organizations, such as consulting firms and system integrators, to
complement the Company's own service operation. The Company has developed an
implementation methodology, called the ROI Methodology, designed for rapid
implementation of the Company's solutions. The objective of the methodology is
to provide a proven implementation roadmap, that together with the Company's
business know-how and expertise, facilitates a rapid implementation to
accelerate an organization's return on its software investment. The Company
believes that it is able to differentiate itself on the service level, the speed
of implementation and the quality of personnel that it provides to customers
during the implementation cycle. The Company had 146 employees in its consulting
services organization as of September 30, 1999.
The Company offers a comprehensive series of fee-based training courses to
its customers. Courses can be taken at the Company's headquarters in Hyannis,
Massachusetts, or at regional training centers in the
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Atlanta, Boston, Chicago, Los Angeles, Oregon, London and Toronto metropolitan
areas. Course offerings can also be delivered at a customer's site.
CUSTOMERS
The Company's products are used by more than 1,800 customers in a wide
range of industries. No single customer accounted for 10% or more of revenue in
fiscal years 1997, 1998 or 1999.
SALES AND MARKETING
The Company offers its products and services through direct sales and
business partner channels throughout the world.
Regional sales and consulting services offices are located in Atlanta,
Boston, Chicago, Los Angeles, Oregon, London, Toronto and Singapore. In
addition, the Company has authorized resellers that license Infinium
applications directly to customers. The Company also has a telesales operation
that markets training and consulting services to the Company's existing customer
base. The Company conducts comprehensive marketing programs that include
advertising, direct mail, telemarketing, seminars, public relations, trade shows
and customer relations. The Company's sales and marketing organizations
consisted of 160 employees as of September 30, 1999.
PRODUCT DEVELOPMENT
The Company devotes substantial resources to research and development in
order to enhance and maintain the competitiveness of its products. In addition
to product enhancements, the Company is currently developing a new user
interface designed to allow customers to access and utilize Infinium software
offerings over the Internet within popular Internet browsers.
The Company maintains multiple research and development operations, located
in the Hyannis, Massachusetts; Boston, Massachusetts; London, England; Bend,
Oregon; and Paris, France greater metropolitan areas. In addition, the Company
uses outsourcing relationships to supplement its internal development resources.
As of September 30, 1999, the Company had 131 employees in its research and
development operations, exclusive of contractors and consultants. The Company's
research and development spending was approximately $20.5 million, $24.2 million
and $24.9 million for the fiscal years ended September 30, 1997, 1998 and 1999,
respectively.
ALLIANCE PROGRAM
The Company has a comprehensive Alliance Program with more than 60
consulting, sales, software, and platform partners supporting the Company's
Human Resources and Financial product lines throughout the world. Through this
program, the Company seeks to expand its sales channels as well as technology,
interoperability and support. The Infinium Alliance Program consists of four
categories of partners: Consulting Alliance Partners, Sales Alliance Partners,
Software Alliance Partners, and Platform Alliance Partners. The Company is
actively seeking to expand its Alliance Program in every category. Alliance
members are supported with joint marketing and sales initiatives, trade show
opportunities, as well as technology development, training and integration
resources.
COMPETITION
The business applications software market is highly competitive and rapidly
changing. A number of companies offer products similar to the Company's products
and target the same customers as the Company. In addition, a number of companies
are planning to offer products over the Internet competitive to the Company's
products. The Company believes its ability to compete depends upon many factors
within and outside its control, including the timely development and
introduction of new products and product enhancements, product functionality,
performance, price, reliability, customer service and support, sales and
marketing efforts and product distribution. The Company believes that it
competes favorably on the basis of each of these factors.
The Company's primary competitors are presently J.D. Edwards & Company,
Lawson Software, and PeopleSoft. The Company believes, however, that competition
in its industry is undergoing rapid change and that the barriers to competition
between market segments that have previously existed are decreasing. Due to the
relatively low barriers to entry in the software market, the Company expects
additional competition from
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these and other emerging companies in the client/server business application
software market as well as from companies in the expanding Internet business
applications market the Company is entering. Many of the Company's existing and
potential competitors are substantially larger than the Company and have
significantly greater financial, technical and marketing resources and have
established extensive direct and indirect channels of distribution. As a result,
they may be able to respond more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products than the Company. The Company
also expects that competition will increase as a result of software industry
consolidation. In addition, current and potential competitors have established
or may establish cooperative relationships among themselves or prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. Increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which would have a material adverse effect on the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressure will not have a material
adverse effect on the Company's business, operating results and financial
condition.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES
The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of contract, copyright, trademark and trade secret laws and other measures to
protect its proprietary intellectual property. The Company has no patents, and
existing copyright laws afford only limited protection. The Company believes
that, because of the rapid rate of technological change in the computer software
industry, trade secret and copyright protection are less significant than
factors such as the knowledge, ability and experience of the Company's
employees, frequent product enhancements and the timeliness and quality of
support services.
The Company provides its products to customers under non-exclusive,
nontransferable licenses. The Company generally licenses its products solely for
the customer's internal operations and only on designated computers. In certain
circumstances, the Company makes available enterprise-wide licenses. The Company
provides source code to its customers for certain of its products and has
escrowed its source code with a commercial bank for the benefit of all
customers. The provision of source code may increase the likelihood of
misappropriation or other misuse of the Company's intellectual property.
From time to time, the Company licenses software from third-parties for use
with its products. The Company believes that no such license agreement to which
it is presently a party is material and that if any such license agreement were
to terminate for any reason, the Company would be able to obtain a license or
otherwise acquire other comparable technology or software on terms that would
not be materially adverse to the Company.
EMPLOYEES
As of September 30, 1999, the Company had 608 full-time-equivalent
employees, including 160 in sales and marketing, 131 in product development, 228
in customer support and field services and 89 in administration. The Company's
success will depend in large part upon its ability to continue to attract and
retain qualified employees. None of the Company's employees is represented by a
labor union or is subject to a collective bargaining agreement. The Company
believes that its relations with its employees are good.
ITEM 2. PROPERTIES
The Company is headquartered in Hyannis, Massachusetts, where it leases an
aggregate of 65,000 square feet of space. Administrative, marketing, product
development and customer support operations are located in the Hyannis space.
The Company also leases 30,900 square feet of space in Lexington, Massachusetts
and 12,000 square feet of space in the London, England area, both of which are
shared for product development, marketing, sales and consulting services. The
Paris, France office is used for product development operations and contains 500
square feet. The Company leases 6,000 square feet in Chatham, England, which is
not currently being used by the Company and is being marketed for sublease to a
third party. In addition, the Company leases an aggregate of 46,700 square feet
predominately for use by field operations located in the Atlanta, Chicago,
Houston, Irvine, Toronto and Singapore areas. Office facilities and suites are
also being
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leased for field representatives throughout various locations in North America
aggregating 2,000 square feet. The Infinium Advantage Unit is located in Bend,
Oregon, in which the Company leases 12,300 square feet of space for support,
field operations, training, marketing, and administration for the Company's
Infinium Advantage product. The Company believes that its existing facilities
are adequate to meet current needs and that suitable additional space will be
available as needed to accommodate any further physical expansion of corporate
operations and for additional sales and service field offices.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended September 30, 1999, through
the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item may be found in the section captioned
"Stock Information" appearing in the 1999 Annual Report to Stockholders, and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item may be found in the section captioned
"Selected Financial Data" appearing in the 1999 Annual Report to Stockholders,
and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item may be found in the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in the 1999 Annual Report to Stockholders, and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item may be found in the section captioned
"Quantitative and Qualitative Disclosures About Market Risk" appearing in the
1999 Annual Report to Stockholders, and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information with respect to this item may be found in the 1999 Annual
Report to Stockholders, and is incorporated herein by reference and indexed by
reference under Item 14(a)(1) and (2) below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to the directors of the
Company is hereby incorporated by reference from the information contained under
the heading "Election of Directors" in the Company's definitive proxy statement
of the Company's 1999 Annual Meeting of Stockholders which will be
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filed with the Securities and Exchange Commission within 120 days after the
close of the fiscal year (the "Definitive Proxy Statement").
Certain information concerning directors and executive officers is hereby
incorporated by reference to the information contained under the headings
"Occupations of Directors and Executive Officers" and "Section 16(a) Beneficial
Ownership Compliance" in the definitive Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference
to the information contained under the heading "Compensation and Other
Information Concerning Directors and Officers" in the Definitive Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by reference
to the information contained under the heading "Management and Principal Holders
of Voting Securities" in the Definitive Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by reference
to the information contained under the heading "Certain Relationships and
Related Transactions" in the Definitive Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Company are included
in the Company's 1999 Annual Report to Stockholders and are incorporated herein
by reference pursuant to Item 8 hereof:
Report of Independent Accountants;
Consolidated balance sheet at September 30, 1998 and 1999;
Consolidated statement of operations for the years ended September 30,
1997, 1998 and 1999;
Consolidated statement of stockholders' equity for the years ended
September 30, 1997, 1998 and 1999;
Consolidated statement of cash flows for the years ended September 30,
1997, 1998 and 1999;
Notes to consolidated financial statements.
The Company's 1999 Annual Report to Stockholders is not to be deemed filed
as part of this report except for those parts thereof specifically incorporated
herein by reference.
(a)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedules of the Company are filed as
part of this Report:
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Schedule I Report of Independent Accountants on Financial
Statement Schedule........................................ S-1
Schedule II Valuation and Qualifying Accounts............... S-2
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Schedules not listed above have been omitted because they are not
applicable, not required, or the information required to be set forth therein is
included in the consolidated financial statements or the notes thereto.
(a)(3) INDEX TO EXHIBITS
See attached Index to Exhibits on page X-1 of this 10-K.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of fiscal
1999.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, this 20th day of
December 1999.
INFINIUM SOFTWARE, INC.
By: /s/ DANIEL J. KOSSMANN
--------------------------------------
Daniel J. Kossmann
Vice President and Chief Financial
Officer
We the undersigned officers and directors of Infinium Software, Inc.,
hereby severally constitute and appoint Robert A. Pemberton and Daniel J.
Kossmann, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities to do all things in our names and on behalf in such capacities to
enable Infinium Software, Inc. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all requirements of the Securities
Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
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SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT A. PEMBERTON Chairman of the Board, December 20, 1999
- ------------------------------------------------ President, Chief Executive
Robert A. Pemberton Officer and Director
/s/ DANIEL J. KOSSMANN Chief Financial Officer, December 20, 1999
- ------------------------------------------------ (Principal Financial and
Daniel J. Kossmann Accounting Officer)
/s/ MANUEL CORREIA Director December 20, 1999
- ------------------------------------------------
Manuel Correia
/s/ ROLAND D. PAMPEL Director December 20, 1999
- ------------------------------------------------
Roland D. Pampel
/s/ ROBERT P. SCHECHTER Director December 20, 1999
- ------------------------------------------------
Robert P. Schechter
</TABLE>
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SCHEDULE I
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULE
To the Board of Directors of
Infinium Software, Inc.:
Our audits of the consolidated financial statements referred to in our
report dated November 23, 1999 appearing in the Annual Report to Stockholders of
Infinium Software, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 16, 1999
S-1
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SCHEDULE II
INFINIUM SOFTWARE, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
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COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
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CHARGED TO CHARGED TO
DESCRIPTION BEGINNING EXPENSE OTHER DEDUCTIONS OTHER ENDING
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<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR 1999
Allowance for Doubtful Accounts... $1,650 $2,679 $ -- $(100) $ -- $4,229
FISCAL YEAR 1998
Allowance for Doubtful Accounts... 1,569 977 -- (916) 20 1,650
FISCAL YEAR 1997
Allowance for Doubtful Accounts... 1,250 397 -- (243) 165 1,569
</TABLE>
S-2
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INFINIUM SOFTWARE, INC.
INDEX TO EXHIBITS
ADDITIONAL CHANGES REQUIRED IN EXHIBIT LIST
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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3.1 -- Articles of Organization of the Registrant, as amended.
3.2 -- By-Laws of the Registrant, as amended, are incorporated
herein by reference to Exhibit 3(I) to the Registrant's Form
10-Q for the quarterly period ended March 31, 1997.
4.1 -- Shareholder Rights Agreement dated as of February 5, 1999 is
incorporated herein by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A.
10.1* -- 1984 Incentive Stock Option Plan, as amended as of August
23, 1988 is incorporated herein by reference to Exhibit 10.1
to the Registrant's Registration Statement on Form S-1
(Registration No. 33-97866).
10.2* -- 1989 Stock Option Plan, as amended as of October 1, 1994 is
incorporated herein by reference to Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-97866).
10.3* -- 1995 Stock Plan is incorporated herein by reference to
Exhibit 10.3 to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-97866).
10.4* -- 1995 Employee Stock Purchase Plan is incorporated herein by
reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-97866).
10.5* -- 1995 Non-Employee Director Stock Option Plan is incorporated
herein by reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-97866).
10.6 -- Lease dated March 31, 1995 between the Registrant and
Independence Park Associates Realty Trust as of August 1995
is incorporated herein by reference to Exhibit 10.6 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-97866).
10.7* -- Form of Executive Compensation Plan is incorporated herein
by reference to Exhibit 10.9 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-97866).
10.8* -- Executive Severance Plan
10.9* -- Form of 1995 Stock Plan Option Agreement is incorporated
herein by reference to Exhibit 10.16 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-97866).
10.10* -- Register of Amendments, Subsections 3.1 and 7.3.4, 1989
Stock Option Plan is incorporated herein by reference to
Exhibit 10.17 to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-97866).
10.11* -- Register of Amendments, Article 5, 1995 Employee Stock
Purchase Plan is incorporated herein by reference to Exhibit
10.18 to the Registrant's Registration Statement on Form S-1
(Registration No. 33-97866).
13.1 -- 1999 Annual Report to stockholders (which shall be deemed
filed only with respect to those portions specifically
incorporated by reference herein).
21.1 -- Schedule of Subsidiaries of the Registrant
23.1 -- Consent of PricewaterhouseCoopers LLP
27 -- Financial Data Schedule for the year ended September 30,
1999
27.1 -- Financial Data Schedule for the year ended September 30,
1998
27.2 -- Financial Data Schedule for the year ended September 30,
1997
</TABLE>
- ---------------
* Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an exhibit to Item 14(c).
X-1
<PAGE> 1
EXHIBIT 3.1
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $________ having been paid, said articles are deemed to have been
filed with me this ______ day of 19_______.
Effective date: ______________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Infinium Software, Inc.
----------------------------------------
Anne Marie Monk, Clerk
----------------------------------------
25 Communications Way
----------------------------------------
Hyannis, MA 02601
----------------------------------------
<PAGE> 2
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date:_____________________________________
SIGNED UNDER THE PENALTIES OF PERJURY, this 17th day of February, 1997.
---- -------- --
Frederick J. Lizza , *President
- --------------------------------------------------
Anne Marie Monk *Clerk
- --------------------------------------------------
*Delete the inapplicable words.
<PAGE> 3
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
<PAGE> 4
FEDERAL IDENTIFICATION
NO. 04-2734036
-------------------
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, Frederick J. Lizza, *President
------------------------------------------------------------------
and Anne Marie Monk, *Clerk of
-------------------------------------------------------------------
of Software 2000, Inc. ,
----------------------------------------------------------------------------
(Exact name of corporation)
located at 25 Communications Way, Drawer 6000, Hyannis, MA 02601 ,
---------------------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
One (1)
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on
February 14, 1997, by vote of:
- ------------------
10,637,652 shares of Common Stock of 10,802,091 shares outstanding,
- ------------ ----------------- --------------
(type, class & series, if any)
shares of of shares outstanding, and
- ------------ ----------------- -------------
(type, class & series, if any)
shares of of shares outstanding,
- ------------ ----------------- --------------
(type, class & series, if any)
1)** being at least a majority of each type, class or series outstanding and
entitled to vote thereon:/
Voted: That the name by which the corporation shall be known is
hereby changed to: Infinium Software, Inc.
*Delete the inapplicable words. **Delete the inapplicable clause.
1) For amendments adopted pursuant to Chapter 156B, Section 70.
2) For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article
requiring each addition is clearly indicated.
<PAGE> 5
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $100 having been paid, said articles are deemed to have been filed
with me this 18th day of February 1997.
Effective date:_____________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
-----------------------------------------
Infinium Software, Inc.
-----------------------------------------
Anne Marie Monk, Clerk
-----------------------------------------
25 Communications Way
-----------------------------------------
Hyannis, MA 02601
-----------------------------------------
<PAGE> 6
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
I hereby approve the within Articles of Amendment and, the filing fee in the
amount of $100 having been paid, said articles are deemed to have been filed
with me this 18th day of February 1997.
Effective date:_____________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Infinium Software, Inc.
-------------------------------------
Anne Marie Monk, Clerk
-------------------------------------
25 Communications Way
-------------------------------------
Hyannis, MA 02601
-------------------------------------
<PAGE> 7
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date:_____________________________________
SIGNED UNDER THE PENALTIES OF PERJURY, this 17th day of February, 1997.
---- -------- --
Frederick J. Lizza *President
- ------------------------------------------------------------,
Anne Marie Monk
- ------------------------------------------------------------, *Clerk
*Delete the inapplicable words.
<PAGE> 8
To change the number of shares and the par value (if any) of any type class or
series of stock which the corporation is authorized to issue, fill in the
following.
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
<PAGE> 9
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
<PAGE> 10
FEDERAL IDENTIFICATION
NO. 04-2734036
-------------------
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
We, Frederick J. Lizza, *President
-------------------------------------------------------------------
and Anne Marie Monk, *Clerk of
-------------------------------------------------------------------
of Software 2000, Inc. ,
----------------------------------------------------------------------------
(Exact name of corporation)
located at 25 Communications Way, Drawer 6000, Hyannis, MA 02601 ,
---------------------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
One (1)
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on
February 14, 1997, by vote of:
- ------------------
10,637,652 shares of Common Stock of 10,802,091 shares outstanding,
- ------------ ----------------- --------------
(type, class & series if any)
shares of of shares outstanding, and
- ------------ ----------------- -------------
(type, class & series if any)
shares of of shares outstanding,
- ------------ ----------------- --------------
(type, class & series if any)
1** being at least a majority of each type, class or series outstanding and
entitled to vote thereon:/
Voted: That the name by which the corporation shall be known is
hereby changed to: Infinium Software, Inc.
*Delete the inapplicable words. **Delete the inapplicable clause.
1 For amendments adopted pursuant to Chapter 156B, Section 70.
2 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article
requiring each addition is clearly indicated.
<PAGE> 11
FORM CD-74-10M-10-79-152328
EXHIBIT A
---------
The Commonwealth of Massachusetts
- ----------
Examiner WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth FEDERAL IDENTIFICATION
ONE ASHBURTON PLACE, BOSTON, MASS 02108 NO. 04-2734036
-------------------
RESTATED ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 74
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
restated articles of organization. The fee for filing this certificate is
prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the
Commonwealth of Massachusetts.
--------------
We, Robert A. Pemberton , President and
Anne Marie Monk , Assistant Clerk of
SOFTWARE 2000, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 25 Communications Way, Drawer 6000, Hyannis, MA 02601
---------------------------------------------------------------------
do hereby certify that the following restatement of the articles of organization
of the corporation was duly adopted at a meeting held October 20, 1995, by vote
of 4,524,540 shares of Common Stock out of 5,899,194 shares outstanding,
--------- -------------- ---------
(Class of Stock)
shares of out of shares outstanding, and
--------- -------------- -------
(Class of Stock)
shares of out of shares outstanding,
--------- -------------- -------
(Class of Stock)
being at least two-thirds of each class of stock outstanding and entitled to
vote and of each class or series of stock adversely affected thereby.
1. The name by which the corporation shall be known is:
SOFTWARE 2000, INC.
2. The purposes for which the corporation is formed are as follows:
To develop and market computer software for financial management, human
resource management and manufacturing control and to conduct the computer
software business generally, and to do any and all acts and things
permitted to be done by business corporations under the provisions of
Chapter 156B, as amended, of the General Business Laws of Massachusetts.
8
- ------
P.C.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper with a left margin of at least 1 inch for binding. Additions to more than
one article may be continued on a single sheet so long as each article requiring
each addition is clearly indicated.
<PAGE> 12
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
WITHOUT PAR VALUE WITH PAR VALUE
------------------------------------ -----------------------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
-------------- ---------------- ---------------- ---------
Preferred 1,000,000 $.01
Common 40,000,000 $.01
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established:
Please see ATTACHMENT 4 on continuation sheets and incorporated herein by
reference. ------------
*5. The restrictions, if any, imposed by the articles of organization upon the
transfer of shares of stock of any class are as follows:
None
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or
for limiting, defining, or regulating the powers of the corporation, or of
its directors or stockholders, or of any class of stockholders:
Please see ATTACHMENT 6 on continuation sheets and incorporated by
reference. ------------
*If there are no such provisions, state "None".
<PAGE> 13
ATTACHMENT 4
------------
ARTICLE 4
---------
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 41,000,000 shares, consisting of the following
classes of stock: (A) 40,000,000 shares of Common Stock, $.01 par value per
share (the "Common Stock"), and (B) 1,000,000 shares of Preferred Stock, $.01
par value per share (the "Preferred Stock").
The designations, powers, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations and restrictions
thereof in respect of each class of authorized capital stock of the Corporation
are as follows:
A. COMMON STOCK
------------
1. After the requirements with respect to preferential dividends on the
Preferred Stock, if any, shall have been met and after the Corporation shall
have complied with all the requirements, if any, with respect to the setting
aside of sums as sinking funds or redemption or purchase accounts, then and not
otherwise the holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of Directors.
2. After distribution in full of the preferential amount to be distributed
to the holders of Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or winding up of the
Corporation, the holders of the Common Stock shall be entitled to receive all
the remaining assets of the Corporation, tangible or intangible, of whatever
kind available for distribution to the stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
3. Except as may otherwise be required by law or the provisions of these
Articles, or by the Board of Directors pursuant to authority granted in these
Articles, each holder of Common Stock shall have one vote in respect of each
share of stock held by him in all matters voted upon by the stockholders.
B. UNDESIGNATED PREFERRED STOCK
----------------------------
Up to 1,000,000 shares of Preferred Stock may be issued in one or more
series at such time or times and for such consideration or considerations as the
Board of Directors may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as to the relative preferences, powers, qualifications, rights and
privileges referred to below, in respect of any or all of which there may be
variations between different series, all shares of Preferred Stock shall be
identical. Different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized, subject to the limitations
prescribed by law and the provisions of these Articles of Organization, to
provide by adopting a vote or votes, a certificate of which shall be filed in
accordance with the Business Corporation Law of the Commonwealth of
Massachusetts, for the issuance of the Preferred Stock in one or more series,
each with such designations, preferences, voting powers, qualifications, special
or relative rights and privileges as shall be stated in the vote or votes
creating such series. The authority of the Board of Directors with respect to
each such series shall include without limitation of the foregoing the right to
determine and fix:
(1) The distinctive designation of such series and the number of shares to
constitute such series;
CONTINUATION SHEET 4.1
<PAGE> 14
ATTACHMENT 4 CONT.
(2) The rate at which dividends on the shares of such series shall be
declared and paid, or set aside for payment, whether dividends at the rate so
determined shall be cumulative, and whether the shares of such series shall be
entitled to any participating or other dividends in addition to dividends at the
rate so determined, and if so on what terms;
(3) The right, if any, of the Corporation to redeem shares of the
particular series and, if redeemable, the price, terms and manner of such
redemption;
(4) The special and relative rights and preferences, if any, and the amount
or amounts per share, which the shares of such series shall be entitled to
receive upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation;
(5) The terms and conditions, if any, upon which shares of such series
shall be convertible into, or exchangeable for, shares of stock of any other
class or classes, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any;
(6) The obligation, if any, of the Corporation to retire or purchase shares
of such series pursuant to a sinking fund or fund of a similar nature or
otherwise, and the terms and conditions of such obligation;
(7) Voting rights, if any;
(8) Limitations, if any, on the issuance of additional shares of such
series or any shares of any other series of Preferred Stock; and
(9) Such other preferences, powers, qualifications, special or relative
rights and privileges thereof as the Board of Directors may deem advisable and
are not inconsistent with law and the provisions of these Articles.
CONTINUATION SHEET 4.2
<PAGE> 15
ATTACHMENT 6
ARTICLE 6
---------
Other lawful provisions, if any, for the conduct and regulation of business and
affairs of the Corporation, for its voluntary dissolution, or for limiting,
defining, or regulating the powers of the Corporation, or of its directors or
stockholders, or of any class of stockholders:
PART A. CLASSIFICATION OF BOARD OF DIRECTORS
------------------------------------
This Article 6, Part A shall be effective only from and after the
closing of the Corporation's initial public offering of shares of Common Stock
pursuant to the Securities Act of 1933, as amended (the "Public Offering
Date").
The number of directors of the Corporation shall be determined in the
manner provided in the by-laws.
In accordance with paragraph (a) of Section 50A of the Massachusetts
Business Corporation Law, commencing with the Public Offering Date, the
directors of the Corporation shall be divided by the Board of Directors into
three classes as nearly equal in number as possible, labeled Class I Directors,
Class II Directors and Class III Directors; the term of office of Class I
Directors to continue until the first annual meeting following the Public
Offering Date and until their successors are duly elected and qualified; the
term of office of Class II Directors to continue until the second annual meeting
following the Public Offering Date and until their successors are duly elected
and qualified; and the term of office of Class III Directors to continue until
the third annual meeting following the Public Offering Date and until their
successors are duly elected. At each annual meeting of the Corporation, the
successors to the class of directors whose term expires at that meeting shall be
elected to hold office for a term continuing until the annual meeting held in
the third year following the year of election and until their successors are
duly elected and qualified.
If the authorized number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of an
incumbent director.
Except as otherwise required by law or by these Articles of Organization,
any vacancy in the Board of Directors shall be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which he or she has been elected expires.
Any director elected by the stockholders, or by the Board of Directors to
fill a vacancy, may be removed only for cause, after reasonable notice and
opportunity to be heard before the annual meeting of stockholders at which his
or her removal is considered and by the affirmative vote of the holders of at
least eighty percent (80%) of the combined voting power of the shares of capital
stock of the Corporation outstanding and entitled to vote for the election of
directors.
For purposes of the foregoing paragraph, "cause," with respect to the
removal of any director, shall mean only (1) conviction of a felony, (2)
declaration of unsound mind by order of court, (3) gross dereliction of duty,
(4) commission of an action involving moral turpitude, or (5) knowing violation
of law if such action in either event results in improper substantial personal
benefit and a material injury to the Corporation.
CONTINUATION SHEET 6.1
<PAGE> 16
ATTACHMENT 6 CONT.
Notwithstanding any other provision of these Second Restated Articles of
Organization, or any provision of law which might otherwise permit a lesser vote
or no vote, the affirmative vote of the holders of at least eighty percent (80%)
of the combined voting power of the shares of capital stock of the Corporation
outstanding and entitled to vote for the election of directors shall be required
to alter, amend or repeal this Article 6, Part A.
PART B. MISCELLANEOUS
-------------
The Corporation eliminates the personal liability of each director to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing such liability;
provided, however, that, to the extent provided by applicable law, this
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 61 or 62 or
successor provisions of the Massachusetts Business Corporation Law, or (iv) for
any transaction from which the director derived an improper personal benefit.
This provision shall not eliminate or limit the liability of a director of the
Corporation for any act or omission occurring prior to the date on which this
provision becomes effective. No amendment to or repeal of this provision shall
apply to or have any effect on the liability or alleged liability of any
director for or with respect to any acts or omissions of such director occurring
prior to such amendment or repeal.
Meetings of the stockholders of the Corporation may be held anywhere in the
United States.
The directors of the Corporation may make, amend or repeal the by-laws in
whole or in part, except with respect to any provision thereof which by law or
the by-laws requires action by the stockholders.
The whole or any part of the authorized but unissued shares of capital
stock of the corporation may be issued at any time or from time to time by the
Board of Directors without further action by the stockholders.
The Corporation may become a partner in any business.
The Corporation, by vote of a majority of the stock outstanding and
entitled to vote thereon (or if there are two or more classes of stock entitled
to vote as separate classes, then by vote of a majority of each such class of
stock outstanding) may (i) authorize any amendment to its Second Restated
Articles of Organization, (ii) authorize the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, including its
goodwill and (iii) approve a merger or consolidation of the Corporation with or
into any other corporation, provided that such amendment, sale, lease, exchange,
merger or consolidation shall have been previously approved by the Board of
Directors.
CONTINUATION SHEET 6.2
<PAGE> 17
*We further certify that the foregoing restated articles of organization
effect no amendments to the articles of organization of the corporation as
heretofore amended, except amendments to the following articles 2, 3, 4 and 6.
(*If there are no such amendments, state "None".)
BRIEFLY DESCRIBE AMENDMENTS IN SPACE BELOW:
ARTICLE 2: Restate purpose clause.
ARTICLE 3: Increase the number of authorized shares of Common Stock to
40,000,000 shares and authorize 1,000,000 shares of Preferred
Stock.
ARTICLE 4: Restate Article 4 in its entirety.
ARTICLE 6: Restate Article 6 in its entirety.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto
signed our names this 13th day of November in the year 1995
Robert A. Pemberton President
- ------------------------------------------------------------
Anne Marie Monk Assistant Clerk
- ------------------------------------------------------------
<PAGE> 18
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
=======================================================================
I hereby approve the within Restated Articles of Organization
and, the filing fee in the amount of $31,500.00 having been paid, said
articles are deemed to have been filed with me this 13th day of
November, 1995.
Effective Date: _______________________________________________________
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Roy D. Edelstein, Esquire
--------------------------------------
Testa, Huruitz & Thibeault
--------------------------------------
125 High Street
--------------------------------------
High Street Tower
--------------------------------------
Boston, MA 02110
--------------------------------------
Telephone (617) 248-7000
--------------------------------------
<PAGE> 19
The Commonwealth of Massachusetts
- -------- OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
Examiner MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
FEDERAL IDENTIFICATION
ARTICLES OF AMENDMENT NO. 04-2734036
GENERAL LAWS, CHAPTER 156B, SECTION 72 -------------------
We Robert A. Pemberton President and
Anne Marie Monk Assistant Clerk of
SOFTWARE 2000, INC.
----------------------------------------------------------------------
(EXACT Name of Corporation)
located at: 25 Communications Way, Post Office Drawer 6000,
Hyannis, Massachusetts 02601
----------------------------------------------------------
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting Articles
NUMBERED: - 3 -
------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended hereby)
- -------- of the Articles of Organization were duly adopted at a meeting held on
Name August 3 1995, by vote of:
Approved -------------
2,252,590 shares of common stock out of 2,948,617 shares outstanding,
--------- ------------ ---------
type, class & series, (if any)
shares of out of shares outstanding, and
------- ------------ ---------
type, class & series, (if any)
shares of out of shares outstanding,
--------- ------------ ---------
type, class & series, (if any)
CROSS OUT being at least a majority of each type, class or series
INAPPLI- outstanding and entitle to vote
CABLE thereon: 1
CLAUSE
C [ ]
P [ ]
M [ ] 1 For amendments adopted pursuant to Chapter 156B, Section 70.
R.A. [ ] 2 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any Amendment or item on this form
is insufficient, additions shall be set forth on separate 8 1/2 x 11
sheets of paper leaving a left-hand margin of at least 1 inch for
binding. Additions to more than one Amendment may be continued on a
single sheet so long as each Amendment requiring each addition is
- -------- clearly indicated.
P.C.
<PAGE> 20
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------------------- -----------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------------------------------- -----------------------------------------
COMMON COMMON 5,000,000 $.01
- ------------------------------------- -----------------------------------------
- ------------------------------------- -----------------------------------------
PREFERRED PREFERRED
- ------------------------------------- -----------------------------------------
- ------------------------------------- -----------------------------------------
CHANGE the total authorized to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ------------------------------------- -----------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ------------------------------------- -----------------------------------------
COMMON COMMON 10,000,000 $.01
- ------------------------------------- -----------------------------------------
- ------------------------------------- -----------------------------------------
PREFERRED PREFERRED
- ------------------------------------- -----------------------------------------
- ------------------------------------- -----------------------------------------
<PAGE> 21
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 of The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date. LATER EFFECTIVE
DATE:_________________________________
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 9th day of August, in the year 1995.
Robert A. Pemberton President
- --------------------------------------------------------
Anne Marie Monk Assistant Clerk
- --------------------------------------------------------
<PAGE> 22
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I hereby approve the within articles of amendment and, the filing fee in
the amount of $5,000.00 having been paid, said articles are deemed to have been
filed with me this 14th day of August, 1995.
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT
TO: Anne Marie Monk, Esq.
----------------------------------------
Software 2000, Inc.
----------------------------------------
25 Communications Way
----------------------------------------
Post Office Drawer 6000
----------------------------------------
Hyannis, MA 02601
----------------------------------------
Telephone: 508-778-2000
----------------------------------------
<PAGE> 23
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee
in the amount of $2,200.00 having been paid, said articles are deemed to
have been filed with me this 31st day of August, 1988.
/s/ Michael Joseph Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO: Anne W. Plimpton, Esquire
-------------------------------------
Csaplar & Bok
-------------------------------------
One Winthrop Square
-------------------------------------
Boston, Massachusetts 02110
-------------------------------------
Telephone: (617) 357-4400, Ext. 270
-------------------------------------
<PAGE> 24
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 25th day of August, in the year 1988.
/s/ Robert A. Pemberton , President
- -----------------------------------------------------------
Robert A. Pemberton
/s/ Patricia C. Pemberton , Clerk
- -----------------------------------------------------------
Patricia C. Pemberton
<PAGE> 25
CONTINUATION SHEET 6A
The following additional provisions are hereby established for the
management, conduct and regulation of the business and affairs of this
corporation, and for creating, limiting, defining and regulating the powers of
this corporation and of its directors and stockholders:
(a) The board of directors is authorized and empowered from time to
time, in its discretion, to make, amend or repeal the by-laws, in part or in
whole, except with respect to any provision thereof which by law or the by-laws
requires action by the stockholders.
(b) The board of directors shall have full power and authority to
determine the terms and manner of issue, including, but not limited to, the
consideration therefor, and to issue or cause the issue of all shares of capital
stock of the corporation now or from time to time hereafter authorized and to
establish and designate series of stock, and fix and determine the relative
rights and preferences of any series of stock.
(c) Any corporate action, including without limitation any amendment
to the articles of organization or a vote to sell, lease or exchange of all or
substantially all of the corporation's property and assets, may be taken by vote
of a majority of the shares of each class of stock outstanding and entitled to
vote thereon.
(d) Meetings of stockholders may be held outside The Commonwealth of
Massachusetts at such location within the United States as the board of
directors may determine. The books of this corporation may be kept (subject to
any provision contained in the statutes) at such place or places within The
Commonwealth of Massachusetts as may be designated from time to time by the
board of directors or in the by-laws of this corporation. Election of directors
need not be by ballot unless so requested by any stockholder entitled to vote
thereon.
(e) No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, notwithstanding any provision of law imposing such
liability; provided, however, that this provision shall not eliminate the
liability of a director, to the extent such liability is imposed by applicable
law, (i) for any breach of the director's duty of loyalty to the corporation or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for acts in
violation of Sections 61 or 62 of Chapter 156B or successor provisions of the
Massachusetts General Laws, or (iv) for any transaction from which the director
derived an improper personal benefit.
<PAGE> 26
CONTINUATION SHEET 6B
(f) Each person who shall be, or shall have been, a director or
officer of the corporation or who shall serve, or shall have served, at its
request as a director, officer, trustee, employee or agent of another
corporation, or who shall serve at its request in any capacity with respect to
any employee benefit plan, shall be indemnified by the corporation against all
liabilities and expenses, including expenses (including attorneys' fees),
judgments, fines, excise taxes and costs for successfully establishing the right
to indemnification, at any time imposed upon or reasonably incurred by him in
connection with, arising out of or resulting from, any action, suit or
proceeding, civil or criminal, in which he may be involved or with which he may
be threatened by reason of his then serving or theretofore having served as
director, officer, trustee, employee or agent, or by reason of any alleged act
or omission by him in any such capacity, whether or not he shall be serving as
such director, trustee or officer at the time any or all of such liabilities or
expenses shall be imposed upon or incurred by him.
No person shall have any right to indemnification for liabilities or
expenses imposed or incurred in connection with any matter as to which such
person shall be finally adjudged in such action, suit or proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the corporation or to the extent that such matter relates to
service with respect to an employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan.
No person shall have any right to indemnification for any amounts paid
by such person in compromise or settlement unless the compromise or settlement
shall be approved as in the best interests of the corporation by a majority of
disinterested directors or stockholders entitled to vote, present or represented
at a meeting called for the purpose.
Each person who has been successful on the merits in respect of any
action, suit or proceeding described in the first paragraph of this Article
6A(f) shall be indemnified as a matter of right. Except as provided in the
preceding paragraph of this Article 6A(f) in respect to approval of expenses or
liabilities in connection with a compromise or settlement, any indemnification
not ordered by a court of competent jurisdiction shall be made by the
corporation only if the board of directors or independent legal counsel retained
by the board determines that such indemnification is permitted under this
Article.
Expenses incurred by a director or officer of the corporation in
defending any threatened, pending or completed civil or criminal action, suit or
proceeding described in the
2
<PAGE> 27
CONTINUATION SHEET 6C
first paragraph of this Article 6A(f) shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such person to repay such amount if he
shall ultimately be adjudicated to be not entitled to indemnification under this
Article 6A(f), except that no such advance payment will be required if it is
determined by the board of directors that there is a substantial probability
that such person will not be able to repay the advance payments. Expenses
incurred by other employees and agents in such circumstances may be paid in
advance by the corporation upon such terms and conditions, if any, as the board
of directors deems appropriate.
Each person who shall be or become a director, trustee or officer as
aforesaid shall be deemed to have accepted and to have continued to serve in
such office in reliance upon the indemnity herein provided. The duties of the
corporation to indemnify and to advance expenses to a director or officer as
provided in this Article 6A(f) shall be deemed to constitute an agreement
between the corporation and each such director, or officer, and no amendment of
repeal of any provision of this Article 6A(f) shall alter, to the detriment of
such director or officer the right of such person to indemnification or to the
advancement of expenses related to a claim based on an act or a failure to act
which took place prior to such amendment, repeal or termination.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, trustee, employee or other agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, trustee, employee or other agent of another corporation of
which the corporation is or was a stockholder or creditor or with respect to any
employee benefit plan, against any liability incurred by him in any such
capacity or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability.
These indemnity provisions shall not be exclusive of any other right
which any director, trustee or officer may have or hereafter acquire, whether
under any by-law, vote of stockholders, agreement, judgment, decree, provision
of law, or otherwise; and these indemnity provisions and all other such rights
shall be cumulative.
These indemnity provisions shall be separable, and if any portion
thereof shall be finally adjudged to be invalid, such invalidity shall not
affect any other portion which can be given effect.
(g) No contract or other transaction between the corporation and any
other person, firm or corporation shall in
<PAGE> 28
CONTINUATION SHEET 6D
the absence of fraud, in any way be affected or invalidated, nor shall any
director be subject to surcharge with respect to any such contract or
transaction, by the fact that such director, or any firm of which any director
is a member, or any corporation of which any director is a shareholder, officer
or director, is a party to, or may be pecuniarily or otherwise interested in,
such contract or transaction, PROVIDED that the fact that he individually or
such firm or corporation is so interested shall be known to the board of
directors prior to, or shall be disclosed to the board of directors at the
meeting at which, or prior to the directors executing their written consents by
which action to authorize, ratify or approve such contract or transaction shall
be taken. Any director of the corporation may vote upon or give his written
consent to any contract or other transaction between the corporation and any
subsidiary or affiliated corporation without regard to the fact that he is also
a director or officer of such subsidiary or affiliated corporation.
(h) Subject to the provisions of Chapter 156B of the Massachusetts
General Laws, no special rights or duties among the stockholders INTER SE or
between any stockholder and the corporation shall arise by virtue of the number
of stockholders of the corporation, the absence of a ready market for the sale
of its capital stock or the existence of stockholder participation in the
management of the corporation. In furtherance, and not in limitation, of the
foregoing:
1. The corporation may purchase or redeem shares of its
capital stock from any purchaser without offering other
stockholders an equal opportunity to have their shares purchased
or redeemed by the corporation;
2. The status of stockholder of the corporation shall confer
no right to be elected a director of the corporation;
3. Except as otherwise provided by written agreement, the
status of stockholder of the corporation shall confer no right to
be employed by the corporation in any capacity or to receive any
salary from the corporation or, in the event that such employment
should exist or such salary should be paid, the status of
stockholder of the corporation shall confer no right to the
continuation of such employment or salary; and
<PAGE> 29
CONTINUATION SHEET 6E
4. The Board of Directors of the corporation shall have full and
absolute discretion to determine whether to declare dividends upon the
capital stock of the corporation from funds legally available therefor
or to refrain from declaring such dividends; the status of stockholder
of the corporation shall confer no right to require that any dividend
be declared.
(i) Each director or officer of the corporation shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account of the corporation, reports made to the corporation by and of
its officers or employees or by counsel, accountants, appraisers or other
experts or consultants selected with reasonable care by the directors or
officers of the corporation or upon other records of the corporation.
(j) In furtherance, and not in limitation, of the purposes enumerated
in Article 2 hereof, the corporation shall have all the powers conferred by the
laws of The Commonwealth of Massachusetts General Laws, provided that no such
power shall be exercised in a manner inconsistent with such Ch. 156B or any
other applicable provision of the Massachusetts General Laws.
(k) Except as may be otherwise provided herein, this corporation
reserves the right to amend, alter, change or repeal any provision contained in
these articles of organization in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
<PAGE> 30
TO CHANGE the number of shares and the par value, if any, of each class of stock
within the corporation fill in the following:
The total presently authorized is:
- --------------------------------------------------------------------------------
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON 750,000 $.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHANGE the total to:
- --------------------------------------------------------------------------------
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON 5,000,000 $.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 31
FORM CD-72-30M-4/86-808881 FEDERAL IDENTIFICATION
NO. 04-2730436
-------------------
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, SECRETARY
ONE ASHBURTON PLACE, BOSTON, MASS 02108
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
We, Robert A. Pemberton , President and
Patricia C. Pemberton , Clerk of
SOFTWARE 2000, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at One Park Center, Independence Park, Hyannis, Massachusetts 02601
---------------------------------------------------------------------
do hereby certify that the following amendment to the articles of organization
of the corporation was duly adopted by unanimous action dated August 23, 1988,
by unanimous action of:
of 527,950 shares of Common Stock out of 527,950 shares outstanding,
--------- -------------- ---------
(Class of Stock)
shares of out of shares outstanding, and
--------- -------------- -------
(Class of Stock)
shares of out of shares outstanding,
--------- -------------- -------
(Class of Stock)
CROSS OUT being all of each class outstanding and entitled to vote thereon
INAPPLI- and of each class or series of stock whose rights are adversely
CABLE affected thereby:(1)
CLAUSE
Article 6 is hereby amended to read in its entirety as set forth on
continuation sheets 6A through 6D attached hereto and incorporated herein
by reference.
(1) For amendment adopted pursuant to Chapter 156B, Section 70.
(2) For amendment adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article
requiring each addition is clearly indicated.
<PAGE> 32
FORM CD:74-10M-10-79-152328 FEDERAL IDENTIFICATION
NO. 04-2734036
-------------------
The Commonwealth of Massachusetts
MICHAEL JOSEPH CONNOLLY
Secretary of State
ONE ASHBURTON PLACE, BOSTON, MASS 02108
RESTATED ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 74
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
restated articles of organization. The fee for filing this certificate is
prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the
Commonwealth of Massachusetts.
--------------
We, Robert A. Pemberton , President and
Anne Marie Monk , Clerk of
SOFTWARE 2000, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 64 Enterprise Road, Hyannis, MA 02601
---------------------------------------------------------------------
do hereby certify that the following restatement of the articles of
organization of the corporation was duly adopted at a meeting held on May 31,
1984, by vote of:
of 200 shares of common stock out of 2000 shares outstanding,
--------- -------------- ---------
(Class of Stock)
shares of out of shares outstanding, and
--------- -------------- -------
(Class of Stock)
shares of out of shares outstanding,
--------- -------------- -------
(Class of Stock)
being at least two-thirds of each class of stock outstanding and entitled to
vote and of each class or series of stock adversley affected thereby:-
1. The name by which the corporation shall be known is:-
SOFTWARE 2000, Inc.
2. The purposes for which the corporation is formed are as follows:-
To produce and market computer software for accounting and manufacturing
control and to conduct the computer software business generally.
SEE CONTINUATION SEET 2A
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of separate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more
than one article may be made on a single sheet so long as each article
requiring each addition is clearly indicated.
<PAGE> 33
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
WITHOUT PAR VALUE WITH PAR VALUE
----------------- -----------------------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- -------------- ---------------- ---------------- ---------
Preferred
Common 750,000 $.01 per share
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established:
NONE
*5. The restrictions, if any, imposed by the articles of organization upon the
transfer of shares of stock of any class are as follows:
NONE
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or
for limiting, defining, or regulating the powers of the corporation, or of
its directors or stockholders, or of any class of stockholders:
SEE CONTINUATION SHEET 6A
"If there are no such provisions, state "None".
<PAGE> 34
CONTINUATION SHEET 2A
To purchase or otherwise acquire, invest in, and to hold, own, use,
lease (as lessor or lessee), license (as licensor or licensee), mortgage,
pledge, import, export, sell, convey, assign, exchange, transfer or otherwise
dispose of, trade, deal in and with, or to act as agent, factor, jobber, broker,
consignee or distributor in connection with the sale, delivery or distribution
of, machinery, appliances, goods, wares, articles, commodities, merchandise and
personal property, or any right or interest therein of every class and
description wheresoever situated, and, in general, to carry on a general
mercantile and trading business, without restriction as to class or products or
merchandise, in all parts of the world.
To be a partner or joint venturer in any business enterprise or
venture which, under law or these Articles of Organization, the corporation
could conduct by itself, and to conduct such business enterprise as a partner or
joint venturer, including the power to form, operate and dissolve such
partnerships and joint ventures.
To acquire by purchase, lease, exchange or otherwise, the whole or any
part of the good will, patents, business, trade names, rights, licenses, and
property of any person or persons, firm, association or corporation heretofore
or hereafter engaged in any of those businesses or any similar business or
businesses which this corporation is authorized to carry on, and pay for the
same in cash or in stock or other securities of this corporation or otherwise,
and hold and in any manner dispose of the whole or any part of the property so
acquired, and to conduct in any lawful manner the whole or any part of the
business or businesses so acquired.
To enter into, make and perform contracts of every kind and
description with any person, firm or association, corporation, municipality,
county, state, body politic or government or colony or dependency thereof.
To borrow money, to issue notes, bonds or other obligations, secured
or unsecured, of the corporation for any purpose for which it is incorporated,
to undertake, assume or guarantee the obligations or liabilities of others,
whether or not controlling, controlled by or under common control with this
corporation, and to mortgage, pledge or otherwise encumber any and all of its
real or personal property for the benefit of others, whether or not controlling,
controlled by or under common control with this corporation, all the foregoing
as determined by this corporation to be in furtherance of its business purposes.
To purchase or otherwise receive, hold, sell and otherwise deal in or
with all or any part of the capital stock,
<PAGE> 35
CONTINUATION SHEET 2B
stock of any class, bonds, notes, debentures, mortgages or other securities of
any corporation, including this corporation, association, government, state,
municipality or other organization, or any individual, trust or partnership.
To do, exercise and perform any and every act, thing or power
necessary, suitable or desirable for the accomplishment of any of the purposes,
the attainment of any of the objects or the furtherance of any of the powers
which are hereinbefore set forth or which are lawful purposes, objects or powers
of a corporation organized under Ch. 156B of the Massachusetts General Laws,
either alone or in conjunction with other corporations, firms, associations,
entities or individuals and either as principal or agent; and to do every other
act or acts or thing or things incidental or appurtenant to or growing out of or
in connection with the aforesaid objects, purposes or powers or any of them,
which a corporation organized under Ch. 156B of the Massachusetts General Laws
is not now or hereafter prohibited from doing, exercising or performing.
The foregoing clauses are to be construed both as purposes and powers,
and it is hereby expressly provided that the enumeration herein of specific
purposes and powers shall not be held to limit or restrict in any manner the
exercise and enjoyment of all the general purposes and powers of business
corporations organized under Ch. 156B of the Massachusetts General Laws.
2
<PAGE> 36
CONTINUATION SHEET 6A
The following additional provisions are hereby established for the
management, conduct and regulation of the business and affairs of this
corporation, and for creating, limiting, defining and regulating the powers of
this corporation and of its directors and stockholders:
(a) The board of directors is authorized and empowered from time to
time, in its discretion, to make, amend or repeal the by-laws, in part or in
whole, except with respect to any provision thereof which by law or the by-laws
requires action by the stockholders.
(b) The board of directors shall have full power and authority to
determine the terms and manner of issue, including, but not limited to, the
consideration therefor, and to issue or cause the issue of all shares of capita]
stock of the corporation now or from time to time hereafter authorized and to
establish and designate series of stock, and fix and determine the relative
rights and preferences of any series of stock.
(c) Any corporate action, including without limitation any amendment
to the articles of organization or a vote to sell, lease or exchange of all or
substantially all of the corporation's property and assets, may be taken by vote
of a majority of the shares of each class of stock outstanding and entitled to
vote thereon.
(d) Meetings of stockholders may be held outside The Commonwealth of
Massachusetts at such location within the United States as the board of
directors may determine. The books of this corporation may be kept (subject to
any provision contained in the statutes) at such place or places within The
Commonwealth of Massachusetts as may be designated from time to time by the
board of directors or in the by-laws of this corporation. Election of directors
need not be by ballot unless so requested by any stockholder entitled to vote
thereon.
(e) Each person who shall be, or shall have been, a director or
officer of the corporation or who shall serve, or shall have served, at its
request as a director or officer of another corporation, or as a trustee or
officer of an association or trust, in which the corporation owns stock or
shares, or of which the corporation is a creditor, shall be indemnified by the
corporation against all liabilities and expenses at any time imposed upon or
reasonably incurred by him in connection with, arising out of or resulting from,
any action, suit or proceeding, civil or criminal, in which he may be involved
or with which he may be threatened by reason of his then serving or theretofore
having served as director, trustee or officer, or by reason of any alleged act
or omission by him in any such capacity, whether or not he shall be serving as
3
<PAGE> 37
CONTINUATION SHEET 6B
such director, trustee or officer at the time any or all of such liabilities or
expenses shall be imposed upon or incurred by him.
The matters covered by the foregoing indemnity shall include any
amounts paid by any such person in compromise or settlement if such compromise
or settlement shall be approved as in the best interests of the corporation by
resolution of disinterested stockholders holding a majority of the shares of
stock entitled to vote, present or represented at a meeting called for the
purpose; but such matters shall not include liabilities or expenses imposed or
incurred in connection with any matters as to which such person shall be finally
adjudged in such action, suit or proceeding not to have acted in good faith in
the reasonable belief that his action was in the best interests of the
corporation. Such indemnification may include payment by the corporation of
expenses incurred in defending any such action, suit or proceeding in advance of
the final disposition thereof, upon receipt of an undertaking by the person
indemnified to repay such payment if he shall be adjudicated to be not entitled
to indemnification under this Article.
Each person who shall be or become a director, trustee or officer as
aforesaid shall be deemed to have accepted and to have continued to serve in
such office in reliance upon the indemnity herein provided. These indemnity
provisions shall be separable, and if any portion thereof shall be finally
adjudged to be invalid, such invalidity shall not affect any other portion which
can be given effect. These indemnity provisions shall not be exclusive of any
other right which any director, trustee or officer may have or hereafter
acquire, whether under any by-law, vote of stockholders, agreement, judgment,
decree, provision of law, or otherwise; and these indemnity provisions and all
other such rights shall be cumulative.
The board of directors may purchase and maintain insurance on behalf
of any person who is or was a director, officer, trustee, employee or other
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, trustee, employee or other agent of another corporation
of which the corporation is or was a stockholder or creditor, against any
liability incurred by him in any such capacity or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability.
(f) No contract or other transaction between the corporation and any
other person, firm or corporation shall, in the absence of fraud, in any way be
affected or invalidated, nor shall any director be subject to surcharge with
respect to any such contract or transaction, by the fact that such
4
<PAGE> 38
CONTINUATION SHEET 6C
director, or any firm of which any director is a member, or any corporation of
which any director is a shareholder, officer or director, is a party to, or may
be pecuniarily or otherwise interested in, such contract or transaction,
PROVIDED that the fact that he individually or such firm or corporation is so
interested shall be known to the board of directors prior to, or shall be
disclosed to the board of directors at the meeting at which, or prior to the
directors executing their written consents by which action to authorize, ratify
or approve such contract or transaction shall be taken. Any director of the
corporation may vote upon or give his written consent to any contract or other
transaction between the corporation and any subsidiary or affiliated corporation
without regard to the fact that he is also a director or officer of such
subsidiary or affiliated corporation.
(g) Subject to the provisions of Chapter 156B of the Massachusetts
General Laws, no special rights or duties among the stockholders INTER SE or
between any stockholder and the corporation shall arise by virtue of the number
of stockholders of the corporation, the absence of a ready market for the sale
of its capital stock or the existence of stockholder participation in the
management of the corporation. In furtherance, and not in limitation, of the
foregoing:
1. The corporation may purchase or redeem shares of its capital
stock from any purchaser without offering other stockholders an equal
opportunity to have their shares purchased or redeemed by the
corporation;
2. The status of stockholder of the corporation shall confer no
right to be elected a director of the corporation;
3. Except as otherwise provided by written agreement, the status
of stockholder of the corporation shall confer no right to be employed
by the corporation in any capacity or to receive any salary from the
corporation or, in the event that such employment should exist or such
salary should be paid, the status of stockholder of the corporation
shall confer no right to the continuation of such employment or
salary; and
4. The Board of Directors of the corporation shall have full and
absolute discretion to determine whether to declare dividends upon the
capital stock of the
5
<PAGE> 39
CONTINUATION SHEET 6D
corporation from funds legally available therefor or to refrain
from declaring such dividends; the status of stockholder of the
corporation shall confer no right to require that any dividend be
declared.
(h) Each director or officer of the corporation shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account of the corporation, reports made to the corporation by and of
its officers or employees or by counsel, accountants, appraisers or other
experts or consultants selected with reasonable care by the directors or
officers of the corporation or upon other records of the corporation.
(i) In furtherance, and not in limitation, of the purposes
enumerated in Article 2 hereof, the corporation shall have all the powers
conferred by the laws of The Commonwealth of Massachusetts General Laws,
PROVIDED that no such power shall be exercised in a manner inconsistent with
such Ch. 156B or any other applicable provision of the Massachusetts General
Laws.
(j) Except as may be otherwise provided herein, this corporation
reserves the right to amend, alter, change or repeal any provision contained in
these articles of organization in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
6
<PAGE> 40
*We further certify that the foregoing restated articles of organization
effect no amendments to the articles of organization of the corporation as
heretofore amended, except amendments to the following articles
2, 3, 5 and 6
- --------------------------------------------------------------------------------
(*If there are no such amendments, state "None".)
Briefly describe amendment in space below:
Article 2 is expanded to clarify the corporation's purposes.
Article 3 is amended to increase the authorized capital stock from 12,500
shares of common stock without par value to 750,000 shares of common stock with
a par value of $.01 per share.
Article 5 is deleted in its entirety.
Article 6 is expanded and amended.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 31st day of May in the year 1984.
/s/ Robert A. Pemberton , President
- ------------------------------------------------------
Robert A. Pemberton
/s/ Patricia Pemberton , Clerk
- ------------------------------------------------------
Patricia Pemberton
<PAGE> 41
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
I hereby approve the within restated articles of organization
and, the filing fee in the amount of $625.00 having been paid, said
articles are deemed to have been filed with me this 6th day of June,
1984.
/s/ Michael Joseph Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT
TO: Anne G. Plimpton, Esq.
-----------------------------------------------------------
Csaplar & Bok
-----------------------------------------------------------
One Winthrop Square
-----------------------------------------------------------
Boston, MA 02110
-----------------------------------------------------------
Telephone 357-4400
-----------------------------------------------------------
Copy Mailed
<PAGE> 42
FORM CD-72 3-72 F.I.D.#: 04-273-4036
---------------------
The Commonwealth of Massachusetts
MICHAEL JOSEPH CONNOLLY
Secretary of the Commonwealth
STATE HOUSE, BOSTON, MASS.
02133
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the Commonwealth
within sixty days after the date of the vote of stockholders adopting the
amendment. The fee for filing this certificate is prescribed by General Laws,
Chapter 156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
We, Robert A. Pemberton , President and
Patricia Pemberton , Clerk of
MSI SOFTWARE, INC.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 1046 Main Street, Osterville, MA 02655
---------------------------------------------------------------------
do hereby certify that the following amendment to the articles of organization
of the corporation was duly adopted at a meeting held August 17, 1983, by vote
of 100 shares of no per common out of 100 shares outstanding,
--------- ----------------- -------
(Class of Stock)
shares of out of shares outstanding, and
--------- ----------------- -------
(Class of Stock)
shares of out of shares outstanding,
--------- ----------------- -------
(Class of Stock)
being at least a majority of each class outstanding and entitled to vote
thereon.
CROSS OUT
INAPPLICABLE
CLAUSE
That the name of said corporation be and it is hereby changed from MSI
Software, Inc., to:
SOFTWARE 2000, INC.
1) For amendments adopted pursuant to Chapter 156B, Section 70.
2) For amendments adopted pursuant to Chapter 156B, Section 71.
NOTE Amendments for which the space provided above is not sufficient should be
set out on continuation sheets to be numbered 2A, 2B, etc. Continuation sheets
shall be on 8 1/2" wide by 11" high paper and must have a left-hand margin 1
inch wide for binding. Only one side should be used.
<PAGE> 43
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment and, the filing fee in
the amount of $75.00 having been paid, said articles are deemed to have been
filed with me this 8th day of September, 1983.
/s/ Michael Joseph Connolly
---------------------------------
Michael Joseph Connolly
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT TO:
Green, McNulty and Hopkins, P.C.
P.O. Box 467
Barnstable, MA 02630
<PAGE> 44
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY
Secretary of State
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
ARTICLES OF ORGANIZATION
(Under G.I. Ch. 156B)
Incorporators
NAME POST OFFICE ADDRESS
---- -------------------
Include given name in full in case of mutual persons; in case of a corporation,
give state of the corporation.
Robert A. Pemberton 1046 Main Street, Osterville, MA 02655
Patricia Pemberton 1046 Main Street, Osterville, MA 02655
The above-named incorporator(s) do hereby associate (themselves) with the
intention of forming a corporation under the provisions of General Laws,
Chapter 156B and hereby state(s):
1. The name by which the corporation shall be known is:
MSI SOFTWARE, INC.
2. The purposes for which the corporation is formed are as follows:
To produce and market computer software for accounting and
manufacturing control, to conduct the computer software business
generally and engage in any business permitted to a small business
corporation organized under Chapter 156B of the General Laws of the
Commonwealth of Massachusetts.
NOTE: If provisions for which the space provided under Articles 2, 4, 5 and 6
is not sufficient, additions should be set out on continuation sheets to be
number 1, 2A, 2B, etc. Indicate under each Article where the provision is set
out. Continuation sheets shall be on 8 1/2" x 11" paper and must have a
left-hand margin 1 inch wide for binding. Only one side should be used.
<PAGE> 45
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
----------------- ---------------------------------------------
PAR
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE AMOUNT
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred $
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
* Common 12,500
- --------------------------------------------------------------------------------------------
</TABLE>
* The above authorized stock is qualified under section 1244 of the
Internal Revenue Code of 1954 as amended.
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established:
NONE
*5. The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are as follows:
SEE CONTINUATION SHEET 5A
*6 Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or
for limiting, defining, or regulating the powers of the corporation, or of
its directors or stockholders, or of any class of stockholders:
SEE CONTINUATION SHEET 6A
*If there are no provisions state "None".
<PAGE> 46
Articles of Organization
Continuation Sheet
5A. Any stockholder, including the heirs, assigns, executors or
administrators of a deceased stockholder, desiring to sell or transfer such
stock owned by him or them, shall first offer it to the corporation through the
Board of Directors, in the manner following:
He shall notify the directors of his desire to sell or transfer by notice
in writing, which notice shall contain the price at which he is willing to sell
or transfer and the name of one arbitrator. The directors (elected by the
stockholder other than the one desiring to sell) shall within thirty days
thereafter either accept the offer, or by notice to him in writing name a
second arbitrator, and these two shall name a third. It shall then be the duty
of the arbitrators to ascertain the value of the stock, and if any arbitrator
shall neglect or refuse to appear at any meeting appointed by the arbitrators, a
majority may act in the absence of such arbitrator.
After the acceptance of the offer, or the report of the arbitrators as to
the value of the stock, the said directors shall have thirty days within which
to purchase the same at such valuation, but if at the expiration of thirty
days, the corporation shall not have exercised the right so to purchase, the
owner of the stock shall be at liberty to dispose of the same in any manner he
may see fit.
No shares of stock shall be sold or transferred on the books of the
corporation until these provisions have been complied with, but the Board of
Directors may in any particular instance waive the requirement.
<PAGE> 47
Articles of Organization
Continuation Sheet
6A. The Board of Directors of the corporation may make, amend, or repeal
the By-Laws of the corporation, in whole or in part, except with respect to any
provision thereof which, by law, the Articles of Organization, or the By-Laws,
require action exclusively by the stockholder entitled to vote thereon; but any
By-Law adopted by the Board of Directors may be amended or repealed by the
stockholders.
All meetings of stockholders of the corporation may be held within the
Commonwealth of Massachusetts or elsewhere within the United States. The place
of such meetings shall be fixed in, or determined in the manner provided in the
By-Laws.
Each director or officer, present or former, of the corporation or of any
other corporation a majority of the stock of which is owned by the corporation,
shall be indemnified by the corporation against all costs and expenses
reasonably incurred by or imposed upon him in connection with or arising out of
any action, suit, or proceeding in which he may be involved by reason of his
being or having been such director or officer, such expenses to include the
costs of reasonable settlements (other than amounts paid to the corporation
itself) made with a view to curtailing costs of litigation. The corporation
shall not, however, indemnify any such director or officer with respect to
matters as to which he shall be finally adjudged in any such action, suit, or
proceeding not to have acted in good faith in the reasonable belief that this
action was in the best interests of the corporation, or in respect of any matter
on which any settlement or compromise is effected if the total expense,
including the cost of such settlement, shall substantially exceed the expense
which might reasonably be incurred by such director or officer in conducting
such litigation to a final conclusion. The foregoing right of indemnification
shall not be exclusive of other rights to which any such director or officer may
be entitled as a matter of law. In determining the reasonableness of any
settlement, the judgment of the Board of Directors shall be final.
No contract or other transaction between this corporation and any other
firm or corporation shall be affected or invalidated by reason of the fact that
any one or more of the directors or officers of this corporation is or are
interested in, or is a member, stockholder, director or officer, or are
<PAGE> 48
members, stockholders, directors, or officers of such other firm or corporation;
and any director or officer or officers, individually or jointly, may be a
party or parties to, or may be interested in, any contract or transaction of
this corporation or in which this corporation is interested, and no contract,
act, or transaction of this corporation with any person or persons, firm,
association or corporation, shall be affected or invalidated by reason of the
fact that any director or directors or officer or officers of this corporation
is a party or are parties to, or interested in, such contract, act or
transaction, or in any way connected with such person or persons, firm,
association or corporation, and each and every person who may become a director
or officer of this corporation is hereby relieved from any liability that might
otherwise exist from thus contracting with this corporation for the benefit of
himself or any firm, association or corporation which he may be otherwise
interested.
The corporation may be a partner in any business enterprise which it would
have the power to conduct by itself.
<PAGE> 49
7. By-laws of the corporation have been adopted and the initial directors,
president, treasurer and clerk, whose names are set out below, have been
duly elected.
8. The effective date of organization of the corporation shall be the date of
filing with the Secretary of the Commonwealth or if later date is desired,
specify date, (not more than 30 days after date of filing).
9. The following information shall act for any purpose be treated as a
permanent part of the Articles of Organization of the corporation.
a. The post office address of the initial principal office of the
corporation in Massachusetts is:
1046 Main Street, Osterville, MA 02655
b. The name, residence, and post office address of each of the initial
directors and following officers of the corporation are as follows:
<TABLE>
<CAPTION>
NAME RESIDENCE POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Robert A. Pemberton 125 Wianno Avenue, Osterville, MA 02655
- --------------------------------------------------------------------------------
Treasurer: Robert A. Pemberton AS ABOVE
- --------------------------------------------------------------------------------
Clerk: Patricia Pemberton 125 Wianno Avenue, Osterville, MA 02655
- --------------------------------------------------------------------------------
Directors: Robert A. Pemberton 125 Wianno Avenue, Osterville, MA 02655
Patricia Pemberton 125 Wianno Avenue, Osterville, MA 02655
</TABLE>
c. The date initially adopted on which the corporation's fiscal year
ends is:
31 August
d. The date initially fixed in the by-laws for the annual meeting of
stockholders of the corporation is:
second Tuesday in October
e. The name and business address of the resident agent, if any, of the
corporation is:
NONE REQUIRED
IN WITNESS WHEREOF and under the penalties of perjury the above-named
INCORPORATOR(S) sign(s) these Articles of Organization this 23rd day of June
1981.
/s/ Robert A. Pemberton
----------------------------------
Robert A. Pemberton
/s/ Patricia Pemberton
----------------------------------
Patricia Pemberton
The signature of each incorporator which is not a natural person must be by an
individual who shall show the capacity in which he acts and by signing shall
represent under the penalties of perjury that he is duly authorized on its
behalf to sign these Articles of Organization.
<PAGE> 50
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I hereby certify that upon an examination of the within-written articles
of organization, duly submitted to me, it appears that the provisions of the
General Laws relative to the organization of corporations have been complied
with, and I hereby approve said articles; and the filing fee in the amount of
$125.00 having been paid, said articles are deemed to have been filed with me
this 6th day of July 1981.
Effective date
/s/ Michael Joseph Connolly
---------------------------------
Michael Joseph Connolly
Secretary of State
PHOTO COPY OF ARTICLES OF ORGANIZATION TO BE SENT
TO BE FILLED IN BY CORPORATION
TO:
Thomas J. McNulty, Jr. Esquire
------------------------------------
P.O. Box 457
------------------------------------
Barnstable, MA 02630
------------------------------------
Telephone (617) 771-8000
---------------------------
FILING FEE: 1 20 of 1% of the total amount of the authorized capital stock with
par value, and one cent a share for all authorized shares without par value,
but not less than $125, General Laws, Chapter 156B. Shares of stock with a par
value of less than one dollar shall be deserved to have par value of one dollar
per share.
<PAGE> 51
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of the General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have signed our
names this 17th day of August, in the year 1983.
Robert A. Pemberton /s/ Robert A. Pemberton President
Patricia Pemberton /s/ Patricia Pemberton Clerk
<PAGE> 1
EXHIBIT 10.8
NAME: ______________________
EXECUTIVE SEVERANCE PLAN
COMPANY: INFINIUM SOFTWARE, INC.
EFFECTIVE AS OF: JULY 15, 1999
EXECUTIVE'S PRINCIPAL TITLES: _________________ AND EXECUTIVE TEAM MEMBER
If the Executive's employment with the Company is terminated by the Company, not
for "cause", and the Executive executes a one year Non-Competition Agreement in
form satisfactory to the Company, (a) the Company will make a lump sum payment
to the Executive equal to the ANNUAL BASE SALARY plus the TARGET EXECUTIVE BONUS
(as such terms are defined in the Executive Compensation Plan executed by the
Company and the Executive) for the Fiscal Year in which the termination date
occurs, (b) the Executive will be entitled to continue to participate in all of
the Company's employee benefits programs for the 12 month period beginning on
the termination date and (c) effective on the termination date, all of the
Executive's unvested stock options in the Company will become immediately
vested.
This paragraph shall apply if a Change in Control (as defined in the attached
Appendix to this Plan) occurs. All of the Executive's unvested stock options
shall vest immediately upon the occurrence of a Change in Control. If the
Executive is terminated not for "cause," the provisions of the preceding
paragraph shall apply except that the requirement to sign a Non-competition
Agreement shall not apply. If the Executive is not offered a position which is
comparable both in level and total compensation to the position he occupied
immediately before the Change in Control, he shall be deemed to have been
terminated not for "cause" and the provisions of the preceding sentence shall
apply.
For purposes of this agreement, "cause" is defined as follows: substantial and
continued failure to perform job duties; disloyalty, gross negligence, or breach
of fiduciary duty to the Company; commission of fraud, embezzlement, dishonesty
or deliberate disregard of the Company's rules or policies; unauthorized
disclosure of a trade secret or confidential business information; use of any
illicit drug or the abuse of any drug, alcohol or medication which adversely
affects the Executive's performance; or conviction of a felony offense.
Executive For: INFINIUM SOFTWARE, INC.
Signature: _________________________ Signature: ____________________________
Date: ______________________________ Date: _________________________________
<PAGE> 2
Appendix A
to Executive Severance Plan
A "Change in Control" shall mean:
(1) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership of any capital stock of the
Company if, after such acquisition, such Person beneficially
owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 50% or more of either (x) the then-outstanding
shares of common stock of the Company (the "Outstanding
Company Common Stock") or (y) the combined voting power of the
then-outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); PROVIDED, HOWEVER, that for
purposes of this subsection (i), the following acquisitions
shall not constitute a Change in Control Event: (A) any
acquisition directly from the Company (excluding an
acquisition pursuant to the exercise, conversion or exchange
of any security exercisable for, convertible into or
exchangeable for common stock or voting securities of the
Company, unless the Person exercising, converting or
exchanging such security acquired such security directly from
the Company or an underwriter or agent of the Company), (B)
any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (C) any acquisition
by any corporation pursuant to a Business Combination (as
defined below) which complies with clauses (x) and (y) of
subsection (iii) of this definition; or
(2) such time as the Continuing Directors (as defined below) do
not constitute a majority of the Board (or, if applicable, the
Board of Directors of a successor corporation to the Company),
where the term "Continuing Director" means at any date a
member of the Board (x) who was a member of the Board on the
date this Severance Agreement was signed or (y) who was
nominated or elected subsequent to such date by at least a
majority of the directors who were Continuing Directors at the
time of such nomination or election or whose election to the
Board was recommended
<PAGE> 3
or endorsed by at least a majority of the directors who were
Continuing Directors at the time of such nomination or
election; PROVIDED, HOWEVER, that there shall be excluded from
this clause (y) any individual whose initial assumption of
office occurred as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of
proxies or consents, by or on behalf of a person other than
the Board; or
(3) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the
Company or a sale or other disposition of all or substantially
all of the assets of the Company (a "Business Combination"),
unless, immediately following such Business Combination, each
of the following two conditions is satisfied: (x) all or
substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding shares of
common stock and the combined voting power of the then-
outstanding securities entitled to vote generally in the
election of directors, respectively, of the resulting or
acquiring corporation in such Business Combination (which
shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially
all of the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring corporation is
referred to herein as the "Acquiring Corporation") in
substantially the same proportions as their ownership of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, respectively, immediately prior to such
Business Combination and (y) no Person (excluding the
Acquiring Corporation or any employee benefit plan (or related
trust) maintained or sponsored by the Company or by the
Acquiring Corporation) beneficially owns, directly or
indirectly, 50% or more of the then-outstanding shares of
common stock of the Acquiring Corporation, or of the combined
voting power of the then outstanding securities of such
corporation entitled to vote generally in the election of
directors (except to the extent that such ownership existed
prior to the Business Combination).
<PAGE> 1
EXHIBIT 13.1
DO GREAT WORK
- --------------------------------------------------------------------------------
INFINIUM 1999 ANNUAL REPORT [ ]
- --------------------------------------------------------------------------------
<PAGE> 2
INFINIUM believes that business software ought to help companies harness and
take advantage of change. If the solution is too complicated, it will confuse
users and lead to errors and wasted time. If it's too rigid, users won't be able
to adapt to the changes in procedure that are inevitable for a dynamic company.
If it's not robust, it won't stand up to the difficulties born of rapid growth.
In this Annual Report, Infinium highlights some of the business challenges that
changing companies face and demonstrates how we help our customers look those
challenges in the eye and say, "Bring it on!"
<PAGE> 3
DEAR SHAREHOLDERS
In Fiscal Year '99, we had the foresight to get Infinium through a period where
businesses were highly reticent about buying new applications before the year
2000. Through successful selling into our loyal customer base and strong
financial management, including intelligent cost containment, we remained
financially healthy, despite the market slowdown. The hard times in our industry
led to turnover in most executive suites, including Infinium's, where I returned
as CEO to redirect the company's energies. Despite these challenges, we also
made prudent investments in areas that we expect to yield significant results
into the new century.
One important investment was in a new brand position for the company. "Do great
work" became the Infinium rallying cry, around which we built an exciting
advertising and marketing campaign. This program has raised awareness of
Infinium in the business community, and we will continue to build on that
awareness in the new year. We use "do great work" internally, too, because it
communicates both what we can achieve and what we can help our customers
achieve.
ROBERT A. PEMBERTON
CEO, Infinium
<PAGE> 4
- --------------------------------------------------------------------------------
CAN YOU HANDLE RAPID
- --------------------------------------------------------------------------------
<PAGE> 5
MAVERICK TRANSPORTATION of Little Rock, Arkansas, has been a strictly "east of
the Rockies" operation, but that is about to change in a big way. By
establishing lease/owner operations in the western U.S., Maverick will put its
trucks on roads throughout the continental U.S. and increase its business
substantially. It's a tremendous opportunity, but for many companies, taking
such a dramatic step would be a nightmare.
Adding this new area of business requires a different kind of employment
relationship with hundreds of new drivers in dozens of new states. The financial
and human resources complications that such a move entails would be enough to
tax any business enterprise software solution. But Maverick feels entirely
confident in its ability to handle the changes that will be required. They have
Infinium working for them.
"Some companies might feel that if they went out and made an acquisition like
this, their financial software would fall apart," says Maverick IS Director
Michael Hufnagel. "With Infinium, we have none of those concerns. Our Infinium
system is robust and flexible enough to handle whatever we throw at it. All I
can say from our viewpoint is: bring it on!"
----------------------------------------
GROWTH? BRING IT ON
----------------------------------------
3
<PAGE> 6
"It is our customers' continuing support of Infinium that provides the
resiliency we need to weather market downturns such as the one our whole
industry experienced in FY '99 . What differentiates Infinium from most software
companies is the size and strength of our customer base. This is by far our most
important asset."
Mark Ohrenberger
Group Vice President
Products
We're also making major investments in retooling our software solutions for Web
deployment. Our current and future customers are looking to the Web as a way to
do business more efficiently and to penetrate new markets. Infinium is
developing its capacity to act as a business partner to help companies do
exactly that. Web capability is becoming an integral part of virtually all our
current products. And the new products we're developing -- "Weblications," I
like to call them -- are Web-centric at the core. The Web also opens up new
options for deploying our solutions to customers, helping them to minimize IS
infrastructure complexity and cost and alleviate the impact of a chronic
shortage of technical staff.
Exciting as the Web is, we're not losing track of who we are. Our customers have
told us that their loyalty is not to "Infinium.com," but to "Infinium.cust." In
other words, the Web is just another tool they want us to use to deliver
excellent solutions and services. After all, it's the customer service that
really counts. I believe it's our understanding of this interlocking
relationship that explains our consistent 90+ percent customer retention rate.
FINANCIAL HEALTH IN A TIME OF CHANGE
During fiscal 1999, Infinium's revenue was $122.0 million and our profits,
before charges to discontinue certain products, were $3.7 million. Exceptionally
strong demand for consulting services and maintenance fees--up 36 percent and 9
percent, respectively, over 1998 levels--more than made up for a 20 percent dip
in software license fees. We also enjoyed a positive cash flow of $919,000,
despite an aggressive stock repurchase program.
Despite the conservatism of enterprise software buyers this year, we took almost
300 customers live with Infinium solutions and contracted with hundreds more.
One reason for our success was that we were able to address our customers'
concerns regarding Y2K, since Infinium solutions are Y2K-ready.
TECHNOLOGY
<PAGE> 7
To demonstrate the breadth of customers we're attracting, here are just a few of
those we took on this year: Little Caesar Enterprises, Inc., a national
restaurant chain; Express Dairies, a major international dairy company; and
Ameristar Casinos, a national gaming and hospitality company.
While other vendors were scrambling to deal with Y2K problems this year, we at
Infinium were able to improve our solutions and extend our Web capabilities to
meet the real business challenges of 2000 and beyond, such as:
- - Managing rapid growth and change
- - Dealing with the complexities of workforce management
- - Taking full advantage of new technologies
- - Getting the information customers need to manage their businesses better and
make them more profitable and competitive.
The customer stories in this Annual Report demonstrate how Infinium is helping
businesses overcome such challenges.
A few of the specific solutions we've developed this year to address such
challenges are:
Business Intelligence Analytic Server (BIAS), which allows executives to query a
company database using a familiar browser UI and extract significant information
on which to base decisions
Electronic Benefits Enrollment and Modeling (eBEAM), which enables employees to
easily manage their own benefits packages online, saving companies hundreds of
thousands of dollars in processing time
Applicant Tracking, an end-to-end, e-collaborative recruiting/ hiring tool that
can shorten cycle time by 60 percent
Requisition and PO Approval, which routes requisitions and purchase orders to
authorized personnel via email.
"Our goal at Infinium is to help our customers succeed in the new world of
virtual business. We're extending our reach to benefit them. We're thinking
through what the virtual business future looks like, planning for it, and
delivering on it. It's a fabulous view from where we are. Our customers will
like what they see."
Maria G. Burud
Group Vice President
Field Operations
and Marketing
IS NOT AN END IN ITSELF
5
<PAGE> 8
- --------------------------------------------------------------------------------
CAN YOU TAKE ADVANTAGE OF
- --------------------------------------------------------------------------------
<PAGE> 9
BELLAGIO is a 36-story, 3,025-room Las Vegas casino/resort maintained by 9,500
employees. The financial and HR complications of running this kind of
hospitality operation are immense: managing inventory; tracking allocations;
administering a complicated wage, salary, benefits, and staffing scheme;
complying with shifting government regulations; and tracking pay scales, union
rules, shift differentials, and tax requirements.
In consultation with Infinium, Arthur Nathan, Bellagio's vice president of human
resources and one of the most respected HR executives in the country, has built
HR Web applications for Bellagio that are revolutionizing operations.
"It's just unbelievable what we've been able to do here in the last year and a
half. We're completely paperless, and our HR department is transaction-free.
Tapping into Infinium through a browser, even the most unsophisticated users can
get exactly the information they need. Without Infinium's commitment to us, we
couldn't have done all this within the timeframe we needed it done."
Nathan is pleased with the long-standing relationship he's had with
Infinium."We've used Infinium for ten years. It's a stable, open environment
that gives us easy access to the information we need. It's never let us down.
And the attitude of Infinium's people is, 'What would you like to accomplish,
and how can we help you get there?'"
----------------------------------------
NEW TECHNOLOGIES? BRING IT ON
----------------------------------------
7
<PAGE> 10
"Following an excellent year of growth in international operations, Infinium
continues to remove boundaries for its customers. We're achieving this not only
by the Webification of our solutions but also by an increased commitment to
localization of those solutions and by expanding our global presence."
Terry Joint
Group Vice President
International
MEETING THE CHALLENGES OF 2000
We have even bigger plans for the new year. With nearly two decades of business
software and consulting experience, we have the know-how to provide enterprise
solutions to help companies face their business challenges and become more
effective and profitable in the 21st century. Some of the initiatives currently
underway are:
Infinium as an Application Service Provider. Our customers and prospects tell
us they want us to provide our applications over the Web and help them maximize
the benefits they get from those applications. We're working on a complete
solution to deploy back-office systems over the Web and consult with our
customers about their use.
Reach Out Weblications. We're developing Web-based applications and
information systems targeted toward specific roles in a business organization.
One example is an employee self-service module that would allow employees to
perform many standard HR functions using an intuitive browser interface.
Front Office and Supply Chain Solutions. Infinium is aggressively expanding
its product portfolio to include front-office-facing strategic solutions, such
as customer relationship management. We are working to provide the strategic
front-office systems our customers need to work effectively and competitively
with their customers, vendors, and suppliers.
Web-Based User Interface. Our core business solutions are known as robust,
dependable, and easy to use. Now we're making them Web-friendly and even more
intuitive, allowing our customers to take full advantage of Web-based systems.
This will make them easily deployable over an intranet or the Internet with zero
administration at the PC.
IT'S ABOUT
<PAGE> 11
INFINIUM.CUST
We're developing a Customer Relationship Program to give our customers even
easier access to Infinium support and other resources. This program will provide
each of our customers with a single point of contact at Infinium. As part of
this initiative, we plan to deploy even more consulting resources aimed at
helping customers get the most out of their Infinium solution investments. We're
also building even stronger relationships with our customers in specific
industries, so we can better meet their unique needs.
In closing, I'd like to return to an idea I raised earlier. Though we pride
ourselves on technological excellence at Infinium, we have never lost sight of
the fact that technology is not an end in itself, but only a means to an end.
And that end is customer service. My pledge is that we will never put
technology, no matter how good, into our customers' hands without simultaneously
providing the support necessary for them to take full advantage of that
technology. Some analysts have said that the 21st century will be the century of
the customer. If they are right, and we believe they are, Infinium is poised to
be a leading global provider of enterprise business solutions in the decades to
come. We invite you to join us.
/s/ Robert A. Pemberton
Robert A. Pemberton
Chief Executive Officer
SERVICE
9
<PAGE> 12
- --------------------------------------------------------------------------------
CAN YOU COPE WITH A COMPLEX
- --------------------------------------------------------------------------------
<PAGE> 13
CATHOLIC HEALTHCARE WEST (CHW), which employs nearly 50,000 people, has deployed
Infinium Human Resources as part of its long-term growth strategy to succeed in
today's highly competitive managed healthcare environment.
"There are pressures from the government, employers, and patients to find ways
to reduce the cost while maintaining and improving the quality of our services,"
says Ann Meyer, Director of Compensation Benefits and HRIS at CHW. "We have to
cut unnecessary duplication and overhead and facilitate the consolidation of
administrative services."
Infinium Human Resources allows CHW to support a larger number of facilities
from the same data centers with the same support staff. It will enable CHW to
track an employee working in multiple locations within a region, and will save
time and costs associated with bidding on insurance and benefit programs. Its
data will help support corporate decision-making, such as determining adequate
wages for employees in various locations.
"Healthcare in the future will expand beyond the four walls of the hospital into
homes and even local shopping centers," says Meyer. "CHW will have different
ways of paying people and new, creative human resource policies and procedures.
Infinium Human Resources is flexible enough to handle all these needs."
----------------------------------------
WORKFORCE? BRING IT ON
----------------------------------------
11
<PAGE> 14
- --------------------------------------------------------------------------------
TOGETHER, WE DO GREAT WORK
- --------------------------------------------------------------------------------
<PAGE> 15
FINANCIALS
14 Selected Financial Data
16 Management's Discussion and Analysis of
Financial Condition and Results of Operations
27 Report of Independent Accountants
28 Consolidated Balance Sheet
29 Consolidated Statement of Operations
30 Consolidated Statement of Stockholders' Equity
31 Consolidated Statement of Cash Flows
32 Notes to Consolidated Financial Statements
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 13
<PAGE> 16
SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, (1)
------------------------------------------------------
1995 1996 1997 1998 1999
(RESTATED) (RESTATED) (RESTATED) (RESTATED)
---------- ---------- ---------- ---------- --------
REVENUE:
<S> <C> <C> <C> <C> <C>
Software license fees $21,080 $24,115 $29,781 $ 40,704 $ 32,437
Services revenue 41,530 47,261 56,861 73,490 89,568
------- ------- ------- -------- --------
TOTAL REVENUE 62,610 71,376 86,642 114,194 122,005
======= ======= ======= ======== ========
OPERATING COSTS AND EXPENSES:
Cost of software license fees (2) 3,829 3,823 5,070 7,210 14,518
Cost of services 15,333 16,562 22,400 32,330 40,389
Research and development 12,725 13,775 16,614 19,071 19,140
Sales and marketing 19,651 23,822 30,449 36,632 40,135
General and administrative (2) 6,245 6,616 7,336 9,351 14,514
Write-off of in-process research and development acquired (3) -- -- 6,846 11,196 --
------- ------- ------- -------- --------
TOTAL OPERATING COSTS AND EXPENSES 57,783 64,598 88,715 115,790 128,696
------- ------- ------- -------- --------
INCOME (LOSS) FROM OPERATIONS 4,827 6,778 (2,073) (1,596) (6,691)
Other income, net 293 1,526 1,923 1,744 2,633
------- ------- ------- -------- --------
INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES 5,120 8,304 (150) 148 (4,058)
Provision for (benefit from) income taxes 1,812 3,008 (263) 47 (1,698)
------- ------- ------- -------- --------
NET INCOME (LOSS) $ 3,308 $ 5,296 $ 113 $ 101 $ (2,360)
======= ======= ======= ======== ========
EARNINGS PER SHARE:
Basic $ 0.40 $ 0.53 $ 0.01 $ 0.01 $ (0.19)
Weighted average shares outstanding - basic 8,252 10,051 11,777 12,399 12,421
Diluted $ 0.38 $ 0.47 $ 0.01 $ 0.01 $ (0.19)
Weighted average shares outstanding - diluted 8,812 11,378 12,539 13,808 12,421
======= ======= ======= ======== ========
</TABLE>
14 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 17
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, (1)
-----------------------------------------------------
1995 1996 1997 1998 1999
(RESTATED) (RESTATED) (RESTATED) (RESTATED)
========== ========== ========== ========== ========
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents, and marketable securities $16,183 $43,337 $48,319 $ 46,293 $47,212
------- ------- ------- -------- -------
Total assets 45,259 77,097 92,815 107,982 93,881
------- ------- ------- -------- -------
Deferred revenue 28,938 29,206 36,702 42,475 37,807
------- ------- ------- -------- -------
Total liabilities 43,093 44,407 54,080 68,351 58,538
------- ------- ------- -------- -------
Stockholders' equity $ 2,166 $32,690 $38,735 $ 39,631 $35,343
======= ======= ======= ======== =======
</TABLE>
(1) The Company restated its financial statements for the fiscal years ended
September 30, 1995, 1996, 1997, and 1998 for the recognition of
maintenance revenue. The restatement affected services revenue, income
(loss) from operations, net income, earnings per share, total assets,
deferred revenue, deferred taxes, total liabilities, and stockholders'
equity. (See Note 3 to the consolidated financial statements).
(2) In fiscal year 1999, the Company recognized expenses of $9,450 as a result
of costs associated with the write-off of two discontinued product lines.
Of this amount, $6,338 is included in cost of software license fees, and
$3,112 is included in general and administrative costs. (See Note 8 to the
consolidated financial statements). Excluding these charges, net income
for fiscal year 1999 is $3,667, or $0.29 per diluted share.
(3) In connection with the acquisition of Time Open Systems Limited in January
1997 and Cort Directions, Inc. in June 1998, $6,846 and $7,796,
respectively, allocated to in-process research and development had not
reached technological feasibility and was charged to operations at the
acquisition date. Also in June 1998, the Company acquired technology
developed by a third party for $3,400 and determined that it had not
reached technological feasibility. Accordingly, $3,400 was written off at
the acquisition date, aggregating a write-off of $11,196 for acquired
in-process research and development in fiscal 1998. (See Note 7 to the
consolidated financial statements.) Excluding these charges, net income
for the fiscal years 1997 and 1998 was $4,567 and $7,714, or $0.36 and
$0.56 per diluted share, respectively.
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 15
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All statements contained herein that are not historical facts, including but not
limited to, statements regarding anticipated future revenue and expense levels
and capital requirements, future product development and marketing plans, the
ability to generate cash from operations, and the ability to attract and retain
employees, are based on current expectations. These statements are
forward-looking in nature, involve a number of risks and uncertainties, as more
fully described under "Factors Affecting Future Performance," and are made
pursuant to the Private Securities Litigation Reform Act of 1995. Actual results
may differ materially from those described in the forward-looking statements.
OVERVIEW
Infinium Software, Inc. (Infinium, or The Company) develops, markets, and
supports enterprise-level business software applications. The Company's software
products automate the financial management, human resource management, and
materials management functions of organizations in a broad range of industries
worldwide. The Company also offers a specialized manufacturing system designed
to manage process manufacturing operations. The Company offers products that are
designed for IBM(R)'s AS/400(R) computers and for the Microsoft Windows NT(R)
operating system. In addition to different operating systems, the Company's
products can be deployed in a number of different networking environments,
including local area networks, wide area networks, intranets, and the Internet.
The Company's revenue is derived from two sources: software license fees and
services revenue. Software license fees include revenue from non-cancelable
software license agreements entered into between the Company and its customers
with respect to both the Company's products and third-party products marketed
and/or distributed by the Company. The Company's services revenue is comprised
of software maintenance fees and fees for consulting and training services.
Consulting services revenue is recognized as the services are performed.
The Company restated its balance sheets and income statements for fiscal year
1998 and prior years. This restatement impacted services revenue, income
(loss) from operations, net income, earnings per share, total assets, deferred
revenue, deferred taxes, total liabilities, and stockholders' equity. The
Company implemented a new computer system in fiscal year 1999 that has the
ability to track maintenance contracts more precisely. Among several
improvements provided by the new system were the abilities to recognize revenue
on a daily basis rather than on a monthly basis and to more accurately track
renewals and terminations. Upon implementation of the new system, the Company
noted a variance between the deferred revenue balance calculated by the new
system and the balance that had been calculated by the former system. The result
of this restatement was an increase in deferred revenue of $4.7 million and $4.9
million as of September 30, 1997, and 1998, respectively, and a reduction in net
income of $244,000, or $0.02 per share, and $127,000, or $0.01 per share, in the
fiscal years ended September 30, 1997, and 1998, respectively. (See Note 3 to
the consolidated financial statements.)
16 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 19
RESULTS OF OPERATIONS
Included in operating costs and expenses are charges of $6.8 million for fiscal
year 1997 and $11.2 million for fiscal year 1998 as a result of the write-off of
in-process research and development acquired. (See Note 7 to the consolidated
financial statements.) Included in operating costs for fiscal year 1999 are
charges of $9.5 million representing expenses associated with the write-off of
discontinued product lines. (See Note 8 to the consolidated financial
statements.)
On a pro forma basis, exclusive of the write-off of in-process research and
development acquired and the write-off of discontinued product lines, results of
operations would be comparatively reported as follows:
(in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------------------------------------------
<S> <C> <C> <C>
Total revenue $ 86,642 $114,194 $122,005
Operating costs and expenses 81,869 104,594 119,246
-------- -------- --------
Income from operations 4,773 9,600 2,759
Other income, net 1,923 1,744 2,633
-------- -------- --------
Income before provision for income taxes 6,696 11,344 5,392
Provision for income taxes 2,129 3,630 1,725
-------- -------- --------
NET INCOME $ 4,567 $ 7,714 $ 3,667
======== ======== ========
Earnings per share:
Basic $ 0.39 $ 0.62 $ 0.30
Weighted shares outstanding - basic 11,777 12,399 12,421
Diluted $ 0.36 $ 0.56 $ 0.29
Weighted shares outstanding - diluted 12,539 13,808 12,601
</TABLE>
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 17
<PAGE> 20
YEAR ENDED SEPTEMBER 30, 1999, COMPARED TO YEAR ENDED SEPTEMBER 30, 1998
(RESTATED)
REVENUE
Total revenue increased 7%, from $114.2 million for the year ended September 30,
1998, to $122.0 million for the year ended September 30, 1999. The increase was
due to an increase in maintenance and consulting services revenues.
Revenue in North America (United States and Canada) increased 7%, from $105.8
million for the year ended September 30, 1998, to $113.5 million for the year
ended September 30, 1999. This is representative of 93% of total revenue for
both fiscal 1998 and fiscal 1999. EMEA (Europe, Middle East, and Africa) revenue
increased from $7.0 million for the year ended September 30, 1998, to $8.2
million for the year ended September 30, 1999, which was 6% and 7% of total
revenue for fiscal 1998 and 1999, respectively. Other international regions,
including Asia Pacific and Latin America, contributed 1% of total revenue for
fiscal 1998 and less than 1% for fiscal 1999.
Software license fee revenue decreased 20%, from $40.7 million for the year
ended September 30, 1998, to $32.4 million for the year ended September 30,
1999. The Company believes that the decrease was primarily due to potential
customers deciding to postpone software purchases to focus on their internal
Year 2000 compliance issues.
Service revenue increased 22%, from $73.5 million for the year ended September
30, 1998, to $89.6 million for the year ended September 30, 1999. This increase
is primarily attributable to an increase in larger consulting service
engagements as well as expanded service offerings, including increased project
management and programming services. Also contributing to this increase is an
increase in the average daily rate realized for those services. The table below
summarizes the composition and growth in the Company's services revenue:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED % OF $
SEPTEMBER 30, INCREASE
------------------------------- ------------
(IN THOUSANDS, 1998 1999 1998 TO 1999
EXCEPT PERCENTAGE DATA) (RESTATED)
------------ ------------- ------------
<S> <C> <C> <C>
Software maintenance revenue $38,530 $42,153 9%
Consulting services revenue 34,960 47,415 36
------- -------
TOTAL SERVICES REVENUE $73,490 $89,568 22%
======= =======
</TABLE>
COST OF SOFTWARE LICENSE FEES
Cost of software license fees consists primarily of amortization expense related
to capitalized software development costs, royalties on the sale of third-party
products, and the cost of product media, manuals, and shipping. Cost of software
license fees increased 101%, from $7.2 million for the year ended September 30,
1998, to $14.5 million for the year ended September 30, 1999. Cost of software
license fees as a percentage of software license fee revenue increased from 18%
for the year ended September 30, 1998, to 45% for the year ended September 30,
1999.
The increase in the dollar amount of such costs and as a percentage of software
license fees resulted primarily from the costs associated with the
discontinuance of some products. In fiscal year 1999, the Company decided to
discontinue new release development of Infinium Financials for Microsoft Windows
NT and Infinium Human Resources for Microsoft Windows NT. The Company plans to
provide maintenance and consulting services for existing customers until
November 2000. The cost of providing the maintenance and consulting services
will continue to be expensed as incurred. The Company recognized $9.5 million of
estimated costs related to the discontinuance, of which $6.3 million (which
includes $5.6 million related to the write-off of capitalized and purchased
software and $0.7 million related to the write-off of prepaid royalties for
third-party products sold with the discontinued product lines) was included in
cost of software license fees for fiscal 1999. The Company will continue to
develop new releases and provide maintenance and consulting services for its
payroll and human resources products for Microsoft Windows NT acquired in the
Cort acquisition (see Note 7 to the consolidated financial statements). Also
contributing to the increase in cost of software license fees was $0.4 million
of amortization related to another discontinued product in the first quarter of
fiscal 1999 (see Note 11 to the consolidated financial statements).
Additionally, the decline in software license fees for 1999 contributed to the
percentage increase.
COST OF SERVICES
Cost of services consists of costs to provide support, implementation,
consulting, and training services to licensees. Cost of services increased 25%,
from $32.3 million for the year ended September 30, 1998, to $40.4 million for
the year ended September 30, 1999. Cost of services as a percentage of service
revenue increased from 44% for the year ended September 30, 1998, to 45% for the
year ended September 30, 1999. The increase in cost of services in both dollar
amount and percentage resulted primarily from an increase in staffing in the
consulting and support organizations in response to the increased demand for
consulting services and an increase in the use of third-party contractors.
18 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 21
RESEARCH AND DEVELOPMENT
Research and development expense consists primarily of engineering personnel
costs, contractor costs, and related facilities and computers and
communications overhead, reduced by capitalized software development costs and
research funding. The following table sets forth, for the periods indicated, the
relationship between the Company's research and development expense as recorded
on its consolidated statement of operations and its total research and
development spending:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------
(IN THOUSANDS) 1998 1999
------------- -----------
<S> <C> <C>
Research and development expense $19,071 $19,140
Capitalized software development costs 4,698 5,793
Funded research 430 --
------- -------
RESEARCH AND DEVELOPMENT SPENDING $24,199 $24,933
======= =======
</TABLE>
Research and development expense was $19.1 million for the years ended September
30, 1998, and 1999. Research and development expense as a percentage of total
revenue was 17% for the year ended September 30, 1998, and 16% for the year
ended September 30, 1999. The Company capitalized $4.7 million of software
development costs for the year ended September 30, 1998, and $5.8 million for
the year ended September 30, 1999. Additionally, research and development
spending increased 3%, from $24.2 million for the year ended September 30,
1998, to $24.9 million for the year ended September 30, 1999. The Company
continues to make significant investments in research and development. The
Company believes that this significant level of research and development
spending is critical to building long-term product and technology advantages in
the market.
SALES AND MARKETING
Sales and marketing expense consists primarily of salaries, commissions, travel,
promotional expenses, and related facilities, computers, and communications
overhead. Sales and marketing expense increased 10%, from $36.6 million for the
year ended September 30, 1998, to $40.1 million for the year ended September 30,
1999. Sales and marketing expense as a percentage of total revenue increased
from 32% for the year ended September 30, 1998, to 33% for the year ended
September 30, 1999. The increase in expenses as both a dollar amount and
percentage was primarily due to increased investments in the Company's corporate
image and brand awareness marketing, including an advertising campaign.
GENERAL AND ADMINISTRATIVE
General and administrative expense consists primarily of compensation for
executive and administrative personnel, associated facilities, computers and
communications overhead, provision for doubtful accounts, amortization of
intangible assets, insurance, and outside professional fees. General and
administrative expense increased 55%, from $9.4 million for the year ended
September 30, 1998, to $14.5 million for the year ended September 30, 1999.
General and administrative expense as a percentage of total revenue increased
from 8% for the year ended September 30, 1998, to 12% for the year ended
September 30, 1999.
The increase in general and administrative expenses was primarily due to product
discontinuation costs. In fiscal year 1999, the Company decided to discontinue
new release development of Infinium Financials for Microsoft Windows NT and
Infinium Human Resources for Microsoft Windows NT. The Company recognized $9.5
million of estimated costs related to the discontinuance, of which $3.1 million
(which includes $2.3 million related to impaired receivables and $0.9 million
related to the write-off of goodwill associated with the Company's acquisition
of Time Open Systems Limited) was included in general and administrative costs
for fiscal 1999. The Company will continue to develop new releases and provide
maintenance and consulting services for its payroll and human resources products
for Microsoft Windows NT acquired in the Cort acquisition. (See Note 7 to the
consolidated financial statements.)
The remainder of the increase was primarily due to expenses related to the
handling and resolution of a dispute with a former business partner, expenses
relating to a potential acquisition that was never consummated, and an increase
in employee severance costs.
WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT ACQUIRED
As discussed in Note 7 to the consolidated financial statements, the Company
recorded a charge to operations of $11.2 million during the year ended September
30, 1998, representing purchased in-process research and development.
In fiscal year 1998, the Company acquired Cort. Upon consummation of the Cort
acquisition, the Company expensed $7.8 million of in-process research and
development that had not yet reached technological feasibility and had no
alternative future use as determined by an independent appraiser. Accordingly,
this amount was charged to operations at the acquisition date. The value was
determined by estimating the future net cash flows from the in-process
technology and discounting the net cash flows back to their present value. The
estimated net cash flows used in the aforementioned valuation were based on
management's estimates of revenue, cost of sales, research and development
costs,
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 19
<PAGE> 22
sales and marketing costs, general and administrative costs, and income taxes
related to the technology. The discount rate used included a factor that took
into account the uncertainty surrounding the successful development of the
purchased in-process technology.
The $7.8 million of in-process research and development represented in-process
research and development for 32-bit versions of Cort's payroll and human
resources applications for Microsoft Windows NT. At the time of the acquisition,
the software required significant modifications in order to reach technological
feasibility. The 32-bit version of the software was necessary in order to
operate the software with current versions of Microsoft Windows NT. In addition,
the 32-bit version was designed to utilize the Microsoft SQL Server database.
The software was completed in June 1999. Actual costs of completion were not
materially different from estimates; however, actual revenue received has been
less than expected. The Company believes the shortfall in revenue is primarily
due to potential customers deciding to postpone software purchases to focus on
their internal Year 2000 compliance issues.
Also in fiscal year 1998, the Company acquired technology to support and enable
operation of transaction-based functionality specific to a Microsoft Windows
NT-based application for $3.4 million. The technology as received had not met
technological feasibility as defined by the Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed. Accordingly, the acquisition of the technology
for $3.4 million was written off upon delivery.
OTHER INCOME, NET
Other income, net consists of interest income, interest expense, foreign
exchange gains (losses), and gains (losses) on the sale of marketable equity
securities. Other income, net increased 51%, from $1.7 million for the year
ended September 30, 1998, to $2.6 million for the year ended September 30, 1999.
The increase was primarily attributed to a gain on the sale of marketable equity
securities.
PROVISION (BENEFIT) FOR INCOME TAXES
The provision (benefit) for federal, state, and foreign income taxes was $0.1
million and ($1.7) million for the years ended September 30, 1998, and 1999,
respectively. The tax benefit realized during fiscal year 1999 was attributed to
a charge to operations of $9.5 million for the write-off of discontinued product
lines. The effective tax rate was 32% for the year ended September 30, 1998, and
42% for the year ended September 30, 1999. (See Note 12 to the consolidated
financial statements.)
YEAR ENDED SEPTEMBER 30, 1998 (RESTATED) COMPARED TO YEAR ENDED SEPTEMBER 30,
1997 (RESTATED)
REVENUE
Total revenue increased 32%, from $86.6 million for the year ended September 30,
1997, to $114.2 million for the year ended September 30, 1998. The increase was
primarily due to increased demand for the Company's application software
products. Generally, along with software license fees, customers typically also
purchase consulting services and maintenance agreements, which increase services
revenue as contracted services are delivered. Revenue in North America (United
States and Canada) increased 38%, from $76.7 million for the year ended
September 30, 1997, to $105.8 million for the year ended September 30, 1998.
Revenue for North America was 89% of the Company's total revenues for fiscal
1997 and 93% for fiscal 1998. EMEA (Europe, Middle East, and Africa) revenue
decreased 15%, from $8.2 million for the year ended September 30, 1997, to $7.0
million for the year ended September 30, 1998, which was 9% and 6% of total
revenue for fiscal 1997 and 1998, respectively. Other international regions,
including Asia Pacific and Latin America, contributed 2% of total revenues for
fiscal 1997 compared to 1% for fiscal 1998.
Software license fee revenue increased 37%, from $29.8 million for the year
ended September 30, 1997, to $40.7 million for the year ended September 30,
1998. The increase was primarily due to increased demand for the Company's
application software products, which were designed to be Year 2000 compliant.
Services revenue increased 29%, from $56.9 million for the year ended September
30, 1997, to $73.5 million for the year ended September 30, 1998. The increase
was primarily attributable to an increase in the installed base of customers,
resulting in an increase in both maintenance and consulting services revenue.
20 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 23
Also contributing to the increase in consulting services revenue was an increase
in larger consulting service engagements as well as expanded service offerings,
including increased project management and programming services. The table below
summarizes the composition and growth in the Company's services revenue:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED % OF $
SEPTEMBER 30, INCREASE
--------------------------- ------------
(IN THOUSANDS, EXCEPT 1997 1998 1997 TO 1998
PERCENTAGE DATA) (RESTATED) (RESTATED)
---------- ---------- ------------
<S> <C> <C> <C>
Software maintenance revenue $33,527 $38,530 15%
Consulting services revenue 23,334 34,960 50
------- -------
TOTAL SERVICE REVENUE $56,861 $73,490 29%
======= =======
</TABLE>
COST OF SOFTWARE LICENSE FEES
Cost of software license fees increased 42%, from $5.1 million for the year
ended September 30, 1997, to $7.2 million for the year ended September 30, 1998.
Cost of software license fees as a percentage of software license fee revenue
increased from 17% for the year ended September 30, 1997, to 18% for the year
ended September 30, 1998. The increase in the dollar amount of these costs and
as a percentage of software license fees is primarily due to an increase in
third-party royalty expense.
COST OF SERVICES
Cost of services increased 44%, from $22.4 million for the year ended September
30, 1997, to $32.3 million for the year ended September 30, 1998. Cost of
services as a percentage of service revenue increased from 39% for the year
ended September 30, 1997, to 44% for the year ended September 30, 1998. The
increase in cost of services as a percentage of services revenue is attributed
to a relatively greater increase in the amount of consulting service revenue
versus maintenance revenue. Consulting service revenues carry a lower gross
margin than maintenance revenues. The increase in cost of services resulted
primarily from increased staffing and contracting in the consulting and services
organizations in response to greater demand for consulting services due to an
increase in the installed base of customers.
RESEARCH AND DEVELOPMENT
The following table sets forth, for the periods indicated, the relationship
between the Company's research and development expenses as recorded on its
consolidated statement of operations and its total research and development
spending:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
------------------------
(IN THOUSANDS) 1997 1998
-------- -------
<S> <C> <C>
Research and development expense $16,614 $19,071
Capitalized internal software development costs 3,594 4,698
Funded research 255 430
------- -------
RESEARCH AND DEVELOPMENT SPENDING $20,463 $24,199
======= =======
</TABLE>
Research and development expense increased 15%, from $16.6 million for the year
ended September 30, 1997, to $19.1 million for the year ended September 30,
1998. Research and development expense as a percentage of total revenue was 19%
for the year ended September 30, 1997, and 17% for the year ended September 30,
1998. The Company capitalized $3.6 million of software development costs for
the year ended September 30, 1997, and $4.7 million for the year ended September
30, 1998. Additionally, research and development spending increased 18%, from
$20.5 million for the year ended September 30, 1997, to $24.2 million for the
year ended September 30, 1998.
SALES AND MARKETING
Sales and marketing expense increased 20%, from $30.4 million for the year ended
September 30, 1997, to $36.6 million for the year ended September 30, 1998.
Sales and marketing expense as a percentage of total revenue decreased from 35%
for the year ended September 30, 1997, to 32% for the year ended September 30,
1998. The increase in sales and marketing expense was attributable to an
increase in staffing as well as an increase in commission expense due to
increased software license fees.
GENERAL AND ADMINISTRATIVE
General and administrative expense increased 27%, from $7.3 million for the year
ended September 30, 1997, to $9.4 million for the year ended September 30, 1998.
General and administrative expenses represented a consistent 8% of total revenue
for the years ended September 30, 1997, and 1998. The increase in general and
administrative expense was attributed to an increase in the provision for
doubtful accounts, incremental costs associated with the acquisition of Cort,
including the amortization of intangible assets, and an increase in overhead
commensurate with the Company's growth.
WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT ACQUIRED
As discussed in Note 7 to the consolidated financial statements, the Company
recorded a charge to operations of $6.8 million for the write-off of in-process
research and development acquired in connection with the acquisition of Time
during the year ended September 30, 1997. Also, the Company recorded a
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 21
<PAGE> 24
charge to operations of $7.8 million for the write-off of in-process research
and development acquired in connection with the acquisition of Cort and $3.4
million for the write-off of in-process research and development for technology
acquired during the year ended September 30, 1998.
Upon consummation of the Cort acquisition in fiscal 1998, the Company expensed
$7.8 million of in-process research and development that had not yet reached
technological feasibility and had no alternative future use as determined by an
independent appraiser. Accordingly, this amount was charged to operations at the
acquisition date. The value was determined by estimating the future net cash
flows from the in-process technology and discounting the net cash flows back to
their present value. The estimated net cash flows used in the aforementioned
valuation were based on management's estimates of revenue, cost of sales,
research and development costs, sales and marketing costs, general and
administrative costs, and income taxes related to the technology. The discount
rate used included a factor that took into account the uncertainty surrounding
the successful development of the purchased in-process technology.
For the Cort acquisition, the $7.8 million of in-process research and
development represented in-process research and development for 32-bit versions
of Cort's payroll and human resources applications for Microsoft Windows NT. At
the time of the acquisition, the software required significant modifications in
order to reach technological feasibility. The 32-bit version of the software was
necessary in order to operate the software with current versions of Microsoft
Windows NT. In addition, the 32-bit version was designed to utilize the
Microsoft SQL Server database. The software was completed in June 1999. Actual
costs of completion were not materially different from estimates; however,
actual revenue received has been less than expected. The Company believes the
shortfall in revenue is primarily due to potential customers deciding to
postpone software purchases to focus on their internal Year 2000 compliance
issues.
For the Time acquisition, the $6.8 million of in-process research and
development represented in-process research and development for a Microsoft
Windows NT version of Time's client/server financial applications. At the time
of the acquisition, the software required significant modifications in order to
reach technological feasibility. The software was completed in September 1997.
Actual costs of completion were not materially different from estimates;
however, actual revenue received was less than expected. The amount of $6.8
million allocated to in-process research and development was determined by an
independent appraiser and represents technology that had not reached
technological feasibility and had no alternative future use. Accordingly, the
amount was charged to operations at the acquisition date. In September 1999, the
Company decided to discontinue new release development of Infinium Financials
for Microsoft Windows NT and Infinium Human Resources for Microsoft Windows NT
in order to focus additional resources in deploying its other financial and
human resource systems over the Internet and expand the breadth of its product
lines. At that time, the remaining goodwill associated with the acquisition of
Time was expensed to operations. (See Note 8 to the consolidated financial
statements.)
Also in fiscal year 1998, the Company acquired technology to support and enable
the operation of transaction-based functionality specific to a Microsoft Windows
NT-based application for $3.4 million. The technology as received had not met
technological feasibility as defined by the Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed. Accordingly, the acquisition of the technology
for $3.4 million was written off upon delivery.
OTHER INCOME, NET
Other income, net decreased 9%, from $1.9 million for the year ended September
30, 1997, to $1.7 million for the year ended September 30, 1998. The decrease is
primarily attributed to lower interest income earned on invested funds as a
result of lower interest rates in fiscal 1998 compared to fiscal 1997.
PROVISION (BENEFIT) FOR INCOME TAXES
The provision (benefit) for federal, state, and foreign income taxes was $(0.3)
million and $0.1 million for the years ended September 30, 1997, and 1998,
respectively. The tax benefit realized during fiscal 1997 was related to a
charge to operations of $6.8 million for the write-off of acquired in-process
research and development, which, when combined with the benefit of research and
development credits, resulted in positive net income for the year. The effective
tax rate was 32% for the year ended September 30, 1998. (See Note 12 to the
consolidated financial statements.)
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company had cash, cash equivalents, and marketable
securities of $47.2 million, resulting in a net increase of cash, cash
equivalents, and marketable securities of $0.9 million during fiscal year 1999.
Operating and financing activities provided $13.2 million, while $5.8 million
was used to fund capitalized software, and $6.5 million was used to purchase
computers and equipment, generating a net increase of $0.9 million in cash
balances. Included in financing activities was the use of $3.0 million to
repurchase common shares under the Company's stock repurchase program. The stock
repurchased during fiscal 1999 was repurchased under a plan approved by the
Company in fiscal 1998, which authorized the repurchase of up to $6.0 million of
the Company's stock.
22 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 25
Days sales outstanding (DSO) decreased to 47 days at September 30, 1999,
compared to 73 days at September 30, 1998. The Company calculates DSO by
dividing the ending accounts receivable balance, net of allowance for doubtful
accounts, by the annualized revenue for the most recent quarter, multiplied by
360. The Company believes that this method of deriving DSO is indicative of
actual results due to the cyclical nature of software license and service
transactions, which are often consummated near the end of the quarter, as well
as the fluctuation of transactions from one quarter to the next. The Company's
accounts receivable balance, net of the allowance for doubtful accounts,
decreased 40%, from $27.4 million at September 30, 1998, to $16.5 million at
September 30, 1999. The decrease in accounts receivable is primarily attributed
to lower software license fees in fiscal year 1999.
Deferred revenue decreased $4.7 million, from $42.5 million at September 30,
1998, to $37.8 million at September 30, 1999. The decrease in deferred revenue
was primarily related to a decrease in prepaid consulting engagements.
The Company plans to continue expanding its offering of complementary products
and technology via third-party software relationships and/or acquisition.
Consummation of additional agreements may result in the use of cash, cash
equivalents, and marketable securities for prepaid royalties, development
funding, and acquisition. In addition, on October 29, 1999, the Company's Board
of Directors approved a new Stock Repurchase Program authorizing the Company to
repurchase up to $10.0 million worth of its common stock on the open market.
The Company believes that cash, cash equivalents, and marketable securities on
hand and cash flows from operations will be sufficient to fund its operations at
least through fiscal 2000. While operating activities may provide cash in
certain periods, to the extent the Company experiences growth in the future, the
Company anticipates that its operating and investing activities may use cash,
and, consequently, such growth may require the Company to obtain additional
sources of financing.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts (collectively referred to as derivatives) and for hedging
activities. The Company will adopt SFAS No. 133 as required by SFAS No. 137,
Deferral of the Effective Date of the FASB Statement No. 133, in fiscal year
2001. The adoption of SFAS No. 133 is not expected to have an impact on the
Company's financial condition or results of operations.
In December 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-9, Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions, which addresses software
revenue recognition as it applies to certain multiple-element arrangements. SOP
98-9 also amends SOP 98-4, Deferral of the Effective Date of a Provision of SOP
97-2, to extend the deferral of application of certain passages of SOP 97-2
through fiscal years beginning on or before March 15, 1999. All other provisions
of SOP 98-9 are effective for transactions entered into in fiscal years
beginning after March 15, 1999. The Company will comply with the requirements of
this SOP as they become effective and does not expect that its revenues or
earnings will be materially affected.
IMPACT OF THE YEAR 2000
The Year 2000 issue relates primarily to computer software and operating systems
in which dates have been abbreviated. Unless corrected, these systems may
recognize the date of "January 1, 2000" as "January 1, 1900." As a result,
computer software and operating systems used by many companies may need to be
upgraded to comply with Year 2000 requirements. The Company has instituted a
Year 2000 project in which Year 2000 issues are assessed and addressed in the
development of its software systems, its relationships with third parties, and
its internal operating systems.
READINESS
The human resource, financial management, materials management, and process
manufacturing systems owned, developed, and marketed by the Company to run on
the IBM AS/400 and the Microsoft Windows NT servers are designed to store
four-digit date formats for years and to process (calculate, compare, and
sequence) date/time data from the twentieth century into the twenty-first
century. Beginning in 1995, in anticipation of the Year 2000, the Company began
testing its systems for defects in date formats. The Company has developed Year
2000 plans under which testing will continue through the Year 2000 on currently
available releases of the software systems and as new releases of the software
systems are developed. The Company is certified by the Information Technology
Association of America (ITAA) regarding Year 2000 methods and processes used in
the development of its AS/400 products. The Company has not sought ITAA
certification for the methods and processes used in the development of its other
software systems. Although the software systems developed by the Company are
designed to be Year 2000 compliant and are being tested for compliance on an
ongoing basis, there can be no assurance that such software systems do not
contain undetected errors or defects or that, when combined or interoperating
with other hardware, software, firmware, or modifications that are not fully
compliant, will process data in a manner that is Year 2000 compliant.
Additionally, some of the Company's customers are running older versions of the
systems, which may have defects in date formats. The Company encourages
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 23
<PAGE> 26
its customers to migrate to current product versions to take advantage of all
error and defect corrections that are currently available.
The Company's financial management and human resource management internal
business information systems are primarily made up of the same commercial
application software products developed and marketed by the Company to end
users. The Company does not expect any significant Year 2000 compliance issues
to arise in connection with those primary internal business information systems.
The Company has completed its Year 2000 project related to third parties with
whom it has development, marketing, services, and other types of relationships,
as well as third parties from whom the Company acquires supplies for its
internal operations. The project consisted of preparing an inventory of these
third parties and assigning priorities for them, obtaining responses to
questionnaires from third parties that are key to the business of the Company
regarding Year 2000 readiness of the third party and its products, testing key
items, and designing and implementing contingency and business continuation
plans.
COSTS
The Company has not separately tracked costs of the Year 2000 project but has,
as part of its existing operating budget, budgeted the anticipated costs related
to efforts in the research and development organization to continue ongoing
testing of the Company's systems and third-party products.
RISKS
The Company believes that application software system acquisitions have slowed
down as potential customers decide to postpone acquisitions and implementations
that are not required by their own Year 2000 projects. The Company's ability to
accurately forecast when application software system acquisitions will increase
is limited.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity, and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third parties, the Company is unable
to determine at this time whether the consequences of Year 2000 failures will
have a material impact on the Company's results of operations, liquidity, or
financial condition.
None of the Company's customers, on its own, is considered material to the
Company's business, and none are being questioned regarding their own Year 2000
readiness. Other third parties are being questioned as part of the Company's
Year 2000 Project, as described above. The Year 2000 project is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of the
key third parties with which it has a relationship. The Company believes that,
with the implementation of new business systems and completion of the Year 2000
project the possibility of significant interruptions of normal operations should
be reduced.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
and the Euro. The participating countries adopted the Euro as their common legal
currency on that date.
The Company modified the financial, human resources, and materials management
application software products it has developed and marketed to end users so that
the systems substantially comply with the Euro currency requirements known
generally as "triangulation" and as "no compulsion/no prohibition," as described
under Articles 3, 4, and 5 of Council Regulation (EC) No. 1103/7 of 17 June 1997
on certain provisions relating to the introduction of the Euro. Such
modifications were made generally available to its customers in fiscal year
1999. Despite the foregoing, there can be no assurance that such software
products will not contain undetected errors or defects or that, when combined or
interoperating with other hardware, software, firmware, or modifications, which
have not been modified for Euro conversion, will convert currency data in a
manner compliant with the Euro conversion adopted by the member countries.
The Company's financial management and human resources management internal
business information systems are primarily made up of the same commercial
application software products developed and marketed by the Company to end
users. The Company does not expect significant Euro conversion issues to arise
in connection with those primary internal business information systems.
FACTORS AFFECTING FUTURE PERFORMANCE
The Company's quarterly revenue and operating results have varied significantly
in the past and are likely to vary substantially from quarter to quarter in the
future. Such fluctuations may result in volatility in the price of the Company's
common stock. Quarterly revenue and operating results may fluctuate as a result
of a variety of factors, including the Company's lengthy sales cycle, the
proportion of revenue attributable to license fees versus services revenue,
changes in the level of operating expenses, demand for the Company's products,
the introduction of new products and product enhancements by the Company or its
competitors, changes in customer budgets, competitive conditions in the
industry, the Year 2000 and Euro conversion issues described above, and general
24 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 27
economic conditions. Further, the purchase of the Company's products often
involves a significant commitment of capital by its customers with the attendant
delays frequently associated with large capital expenditures and authorization
procedures within an organization. For these and other reasons, the sales cycles
for the Company's products are typically lengthy and subject to a number of
significant risks over which the Company has little or no control. The Company
historically has operated with little software license backlog because its
software products are generally shipped as orders are received. The Company has
often recognized a substantial portion of its revenue in the last month of the
quarter and often in the last week of that month. As a result, license fees in
any quarter are substantially dependent on orders booked and shipped in the last
month or last week of that quarter. Accordingly, a small variation in the timing
of recognition of revenue for specific transactions would adversely and
disproportionately affect the Company's operating results for a quarter because
the Company establishes its expenditure levels on the basis of its expected
future revenue and only a small portion of the Company's expenses varies with
its revenue. The Company believes that period-to-period comparisons of results
of operations are not necessarily meaningful and should not be relied upon as
indicative of future performance.
The Company's business has experienced and is expected to continue to experience
significant seasonality. In recent years, the Company has had greater demand for
its products in its fourth fiscal quarter and has experienced lower revenue in
its succeeding first and second fiscal quarters. The fluctuations are caused
primarily by customer purchasing patterns and the Company's sales recognition
programs, which reward and recognize sales personnel on the basis of achievement
of annual performance quotas. Due to the foregoing factors and the factors set
forth under "Results of Operations" above, it is likely that in some future
quarter the Company's operating results will be below the expectations of the
Company and public market analysts and investors. In such event, the price of
the Company's common stock would likely be materially adversely affected.
The business applications software market is characterized by rapid
technological change, frequent new product introductions, evolving industry
standards, and changes in customer demands. The introduction of products
embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. The Company's success will
depend in part on its ability to enhance products and services to meet changing
customer requirements. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products that
respond to technological change or evolving industry standards; that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction, and marketing of these products and enhancements; or
that any new products or product enhancements it may introduce will achieve
market acceptance. In addition, there can be no assurance that the Company will
not encounter product development delays in the future or that, despite testing
by the Company, errors will not be found in new products or product enhancements
after commencement of commercial shipments, resulting in loss of market share,
delay in market acceptance, or warranty claims that could have a material
adverse effect upon the Company's business, operating results, and financial
condition.
As the Company's primary current source of revenue comes from customers using
IBM midrange computers, future revenue from licenses of present products and
sales of services and recurring maintenance revenue are therefore dependent on
continued widespread use of the AS/400 and the continued support of such
computers by IBM. In addition, because the Company's current AS/400 product line
requires the use of IBM's OS/400 operating system, the Company may be required
to adapt its products to any changes made in such operating system in the
future. The Company's inability to adapt to future changes in the OS/400
operating system, or delays in doing so, could have a material adverse effect on
the Company's business, operating results, and financial condition.
In fiscal year 1999, the Company decided to discontinue new release development
of Infinium Financials for Microsoft Windows NT and Infinium Human Resources for
Microsoft Windows NT, in order to focus additional resources towards deploying
its other financial and human resource systems over the Internet and expanding
the breadth of its product lines. The Company is continuing to develop its
financial and human resources systems for the IBM AS/400 and the Advantage Human
Resources and Payroll systems for Microsoft Windows NT, which it acquired from
Cort. The Company is working with the customers of the discontinued products to
provide various alternative solutions, including migration to the Company's
other financial and human resources applications and identifying partners to
continue to provide new release development of the discontinued products.
However, there can be no assurance that the Company will not encounter customer
claims resulting from this discontinuance that could have a material adverse
effect upon the Company's financial condition.
The Company is continuing to develop software applications to operate over the
Internet, within corporate intranets, and in an outsourced model. The Company's
development and implementation of versions of its business software applications
to operate in this manner involves more intense competition from a larger number
of competitors. The adoption of Internet-based software applications could be
limited by concerns over transaction security and user privacy, the performance
of the Internet, and potential customers not seeing the value of these
solutions.
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 25
<PAGE> 28
The business applications software market is highly competitive and rapidly
changing. A number of companies offer products similar to the Company's
products and target the same customers as the Company. In addition, a number of
companies are planning to offer products over the Internet competitive to the
Company's products. The Company believes its ability to compete depends upon
many factors within and outside its control, including the timely development
and production of new products and product enhancements, product functionality,
performance, price, reliability, customer service and support, sales and
marketing efforts, and product distribution. The Company believes that
competition in its industry is undergoing rapid change and that the barriers to
competition between market segments that have previously existed are decreasing.
Due to the relatively low barriers to entry in the software market, the Company
expects additional competition from other established and emerging companies in
the client/server business applications software market as well as from
companies in the expanding Internet business applications market that the
Company is entering. Increased competition may result in price reductions,
reduced gross margins, and loss of market share, any of which would have a
material adverse effect on the Company's business, operating results, and
financial condition. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures will not have a material adverse effect on the Company's business,
operating results, and financial condition.
Revenue from customers outside North America represented 11%, 7%, and 7% of the
Company's total revenue in fiscal 1997, 1998, and 1999, respectively. The
Company believes that its revenue and future operating results will depend, in
part, on its ability to increase sales in international markets. There can be no
assurance that the Company will be able to maintain or increase its current
level of international revenue.
Risks inherent in the Company's international business activities generally
include unexpected changes in regulatory requirements, tariffs, and other trade
barriers, costs, and difficulties of localizing products for foreign countries,
lack of acceptance of localized products in foreign countries, longer accounts
receivable payments cycles, difficulties in managing international operations,
potentially adverse tax consequences, including restrictions on the repatriation
of earnings, the burdens of complying with a wide variety of foreign laws, and
economic instability. There can be no assurance that such factors would not have
a material adverse effect on the Company's future international revenue and,
consequently, on the Company's business, operating results, and financial
condition.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's market risk involves
forward-looking statements. Actual results could differ materially from those
discussed in the forward-looking statements. The Company is exposed to market
risk related to changes in interest rates and foreign currency exchange rates.
The Company does not use derivative financial instruments for speculative or
trading purposes.
INTEREST RATE RISK
The Company is exposed to market risk from changes in interest rates primarily
through its investing and borrowing activities. In addition, the Company's
ability to finance future acquisition transactions may be impacted if the
Company is unable to obtain appropriate financing at acceptable rates. The
Company's investing strategy to manage interest rate exposure is to invest in
short-term, highly liquid investments. The Company maintains a portfolio of
highly liquid cash equivalents and short-term investments (primarily in
high-grade municipal notes). At September 30, 1999, the fair value of the
Company's short-term investments approximated market value.
FOREIGN CURRENCY RISK
The Company faces exposure to movements in foreign currency exchange rates.
These exposures may change over time as business practices evolve and could have
a material adverse effect on the Company's business, financial condition and
results of operations. The Company does not use derivative financial instruments
to hedge foreign currency exposures or for trading. Historically, the Company's
primary exposures have been related to the operations of its foreign
subsidiaries. In fiscal 1999, the net impact of foreign currency changes was not
material. The introduction of the Euro as a common currency for most members of
the European Monetary Union has taken place in the Company's fiscal year 1999.
26 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders of Infinium Software, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows, after
the restatement described in Note 3, present fairly, in all material respects,
the financial position of Infinium Software, Inc. and its subsidiaries at
September 30, 1999 and September 30, 1998, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1999 in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 23, 1999
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 27
<PAGE> 30
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) SEPTEMBER 30,
-----------------------------
1998 1999
(RESTATED)
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,708 $ 23,099
Marketable securities at fair market value 33,585 24,113
Accounts receivable, less allowance for doubtful accounts of $1,650
and $4,229 at September 30, 1998, and 1999, respectively 27,383 16,510
Deferred income taxes 4,049 3,590
Prepaid expenses and other current assets 6,103 4,142
--------- ---------
TOTAL CURRENT ASSETS 83,828 71,454
--------- ---------
Property and equipment, net 7,442 10,593
Capitalized software development costs, net 9,643 5,406
Goodwill and other intangible assets, net 2,245 755
Deferred income taxes 1,731 3,477
Other assets 3,093 2,196
--------- ---------
TOTAL ASSETS $ 107,982 $ 93,881
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,136 $ 7,775
Accrued expenses 14,672 11,709
Income taxes payable 3,068 795
Lease obligation, short-term portion -- 109
Deferred revenue 40,889 35,744
--------- ---------
TOTAL CURRENT LIABILITIES 66,765 56,132
--------- ---------
Lease obligation, long-term portion -- 343
Deferred revenue 1,586 2,063
--------- ---------
TOTAL LIABILITIES 68,351 58,538
--------- ---------
Commitments and contingencies (Note 18)
Common stock, $.01 par value; authorized 40,000 shares, issued
12,607 shares at September 30, 1998, and 1999 126 126
Additional paid-in capital 36,644 36,306
Retained earnings 4,473 1,188
Accumulated other comprehensive loss (319) (257)
--------- ---------
40,924 37,363
--------- ---------
Less: treasury stock at cost, 89 and 410 shares at September 30, 1998,
and 1999, respectively (1,293) (2,020)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 39,631 35,343
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 107,982 $ 93,881
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
28 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 31
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE:
Software license fees $ 29,781 $ 40,704 $ 32,437
Services revenue 56,861 73,490 89,568
--------- --------- ---------
TOTAL REVENUE 86,642 114,194 122,005
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of software license fees (Note 8) 5,070 7,210 14,518
Cost of services 22,400 32,330 40,389
Research and development 16,614 19,071 19,140
Sales and marketing 30,449 36,632 40,135
General and administrative (Note 8) 7,336 9,351 14,514
Write-off of in-process research and development acquired (Note 7) 6,846 11,196 --
--------- --------- ---------
TOTAL OPERATING COSTS AND EXPENSES 88,715 115,790 128,696
--------- --------- ---------
LOSS FROM OPERATIONS (2,073) (1,596) (6,691)
Other income, net 1,923 1,744 2,633
--------- --------- ---------
INCOME (LOSS) BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES (150) 148 (4,058)
Provision for (benefit from) income taxes (263) 47 (1,698)
--------- --------- ---------
NET INCOME (LOSS) $ 113 $ 101 $ (2,360)
========= ========= =========
BASIC PER SHARE DATA:
Net income (loss) per share - basic $ 0.01 $ 0.01 $ (0.19)
Weighted shares outstanding - basic 11,777 12,399 12,421
DILUTED PER SHARE DATA:
Net income (loss) per share - diluted $ 0.01 $ 0.01 $ (0.19)
Weighted shares outstanding - diluted 12,539 13,808 12,421
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 29
<PAGE> 32
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1997 (RESTATED), 1998 (RESTATED), AND 1999 (IN THOUSANDS)
ACCUMULATED
COMMON ADDITIONAL RETAINED OTHER
SHARES COMMON PAID-IN EARNINGS COMPREHENSIVE
ISSUED STOCK CAPITAL (RESTATED) LOSS
-------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 11,114 $ 111 $ 27,394 $ 5,185 $ --
Stock issued in connection with acquisition 770 8 4,506
Stock issued upon exercise of stock options 205 2 748
Stock issued in connection with employee
stock purchase plan 73 1 528
Income tax benefit from exercise of stock
options 149
Comprehensive income:
Net income for the year 113
Cumulative translation adjustment (10)
Comprehensive income
------ -------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1997 12,162 122 33,325 5,298 (10)
------ -------- -------- -------- --------
Stock issued upon exercise of stock options 405 4 1,990
Stock issued in connection with employee
stock purchase plan 40 326
Income tax benefit from exercise of stock
options and employee stock purchase plan 1,003
Purchase of treasury stock at cost
Treasury stock reissued upon exercise of stock
options and employee stock purchase plan (926)
Comprehensive loss:
Net income for the year 101
Cumulative translation adjustment (309)
Comprehensive loss
------ -------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1998 12,607 126 36,644 4,473 (319)
------ -------- -------- -------- --------
Income tax provision from
exercise of stock options (338)
Purchase of treasury stock at cost
Treasury stock reissued upon exercise of stock
options and employee stock purchase plan (925)
Comprehensive loss:
Net loss for the year (2,360)
Unrealized gain on marketable equity securities 74
Cumulative translation adjustment (12)
Comprehensive loss
------ -------- -------- -------- --------
BALANCE AT SEPTEMBER 30, 1999 12,607 $ 126 $ 36,306 $ 1,188 $ (257)
====== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
TOTAL COMPREHENSIVE
TREASURY STOCKHOLDERS' INCOME
STOCK EQUITY (LOSS)
AT COST (RESTATED) (RESTATED)
--------- ------------- -------------
<S> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 $ -- $ 32,690
Stock issued in connection with acquisition 4,514
Stock issued upon exercise of stock options 750
Stock issued in connection with employee
stock purchase plan 529
Income tax benefit from exercise of stock
options 149
Comprehensive income:
Net income for the year 113 $ 113
Cumulative translation adjustment (10) (10)
--------
Comprehensive income $ 103
-------- -------- ========
BALANCE AT SEPTEMBER 30, 1997 -- 38,735
-------- --------
Stock issued upon exercise of stock options 1,994
Stock issued in connection with employee
stock purchase plan 326
Income tax benefit from exercise of stock
options and employee stock purchase plan 1,003
Purchase of treasury stock at cost (2,944) (2,944)
Treasury stock reissued upon exercise of stock
options and employee stock purchase plan 1,651 725
Comprehensive loss:
Net income for the year 101 $ 101
Cumulative translation adjustment (309) (309)
--------
Comprehensive loss $ (208)
-------- -------- ========
BALANCE AT SEPTEMBER 30, 1998 (1,293) 39,631
-------- --------
Income tax provision from
exercise of stock options (338)
Purchase of treasury stock at cost (2,968) (2,968)
Treasury stock reissued upon exercise of stock
options and employee stock purchase plan 2,241 1,316
Comprehensive loss:
Net loss for the year (2,360) $ (2,360)
Unrealized gain on marketable equity securities 74 74
Cumulative translation adjustment (12) (12)
--------
Comprehensive loss $ (2,298)
-------- -------- ========
BALANCE AT SEPTEMBER 30, 1999 $ (2,020) $ 35,343
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
30 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 33
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS) FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 113 $ 101 $ (2,360)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 5,939 6,780 15,138
Allowance for doubtful accounts 397 977 2,679
Deferred income taxes (1,364) (2,634) (1,287)
Write-off of in-process research and development acquired (Note 7) 6,846 11,196 --
Changes in operating assets and liabilities, net of effects from
the corporate acquisitions of Time in 1997 and Cort in 1998
Accounts receivable (6,427) (9,165) 8,181
Prepaid expenses and other current assets (1,345) (1,123) 1,941
Other assets (172) (272) 969
Accounts payable 453 2,829 (360)
Accrued expenses 1,860 1,713 (2,834)
Income taxes payable 1,172 1,750 (2,525)
Deferred revenue 6,518 5,215 (4,644)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,990 17,367 14,898
======== ======== ========
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (78,185) (55,640) (20,714)
Sale of marketable securities 75,165 60,595 30,186
Purchase of property and equipment (3,240) (3,528) (6,473)
Capitalization of internal software development costs (3,594) (5,473) (5,843)
Corporate acquisitions, net of cash acquired (Note 7) (3,443) (9,371) --
Investment in unaffiliated entities -- (850) --
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (13,297) (14,267) (2,844)
======== ======== ========
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options, warrants,
and employee stock purchase plan 1,279 3,021 1,316
Purchase of treasury stock -- (2,944) (2,968)
-------- -------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 1,279 77 (1,652)
======== ======== ========
EFFECT OF FOREIGN EXCHANGE RATE ON CASH (10) (248) (11)
-------- -------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,962 2,929 10,391
-------- -------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,817 9,779 12,708
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 9,779 $ 12,708 $ 23,099
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1 $ -- $ --
Income taxes, net of refunds received 9 804 2,209
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchased under capital leases $ -- $ -- $ 452
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
1. THE COMPANY
Founded in 1981, Infinium develops, markets, and supports enterprise-level
business software applications. The Company's software products automate the
financial management, human resource management, and materials management
functions of organizations in a broad range of industries worldwide. The Company
also offers a specialized manufacturing system designed to manage process
manufacturing operations. The Company offers products that are designed for
IBM's AS/400 computers and for the Microsoft Windows NT operating system. In
addition to different operating systems, the Company's products can be deployed
in a number of different networking environments, including local area networks,
wide area networks, intranets, and the Internet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly owned domestic and foreign subsidiaries. All intercompany
transactions and balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosures of contingent assets and liabilities, at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with the provisions of Statement of
Position 97-2, Software Revenue Recognition. Revenue from software license fees
is recognized when there is evidence of an arrangement, the product has been
shipped, fees are fixed and determinable, and collection of the related
receivable is probable. Revenue from sales through distributors is recorded net
of distributor commissions. Maintenance revenues, including those bundled with
the initial license fee, are deferred and recognized ratably over the service
period. Consulting and training services revenues are recognized as the services
are performed.
CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
The Company invests its excess cash primarily in securities of government
agencies, high-grade commercial paper, and mutual funds that invest primarily in
the securities of government agencies. These investments are subject to minimal
credit and market risk. The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents. Marketable securities include securities purchased with an original
maturity of greater than three months.
The Company accounts for its investments under the provisions of Statement of
Financial Accounting Standards No. 115 (SFAS 115), Accounting for Certain
Investments in Debt and Equity Securities. SFAS 115 requires that, except for
debt securities classified as held-to-maturity, investments in debt and equity
securities should be reported at fair value. At September 30, 1998, and 1999,
all of the Company's investments are classified as available-for-sale.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the depreciable assets.
Leasehold improvements are depreciated over the lesser of the lease term or
useful life of the assets. Repair and maintenance costs are expensed as
incurred.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially expose the Company to concentrations of
credit risk include accounts receivable. To minimize this risk, the Company
generally requires a cash deposit upon contract signing. In addition, the
Company maintains reserves for potential credit losses. Such losses, in the
aggregate, have not exceeded management expectations.
RESEARCH AND DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS
Research and development expenses, other than certain software development
costs, are charged to expense as incurred. In accordance with the provisions of
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed, the Company
capitalizes certain software development costs upon technological feasibility.
Amortization of capitalized software development costs is provided upon
commercial release of the products at the greater of the ratio of current
product revenue to the total of current and anticipated product revenue or on a
straight-line basis over the estimated economic life of the software, which the
Company has determined is not more than five years.
FOREIGN CURRENCY TRANSLATION
Effective for fiscal 1997, the Company changed the functional currency of the UK
subsidiary to the local currency. During fiscal 1998, the functional currency of
the Canadian entity, which had been determined to be the U.S. dollar for all
previous years, was also determined to be the local currency. Under this
approach, assets and liabilities are translated at current exchange rates.
Income and expense items are translated using average rates during the year.
32 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 35
Translation adjustments are not included in determining consolidated net income
but rather are accumulated and reported as a separate component of stockholders'
equity.
The functional currency of the Company's other foreign subsidiaries is the U.S.
dollar. Monetary assets and liabilities of the subsidiaries are translated into
U.S. dollars at the exchange rate in effect at period end, and nonmonetary
assets and liabilities are remeasured at historic exchange rates. Income and
expenses are remeasured at the average exchange rate for the period. Translation
gains and losses are reflected in other income, net in the consolidated
statement of operations.
NET INCOME PER SHARE
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128 (SFAS 128), Earnings per Share. This Statement, which the Company
adopted during the quarter ended December 31, 1997, establishes and simplifies
standards for computing and presenting earnings per share. SFAS 128 requires
restatement of all previously reported earnings per share data that are
presented.
Basic earnings per share is determined by dividing net income applicable to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share is determined by dividing net
income applicable to common stockholders by the weighted average number of
common shares and common share equivalents outstanding during the period. Common
share equivalents are included in the diluted earnings per share calculation
when dilutive. Common share equivalents consisting of common stock issuable upon
exercise of outstanding common stock options are computed using the treasury
stock method.
The computation of basic and diluted earnings per share for the years ended
September 30, 1997, 1998, and 1999 is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------------------
1997 (RESTATED) 1998 (RESTATED) 1999
----------------------------- --------------------------- ---------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE INCOME SHARES PER SHARE
----------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Income available to
common stockholders $113 11,777 $0.01 $101 12,399 $0.01 $(2,360) 12,421 $(0.19)
EFFECT OF DILUTIVE SECURITIES:
Stock options 762 1,409 N/A
------ ------ ------
DILUTED EARNINGS PER SHARE:
Income available to
common stockholders $113 12,539 $0.01 $101 13,808 $0.01 $(2,360) 12,421 $(0.19)
---- ------ ----- ---- ------ ----- ------- ------ ------
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 33
</TABLE>
<PAGE> 36
STOCK COMPENSATION
The Company's employee stock option plans are accounted for in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. In October 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for
Stock-Based Compensation. (See Note 13.)
COMPREHENSIVE INCOME
On October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130), Reporting of Comprehensive Income. Comprehensive
income for the Company includes net income, the effects of currency
translation, which are charged or credited to the cumulative translation
adjustment account within stockholders' equity, and the unrealized gain (loss)
on investments available for sale, which is recorded within stockholders'
equity. Comprehensive income for all periods presented is included in the
consolidated statement of stockholders' equity.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities. The Company will adopt
SFAS No. 133 as required by SFAS No. 137, Deferral of the Effective Date of the
FASB Statement No. 133, in fiscal year 2001. The adoption of SFAS No. 133 is not
expected to have an impact on the Company's financial condition or results of
operations.
In December 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-9, Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions, which addresses software
revenue recognition as it applies to certain multiple-element arrangements. SOP
98-9 also amends SOP 98-4, Deferral of the Effective Date of a Provision of SOP
97-2, to extend the deferral of application of certain passages of SOP 97-2
through fiscal years beginning on or before March 15, 1999. All other provisions
of SOP 98-9 are effective for transactions entered into in fiscal years
beginning after March 15, 1999. The Company will comply with the requirements of
this SOP as they become effective and does not expect that its revenues or
earnings will be materially affected.
3. RESTATEMENT OF FINANCIAL STATEMENTS
The Company's consolidated financial statements as of October 1, 1997, and for
the years ended September 30, 1998, and 1997 have been restated for the
recognition of maintenance revenue. Retained earnings as of October 1, 1997,
reflects a decrease of $3,204, and the net income for the fiscal years ended
September 30, 1998, and 1997 reflects a decrease of $127 and $244, respectively.
In fiscal year 1999, the Company installed a new system to track its maintenance
contracts. Upon installation, the Company noted a variance between the deferred
maintenance revenue recognized under the former system and the newly installed
system, resulting from the newly installed system's ability to track maintenance
revenue more precisely. The effect of the restatement is as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1997 1998
---------------------------- ----------------------------
PREVIOUSLY AS PREVIOUSLY AS
REPORTED RESTATED REPORTED RESTATED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Consolidated Balance Sheet:
Deferred revenue $31,990 $36,702 $37,577 $42,475
Deferred income taxes 1,638 3,146 4,213 5,780
Retained earnings 8,502 5,298 7,804 4,473
Consolidated Statement of Operations:
Services revenue $57,220 $56,861 $73,676 $73,490
Net income 357 113 228 101
Net income per share - basic $ 0.03 $ 0.01 $ 0.02 $ 0.01
Net income per share - diluted $ 0.03 $ 0.01 $ 0.02 $ 0.01
</TABLE>
The effect of the restatement on the reported results of operations for the
first three quarters of fiscal year 1999 was not material.
34 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 37
4. CASH EQUIVALENTS AND MARKETABLE SECURITIES
Following is a summary of the fair market value of available-for-sale
securities, by balance sheet classification, as of September 30, 1998, and 1999:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1998 1999
------- -------
<S> <C> <C>
CASH EQUIVALENTS:
U.S. government obligations $ -- $ 5,630
State government obligations 2,566 6,651
Corporate debt obligations -- 1,524
Money market funds 5,957 5,173
MARKETABLE SECURITIES:
State government obligations 33,271 20,293
Corporate debt obligations -- 3,820
Foreign debt obligations 314 --
------- -------
$42,108 $43,091
======= =======
</TABLE>
Cash equivalents and marketable securities are carried at fair market value,
which approximates amortized cost. The contractual maturities of all
available-for-sale securities classified as cash equivalents are less than three
months. Available-for-sale securities classified as marketable securities with
fair market values of $11,577 and $12,536 have contractual maturities of less
than one and one to five years, respectively. All of the Company's marketable
securities are classified as current at September 30, 1998, and 1999, as these
funds are highly liquid and are available to meet working capital needs and to
fund current operations. Gross unrealized gains and losses were $0 and $74 as of
September 30, 1998, and 1999. Realized gains and losses on sales of securities
for the year were $0 and $1,188 for the years ended September 30, 1998, and
1999, respectively.
5. BALANCE SHEET COMPONENTS
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------------
USEFUL LIFE 1998 1999
------------ -------- --------
<S> <C> <C> <C>
Computer equipment 2 to 5 years $ 15,200 $ 17,124
Furniture and fixtures 5 years 1,656 2,443
Leasehold improvements Lease term 1,133 4,758
Construction in progress 325 359
Land 287 287
-------- --------
18,601 24,971
-------- --------
Less accumulated
depreciation and amortization (11,159) (14,378)
-------- --------
$ 7,442 $ 10,593
======== ========
</TABLE>
Capitalized software development costs, net consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1998 1999
-------- --------
<S> <C> <C>
Internal development costs $ 23,444 $ 23,839
Purchased from third parties 1,653 1,703
-------- --------
25,097 25,542
Less accumulated amortization (15,454) (20,136)
-------- --------
$ 9,643 $ 5,406
======== ========
</TABLE>
Included in capitalized software development costs at September 30, 1998, and
1999 are $3,526 and $277, respectively, related to products that had not yet
been commercially released. Accordingly, amortization of these costs had not
commenced.
Amortization expense of capitalized software development costs for the years
ended September 30, 1997, 1998, and 1999 amounted to $2,998, $3,341, and $4,469,
respectively. During the year ended September 30, 1999, the Company wrote off
$5,611 in capitalized development costs and purchased software related to the
discontinued product lines discussed in Note 8.
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 35
<PAGE> 38
Goodwill and other intangible assets, net consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1998 1999
---- ----
<S> <C> <C>
Goodwill, net of tax benefit of $144 and $0 at
September 30, 1998 and 1999, respectively $ 2,355 $ 1,022
Workforce in place 468 --
------- -------
2,823 1,022
Less accumulated amortization (578) (267)
------- -------
$ 2,245 $ 755
======= =======
</TABLE>
During the year ended September 30, 1999, the Company wrote off $853 in goodwill
and workforce in place related to the discontinued product lines discussed in
Note 8.
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1998 1999
---- ----
<S> <C> <C>
Employee compensation and benefits $ 7,132 $ 5,649
Accrued royalties 1,537 509
Accrued professional fees 556 709
Deferred Cort acquisition (Note 7) 1,904 --
Other 3,543 4,842
------- -------
$14,672 $11,709
======= =======
</TABLE>
6. OTHER INCOME, NET
Other income, net consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Interest income $ 2,035 $ 1,891 $ 1,445
Interest expense (2) -- --
Gain on marketable equity securities -- -- 1,188
Foreign exchange loss (110) (147) --
------- ------- -------
$ 1,923 $ 1,744 $ 2,633
======= ======= =======
</TABLE>
7. ACQUISITIONS
CORT DIRECTIONS, INC.
On June 11, 1998, the Company acquired all of the outstanding capital stock of
Cort Directions, Inc. (Cort), a privately held software concern that primarily
developed and marketed payroll and human resources applications for the
Microsoft Windows NT platform. The transaction was consummated for $7,857 in
cash, of which $5,953 was paid upon closing, $952 was paid February 1, 1999, and
$952 on June 11, 1999, as well as $375 of acquisition costs. An amount of $7,796
was allocated to in-process research and development and was charged to
operations at the acquisition date. Goodwill of $1,022 was acquired and is being
amortized over an expected useful life of five years. Acquired software of $566
is being amortized over the expected useful life of three years. Pro forma
statements of operations are not shown as they would not differ materially from
reported results.
The $7,796 allocated to in-process research and development represented
in-process research and development for 32-bit versions of Cort's payroll and
human resources applications for Microsoft Windows NT. The value was determined
by estimating the future net cash flows from the in-process technology and
discounting the net cash flows back to their present value. The estimated net
cash flows used in the aforementioned valuation were based on management's
estimates of revenue, cost of sales, research and development costs, sales and
marketing costs, general and administrative costs, and income taxes related to
the technology. The discount rate used included a factor that took into account
the uncertainty surrounding the successful development of the purchased
in-process technology. At the time of the acquisition, the software required
significant modifications in order to reach technological feasibility. The
32-bit version of the software was necessary in order to operate the software
with the current versions of Microsoft Windows NT. In addition, the 32-bit
versions were designed to utilize the Microsoft SQL Server database. The
36 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 39
software was completed in June 1999. Actual costs of completion were not
materially different from estimates; however, actual revenue received has been
less than expected. The Company believes the shortfall in revenue is primarily
due to potential customers deciding to postpone software purchases to focus on
their internal Year 2000 compliance issues.
TIME OPEN SYSTEMS LIMITED
On January 6, 1997, the Company acquired all of the outstanding stock of Time
Open Systems Limited (Time), a UK-based privately held software concern that
developed and marketed a suite of client/server financial applications. The
transaction was consummated for $2,793 in cash, approximately 770 shares of the
Company's common stock, and $650 of related acquisition costs. The shares were
issued at the closing of the acquisition and are being held pursuant to an
escrow agreement under which all the shares will be released ratably over a
three-year period. The value ascribed to the shares was $4,514. An amount of
$6,846 was allocated to in-process research and development and was charged to
operations at the acquisition date. Goodwill of $1,477 was also acquired and is
being amortized over an expected useful life of seven years. Pro forma
statements of operations are not shown as they would not differ materially from
reported results.
The $6,846 allocated to in-process research and development represented
in-process development for a Microsoft Windows NT version of Time's client/
server financial applications. At the time of the acquisition, the software
required significant modifications in order to reach technological feasibility.
The software was completed in September 1997. Actual costs of completion were
not materially different from estimates; however, actual revenue received was
less than expected. The amount of $6,846 allocated to in-process research and
development was determined by an independent appraiser and represents technology
that had not reached technological feasibility and had no alternative future
use. Accordingly, the amount was charged to operations at the acquisition date.
In September 1999, the Company decided to discontinue new release development of
Infinium Financials for Microsoft Windows NT and Infinium Human Resources for
Microsoft Windows NT in order to focus additional resources in deploying its
other financial and human resource systems over the Internet and expand the
breadth of its product lines. At that time, the remaining goodwill associated
with the acquisition of Time was expensed to operations. (See Note 8.)
OTHER IN-PROCESS RESEARCH AND DEVELOPMENT ACQUIRED
In fiscal 1998, the Company acquired technology to support and enable the
operation of transaction-based functionality specific to a Microsoft Windows NT
server-based application for $3,400. The technology as received had not met
technological feasibility as defined by Statement of Financial Accounting
Standards no. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed. Accordingly, the acquisition of the technology for
$3,400 was written off upon delivery.
8. DISCONTINUED PRODUCT LINES
In September 1999, the Company decided to discontinue new release development of
Infinium Financials for Microsoft Windows NT and Infinium Human Resources for
Microsoft Windows NT. The Company plans to provide maintenance and consulting
services for existing customers until November 2000. Of the $9,450 estimated
costs related to these actions, $6,338, including $5,611 related to the
write-off of capitalized and purchased software due to unamortized capitalized
costs exceeding the net realizable value of those assets and $727 related to the
write-off of prepaid royalties for third-party products sold with the
discontinued product lines, is included in cost of software license fees. The
remaining $3,112, including $2,259 related to impaired receivables and $853
related to the write-off of goodwill associated with the Company's acquisition
of Time, is included in general and administrative expenses. The Company will
continue to develop new releases and provide maintenance and consulting services
for its payroll and human resources products for Microsoft Windows NT acquired
in the Cort acquisition. (See Note 7.)
9. LEGAL SETTLEMENT
During the second fiscal quarter of 1999, the Company settled a dispute with a
former business partner for $350. The payment is classified within general and
administrative expenses.
10. GAIN ON INVESTMENT IN CONDUIT SOFTWARE, INC.
During the third quarter of 1998, the Company made a $750 equity investment in
Conduit Software, Inc. (Conduit), a developer of employee self-service software.
During the third quarter of 1999, Conduit was acquired in a stock for stock
transaction by ProBusiness Services, Inc. (ProBusiness), and the Company was
granted ProBusiness shares in exchange for its Conduit shares. Subsequently, the
Company sold 90% of its ProBusiness stock for $1,863. This resulted in a
realized gain of $1,188 that is included in other income. The remaining 10% of
the stock is included in marketable securities at fair market value, and an
unrealized gain on marketable equity securities of $74, related to the remaining
10%, is included in stockholders' equity.
11. WRITE-OFF OF CAPITALIZED SOFTWARE COSTS
During the second fiscal quarter of 1999, the Company wrote off $430 of
capitalized third-party-developed software costs related to a product the
Company no longer plans to market and which had no alternative future use.
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 37
<PAGE> 40
12. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------- ---------- ----
<S> <C> <C> <C>
CURRENT:
Federal $ 1,193 $ 2,370 $ (719)
State 77 249 55
Foreign 154 356 394
------- ------- -------
Total current 1,424 2,975 (270)
======= ======= =======
DEFERRED:
Federal (1,571) (2,749) (1,253)
State (116) (179) (175)
------- ------- -------
Total deferred (1,687) (2,928) (1,428)
------- ------- -------
$ (263) $ 47 $(1,698)
======= ======= =======
</TABLE>
The income tax provision differs from an amount computed by applying the U.S.
statutory federal income tax rate to pretax income as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------- ---------- ----
<S> <C> <C> <C>
Statutory federal income tax $ (51) $ 50 $(1,379)
State income taxes (27) 46 (79)
Research and development credits (429) (942) --
Foreign tax rate differential 28 246 139
Other 216 647 (379)
------- ------- -------
$ (263) $ 47 $(1,698)
======= ======= =======
</TABLE>
Deferred tax assets and liabilities are composed of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------
1998 1999
(RESTATED)
---------- ----
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 72 $ 36
Intangible assets 4,265 4,455
Deferred revenue 4,518 2,812
Accrued expenses and reserves not
currently deductible 499 1,716
Other 70 110
----- -----
Total deferred tax assets 9,424 9,129
===== =====
DEFERRED TAX LIABILITIES:
Prepaid expenses deducted currently 773 511
Capitalized software development costs 2,851 1,551
Other 20 --
------ ------
Total deferred tax liabilities 3,644 2,062
------ ------
$5,780 $7,067
====== ======
</TABLE>
As of September 30, 1999, the Company had federal net operating loss
carryforwards of $106, which expire at various dates through 2010.
Ownership changes, as defined in the Internal Revenue Code, may limit the amount
of net operating loss and tax credit carryforwards that can be utilized to
offset future taxable income or tax liability. The amount of the annual
limitation is determined in accordance with Section 382 of the Internal Revenue
Code.
Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries because those earnings are
intended to be permanently reinvested. Such earnings would become taxable upon
the sale or liquidation of these foreign subsidiaries or upon the remittance of
dividends. It is not practicable to estimate the amount of additional tax that
might be payable on the foreign earnings. Upon remittance, certain foreign
countries impose withholding taxes that are then available, subject to certain
limitations, for use against the Company's U.S. tax liability. The amount of
withholding tax that would be payable upon remittance of the entire amount of
undistributed earnings would not be material.
38 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 41
13. STOCKHOLDERS' EQUITY
STOCK OPTIONS
In October 1995, the Board of Directors approved the 1995 Stock Plan (the 1995
Plan), which provides for the issuance of up to 3,500 shares of common stock
pursuant to the grant of qualified and non-qualified stock options, stock awards
or purchase rights to employees, consultants, directors, and officers of the
Company. Additionally, in February 1999, the Company amended the 1995 Plan to
provide for the issuance of an additional 1,000 shares of common stock. The
options are generally exercisable over a four-year period. The Compensation
Committee is composed of members of the Company's Board of Directors. The option
price is set at the fair market value of the Company's stock on the date of the
option grant, as determined by the Compensation Committee.
The Company also has a 1989 Incentive Stock Option Plan (the 1989 Plan) and a
1984 Incentive Stock Option Plan (the 1984 Plan), which authorized options for
2,800 and 1,400 shares of common stock, respectively, under terms similar to
those described in the preceding paragraph. In conjunction with the approval of
the 1995 Plan, the Board of Directors formally terminated the 1989 Plan, and as
such no future grants will be made under this Plan. Authority to grant
additional options under the 1984 Plan has expired.
In October 1995, the Board of Directors approved the 1995 Non-Employee Director
Stock Option Plan (the Director Plan) under which options to purchase a maximum
of 210 shares of the Company's common stock may be granted to non-employee
directors. Under the Director Plan, each non-employee director will be granted
an option to purchase 28 shares of common stock upon first joining the Board of
Directors and 4 shares at each successive annual meeting of stockholders,
beginning at the Company's annual meeting of stockholders for the fiscal year
ended September 30, 1996, at an exercise price per share equal to the then fair
market value per common share. Options granted under the Director Plan become
exercisable in four equal annual installments commencing one year after the date
of grant provided that the optionee then remains a director or consultant. The
term of each option granted under the Director Plan will be for a period of ten
years from the date of the grant.
At September 30, 1999, the Company had 1,819 shares of its common stock
available for future grant and had reserved 3,264 shares of its common stock for
issuance upon exercise of outstanding stock options and warrants under the
Plans.
Transactions under the 1984, 1989, 1995, and the Director Plans during the years
ended September 30, 1997, 1998, and 1999 are summarized as follows:
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 39
<PAGE> 42
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1997 1998 1999
----------------------- ----------------------- ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING AT BEGINNING OF PERIOD 1,927 $ 5.74 3,036 $ 6.34 2,926 $ 6.03
Granted 1,467 6.70 609 15.36 1,183 5.64
Exercised (206) 3.66 (475) 4.93 (189) 4.06
Cancelled (152) 5.83 (244) 8.55 (656) 8.27
----- --------- ----- --------- ----- --------
OUTSTANDING AT END OF PERIOD 3,036 6.34 2,926 8.28 3,264 7.57
===== ========= ===== ========= ===== ========
OPTIONS EXERCISABLE AT END OF PERIOD 800 4.87 1,196 6.03 1,792 7.79
===== ========= ===== ========= ===== ========
WEIGHTED AVERAGE FAIR VALUE OF OPTIONS
GRANTED DURING THE PERIOD $ 4.08 $ 10.13 $ 3.62
========= ========= ========
</TABLE>
The following table summarizes the employee and director stock options
outstanding at September 30, 1999:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
----------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- ----------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 2.85 - $ 4.24 425 4.53 $ 3.74 405 $ 3.72
4.25 - 6.49 1,491 8.42 5.64 470 5.67
6.50 - 9.99 626 7.00 7.55 427 7.92
10.00 - 14.99 414 7.10 12.08 321 11.81
$15.00 - $22.38 308 8.20 $ 16.23 169 $ 16.17
----- -----
3,264 1,792
===== =====
</TABLE>
40 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 43
FAIR VALUE DISCLOSURES
Had compensation cost for the Company's option plans and employee stock purchase
plan been determined based on the fair value at the grant dates, as prescribed
in SFAS 123, the Company's net income and net income per share would have been
as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
-----------------------------------------------------
<S> <C> <C> <C>
NET INCOME:
As reported $ 113 $ 101 $ (2,360)
Pro forma (1,410) (2,087) (6,014)
BASIC INCOME PER SHARE:
As reported $ 0.01 $ 0.01 $ (0.19)
Pro forma (0.12) (0.17) (0.48)
DILUTED INCOME PER SHARE:
As reported $ 0.01 $ 0.01 $ (0.19)
Pro forma (0.11) (0.15) (0.48)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes method with the following assumptions used for grants during the
applicable period: dividend yield of 0.0% for all periods; risk-free interest
rates of 5.30% to 6.82% for options granted during the year ended September 30,
1996, 5.92% to 6.75% for options granted during the year ended September 30,
1997, 4.68% to 5.86% for options granted during the year ended September 30,
1998, and 4.32% to 6.08% for options granted during the year ended September 30,
1999; weighted average expected option term of five years for all periods; and
volatilities of 68.06% for the year ended September 30, 1996, 65.67% for the
year ended September 30, 1997, 75.85% for the year ended September 30, 1998, and
75.00% for the year ended September 30, 1999.
1995 EMPLOYEE STOCK PURCHASE PLAN
On October 2, 1995, the Board of Directors approved the 1995 Employee Stock
Purchase Plan (the Purchase Plan), which enables eligible employees to purchase
shares of the Company's common stock. The Purchase Plan is administered by the
Compensation Committee of the Board of Directors. Under the Purchase Plan,
eligible employees may purchase common shares during six-month payment periods.
The exercise price per share is 85% of the lesser of the market price per share
on the first or last business day of the six-month period. The maximum number of
shares of common stock that an employee may purchase in any six-month period is
500 shares. An employee's rights under the Purchase Plan terminate upon
voluntary withdrawal from the plan at any time or upon termination of
employment. The Company has reserved 1,400 shares of common stock for issuance
under the Purchase Plan.
The first period commenced on November 17, 1995 (the effective date of the
Company's initial public offering) and ended on June 30, 1996. Employees
purchased 48 shares of stock at $9.35 per share. In subsequent six-month
periods, employees purchased 40 shares of stock at $7.12 per share, 33 shares of
stock at $7.44 per share, 39 shares of stock at $8.29 per share, 32 shares of
stock at $11.79 per share, 58 shares of stock at $5.31 per share, and 55 shares
of stock at $4.46 per share.
STOCK REPURCHASE PROGRAM
In February 1998, the Company announced a stock repurchase program for up to $6
million of common stock to use to meet requirements of its employee stock option
and stock purchase plan. No minimum number or value of shares to be repurchased
was fixed nor was a time limit set for the duration of the program. The Company
repurchased 191 shares at a cost of $2,944 and reissued 102 shares during the
year ended September 30, 1998. The Company repurchased 622 shares at a cost of
$2,968 for the year ended September 30, 1999, and reissued 301 shares during
that same 12-month period.
On October 29, 1999, the Company's Board of Directors approved a new stock
repurchase program authorizing the Company to repurchase an additional $10
million of common stock to use to meet requirements of its employee stock option
and stock purchase plan. No minimum number or value of shares to be repurchased
has been fixed for the new program nor has a time limit as to the duration of
the program been established.
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 41
<PAGE> 44
14. RETIREMENT SAVINGS PLAN
The Company has a savings and profit-sharing plan covering all eligible
employees, which is qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended. The Company may, at its option, provide matching
contributions up to 50% of each participating employee's contributions to the
plan, subject to a maximum of 2.5% of compensation. Total contributions by the
Company to the plan for the years ended September 30, 1997, 1998, and 1999 were
$553, $705, and $843, respectively.
In June 1996, a Group Personal Pension Plan was established for eligible
employees in the United Kingdom, allowing employees to contribute a percentage
of their salaries into a personal retirement savings plan. For those employees
electing to contribute more than 3% of their salaries into their plan, the
Company contributes a fixed 3% on their behalf. Company contributions to
individual plans aggregated $83, $81, and $157 for the years ended September 30,
1997, 1998, and 1999, respectively.
A Registered Retirement Savings Plan was established in August 1997, allowing
eligible employees in Canada to contribute a percentage of their compensation
into a retirement savings plan. Total contributions by the Company to this plan
for the years ended September 30, 1997, 1998, and 1999 were $11, $32, and $33,
respectively.
15. SEGMENT INFORMATION AND GEOGRAPHIC AREAS
Effective October 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131 (SFAS 131), Disclosures About Segments of an Enterprise and
Related Information. SFAS 131 superseded Statement of Financial Accounting
Standards No. 14 (SFAS 14), Financial Reporting for Segments of a Business
Enterprise. SFAS 131 establishes standards for disclosures about operating
segments, products and services, geographic areas, and major customers.
Management has determined that the Company operates in one industry segment: the
design, development, sale, service, and support of proprietary software
products. Substantially all of the Company's revenues are derived from the
licensing of software products and providing related consulting, support, and
training services. The Company has determined that its reportable business
segments are North American Operations (which includes all operations in the
United States and Canada with the exclusion of the Cort Payroll Unit), the Cort
Payroll Unit, and International Operations. The Company's determination of its
reportable segments was based on its internal reporting. The following table
presents a summary of operating information and certain year-end balance sheet
information by business segment for the years ended September 30, 1997, 1998,
and 1999:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------- ---------- ----
<S> <C> <C> <C>
REVENUES
North American operations
(excluding Cort) $ 76,731 $ 103,777 $ 107,814
Cort payroll unit -- 2,005 5,677
International operations 9,911 8,412 8,514
--------- --------- ---------
CONSOLIDATED $ 86,642 $ 114,194 $ 122,005
========= ========= =========
OPERATING INCOME
North American operations
(excluding Cort) $ (632) $ 3,104 $ (2,505)
Cort payroll unit -- 825 (637)
International operations (1,441) (5,525) (3,549)
--------- --------- ---------
CONSOLIDATED $ (2,073) $ (1,596) $ (6,691)
========= ========= =========
IDENTIFIABLE ASSETS
North American operations
(excluding Cort) $ 85,805 $ 101,280 $ 87,015
Cort payroll unit -- 1,360 1,798
International operations 7,010 5,342 5,068
--------- --------- ---------
CONSOLIDATED $ 92,815 $ 107,982 $ 93,881
========= ========= =========
</TABLE>
Geographically, revenues are reflected in the geographic areas from which the
sales are made. Information related to the Company's revenues from unaffiliated
customers in different geographical areas is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------- ---------- ----
<S> <C> <C> <C>
REVENUES
United States $ 74,277 $101,311 $109,060
United Kingdom 6,779 6,568 7,749
Canada 2,451 4,471 4,431
Other 3,135 1,844 765
-------- -------- --------
CONSOLIDATED $ 86,642 $114,194 $122,005
======== ======== ========
</TABLE>
42 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 45
Information related to the Company's long-lived assets by geographical area is
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------------------------
1997 1998 1999
(RESTATED) (RESTATED)
---------- ---------- ----
<S> <C> <C> <C>
LONG-LIVED ASSETS
United States $16,884 $21,617 $18,544
United Kingdom 487 462 286
Canada -- 32 62
Other 103 312 58
------- ------- -------
CONSOLIDATED $17,474 $22,423 $18,950
======= ======= =======
</TABLE>
No single customer accounted for more than 10% of the Company's consolidated
revenues for the years ended September 30, 1997, 1998, and 1999.
16. RELATED PARTY TRANSACTIONS
LIFE INSURANCE TRUSTS
One current principal stockholder and two former principal stockholders of the
Company have split-dollar life insurance policies (the Policies). The Policies
are owned by various trusts. The trusts have executed Collateral Assignment
Agreements for the benefit of the Company. Under the Collateral Assignment
Agreements, the Company originally paid the annual premiums under the Policies.
Effective October 1, 1996, the Collateral Assignment Agreements for the two
former principal stockholders were amended so that the trusts (rather than the
Company) were obligated from that date to make all premium payments under the
Policies. In March 1998, the Company paid the last premium payments required
under the current principal stockholder's Policies to make them self-funding as
of that date. The Company has made premium payments under the Policies of $143,
$88, and $0 for the years ended September 30, 1997, 1998, and 1999,
respectively. The premium payments made under the Policies were recorded as
advances to the trusts and are secured by the cash surrender value of related
insurance policies. Cash advances in excess of the cash surrender value of the
related insurance policies were expensed when advanced. Total advances to the
trusts of $1,971, $2,096, and $2,096 at September 30, 1997, 1998, and 1999,
respectively, are included in other assets in the consolidated balance sheet.
The Collateral Assignment Agreement for the current principal stockholder can be
terminated at any time on 30 days' notice by either the Company or the related
trust. Upon termination of the Collateral Assignment Agreement for the principal
stockholder, (i) the Company and the trust can agree on disposition of the
Policy, (ii) the trust can repay the advances to the Company, or (iii) the net
cash surrender value would be distributed to the Company to the extent of the
advances, with the balance of the net cash surrender value being paid to the
trust. The Collateral Assignment Agreements for the two former principal
stockholders can be terminated (i) by the trust on 30 days' written notice to
the Company, (ii) upon the failure of the trust to make annual premium payments,
(iii) at the trust's election to receive a release of the assignment of the
Policies from the Company, or (iv) by the Company if the cash surrender value
declines and the Company is not willing to accept substitute collateral. Upon
termination of the Collateral Assignment Agreement for either of the former
principal stockholders, the trust must immediately repay to the Company the
amounts of premium advances made by the Company. If a Collateral Assignment
Agreement is not terminated and the principal stockholder dies, the death
benefits will be paid first to the Company to the extent of the advances. There
is no agreement between the Company and the remaining principal stockholder as
to whether the Collateral Assignment Agreement would be terminated on the
disassociation of the stockholder from the Company.
In October 1994, the three principal stockholders waived their rights to the
cash surrender value of the Policies through that date. Advances to the trusts
equal to the cash surrender value at October 1, 1994, of $1,275, were recorded
as other assets in the consolidated balance sheet as a non-cash capital
contribution.
During 1995, the trusts borrowed $875 of the cash surrender value of the
Policies. The trusts' obligations to repay those funds were secured by a pledge
of an aggregate of 330 shares of the Company's common stock owned by the current
and a former principal stockholder. The trusts assigned the stock pledges to the
Company as replacement collateral. During fiscal 1996, the trusts repaid a net
of $565 of those borrowings and released 232 shares of the Company's common
stock from the pledge. During fiscal 1997, the trust borrowed an additional $47.
During fiscal 1998, all loans were repaid in full. No loans were outstanding as
of September 30, 1999.
17. RESEARCH AND DEVELOPMENT AGREEMENT
During fiscal 1998, the Company amended a research funding agreement with a
third party who had funded certain research activities in fiscal years 1994 and
1995. Prior to the amendment, the Company was obligated to pay royalties to the
third party in return for the funding received in the earlier years. The
amendment released the Company from the future royalty payments in return for
the Company's obligation to develop certain e-business extensions to its
existing products. Upon the completion of the e-business extensions in fiscal
INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT 43
<PAGE> 46
year 1998, the Company recognized a benefit of $400 of funded research against
research and development expenses. The benefit recognized represented a portion
of the funding received in the prior years, which had been recorded as a
liability on the Company's balance sheet to represent the royalty obligations.
18. COMMITMENTS AND CONTINGENCIES
LEASES
The Company has several operating lease agreements primarily involving real
estate and computers and equipment. The Company also has a capital lease
involving computer equipment. These leases are non-cancelable and expire on
various dates through 2002 except for the Company's Lexington, Massachusetts,
facility lease, which expires in 2003, its Hyannis, Massachusetts, facility
lease, which expires in 2005, its Alpharetta, Georgia, facility lease, which
expires in 2005, its London, England, facility lease, which expires in 2015, and
its Chatham, England, facility lease, which expires in 2019.
The following is a schedule by year of future minimum lease payments under
capital and operating leases, together with the present value of the net minimum
lease payments as of September 30, 1999:
<TABLE>
<CAPTION>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
- ----------- ------- ---------
<S> <C> <C>
2000 $114 $ 3,620
2001 114 2,922
2002 114 2,636
2003 114 2,505
2004 113 1,476
Thereafter -- 9,217
--- ------
TOTAL FUTURE MINIMUM LEASE PAYMENTS $569 $22,376
=== ======
Less amount representing interest (117)
---
Present value of net minimum lease payments 452
Less current maturities of capital lease obligations (109)
---
CAPITAL LEASE OBLIGATIONS, LESS CURRENT PORTION $343
===
</TABLE>
Total rent expense for operating leases was $4,764, $4,731, and $4,994 for the
years ended September 30, 1997, 1998, and 1999, respectively. Total interest
paid for capital leases was $0 for each of the three years ended September 30,
1997, 1998, and 1999. Accumulated amortization related to equipment leased under
capital leases was $0 as of September 30, 1999.
LEGAL MATTERS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
results of operations or financial position.
STOCK INFORMATION
PRICE RANGE OF COMMON STOCK
The Company's common stock is traded on the Nasdaq National Market under the
symbol "INFM." Public trading of the common stock commenced on November 17,
1995, on the Nasdaq National Market under the symbol "SFWR" until February 18,
1997, when the Company changed the corporate name to Infinium Software, Inc.
Prior to that time, there was no public market for the Company's common stock.
The following table sets forth the high and low closing prices, as reported by
Nasdaq, for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1999
First Quarter $ 9.000 $ 5.063
Second Quarter 6.938 3.813
Third Quarter 6.125 4.063
Fourth Quarter 5.813 4.281
FISCAL 1998
First Quarter $ 18.500 $ 10.375
Second Quarter 21.813 12.125
Third Quarter 22.375 9.875
Fourth Quarter 15.875 9.375
FISCAL 1997
First Quarter (from November 17) $ 10.375 $ 6.875
Second Quarter 8.750 5.500
Third Quarter 10.500 5.500
Fourth Quarter 14.813 9.625
</TABLE>
At November 29, 1999, there were approximately 555 holders of record.
The Company has never paid any cash dividends on its common stock and does not
anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to fund the development and growth
of its business.
44 INFINIUM SOFTWARE, INC. 1999 ANNUAL REPORT
<PAGE> 47
STOCK INFORMATION AND CORPORATE INFORMATION
STOCK LISTING
Nasdaq National Market Trading Symbol: INFM
INTERNET
Additional corporate information is available on the World Wide Web:
http://www.infinium.com
ANNUAL MEETING
The Annual Meeting of Stockholders of the Company will be held on Friday,
February 11, 2000, at 3:00 p.m., local time, at Boston's Marriott Long Wharf
Hotel.
TRANSFER AGENT
BankBoston, N.A.
c/o Boston EquiServe, LP
Post Office Box 8040
Boston, Massachusetts 02266-8040
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
COUNSEL
Hale & Dorr LLP
60 State Street
Boston, Massachusetts 02109
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, is available in print form without charge to stockholders
upon request, and is available on the Company's Internet site: www.infinium.com.
To obtain a printed copy, please contact Investor Relations, Infinium Software,
Inc., 25 Communications Way, Hyannis, MA 02601, (508) 778-2000.
EXECUTIVE OFFICERS
Robert A. Pemberton
Chief Executive Officer and Chairman of the Board
Maria G. Burud
Group Vice President, Marketing and N.A. Field Operations
Daniel J. Kossmann
Chief Financial Officer,
Vice President, and Treasurer
Anne Marie Monk
Group Vice President, Administration, General Counsel, and Secretary
Mark F. Ohrenberger
Group Vice President,
Products
Terry Joint
Group Vice President,
International
DIRECTORS
Manuel Correia
Chief Operating Officer,
CoWare, Inc.
Robert A. Pemberton
Chairman
Roland D. Pampel
Robert P. Schechter
Chairman and Chief Executive Officer,
Natural MicroSystems Corporation
INVESTOR INFORMATION
Alisha Simmons
Corporate Communications Manager
Telephone: (508) 790-6819
[email protected]
INFINIUM SOFTWARE, INC. OFFICES
CORPORATE HEADQUARTERS
Infinium Software, Inc.
25 Communications Way
Hyannis, MA 02601
Telephone: (508) 778-2000
ATLANTA
2500 North Winds Parkway
Suite 600
Alpharetta, GA 30004
Telephone: (678) 319-4000
OREGON
94 SE Wilson Avenue
Bend, OR 97702
Telephone: (541) 388-3800
BOSTON
10 Maguire Road
Suite 220
Lexington, MA 02421
Telephone: (781) 372-4500
CHICAGO
One Tower Lane
25th Floor, Suite 2500
Oakbrook Terrace, IL 60181
Telephone: (630) 573-0711
LOS ANGELES
2010 Main Street
Suite 300
Irvine, CA 92614
Telephone: (949) 476-5800
UNITED KINGDOM
Infinium Software Limited
Crosby House
Unit A Meadowbank
74 Furlong Road, Bourne End
Buckinghamshire SL8 5AJ
Telephone: +44 1628-850850
SINGAPORE
Infinium Software Asia/Pacific
10 Science Park Road
#02-01, The Alpha
Singapore Science Park II
Singapore 117684
Telephone: +65 778 7337
CANADA
Infinium Software Canada
90 Allstate Parkway
Markham, Ontario L3R 6H3
Telephone: (905) 940-6700
<PAGE> 48
25 Communications Way
Hyannis, MA 02601
www.infinium.com 9911221513
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
The following lists all Infinium Software, Inc. subsidiaries:
Name of Subsidiary State of Organization
INFINIUM SOFTWARE EUROPE, INC. Massachusetts, United States
INFINIUM CORP. Massachusetts, United States
INFINIUM SOFTWARE ASIA/PACIFIC, INC. Massachusetts, United States
CORT DIRECTIONS, INC. dba Oregon, United States
INFINIUM SOFTWARE, CORT PAYROLL UNIT
CORT DEVELOPMENT, LLC Oregon, United States
INFINIUM SOFTWARE LIMITED Buckinghamshire, United Kingdom
INFINIUM HOLDINGS LIMITED Buckinghamshire, United Kingdom
INFINIUM OPEN SYSTEMS LIMITED Kent, United Kingdom
INFINIUM SOFTWARE PROPRIETARY Johannesburg, South Africa
LIMITED
INFINIUM INTERNATIONAL, INC. United States Virgin Islands
DOMAIN SOFTWARE, B.V.(1) Amsterdam
(corporate seat)
(1) Inactive and in the process of being dissolved.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-05439) of Infinium Software, Inc. of our report
dated November 23, 1999 relating to the financial statements, which appears in
the Annual Report to Stockholders, which is incorporated in this Annual Report
on Form 10-K. We also consent to the incorporation of our report dated
December 16, 1999 relating to the financial statement schedule, which appears
in this Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 20, 1999
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<CURRENCY> U.S. DOLLARS
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<PERIOD-TYPE> YEAR
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<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
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0
0
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