<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1996
REGISTRATION NO. 333-05495
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 NO. 51-0374596
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
----------------
KUNGSGATAN 12-14 MARVIN S. ROBINSON, ESQ.
BOX 7733 TANNENBAUM DUBIN & ROBINSON, LLP
103 95 STOCKHOLM 1140 AVENUE OF THE AMERICAS
SWEDEN NEW YORK, NEW YORK 10036
(011) (468) 676-5000 (212) 302-2900
(ADDRESS, INCLUDING ZIP CODE, AND (NAME, ADDRESS, INCLUDING ZIP CODE,
TELEPHONE NUMBER, INCLUDING AREA CODE, AND
OF REGISTRANT'S PRINCIPAL TELEPHONE NUMBER, INCLUDING AREA CODE,
EXECUTIVE OFFICES) OF AGENT FOR SERVICE)
----------------
WITH COPIES TO:
DONALD J. GUINEY, ESQ. BARRY E. TAYLOR, ESQ.
CHRISTOPHER A. GREW, ESQ. MICHAEL J. DANAHER, ESQ.
ERIC R. DOERING, ESQ. ROBERT G. O'CONNOR, ESQ.
BROBECK HALE AND DORR INTERNATIONAL WILSON SONSINI GOODRICH & ROSATI
VERITAS HOUSE PROFESSIONAL CORPORATION
125 FINSBURY PAVEMENT 650 PAGE MILL ROAD
LONDON EC2A 1NQ, ENGLAND PALO ALTO, CA 94304-1050
(011) (44) (171) 638-6688 (415) 493-9300
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If this Form is filed to register additional securities for an offering pur-
suant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier ef-
fective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) un-
der the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
----------------
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN
PROSPECTUS OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-1
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
----------------------- ----------------------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside
Back Cover Pages of Prospec- Inside Front Cover Page; Risk Factors;
tus....................... . Outside Back Cover Page
3. Summary Information, Risk
Factors and Ratio of Earn-
ings to Fixed Charges....... Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds............. Prospectus Summary; Risk Factors; Use of
Proceeds
5. Determination of Offering Outside Front Cover Page; Risk Factors;
Price....................... Underwriting
6. Dilution.................... Risk Factors; Dilution
7. Selling Security Holders.... Outside Front Cover Page; Principal and
Selling Stockholders
8. Plan of Distribution........ Outside Front Cover Page; Underwriting
9. Description of Securities to Outside Front Cover Page; Description of
be Registered............... Capital Stock
10. Interests of Named Experts
and Counsel................. Legal Matters; Experts
11. Information with Respect to Outside Front and Inside Front Cover Pages;
the Registrant.............. Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend Policy;
Capitalization; Dilution; Exchange Rates;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital Stock;
Shares Eligible for Future Sale;
Underwriting; Legal Matters; Experts;
Additional Information; Consolidated
Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................. Not Applicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JULY 5, 1996
4,000,000 Shares
LOGO
Common Stock
--------
Of the 4,000,000 shares of Common Stock offered hereby, 3,200,000 shares are
being sold by Industri-Matematik International Corp. ("IMI" or the "Company")
and 800,000 shares are being sold by a stockholder of the Company (the "Selling
Stockholder"). See "Principal and Selling Stockholders." The Company will not
receive any proceeds from the sale of shares by the Selling Stockholder. Prior
to this offering, there has been no public market for the Common Stock of the
Company. It is currently estimated that the initial public offering price will
be between $11.00 and $13.00 per share. See "Underwriting" for the factors to
be considered in determining the initial public offering price. The Company has
applied to have its Common Stock approved for quotation on the Nasdaq National
Market under the symbol "IMIC."
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 5.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(3)
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<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
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Total(3)..................... $ $ $ $
</TABLE>
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(1) See "Underwriting" for information relating to indemnification of the
Underwriters and other matters.
(2) Before deducting expenses of the offering payable by the Company, estimated
to be $1,350,000.
(3) A stockholder (together with the Selling Stockholder, the "Selling
Stockholders") has granted to the Underwriters a 30-day option to purchase
up to 600,000 additional shares of Common Stock solely to cover over-
allotments, if any. To the extent that the option is exercised, the
Underwriters will offer the additional shares at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Selling
Stockholders will be $ , $ , and $ respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part and
certain other conditions. It is expected that delivery of the shares of Common
Stock will be made at the offices of Alex. Brown & Sons Incorporated,
Baltimore, Maryland, on or about , 1996.
Alex. Brown & Sons
INCORPORATED
UBS Securities
SoundView Financial Group, Inc.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
IMI develops, markets, and supports client/server application software that
enables manufacturers, distributors and wholesalers to more effectively manage
the demand chain
[SYSTEM ESS DEMAND CHAIN MANAGEMENT HONEYCOMB APPEARS HERE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
In this Prospectus, references to "krona", "kronor" and "SEK" are to Swedish
kronor, the lawful currency of the Kingdom of Sweden, and references to
"dollars" and "$" are to United States dollars.
Industri-Matematik and System ESS are trademarks of the Company. All other
trademarks or service marks appearing in this Prospectus are trademarks or
registered trademarks of the respective companies that utilize them.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including information under "Risk Factors," and Consolidated
Financial Statements and notes thereto, appearing elsewhere in this Prospectus.
IMI develops, markets, and supports client/server application software that
enables manufacturers, distributors and wholesalers to more effectively manage
the "demand chain." Demand chain management encompasses the execution of
multiple customer-centric order fulfillment processes, including order
management, distribution logistics, inventory replenishment and demand
planning. The Company believes that its principal product, System ESS, is the
only software solution designed specifically to meet the complex or high-volume
demand chain management requirements of manufacturers, distributors and
wholesalers. System ESS allows customers to leverage the value of their
existing systems by integrating with legacy and new client/server
manufacturing, planning and financial information systems.
The Company's target customers are multinational manufacturers, distributors
and wholesalers in the consumer packaged goods, health care, electronics,
automotive parts, and industrial products sectors, as well as other high-volume
wholesalers. The Company sells and supports its products through direct sales
and support organizations in the United States, Sweden and the United Kingdom,
as well as through third party systems integrators. Current customers of IMI
include large manufacturers such as Bristol-Myers Squibb Company, Campbell Soup
Company, Canon U.S.A., Inc., Dannon Company, Inc., Eastman Kodak Company,
Kellogg Company, Matsushita Electrical Corporation of America and Unisys
Corporation, as well as several retail and wholesale distributors.
In recent years, there has been a fundamental shift in market power from
manufacturers and distributors to retailers and consumers. Historically,
manufacturers dictated the terms of trade with retailers and consumers and,
consequently, organized their businesses and utilized their information systems
primarily to increase manufacturing efficiency and output. Today, customers
increasingly are choosing suppliers based on their ability to match product
flow to actual customer demand. As a result, manufacturers and distributors are
reengineering their businesses and redirecting their information systems to
focus on satisfying customer demand through effective order fulfillment. System
ESS has been designed specifically for the sophisticated order fulfillment
requirements of manufacturers, distributors and wholesalers, enabling them to
better match product flow to actual customer demand, thereby enhancing revenue
opportunities and reducing administrative and logistics/distribution costs.
System ESS serves as an infrastructure to enable companies to implement the
"virtual enterprise" by synchronizing internal systems with external
participants in the demand chain.
System ESS is an open systems, client/server demand chain management solution
that provides full capabilities for managing and executing the entire order
fulfillment process. In addition, it provides interfaces to other complementary
applications to provide customers with an integrated solution. The Company
supports System ESS with a range of software tools developed by the Company or
by third parties and provides its customers with a full range of software
maintenance and support, training, and consulting services.
The Company's objective is to be the leading global supplier of demand chain
management software solutions to manufacturers, distributors and wholesalers.
The key elements of the Company's strategy to achieve this leading position
are: (i) to target specific vertical markets for System ESS; (ii) to expand its
worldwide sales, support, service and marketing organizations; (iii) to expand
usage of System ESS within its existing customer base; (iv) to enhance the core
functionality of System ESS; (v) to continue to integrate System ESS with
complementary products; and (vi) to establish partnerships to assist in
developing customer relationships and implementing System ESS.
3
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company............. 3,200,000 shares
Common Stock offered by the Selling Stockholder. 800,000 shares
Common Stock to be outstanding after the offer-
ing............................................ 27,694,253 shares(1)
Use of proceeds................................. For general corporate
purposes and working capital,
including the expansion of
the Company's sales, support,
service and marketing
organizations, and reduction
of certain indebtedness. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.......... IMIC
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERA-
TIONS DATA:
Total revenues................... $25,909 $23,796 $18,780 $27,744 $40,009
Gross profit..................... 4,207 8,389 7,198 10,896 19,532
Income (loss) from operations.... (5,782) (2,328) (5,063) (6,025) 1,385
Net income (loss)................ (6,730) (1,809) (5,670) (6,388) 1,750
Pro forma net income per
share(2)........................ $ 0.07
Pro forma shares used in per
share calculation(2)............ 25,278
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996
----------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 558 $26,621
Working capital........................................ 5,962 32,374
Total assets........................................... 21,324 47,387
Long-term debt, less current portion................... 7,950 --
Total stockholders' equity............................. 502 34,864
</TABLE>
- --------
(1) Based on the number of shares outstanding as of April 30, 1996. Excludes
options outstanding as of April 30, 1996 to purchase 939,975 shares of
Common Stock at a weighted average exercise price per share of $2.00.
(2) See Note 2 of Notes to Consolidated Financial Statements for an explanation
of the determination of shares used in calculating pro forma net income per
share.
(3) Adjusted to reflect the sale of 3,200,000 shares of Common Stock offered by
the Company hereby (assuming an estimated initial offering price of $12.00
per share and after deducting estimated underwriting discounts and
commissions and offering expenses payable by the Company) and the expected
application of the estimated net proceeds therefrom. See "Use of Proceeds"
and "Capitalization."
----------------
Except as otherwise indicated, all information in this Prospectus (i)
reflects the conversion of all of the Company's currently outstanding shares of
Preferred Stock into Common Stock and Class B Common Stock upon the closing of
this offering, (ii) reflects a three-for-one stock split to be effected prior
to the closing of this offering, (iii) reflects the filing of an Amended and
Restated Certificate of Incorporation upon the closing of this offering, (iv)
assumes that the Underwriters' over-allotment option is not exercised, and (v)
includes as Common Stock 12,088,200 shares of non-voting Class B Common Stock.
See "Description of Capital Stock" and "Underwriting."
4
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus. The discussion in this
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as those discussed elsewhere in this
Prospectus.
No Assurance of Profitability. The Company has incurred significant net
losses at various times since its inception, including losses of $5.7 million
and $6.4 million for fiscal 1994 and 1995, respectively. At April 30, 1996,
the Company had an accumulated deficit of $10.9 million. Although the Company
achieved net income of $1.8 million for the quarter and $1.8 million for the
year ended April 30, 1996, there can be no assurance that the Company will
continue to be profitable in any future period and recent operating results
should not be considered indicative of future financial performance. The
Company plans to increase expenditures in order to fund the continued
expansion of its worldwide operations, including greater levels of product
development and larger and more geographically dispersed sales, support,
service and marketing organizations. Although the Company believes such
expenditures ultimately will improve the Company's operating results, to the
extent such expenditures are incurred and revenues do not correspondingly
increase, the Company's operating results will be materially and adversely
affected. Future operating results will depend on many factors, including the
growth of the demand chain management software market, market acceptance of
System ESS or enhanced versions thereof, competition, the success of the
Company's expansion of its sales, support, service and marketing
organizations, general economic conditions and other factors. No assurance can
be given that the Company will be profitable in future periods. See "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Significant Fluctuations in Quarterly Operating Results and Seasonality;
Potential Quarterly Losses. The Company has experienced, and expects to
continue to experience, significant fluctuations in quarterly operating
results that may be caused by many factors, including, among others: the size
and timing of orders for the Company's products; the lengthy sales and
implementation cycle for the Company's products, and delays in the
implementation process; introduction or enhancement of products by the Company
or its competitors; changes in pricing policy of the Company or its
competitors; increased competition; technological changes in computer systems
and environments; the ability of the Company to timely develop, introduce and
market new products and new versions of existing products; quality control of
products sold; market readiness to deploy demand chain management products for
distributed computing environments; market acceptance of new products and
product enhancements; seasonality of revenue; customer order deferrals in
anticipation of new products and product enhancements; the Company's success
in expanding its sales, support, service and marketing organizations;
personnel changes; fluctuations in foreign currency exchange rates; mix of
licence and service and maintenance revenues and general economic conditions.
Because a significant portion of the Company's revenues has been, and the
Company believes will continue to be, derived from large orders, the timing of
orders and their fulfillment has caused, and is expected to continue to cause,
material fluctuations in the Company's operating results, particularly on a
quarterly basis. In addition, the Company intends to continue to expand its
direct sales force, and the timing of such expansion and the rate at which new
sales people become productive could also cause material fluctuations in the
Company's quarterly operating results. As a result of these and other factors,
the Company believes that period-to-period quarterly comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance.
5
<PAGE>
The Company's quarterly operating results are also subject to certain
seasonal fluctuations. The Company's revenues, particularly its license
revenues, are typically strongest in its third and fourth fiscal quarters
ended January 31 and April 30, respectively, and weakest in its first and
second fiscal quarters ended July 31 and October 31, respectively. The
Company's revenues and operating results in its third fiscal quarter typically
benefit from purchase decisions made by the large concentration of customers
with calendar year-end budgeting rules, while revenues and operating results
in its fourth fiscal quarter typically benefit from the efforts of the
Company's sales force to meet fiscal year-end sales quotas. Like many
enterprise application software vendors with large average order sizes, the
Company's revenues and operating results are typically lower in its first and
second fiscal quarters, as the Company's sales force initiates sales activity
directed to achieving fiscal year-end goals. In addition, the Company's first
and second fiscal quarters include the months of July and August, when both
sales and billable customer services activity, as well as customer purchase
decisions, are reduced, particularly in Europe, due to summer vacation
schedules. As a result of these seasonal factors, the Company historically has
experienced operating losses in its first and/or second fiscal quarters and
may continue to experience losses in such quarters in the future, including
the quarters ending July 31, 1996 and October 31, 1996.
The Company's future quarterly revenues are difficult to forecast in part
because the demand chain management software market is an emerging market that
is subject to rapid change. Further, because the Company generally ships
software products within a short period after receipt of an order, it
typically does not have a material backlog of unfulfilled orders. License
revenues in any quarter are substantially dependent on orders booked and
shipped in that quarter and cannot be predicted with any degree of certainty.
In addition, the Company typically recognizes a significant portion of license
revenue in the last two weeks of a quarter. Any significant shortfall of
license revenues in relation to the Company's expectations or any material
delay of customer orders would have an immediate adverse effect on its
business, operating results and financial condition. Due to the foregoing
factors, it is possible that in future periods the Company's revenues and thus
its operating results may be below the expectations of public market analysts
and investors. In such event, the price of the Company's Common Stock could be
materially and adversely affected. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Quarterly Financial
Results."
Lengthy Sales and Implementation Cycle; Increasing Size of Orders. The sale
and implementation of the Company's products generally involves a significant
commitment of resources by prospective customers. During fiscal 1996, license
fees for System ESS generally ranged from $0.5 million to $3.0 million, and
averaged $1.5 million. The Company expects that license fees will continue to
increase in size and the implementation of the Company's products will become
more complex as System ESS is used to manage larger and more geographically
dispersed installations. As a result, the Company's sales process often is
subject to delays associated with lengthy approval processes attendant to
significant capital expenditures. For these and other reasons, the sales cycle
associated with the license of the Company's products varies substantially
from customer to customer and typically lasts between six and 12 months,
during which time the Company may devote significant time and resources to a
prospective customer, including costs associated with multiple site visits,
product demonstrations and feasibility studies, and experience a number of
significant delays over which the Company has no control. Any significant or
ongoing failure by the Company to ultimately achieve such sales could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, following license sales, the implementation
of System ESS typically involves six to 12 months for customer training and
integration of System ESS with the customer's other existing systems. A
successful implementation requires a close working relationship between the
Company, the customer and, generally, third party consultants and systems
integrators who assist in the process. There can be no assurance that delays
in the implementation process of System ESS for any given customer will not
have a material adverse effect on the Company's business, operating results
and financial condition. See "Managements Discussion and Analysis of Financial
Condition and Results of Operations," "Business--Products and Services" and
"--Sales and Marketing."
6
<PAGE>
Dependence upon Successful Expansion of Sales, Support, Service and
Marketing Organizations. The Company's future success depends upon the
successful expansion of its sales, support, service and marketing
organizations and its ability to establish indirect distribution channels,
including resellers, systems solution vendors, application software vendors
and systems integrators. The Company currently plans to increase significantly
its expenditures, to expand its direct sales force in the United States,
Europe and Asia Pacific and elsewhere, to develop additional indirect
distribution channels and to expand significantly its customer service and
support organizations which are required to support increased license sales.
Although the Company believes that such expenditures ultimately will improve
the Company's operating results, to the extent such expenditures are incurred
and revenues do not correspondingly increase, the Company's operating results
will be materially and adversely affected. Further, if the Company is unable
to expand its sales, support, service and marketing organizations and develop
additional distribution channels on a timely basis, the Company's business,
operating results and financial condition could be materially and adversely
affected. See "Business--Sales and Marketing."
Risks Associated with Expanding United States Operations; Implementation
Risks. In fiscal 1995 the Company commenced a major investment program in the
United States, establishing a management team and increasing the number of
sales, support, service and marketing personnel in the United States, which
grew from 37 people at April 30, 1995 to 64 people at April 30, 1996, and
which is expected to continue to grow substantially in fiscal 1997. Due to the
lengthy sales and implementation cycles of System ESS, such investment program
has resulted to date in a limited number of fully operational installations of
its System ESS products at customer sites in the United States, and therefore
only a limited number of reference customers in the United States. The Company
recently entered into major license agreements with several United States
customers, including Kellogg Company, Canon U.S.A., Inc. and Hormel Foods
Corporation, many of which are continuing to implement the Company's products,
and some of these customers are only in the early stage of implementation. If
the Company were to experience significant implementation problems at these or
other customer sites, it could significantly and adversely impact future sales
and operating results. In addition, in order to support the anticipated growth
of the Company's business in the United States market, the Company is
incurring significant costs to build a corporate infrastructure ahead of
anticipated revenues. This includes developing experienced resources, through
both internal hiring and establishing relationships with third party
implementation providers, which are necessary to support customer
installations of System ESS and provide other customer services. Most of the
Company's senior management and customer service and support, product
development and finance and administration personnel and related activities
are located in Sweden. As a result of this expansion in the United States, the
Company, particularly its Swedish-based management team, must continue to
implement and improve its operational and financial control systems and
expand, train and manage its employee base and relationships with third party
implementation services. These factors have placed, and are expected to
continue to place, a significant strain on the Company's management and
operations. There can be no assurance that the Company's United States
operations will be successful or that the Company will be able to manage
effectively an increased level of operations in the United States. Any lack of
success in the United States market or inability to manage these activities
effectively could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business--Sales and
Marketing."
Risks Associated with Multinational Operations. The Company's products
currently are marketed in the United States, Sweden, the United Kingdom and
approximately 15 other countries world-wide. During fiscal 1996, approximately
66% of the Company's total revenues were derived from sales outside of Sweden,
and the Company expects that sales in the United States, other European
countries, Asia Pacific and elsewhere outside of Sweden will continue to be
significant in the future as the Company expands the implementation of its
products across multinational companies. Such international expansion may
require that the Company establish additional offices and hire additional
personnel outside Sweden and recruit additional international resellers. This
may require significant management attention and financial resources and could
adversely affect the Company's operating margins and ability to achieve and
sustain profitability. To the extent the Company is unable to effect these
additions efficiently and in a timely manner, its growth, if any, in
international sales will be limited, and the Company's business, operating
results and financial
7
<PAGE>
condition could be materially and adversely affected. Further, the Company
intends to expand its international operations by increasing the number of
direct customer support personnel in existing markets and additional
international markets. Accordingly, the Company's business, and its ability to
expand its operations internationally, is subject to risks inherent in
international business activities, including, in particular, general economic
conditions in each country, foreign currency exchange rate fluctuations,
overlap of different tax structures, management of an organization spread over
various countries, unexpected changes in regulatory requirements, compliance
with a variety of foreign laws and regulations, and longer accounts
receivables payment cycles in certain countries. Other risks associated with
international operations include import and export licensing requirements,
trade restrictions and changes in tariff rates. There can be no assurance that
any of the foregoing factors will not have a material adverse effect on the
Company's ability to expand its international operations and, in general, its
business, operating results and financial condition. See "Exchange Rates" and
"Business--Sales and Marketing."
Management of Growth. The Company currently is experiencing a period of
rapid growth that has placed and is expected to continue to place a strain on
the Company's administrative, financial and operational resources. During
fiscal 1996, the Company increased the size of its direct sales force from 18
to 27 and the number of customer service and support personnel from 131 to
151. The Company plans to continue to expand internationally and to continue
to increase the number of its sales, support, service and marketing and
customer support personnel significantly in fiscal 1997, which planned
expansion, if achieved, would place a further strain on the Company's
resources and increase operating costs. The Company's ability to manage its
staff and growth effectively will require it to continue to improve its
operations, financial and management controls, reporting systems and
procedures, to train, motivate and manage its employees and, as required,
install new management information and control systems. There can be no
assurance that the Company will implement improvements to such management
information and control systems in an efficient and timely manner or that, if
implemented, such improved systems will be adequate to support the Company's
operations. Any inability of the Company to successfully manage future
expansion, if any, could have a material adverse effect on the Company's
business, financial condition or operating results.
Dependence on and Need to Hire Additional Personnel in All Areas. The
Company's future performance depends in part upon the continued service of its
key members of management, as well as sales, support, service and marketing
and product development personnel. The Company does not have, and does not
intend to obtain, key man life insurance on any of its executive management
personnel. The loss of one or more of the Company's key personnel could have a
material adverse effect on the Company's business, operating results and
financial condition. The Company believes its future success will depend in
part upon its ability to attract and retain highly skilled management, sales,
support, service and marketing and product development personnel. Competition
for such personnel is intense, and there can be no assurance that the Company
will be able to retain its key employees or that it will be successful in
attracting, assimilating and retaining such personnel in the future. Failure
to attract, assimilate and retain key personnel could have a material adverse
effect on the Company's business, operating results and financial condition.
See "Business--Employees" and "Management--Executive Officers and Directors."
Reliance on and Need to Develop Additional Relationships with Third
Parties. The Company relies on informal arrangements with a number of
consulting and systems integration firms to enhance its sales, support,
service and marketing efforts, particularly with respect to implementation and
support of its products as well as lead generation and assistance in the sale
process. The Company expects to continue to rely significantly upon such third
parties for marketing and sales, lead generation, product implementation,
customer support services and end user training. The Company will need to
expand its relationships with these parties and enter into relationships with
additional third parties in order to support revenue growth. Many such firms
have similar, and often more established, relationships with the Company's
principal competitors. There can be no assurance that these and other third
parties will provide the level and quality of service required to meet the
needs of the Company's customers, that the Company will be able to maintain an
effective, long term relationship with such third parties, or that such
8
<PAGE>
third parties will continue to meet the needs of the Company's customers. If
the Company is unable to develop and maintain effective relationships with
these and other third parties, or if such parties fail to meet the needs of
the Company's customers, the Company's business, operating results and
financial condition could be adversely affected. Further, there can be no
assurance that these third party implementation providers, many of which have
significantly greater financial, technical, personnel and marketing resources
than the Company, will not market software products in competition with the
Company in the future or will not otherwise reduce or discontinue their
relationships with or support of the Company and its products. See "Business--
Sales and Marketing."
Relationship with Oracle Corporation. The Company has an informal joint
marketing and sales arrangement with Oracle Corporation ("Oracle") pursuant to
which the two companies jointly market to potential customers in the consumer
packaged goods market. Pursuant to this arrangement, the Company pays to
Oracle a percentage of the Company's license revenue from customers in the
consumer packaged goods market to whom licenses are jointly marketed by Oracle
and the Company. This fee is not payable with respect to certain specified
customers or potential customers with whom the Company has had previous
contact. For the fiscal year ended April 30, 1996, 58% of the Company's
license revenues and 24% of the Company's total revenues was derived from six
customers introduced to the Company by Oracle pursuant to this arrangement.
Because the Company does not have a formal written agreement with Oracle,
neither party is legally bound to maintain the arrangement on its current
terms, or at all. As such, the Company's operating results depend to a large
extent upon the effectiveness of Oracle's efforts under such arrangement,
which the Company cannot control. Accordingly, there can be no assurance that
Oracle will not market software products (including software applications
developed by Oracle) in competition with the Company either currently or in
the future or that Oracle will not otherwise curtail or discontinue its
relationship with the Company or cease recommending the Company and its
products to potential customers, any of which could have a material adverse
effect on the business, operating results and financial condition of the
Company. The Company believes that its relationship with Oracle is beneficial
to the Company, and the parties have commenced discussions concerning the
formalization of their relationship in a written contract. The Company
anticipates that, if concluded, such written contract may provide for Oracle
to receive, in certain geographic markets, a higher proportion of license
revenue from System ESS if Oracle's responsibility for sales and marketing
activities in such geographic markets increases. The Company intends to limit
such arrangement, if formalized, to the consumer packaged goods market. There
can be no assurance that the Company will successfully conclude a formal
agreement with Oracle or that such formal agreement, if concluded, will be on
terms favorable to the Company. See "Business--Sales and Marketing."
Competition. The Company's products are targeted at the emerging market for
demand chain management software products, which is intensely competitive and
characterized by rapid technological change. The Company's competitors are
diverse and offer a variety of solutions directed at various segments of the
supply and demand chain as well as the enterprise as a whole. These
competitors include (i) enterprise application software vendors, such as SAP
AG ("SAP"), which currently offer sophisticated client/server enterprise
resource planning ("ERP") solutions, (ii) companies offering standardized or
customized products on mainframe and/or mid-range computer systems, (iii)
internal development efforts by corporate information technology departments,
(iv) smaller independent companies which have developed or are attempting to
develop advanced logistics and execution software which complement or compete
with the Company's software solutions and (v) other business application
software vendors who may broaden their product offerings by internally
developing, or by acquiring or partnering with independent developers of,
advanced logistics and execution software. In connection with specific
customer evaluations, certain ERP and other application software vendors have
from time to time jointly marketed the Company's products as a complement to
their own systems. To the extent such vendors develop or acquire systems with
functionality comparable or superior to System ESS, their significant
installed customer base, long-standing customer relationships and ability to
offer a broader solution could provide a significant competitive advantage
over the Company. In addition, many of the Company's
9
<PAGE>
competitors have longer operating histories, significantly greater financial,
technical, marketing and other resources, greater name recognition and a
larger installed base of customers than the Company. In order to be successful
in the future, the Company must continue to respond promptly and effectively
to the challenges of technological change and competitors' innovations. The
Company's competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources
to the development, promotion and sale of their products than the Company. The
Company also expects to face additional competition as other established and
emerging companies enter the market for order fulfillment software and new
products and technologies are introduced. In addition, current and potential
competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties, thereby increasing the
ability of their products to address the needs of the Company's prospective
customers. Accordingly, it is possible that new competitors or alliances among
current and new competitors may emerge and rapidly gain significant market
share, resulting in price reductions, fewer customer orders and reduced gross
margins, any one of which could materially adversely affect the Company's
business, operating results and financial condition. There can be no assurance
that the Company will be able to compete successfully with existing or new
competitors or that competition will not have a material adverse effect on the
Company's business, operating results and financial condition. See "Business--
Competition."
Dependence on Principal Product. The Company derived approximately 68%, 74%
and 84% of its total revenues in fiscal 1994, 1995 and 1996, respectively,
from the licensing of the Company's System ESS software and providing
complementary services. Licenses and services related to System ESS are
expected to continue to represent a significant percentage of the Company's
revenues in the future. The Company's success depends on continued market
acceptance of System ESS software and services as well as the Company's
ability to introduce new versions of System ESS or other products to meet the
evolving needs of its customers. There can be no assurance that System ESS
will continue to achieve market acceptance or that the Company will introduce
enhanced versions of System ESS on a timely basis, or at all, to meet the
evolving needs of its customers. Any reduction in demand for System ESS,
increased competition in the market for demand chain management software,
technological change or other factors could have a material adverse effect on
the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Products and Services."
Dependence on Emerging Market for Demand Chain Management Software. The
Company currently derives, and is expected to continue to derive,
substantially all of its revenues from licenses and services related to System
ESS, a client/server demand chain management software product. Although demand
for System ESS has grown in recent periods, the market for enterprise-wide
management software in general, and for demand chain management software in
particular, is still emerging and there can be no assurance that it will
continue to grow or that, even if the market does grow, businesses will
continue to adopt System ESS. The Company has spent, and intends to continue
to spend, considerable resources educating potential customers generally about
demand chain management, about the need for order fulfillment software
solutions and specifically about System ESS. However, there can be no
assurance that such expenditures will enable System ESS to achieve any
additional degree of market acceptance. If the demand chain management
software market fails to grow or grows more slowly than the Company currently
anticipates, the Company's business, operating results and financial condition
could be materially and adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Products and Services."
Rapid Technological Change and Requirement for Frequent Product
Transitions. The market for the Company's products is characterized by rapid
technological developments, evolving industry standards and rapid changes in
customer requirements. The introduction of products embodying new
technologies, the emergence of new industry standards or changes in customer
requirements could render the
10
<PAGE>
Company's existing products obsolete and unmarketable. As a result, the
Company's success depends upon its ability to continue to enhance existing
products, respond to changing customer requirements and develop and introduce
in a timely manner new or enhanced products that keep pace with technological
developments and emerging industry standards. Customer requirements include,
but are not limited to, operability across distributed and changing
heterogeneous hardware platforms, operating systems, relational databases and
networks. For example, as certain of the Company's customers start to utilize
Windows NT or other operating platforms, it will be necessary for the Company
to enhance its System ESS products to operate on such platforms in order to
meet these customers' requirements. The Company is currently developing a new
version of System ESS that operates on a Windows NT server platform, supports
Internet-based electronic commerce and supports five additional languages.
However, there can be no assurances that the Company will be successful in
developing this enhanced version of System ESS or new products on a timely
basis, or that such enhancements or new products, when introduced, will
achieve market acceptance or will adequately address the changing needs of the
marketplace. If the Company is unable to develop and introduce new products,
or enhancements to existing products, in a timely manner in response to
changing market conditions or customer requirements, the Company's business,
operating results and financial condition could be materially and adversely
affected. See "Business--Product Development."
Risk of Software Defects. Software products as complex as those offered by
the Company frequently contain errors or defects, especially when first
introduced or when new versions or enhancements are released. Despite product
testing, the Company has in the past released products with defects,
discovered software errors in certain of its new versions after introduction
and experienced delays or lost revenue during the period required to correct
these errors. The Company regularly introduces new releases and periodically
introduces new versions of System ESS. There can be no assurance that, despite
testing by the Company and by its customers, defects and errors will not be
found in existing products or in new products, releases, versions or
enhancements after commencement of commercial shipments. Any such defects and
errors could result in adverse customer reactions, negative publicity
regarding the Company and its products, harm to the Company's reputation, loss
of or delay in market acceptance or require product changes, any of which
could have a material adverse effect upon the Company's business, operating
results and financial condition. See "Business--Products and Services."
Product Liability. The Company's license agreements with customers typically
contain provisions designed to limit the Company's exposure to potential
product liability claims. The limitation of liability provisions contained in
such license agreement may not be effective. The Company's products are
generally used to manage data critical to large organizations, and, as a
result, the sale and support of products by the Company may entail the risk of
product liability claims. A successful liability claim brought against the
Company could have a material adverse effect upon the Company's business,
operating results and financial condition. See "Business--Products and
Services."
Dependence on Proprietary Technology; Risks of Infringement. The Company's
success depends, in part, upon the protection of its proprietary technology.
The Company relies on a combination of copyright, trademark and trade secret
laws, confidentiality procedures, and license arrangements to establish and
protect its proprietary rights. As part of its confidentiality procedures, the
Company licenses its software pursuant to signed license agreements that
impose restrictions on the licensee's ability to utilize the software and
generally enters into non-disclosure agreements with its employees,
distributors and corporate partners, and limits access to and distribution of
its software, documentation and other proprietary information. Despite these
precautions, it may be possible for a third party to copy the Company's
products or otherwise obtain and use the Company's proprietary technology
without authorization. There can be no assurance that the Company's protection
of its proprietary rights will be adequate or that the Company's competitors
will not independently develop similar technology or duplicate illegally the
Company's products.
11
<PAGE>
The Company is not aware that any of its products infringe the proprietary
rights of third parties. There can be no assurance, however, that third
parties will not claim such infringement by the Company with respect to
current or future products. The Company expects that software product
developers increasingly will be subject to such claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in the industry segment overlaps. Any such claims,
with or without merit, could result in costly litigation that could absorb
significant management time, which could have a material adverse effect on the
Company's business, operating results and financial condition. Such claims
might require the Company to enter into royalty or license agreements. Such
royalty or license agreements, if required, may not be available on terms
acceptable to the Company or at all, which could have a material adverse
effect upon the Company's business, operating results and financial condition.
See "Business--Proprietary Rights."
Exposure to Currency Fluctuations. A significant portion of the Company's
business is conducted in currencies other than the U.S. dollar (the currency
in which its financial statements are stated), primarily the Swedish krona.
The Company incurs a significant portion of its expenses in Swedish kronor,
including all of its product development expenses and a substantial portion of
its general and administrative expenses. As a result, appreciation of the
value of the Swedish krona relative to the other currencies in which the
Company generates revenues, particularly the U.S. dollar, could adversely
affect operating results. The financial statements of the Company are
translated from the functional currency of the operating subsidiaries into
U.S. dollars, the Company's reporting currency, utilizing the current rate
method. Accordingly, assets and liabilities are translated at exchange rates
in effect at the end of the reporting period, and revenues and expenses are
translated at the average exchange rate during the period. All translation
gains or losses from the translation into the Company's reporting currency are
included as a separate component of stockholders' equity. Fluctuations in the
Swedish krona and other currencies relative to the U.S. dollar will effect
period to period comparison of the Company's reported results of operations.
Due to the constantly changing currency exposures and the volatility of
currency exchange rates, there can be no assurance that the Company will not
experience currency losses in the future, nor can the Company predict the
effect of exchange rate fluctuations upon future operating results. For
additional information regarding the effects of currency fluctuations on the
Company's results, see "Exchange Rates" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Uncertainty of Realizability of Deferred Tax Asset. At April 30, 1996, the
Company has approximately $5.3 million of gross deferred tax assets comprised
primarily of net operating loss carryforwards in Sweden. Such net operating
loss carryforwards are available for an indefinite period of time. The Company
believes that, based upon a number of factors, the available objective
evidence creates sufficient uncertainty regarding the realizability of the
deferred tax asset such that a valuation allowance has been recorded. These
factors include the Company's history of net losses, the Company's limited
profitability in recent periods, the fact that the market in which the Company
competes is intensely competitive and characterized by rapidly changing
technology, and the uncertainty regarding market acceptance of new versions of
the Company's System ESS. Accordingly, the Company has recorded a valuation
allowance with respect to a portion of such deferred tax asset. The Company
will continue to assess the realizability of the deferred tax assets based
upon actual and forecasted operating results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Holding Company Structure. All of the operations of the Company are and will
be conducted through direct and indirect subsidiaries. The Company's cash flow
will depend upon the operating results and cash flow of its subsidiaries and
the payment of funds by those subsidiaries to the Company in the form of
loans, dividends or otherwise. The subsidiaries are separate and distinct
legal entities and have no obligation, contingent or otherwise, to make funds
available to the Company, whether in the form of loans, dividends or
otherwise. Applicable law in certain countries may limit the ability of a
subsidiary to
12
<PAGE>
pay dividends in the absence of sufficient distributable reserves or for other
reasons. The Company's Swedish, United Kingdom and United States subsidiaries
are not subject to any current exchange controls. However, future exchange
controls in these counties, or the existence of such controls in other
countries in which the Company establishes subsidiaries could limit or
restrict the ability of the Company to obtain loans, dividends or otherwise
access financial resources in such subsidiary. In addition, the Company's
subsidiaries may from time to time in the future become parties to financing
arrangements which may contain limitations on the ability of such subsidiaries
to pay dividends or to make loans or advances to the Company. In the event of
any insolvency, bankruptcy or similar proceedings, creditors of the
subsidiaries would generally be entitled to priority over the stockholders of
the Company with respect to assets of the affected subsidiary. See "The
Company," "Dividend Policy" and "Certain Transactions."
No Prior Public Market; Determination of Public Offering Price; Possible
Volatility of Stock Price. Prior to this offering, there has been no public
market for shares of the Common Stock, and there can be no assurance that an
active public trading market will develop following completion of this
offering or, if developed, that such market will be sustained. The initial
public offering price of the shares of Common Stock will be determined by
negotiation between the Company, the Selling Stockholders and the
Representatives of the Underwriters and will not necessarily reflect the
market price of the Common Stock following this offering. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price.
The market price for the Common Stock following this offering will be
affected by a number of factors, including the announcement of new products or
product enhancements by the Company or its competitors, quarterly variations
in the Company's results of operations or results of operations of its
competitors or companies in related industries, changes in earnings or revenue
estimates or recommendations by securities analysts, developments in the
Company's industry, general market conditions and other factors, including
factors unrelated to the operating performance of the Company or its
competitors. In addition, stock prices for many companies in the technology
and emerging growth sectors have experienced wide fluctuations that have often
been unrelated to the operating performance of such companies. Such factors
and fluctuations, as well as general economic, political and market
conditions, such as recessions, could materially and adversely affect the
market price of the Company's Common Stock.
Control by Management and Current Stockholders; Indemnification of Officers
and Directors. Following completion of this offering, the Company's executive
officers and directors, and their affiliates, in the aggregate, will own
beneficially 72.9% of the Company's Common Stock outstanding with full voting
rights and will own beneficially 84.7% of the Company's outstanding Common
Stock. In particular, Warburg, Pincus Investors, L.P. ("Warburg") will own
beneficially 44.1% of the Company's Common Stock outstanding with full voting
rights and will own beneficially 68.5% of the Company's outstanding Common
Stock. As a result, Warburg will be able to exercise significant influence
over all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions. The voting power
of Warburg and the Company's officers and directors under certain
circumstances could have the effect of delaying, deferring or preventing a
change in control of the Company, and making certain transactions more
difficult or impossible absent the support of such stockholders, including
proxy contests, mergers involving the Company, tender offers, open-market
purchase programs or other purchases of Common Stock that could give
stockholders of the Company the opportunity to realize a premium over the then
prevailing market price for shares of Common Stock. The Company has entered
into agreements with its officers and directors indemnifying them against
losses they may incur in legal proceedings arising from their service to the
Company. See "Principal and Selling Stockholders" and "Description of Capital
Stock."
Effect of Certain Charter Provisions; Antitakeover Effects of the Company's
Charter, Bylaws and Delaware Law. The Company's Board of Directors has the
authority to issue up to 15,000,000 shares of
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<PAGE>
Preferred Stock and to determine the price, preferences, privileges and
restrictions, including voting rights, of those shares without any further
vote or action by the stockholders. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance
of Preferred Stock could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. In addition, the Company is subject to the antitakeover provisions of
Section 203 of the Delaware General Corporation Law (the "GCL"), which
prohibits the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 also could have the effect of delaying, deferring or preventing a
change of control of the Company. Further, certain provisions of the Company's
Certificate of Incorporation and Bylaws may have the effect of discouraging,
delaying or preventing a merger, tender offer or proxy contest involving the
Company, which could adversely affect the market price of the Company's Common
Stock. See "Description of Capital Stock--Preferred Stock" and "--Antitakeover
Effects of Provisions of the Certificate of Incorporation, Bylaws and Delaware
Law."
Shares Eligible for Future Sale; Registration Rights. Sales of a substantial
number of shares of Common Stock in the public market following this offering
could adversely affect the market price for the Company's Common Stock. The
holders of shares of the Common Stock are subject to restrictions upon resale
in the public market under the Securities Act of 1933, as amended (the
"Securities Act"), and restrictions in lock-up agreements under which each
director, executive officer and stockholder has agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the
effective date of this offering without the prior written consent of Alex.
Brown & Sons Incorporated. Following completion of this offering, the
4,000,000 shares offered hereby will be eligible for sale without restriction.
Of the 23,694,253 remaining shares held by existing stockholders, 23,469,268
are held by "affiliates" of the Company (within the meaning of Rule 144 under
the Securities Act) and will be eligible for sale pursuant to Rule 144 upon
the expiration of their respective two-year holding periods, subject to the
volume, manner of sale and other limitations of Rule 144, and 1,256,985 were
issued under the Company's Restricted Stock Program and will be eligible for
future sale without restriction 90 days following this Offering under Rule 701
under the Securities Act (unless held by "affiliates" of the Company), subject
to restrictions in the lock-up agreements. In addition, the Company intends to
register pursuant to a registration statement on Form S-8/S-3 939,975 shares
of Common Stock subject to outstanding options and 2,060,025 shares reserved
for future issuance under the Company's Stock Option Plan and 1,256,985 shares
issued under the Restricted Stock Program. Such shares of Common Stock (to the
extent issued) will be eligible for sale upon expiration of the lock-up
agreements, subject to vesting and exercisability restrictions. The lock-up
agreements may be waived by Alex. Brown and Sons Incorporated in its sole
discretion at any time without notice. Furthermore, all 22,437,268 shares of
Common Stock held in the aggregate by Warburg and Martin Leimdorfer will be
entitled to certain registration rights. If such holders, by exercising their
registration rights, cause a large number of shares to be registered and sold
in the public market, the sale of such shares could have a material adverse
effect on the market price for the Company's Common Stock and could materially
adversely affect the Company's ability to raise additional capital when or if
required. See "Shares Eligible for Future Sale."
Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the book value per share of Common Stock. Investors
purchasing shares of Common Stock in this offering will experience immediate
and substantial dilution in net tangible book value of $10.81 per share. The
Company has issued options at prices significantly below the public offering
price. To the extent outstanding options to purchase share of Common Stock are
exercised, there will be further dilution in net tangible book value. See
"Dilution."
Enforceability of U.S. Judgments against Non-U.S. Officers and Directors. A
substantial portion of the Company's assets are located outside the United
States. In addition, members of the Board of Directors
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of the Company and certain experts named herein are residents of countries
other than the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons or to enforce against such persons judgments of courts of the United
States predicated upon civil liabilities under the United States federal
securities laws. There can be no assurance that United States investors will
be able to enforce against the members of the Board of Directors or certain
experts named herein who are residents of Sweden or countries other than the
United States, any judgments in civil and commercial matters, including
judgments under the federal securities laws. In addition, there is doubt as to
whether a Swedish court would impose civil liability on the members of the
Board of Directors of the Company in an original action predicated solely upon
the federal securities laws of the United States brought in a court of
competent jurisdiction in Sweden against the Company or such members.
Significant Unallocated Net Proceeds. The Company has not yet identified
specific uses for the substantial majority of the net proceeds to be received
by it from this offering, and pending such uses, the Company expects to invest
such net proceeds in investment grade, short-term, interest-bearing debt
securities. The Company will have discretion over the use and investment of
such proceeds. See "Use of Proceeds."
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<PAGE>
THE COMPANY
The Company was incorporated in the State of Delaware in 1995 and conducts
its business through its domestic and international subsidiaries. The
Company's business was founded in 1967 and incorporated in Sweden as Industri-
Matematik AB ("IMAB"). In May 1995, the then shareholders of IMAB exchanged
all of their IMAB shares for shares of the Company's capital stock and IMAB
became a wholly-owned subsidiary of the Company. See "Certain Transactions".
Unless the context otherwise requires, references in this Prospectus to the
"Company" refer to IMI, its predecessors and its subsidiaries. The Company's
principal executive offices are located at Kungsgatan 12-14, Box 7733, 103 95
Stockholm, Sweden, telephone number (011) (468) 676-5000 and its principal
U.S. office is located at Five Greentree Center, Suite 201, Marlton, New
Jersey 08053, telephone number (609) 988-3922.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,200,000 shares of
Common Stock being offered by the Company are estimated to be $34.4 million,
after deducting estimated underwriting discounts and commissions and offering
expenses payable by the Company. The principal purposes of this offering are
to obtain additional working capital, establish a public market for the
Company's Common Stock and facilitate future access by the Company to the
public capital markets. The Company may apply a portion of the net proceeds to
the repayment of some or all of the outstanding principal indebtedness, plus
accrued interest thereon, under the Company's bank lines of credit. The net
proceeds will be used for working capital and general corporate purposes,
including the expansion of its sales, support, service and marketing
organizations. The Company may also use a portion of the net proceeds to fund
acquisitions of complementary technologies, products or businesses, although
there are no current agreements or negotiations with respect to any such
transaction. Pending such uses, the Company currently plans to invest the net
proceeds in investment grade, short-term, interest-bearing debt securities.
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholder. See "Certain Transactions."
DIVIDEND POLICY
The Company has never declared or paid any dividends on its Common Stock and
does not intend to do so in the foreseeable future. It is the present
intention of the Company to retain any future earnings to provide funds for
the operation and expansion of its business. In addition, the payment of
dividends is restricted under the terms of the Company's existing credit
facilities. The Swedish Company Act imposes certain limitations on the ability
of IMAB to pay dividends to the Company. See "Risk Factors--Holding Company
Structure."
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CAPITALIZATION
The following table sets forth as of April 30, 1996 (i) the actual
capitalization of the Company, (ii) the capitalization of the Company on a pro
forma basis giving effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock and Class B Common Stock, and (iii) the
capitalization of the Company as adjusted to reflect the sale of the 3,200,000
shares of Common Stock offered by the Company hereby (assuming an estimated
initial offering price of $12.00 per share and after deducting estimated
underwriting discounts and commissions and offering expenses payable by the
Company and the expected application of the estimated net proceeds therefrom).
See "Use of Proceeds."
<TABLE>
<CAPTION>
APRIL 30, 1996
------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt (1)........... $ 349 $ 349 $ --
======= ======= ========
Long-term debt, less current portion (1)........ $ 7,950 $ 7,950 $ --
Stockholders' equity:
Preferred Stock; $.01 par value; 15,000,000
shares authorized; 14,630,250 shares issued
and outstanding (pro forma: no shares
outstanding)................................. 146 -- --
Common Stock; voting, $.01 par value;
62,500,000 shares authorized; 9,480,003
shares issued and outstanding
(pro forma and as adjusted: 12,406,053 and
15,606,053 shares issued and outstanding)
(2).......................................... 94 124 156
Class B Common Stock; non-voting, $.01 par
value; 12,500,000 shares authorized; 384,000
shares issued and outstanding (pro forma and
as adjusted: 12,088,200 shares issued and
outstanding)................................. 4 120 120
Additional paid-in capital...................... 15,323 15,323 49,653
Accumulated deficit............................. (10,870) (10,870) (10,870)
Cumulative translation adjustment............... (1,569) (1,569) (1,569)
Notes receivable from stockholders.............. (2,626) (2,626) (2,626)
------- ------- --------
Total stockholders' equity ................. 502 502 34,864
------- ------- --------
Total capitalization ..................... $ 8,452 $ 8,452 $ 34,864
======= ======= ========
</TABLE>
- --------
(1) See Note 10 of Notes to Consolidated Financial Statements.
(2) Excludes 939,975 shares of Common Stock issuable upon the exercise of
stock options outstanding as of April 30, 1996, at a weighted average
exercise price of $2.00 per share. See "Management--Stock Option Plan."
17
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at April 30, 1996 was
$(1,486,000), or $(0.06) per share. Pro forma net tangible book value per
share represents the amount of total tangible assets (which excludes deferred
tax assets) less total liabilities, divided by the number of shares of Common
Stock outstanding after giving effect to the conversion of all outstanding
shares of Preferred Stock into Common Stock and Class B Common Stock upon the
closing of this offering.
After giving effect to the sale of the 3,200,000 shares of Common Stock
offered by the Company hereby (assuming an estimated initial offering price of
$12.00 per share and after deducting estimated underwriting discounts and
commissions and offering expenses payable by the Company) and the expected
application of the estimated net proceeds therefrom, the pro forma net
tangible book value of the Company at April 30, 1996, would have been
$32,876,000, or $1.19 per share. This represents an immediate increase in net
tangible book value of $1.25 per share to existing stockholders and an
immediate dilution in net tangible book value of $10.81 per share to
purchasers of Common Stock in this offering. The following table illustrates
the dilution in net tangible book value per share to new investors:
<TABLE>
<S> <C> <C>
Initial public offering price per share......................... $12.00
Pro forma net tangible book value per share at April 30, 1996. $(0.06)
Increase per share attributable to new investors.............. 1.25
------
Pro forma net tangible book value per share after offering...... 1.19
------
Pro forma net tangible book value dilution per share to new in-
vestors........................................................ $10.81
======
</TABLE>
The following table summarizes, on a pro forma basis, as of April 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
cash paid to the Company and the average price paid per share by existing
stockholders and by new investors purchasing shares at an assumed initial
public offering price of $12.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED
(1) TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 24,494,253 88.4% $15,567,000 28.9% $ 0.64
New investors.............. 3,200,000 11.6 38,400,000 71.1 12.00
---------- ----- ----------- -----
Total.................... 27,694,253 100.0% $53,967,000 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) Sales by the Selling Stockholder in this offering will reduce the number
of shares held by existing stockholders to 23,694,253 shares, or 85.6% of
the total number of shares of Common Stock to be outstanding after the
offering, and will increase the number of shares held by the new investors
to 4,000,000 shares, or 14.4% of the total number of shares of Common
Stock to be outstanding after this offering. See "Principal and Selling
Stockholders."
The above tables exclude 939,975 shares issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $2.00 per
share. To the extent outstanding options are exercised, new investors will
experience further dilution. See "Management--Stock Option Plan."
18
<PAGE>
EXCHANGE RATES
A significant portion of the Company's business is conducted in currencies
other than the U.S. dollar (the currency in which its financial statements are
stated), primarily the Swedish krona. The Company incurs a significant portion
of its expenses in Swedish kronor, including all of its product development
expenses and a substantial portion of its general and administrative expenses.
As a result, appreciation of the value of the Swedish krona relative to the
other currencies in which the Company generates revenues, particularly the
U.S. dollar, could adversely affect operating results. The financial
statements of the Company are translated from the functional currency of the
operating subsidiaries into U.S. dollars, the Company's reporting currency,
utilizing the current rate method. Accordingly, assets and liabilities are
translated at exchange rates in effect at the end of the reporting period, and
revenues and expenses are translated at the average exchange rate during the
period. All translation gains or losses from the translation into the
Company's reporting currency are included as a separate component of
stockholders' equity. Fluctuations in the Swedish krona and other currencies
relative to the U.S. dollar will effect period to period comparison of the
Company's reported results of operations. Due to the constantly changing
currency exposures and the volatility of currency exchange rates, there can be
no assurance that the Company will not experience currency losses in the
future, nor can the Company predict the effect of exchange rate fluctuations
upon future operating results.
The table below sets forth, for the periods and dates indicated, the
exchange rate for the U.S. dollar against the Swedish krona based on the noon
buying rate in New York City for cable transfers in Swedish kronor as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate"). On June 6, 1996, the Noon Buying Rate was $1.00 = SEK
6.7480.
KRONA/DOLLAR EXCHANGE RATES
(KRONOR PER DOLLAR)
<TABLE>
<CAPTION>
AT END
OF AVERAGE
PERIOD RATE (1) HIGH LOW
------ -------- ---- ----
<S> <C> <C> <C> <C>
May 1, 1993 to April 30, 1994......................... 7.66 7.95 8.48 7.17
May 1, 1994 to April 30, 1995......................... 7.27 7.52 7.96 7.06
May 1, 1995 to April 30, 1996......................... 6.79 6.94 7.44 6.50
</TABLE>
- --------
(1) The average of the Noon Buying Rates on the last day of each month during
the relevant period.
Prior to May 17, 1991, the position of the krona was measured by an index in
which the currencies of each of Sweden's 15 most important trading partners
had a specific weight related to each country's average portion of Swedish
foreign trade during the preceding five years. On May 17, 1991, the Bank of
Sweden unilaterally pegged the Swedish krona to the European Currency Unit
("ECU"). However, as a result of instability in the currency system during the
fall of 1992, a number of countries withdrew from the European Monetary
System. During this time, there was speculation against the krona, forcing the
Bank of Sweden to intervene heavily in the foreign exchange market to support
the krona. As this intervention proved insufficient to stabilize the krona,
the Bank of Sweden let the krona exchange rate float against other currencies
from November 19, 1992, leading to depreciation of the krona against several
other currencies during 1992 and 1993, before stabilizing in 1994. During the
first six months of 1995, the Swedish krona depreciated approximately 6%
against the ECU, while it appreciated approximately 11% against the ECU in the
last six months of 1995, with the effect that the average Swedish krona
exchange rate in relation to the ECU in 1995 was 2% lower than the
corresponding rate in 1994. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Risk Factors--Exposure to
Currency Fluctuations."
There are currently no Swedish foreign exchange control restrictions on the
conduct of the Company's operations.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is qualified by reference
to, and should be read in conjunction with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Consolidated
Financial Statements and Notes thereto and the other financial information
included elsewhere in this Prospectus. The statement of operations for the
years ended April 30, 1994, 1995, and 1996, and the balance sheet data at
April 30, 1995, and 1996, are derived from and should be read in conjunction
with the Consolidated Financial Statements of the Company and the Notes
thereto included elsewhere in this Prospectus which have been audited by
Ohrlings Coopers & Lybrand AB, independent auditors.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERA-
TIONS DATA:
Revenues:
Licenses........................ $ 3,433 $ 5,698 $ 5,254 $10,661 $15,474
Services and maintenance........ 17,107 15,648 11,950 14,543 23,103
Other........................... 5,369 2,450 1,576 2,540 1,432
------- ------- ------- ------- -------
Total revenues................ 25,909 23,796 18,780 27,744 40,009
Cost of revenues:
Licenses........................ 220 1,136 721 2,172 2,717
Services and maintenance........ 15,829 11,854 10,030 12,424 16,813
Other........................... 5,653 2,417 831 2,252 947
------- ------- ------- ------- -------
Total cost of revenues........ 21,702 15,407 11,582 16,848 20,477
------- ------- ------- ------- -------
Gross profit.................. 4,207 8,389 7,198 10,896 19,532
Operating expenses:
Product development............. 3,976 3,593 5,517 7,009 6,822
Sales and marketing............. 3,503 2,693 3,056 5,720 7,746
General and administrative...... 2,510 4,431 3,688 4,192 3,579
------- ------- ------- ------- -------
Total operating expenses...... 9,989 10,717 12,261 16,921 18,147
------- ------- ------- ------- -------
Income (loss) from operations.... (5,782) (2,328) (5,063) (6,025) 1,385
Other income (expense):
Gain on sale of subsidiary(1)... -- 1,291 -- -- --
Interest income................. 46 8 40 15 13
Interest expense................ (371) (584) (229) (689) (744)
Miscellaneous income (expense).. 11 82 (227) (384) (12)
------- ------- ------- ------- -------
Income (loss) from continuing
operations before income taxes.. (6,096) (1,531) (5,479) (7,083) 642
Provision (benefit) for income
taxes........................... 202 122 40 (941) (781)
------- ------- ------- ------- -------
Income (loss) from continuing
operations...................... (6,298) (1,653) (5,519) (6,142) 1,423
Income (loss) from discontinued
operations...................... (432) (156) (151) (246) 327
------- ------- ------- ------- -------
Net income (loss)................ $(6,730) $(1,809) $(5,670) $(6,388) $ 1,750
======= ======= ======= ======= =======
Pro forma net income per share
data(2):
Income from continuing
operations...................... $ 0.06
Income from discontinued
operations...................... 0.01
-------
Pro forma net income per share... $ 0.07
=======
Pro forma shares used in per
share calculation............... 25,278
=======
<CAPTION>
APRIL 30,
-------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........ $ 286 $ 99 $ 75 $ 160 $ 558
Working capital.................. 8,102 7,988 3,789 2,980 5,962
Total assets..................... 18,550 15,630 13,364 15,508 21,324
Long-term debt, less current por-
tion............................ 3,977 4,284 3,634 6,725 7,950
Total stockholders' equity....... 6,349 5,513 1,779 (2,097) 502
</TABLE>
- --------
(1) During the fiscal year ended April 30, 1993, the Company sold all of its
interest in Systecon AB, a wholly-owned subsidiary. The gain recognized on
the sale represents the excess of the sales price over the Company's book
basis. During fiscal 1993, Systecon AB generated revenues of $3.1 million.
(2) See Note 2 of Notes to Consolidated Financial Statements for an
explanation of the determination of shares used in calculating pro forma
net income per share.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other parts of this Prospectus contain forward-
looking statements that involve risks and uncertainties. The Company's actual
results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such a difference include, but
are not limited to, those discussed in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Risk Factors" and
"Business."
OVERVIEW
IMI develops, markets and supports client/server application software that
enables manufacturers, distributors and wholesalers to more effectively manage
the demand chain. The Company was founded in 1967 as a custom software
development and consulting services organization. The Company developed and
delivered its first distribution logistics software in 1974, its first UNIX-
based version in 1984 and its first Oracle-based client/server version in
1991. In 1993, the Company introduced its current generation product, System
ESS, which was designed to meet the needs of multinational manufacturers,
distributors and wholesalers. Since that time, the Company's operating
expenses have increased substantially as the Company has made significant
investments outside Sweden in sales and marketing, customer support and
product development related to System ESS. As a result of these investments,
greater market acceptance of System ESS and expansion of its business outside
Sweden, the Company's revenues have grown in recent years, increasing from
$18.8 million in fiscal 1994 to $40.0 million in fiscal 1996, with revenues
from sales outside Sweden increasing from $5.0 million to $26.2 million over
the same period. The Company reached profitability in the third and fourth
quarters of fiscal 1996 and in the most recent fiscal year ended April 30,
1996. There can be no assurance that the Company will sustain profitablity on
a quarterly or annual basis in the future. See "Quarterly Financial Results"
and "Risk Factors--No Assurance of Profitability" and "--Significant
Fluctuations in Quarterly Operating Results and Seasonality; Potential
Quarterly Losses."
A substantial majority of the Company's revenues in the last three years
have been attributable to license fees and related services, including
software maintenance and support, implementation, consulting and training.
Recently, the Company has experienced an increase in license revenues as a
percentage of total revenues due to an increase in individual licenses of
System ESS to multinational manufacturers, distributors and wholesalers. The
Company expects that license and services revenues related to System ESS will
continue to constitute predominantly all of the Company's total revenues in
the foreseeable future. License revenues are recognized upon the signing of
the license agreement and shipment of the product if no significant vendor
obligations remain and collection of the resulting receivable is probable.
Annual maintenance and support revenues consist of ongoing support and product
updates and are recognized ratably over the term of the maintenance agreement.
Revenues from implementation, training and consulting services are recognized
when the relevant services are performed. The Company recognized revenues, in
all periods presented, in accordance with the American Institute of Certified
Public Accountants Statement of Position 91-1, "Software Revenue Recognition."
The Company plans to increase expenditures in order to fund the continued
expansion of its worldwide operations, including greater levels of product
development and larger and more geographically dispersed sales, support,
service and marketing organizations. Although the Company believes such
expenditures will ultimately improve the Company's operating results, to the
extent such expenditures are incurred and revenues do not correspondingly
increase, the Company's operating results will be materially adversely
affected. Future operating results will depend on many factors, including the
growth of the demand chain management software market, market acceptance of
the Company's products, competition, the success of the Company's expansion of
its sales, support, service and marketing organizations, general economic
conditions and other factors. See "Risk Factors--No Assurance of
Profitability," "--Significant Fluctuations in Quarterly Operating Results and
Seasonality; Potential Quarterly Losses" and "--Dependence upon Successful
Expansion of Sales, Support, Service and Marketing Organizations."
21
<PAGE>
A significant portion of the Company's business is conducted in currencies
other than the U.S. dollar (the currency in which its financial statements are
stated), primarily the Swedish krona. The Company incurs a significant portion
of its expenses in Swedish kronor, including all of its product development
expenses and a substantial portion of its general and administrative expenses.
As a result, appreciation of the value of the Swedish krona relative to the
other currencies in which the Company generates revenues, particularly the
U.S. dollar, could adversely affect operating results. The financial
statements of the Company are translated from the functional currency of the
operating subsidiaries into U.S. dollars, the Company's reporting currency,
utilizing the current rate method. Accordingly, assets and liabilities are
translated at exchange rates in effect at the end of the reporting period, and
revenues and expenses are translated at the average exchange rate during the
period. All translation gains or losses from the translation into the
Company's reporting currency are included as a separate component of
stockholders' equity. Fluctuations in the Swedish krona and other currencies
relative to the U.S. dollar will affect period to period comparison of the
Company's reported results of operations. Due to the constantly changing
currency exposures and the volatility of currency exchange rates, there can be
no assurance that the Company will not experience currency losses in the
future, nor can the Company predict the effect of exchange rate fluctuations
upon future operating results. The Company does not currently undertake
hedging transactions and has limited lines of credit to cover its currency
exposure. The Company may choose to hedge a portion of its currency exposure
in the future as it deems appropriate. See "Risk Factors--Exposure to Currency
Fluctuations" and "Exchange Rates."
22
<PAGE>
RESULTS OF OPERATIONS
For the fiscal periods indicated, the following table sets forth the
percentage of total revenues represented by certain items reflected in the
Company's consolidated statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------
1992 1993 1994 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses............................. 13.3 % 23.9 % 28.0 % 38.4 % 38.7 %
Services and maintenance............. 66.0 65.8 63.6 52.4 57.7
Other................................ 20.7 10.3 8.4 9.2 3.6
----- ----- ----- ----- -----
Total revenues..................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
Licenses............................. 0.8 4.8 3.8 7.8 6.8
Services and maintenance............. 61.1 49.8 53.4 44.8 42.0
Other................................ 21.8 10.2 4.4 8.1 2.4
----- ----- ----- ----- -----
Total cost of revenues............. 83.7 64.8 61.6 60.7 51.2
----- ----- ----- ----- -----
Gross profit....................... 16.3 35.2 38.4 39.3 48.8
Operating expenses:
Product development.................. 15.3 15.1 29.4 25.3 17.1
Sales and marketing.................. 13.5 11.3 16.3 20.6 19.4
General and administrative........... 9.7 18.6 19.6 15.1 8.9
----- ----- ----- ----- -----
Total operating expenses........... 38.5 45.0 65.3 61.0 45.4
----- ----- ----- ----- -----
Income (loss) from operations.......... (22.2) (9.8) (26.9) (21.7) 3.4
Other income (expense):
Gain on sale of subsidiary(1)........ -- 5.4 -- -- --
Interest income...................... 0.2 0.0 0.2 0.1 0.0
Interest expense..................... (1.4) (2.5) (1.2) (2.5) (1.9)
Miscellaneous income (expense)....... 0.0 0.3 (1.2) (1.4) 0.0
----- ----- ----- ----- -----
Income (loss) from continuing
operations before income taxes...... (23.4) (6.6) (29.1) (25.5) 1.5
Provision (benefit) for income taxes... 0.8 0.5 0.2 (3.4) (2.0)
----- ----- ----- ----- -----
Income (loss) from continuing opera-
tions................................. (24.2) (7.1) (29.3) (22.1) 3.5
Income (loss) from discontinued opera-
tions................................. (1.7) (0.7) (0.8) (0.9) 0.8
----- ----- ----- ----- -----
Net income (loss)...................... (25.9)% (7.8)% (30.1)% (23.0)% 4.3 %
===== ===== ===== ===== =====
</TABLE>
- --------
(1) During the fiscal year ended April 30, 1993, the Company sold all of its
interest in Systecon AB, a wholly-owned subsidiary. The gain recognized on
the sale represents the excess of the sales price over the Company's book
basis.
COMPARISON OF FISCAL YEARS 1996, 1995 AND 1994
Revenues
Total revenues consist of revenues derived from sales of software licenses
and related services, including software maintenance and support,
implementation, consulting and training. Total revenues increased 44.2% to
$40.0 million in fiscal 1996 from $27.7 million in fiscal 1995, and increased
47.7% in fiscal 1995 from $18.8 million in fiscal 1994. The increase in
revenues during these periods was primarily due to increased license fees from
the Company's System ESS product and related service and maintenance fees.
Licenses. Software license revenues increased 45.1% to $15.5 million in
fiscal 1996 from $10.7 million in fiscal 1995, and increased 102.9% in fiscal
1995 from $5.3 million in fiscal 1994. Software license revenues constituted
38.7%, 38.4% and 28.0% of total revenues in fiscal 1996, 1995 and 1994,
respectively. The significant increases in software license revenues were
primarily due to growing market acceptance
23
<PAGE>
of the Company's software products and continued expansion of the Company's
sales and marketing organization, particularly into new geographical areas and
new vertical markets. This is evidenced by the increase in the percentage of
license revenues from the market outside Sweden to 93.1% of license revenues
in fiscal 1996 from 64.8% in fiscal 1995 and 90.6% in fiscal 1994. The
majority of such license revenues outside Sweden were from the United States
and the United Kingdom. The Company expects to continue to expand into new
geographical areas and vertical markets; however, there can be no assurance
that market acceptance of the Company's products will continue to grow or that
the Company will be able to expand its direct sales, service, support and
marketing organizations successfully. See "Risk Factors--Dependence upon
Successful Expansion of Sales, Support, Service and Marketing Organizations."
Service and Maintenance. Service and maintenance revenues increased 58.9% to
$23.1 million in fiscal 1996 from $14.5 million in fiscal 1995, and increased
21.7% from $12.0 million in fiscal 1994. Service and maintenance revenues
constituted 57.7%, 52.4% and 63.6% of total revenues in fiscal 1996, 1995 and
1994, respectively. The significant increases in the dollar amount of service
and maintenance revenues were primarily due to the increase in services
related to a greater number of System ESS licenses sold, as well as the high
percentage of maintenance agreement renewals for licenses sold in prior years.
The Company expects service and maintenance revenues as a percentage of total
revenues to continue to fluctuate on a period to period basis. The Company's
sales and marketing strategy is to increase its utilization of third-party
implementation services to enable it to more rapidly penetrate its target
markets. To the extent that such efforts are successful, the Company believes
that service and maintenance revenues could decline as a percentage of total
revenues. See "Risk Factors--Reliance on and Need to Develop Additional
Relationships with Third Parties."
Other. Other revenues are primarily third-party hardware sales to help
certain customers implement System ESS. Other revenues decreased 43.6% to $1.4
million in fiscal 1996 from $2.5 million in fiscal 1995 and increased 61.2% in
fiscal 1995 from $1.6 million in fiscal 1994. Other revenues constituted 3.6%,
9.2% and 8.4% of revenues in fiscal 1996, 1995 and 1994 respectively.
Commencing in fiscal 1993 the Company deliberately reduced its emphasis on
providing third-party hardware and support, and its strategy is to minimize
its efforts in this area except on an as needed basis. The Company expects
other revenues to fluctuate on a period to period basis, to generally decrease
in absolute dollars and to decline significantly as a percentage of total
revenues.
Cost of Revenues
Cost of revenues was $20.5 million, $16.8 million and $11.6 million in
fiscal 1996, 1995 and 1994, representing 51.2%, 60.7% and 61.6% of total
revenues, respectively. As a percentage of total revenues, cost of revenues
remained relatively flat from fiscal 1994 to fiscal 1995, but declined from
fiscal 1995 to fiscal 1996. This decrease was primarily due to an increase in
the gross margin of service and maintenance revenues and a decrease in other
revenues as a percentage of total revenues. The Company anticipates that if
revenues from licenses of System ESS continue to increase as a percentage of
total revenues, then costs of revenues may continue to decline as a percentage
of total revenues, because the gross margin on license revenues is higher than
the gross margin on all other revenues.
The following table sets forth, for the periods indicated, cost of revenues
for each revenue category and the cost of revenues represented as a percentage
of each revenue category:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------------------------------------
1994 1995 1996
----------------- ----------------- -----------------
COST % OF COST % OF COST % OF
OF REVENUE OF REVENUE OF REVENUE
REVENUES CATEGORY REVENUES CATEGORY REVENUES CATEGORY
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
Licenses................ $ 721 13.7% $ 2,172 20.4% $ 2,717 17.6%
Services and
maintenance............ 10,030 83.9 12,424 85.4 16,813 72.8
Other................... 831 52.7 2,252 88.7 947 66.1
------- ------- -------
Total cost of revenues. $11,582 61.6% $16,848 60.7% $20,477 51.2%
======= ======= =======
</TABLE>
24
<PAGE>
Cost of License Revenues. Cost of license revenues consists primarily of
commissions and license fees paid to third parties in fiscal years 1995 and
1996, particularly fees paid to Oracle pursuant to an informal joint marketing
and sales arrangement. Cost of license revenues was $2.7 million, $2.2 million
and $0.7 million in fiscal 1996, 1995 and 1994, and 17.6%, 20.4% and 13.7% of
license revenues, respectively. The increase in the absolute dollar amount of
the cost of license revenues was principally related to the higher level of
software licenses sold. In fiscal 1996, 58% of the Company's license revenues
and 24% of the Company's total revenues was derived from six customers
introduced to the Company by Oracle pursuant to such arrangement. The parties
have commenced discussions concerning the formalization of their relationship
in a written contract. The Company anticipates that, if concluded, such
written contract may provide for Oracle to receive, in certain geographic
markets, a higher proportion of license revenues from System ESS if Oracle's
responsibility for sales and marketing activities in such geographic markets
increases. There can be no assurance that the Company will successfully
conclude a formal agreement with Oracle or that such formal agreement, if
concluded, will be on terms favorable to the Company. See "Risk Factors--
Relationship with Oracle Corporation."
Cost of Service and Maintenance Revenues. Cost of service and maintenance
revenues consists primarily of costs associated with consulting,
implementation, training and ongoing support. Cost of service and maintenance
revenues was $16.8 million, $12.4 million and $10.0 million in fiscal 1996,
1995 and 1994, representing 72.8%, 85.4% and 83.9% of service and maintenance
revenues, respectively. The increase in cost of service and maintenance
revenues in absolute dollars was primarily due to the increase in the number
of personnel providing consulting and training services to customers. Although
the Company intends to continue to enter into informal joint marketing
arrangements with third parties, including systems integrators, who might
provide services to the Company's customers, the Company expects to continue
to increase the number of its service personnel in the future as the number of
licensees of System ESS increases.
Cost of Other Revenues. Cost of other revenues consists primarily of the
cost of third party hardware supplied to certain customers. Cost of other
revenues was $0.9 million, $2.3 million and $0.8 million in fiscal 1996, 1995
and 1994, representing 66.1%, 88.7% and 52.7% of other revenues, respectively.
Commencing in fiscal 1993, the Company deliberately reduced its emphasis on
providing third-party hardware and support, and its strategy is to minimize
its efforts in this area except on an as needed basis. The Company expects
cost of other revenues to fluctuate on a period to period basis, to generally
decrease in absolute dollars and to decline significantly as a percentage of
total cost of revenues.
Product Development. Product development expenses consist primarily of
salaries and other related costs for the Company's engineering staff. Product
development expenses were $6.8 million, $7.0 million and $5.5 million in
fiscal 1996, 1995 and 1994, representing 17.1%, 25.3% and 29.4% of total
revenues, respectively. The increase in fiscal 1995 in product development
expenses in absolute dollars was primarily due to the increased headcount of,
and associated support for, product engineers to assist with the completion of
Release 4.1 of System ESS, and the hiring of third party consultants. The
decrease in fiscal 1996 in product development expenses in absolute dollars
was due primarily to a decline in the Company's use of third party consultant
engineers. As a percentage of total revenues, product development expenses
declined in fiscal 1995 and 1996, primarily due to an increase in revenues
related to System ESS. The Company believes that a significant level of
investment for product development is required to remain competitive and,
accordingly, the Company anticipates that product development expenses will
increase in the future, both in absolute dollars and as a percentage of total
revenues.
In accordance with the Financial Accounting Standards Board (the "FASB")
Statement of Financial Accounting Standards ("SFAS") No. 86, software
development costs are expensed as incurred until technological feasibility has
been established, after which time such costs are capitalized until the
product is available for general release to customers. To date, costs incurred
after establishment of technological feasibility have been immaterial and, as
a result, all product development costs have been expensed as incurred.
25
<PAGE>
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses, and other related costs for sales and
marketing personnel. Sales and marketing expenses were $7.7 million, $5.7
million and $3.1 million in fiscal 1996, 1995 and 1994, representing 19.4%,
20.6% and 16.3% of total revenues, respectively. The increase in sales and
marketing expenses in absolute dollars from fiscal 1994 to fiscal 1996 was
primarily due to increased headcount as the Company established and expanded
new sales offices in the United States and the United Kingdom. The Company
intends to continue the expansion of its sales and marketing efforts and
anticipates that sales and marketing expenses will increase in absolute
dollars and as a percentage of total revenues in the future. See "Risk
Factors--Dependence upon Successful Expansion of Sales, Support, Service and
Marketing Organizations."
General and Administrative. General and administrative expenses consist
primarily of salary expenses and related expenses for administrative and
executive staff. General and administrative expenses were $3.6 million, $4.2
million and $3.7 million in fiscal 1996, 1995 and 1994, representing 8.9%,
15.1% and 19.6% of total revenues, respectively. General and administrative
expenses increased from fiscal 1994 to fiscal 1995 due primarily to severance
benefits incurred relating to changes in management and costs incurred
relating to obsolete computer equipment. The Company believes that general and
administrative expenses will generally increase in absolute dollars but should
decrease as a percentage of total revenues.
Discontinued Operations. In fiscal 1996, the Company adopted a plan to
divest its 55% owned subsidiary, Pargon AB ("Pargon"), whose business was
focused on microprocessor compiler software and systems consulting services,
and therefore did not fit the Company's strategy of focusing on System ESS. In
connection with the discontinued Pargon operations, the Company recorded
income of $0.3 million, losses of $0.2 million and losses of $0.2 million in
fiscal 1996, 1995 and 1994, respectively. It is not yet possible to estimate
the prospective gain or loss on the disposition of the discontinued
operations; however, the Company does not expect that such disposition will
have a material effect on the Company's financial condition and results of
operations.
Provision for Income Taxes. In fiscal 1996 and 1995, respectively, the
Company recorded a benefit for income taxes of $0.8 million and $0.9 million,
respectively. The benefits related primarily to the reduction of the Company's
valuation allowance on deferred tax assets. At April 30, 1996, the Company had
approximately $5.3 million of gross deferred tax assets comprised primarily of
net operating loss carry- forwards in Sweden. Such net operating loss
carryforwards are available for an indefinite period of time. The Company has
recorded a valuation allowance with respect to a portion of such deferred tax
asset. The Company will continue to assess the realizability of the deferred
tax assets based upon actual and forecasted operating results. See "Risk
Factors--Uncertainty of Realizability of Deferred Tax Asset."
26
<PAGE>
QUARTERLY FINANCIAL RESULTS
The following table set forth unaudited consolidated statement of operations
data for each of the eight quarters in the period ended April 30, 1996. This
information has been derived from unaudited interim consolidated financial
statements that, in the opinion of the Company, have been prepared on a basis
consistent with the Consolidated Financial Statements contained elsewhere
herein, and include all adjustments necessary for a fair presentation of such
information when read in conjunction with the Consolidated Financial
Statements and the Notes thereto. The operating results for any quarter are
not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1994 1994 1995 1995 1995 1995 1996 1996
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses................................. $ 63 $3,862 $ 3,438 $ 3,298 $ 197 $ 1,536 $ 6,258 $ 7,483
Services and maintenance................. 3,218 3,271 3,910 4,144 4,272 5,770 6,149 6,912
Other.................................... 456 783 658 643 256 506 396 274
-------- ------ ------- -------- -------- ------- ------- -------
Total revenues.......................... 3,737 7,916 8,006 8,085 4,725 7,812 12,803 14,669
Cost of revenues:
Licenses................................. 8 685 890 589 3 152 1,016 1,546
Services and maintenance................. 2,654 2,926 3,386 3,458 3,579 3,908 4,029 5,297
Other.................................... 378 627 506 741 204 369 220 154
-------- ------ ------- -------- -------- ------- ------- -------
Total cost of revenues.................. 3,040 4,238 4,782 4,788 3,786 4,429 5,265 6,997
-------- ------ ------- -------- -------- ------- ------- -------
Gross profit............................ 697 3,678 3,224 3,297 939 3,383 7,538 7,672
Operating expenses:
Product development...................... 1,178 1,556 2,163 2,112 1,368 1,557 1,716 2,181
Sales and marketing...................... 812 1,201 1,232 2,475 1,385 1,629 2,121 2,611
General and administration............... 563 585 444 2,600 828 907 886 958
-------- ------ ------- -------- -------- ------- ------- -------
Total operating expenses................ 2,553 3,342 3,839 7,187 3,581 4,093 4,723 5,750
-------- ------ ------- -------- -------- ------- ------- -------
Income (loss) from operations............. (1,856) 336 (615) (3,890) (2,642) (710) 2,815 1,922
Other income (expense):
Interest income.......................... 0 0 7 8 4 0 5 4
Interest expense......................... (132) (169) (193) (195) (189) (196) (188) (171)
Miscellaneous income (expense)........... (20) (23) 45 (386) (16) 258 (259) 5
-------- ------ ------- -------- -------- ------- ------- -------
Income (loss) from continuing operations
before income taxes...................... (2,008) 144 (756) (4,463) (2,843) (648) 2,373 1,760
Provision (benefit) for income taxes...... (249) (120) (175) (397) (564) (301) 62 22
-------- ------ ------- -------- -------- ------- ------- -------
Income (loss) from continuing operations.. (1,759) 264 (581) (4,066) (2,279) (347) 2,311 1,738
Income (loss) from discontinued
operations............................... (117) (148) 24 (5) (78) 134 189 82
-------- ------ ------- -------- -------- ------- ------- -------
Net income (loss)......................... $ (1,876) $ 116 $ (557) $ (4,071) $ (2,357) $ (213) $ 2,500 $ 1,820
======== ====== ======= ======== ======== ======= ======= =======
</TABLE>
27
<PAGE>
The following table sets forth as a percentage of total revenues, certain
line items in the Company's consolidated statement of operations for the
periods indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1994 1994 1995 1995 1995 1995 1996 1996
-------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Licenses............... 1.7% 48.8% 43.0% 40.7% 4.2% 19.7% 48.9% 51.0%
Services and
maintenance........... 86.1 41.3 48.8 51.3 90.4 73.8 48.0 47.1
Other ................. 12.2 9.9 8.2 8.0 5.4 6.5 3.1 1.9
----- ----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- -----
Cost of revenues:
Licenses............... 0.2 8.6 11.1 7.2 0.1 1.9 7.9 10.5
Services and
maintenance........... 71.0 37.0 42.3 42.8 75.7 50.0 31.5 36.2
Other.................. 10.1 7.9 6.3 9.2 4.3 4.8 1.7 1.0
----- ----- ----- ----- ----- ----- ----- -----
Total cost of
revenues............. 81.3 53.5 59.7 59.2 80.1 56.7 41.1 47.7
----- ----- ----- ----- ----- ----- ----- -----
Gross profit.......... 18.7 46.5 40.3 40.8 19.9 43.3 58.9 52.3
Operating expenses:
Product development.... 31.5 19.6 27.0 26.1 28.9 19.9 13.4 14.9
Sales and marketing.... 21.7 15.2 15.4 30.6 29.4 20.9 16.6 17.8
General and
administrative 15.1 7.4 5.6 32.2 17.5 11.6 6.9 6.5
----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses............. 68.3 42.2 48.0 88.9 75.8 52.4 36.9 39.2
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............. (49.6) 4.3 (7.7) (48.1) (55.9) (9.1) 22.0 13.1
Other income (expense):
Interest income........ 0.0 0.0 0.1 0.1 0.1 0.0 0.0 0.0
Interest expense....... (3.6) (2.2) (2.4) (2.4) (4.0) (2.5) (1.5) (1.1)
Miscellaneous income
(expense)............. (0.5) (0.3) 0.6 (4.8) (0.4) 3.3 (2.0) 0.0
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
continuing operations
before income taxes.... (53.7) 1.8 (9.4) (55.2) (60.2) (8.3) 18.5 12.0
Provision (benefit) for
income taxes........... (6.6) (1.5) (2.1) (4.9) (12.0) (3.9) 0.4 0.1
----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
continuing operations.. (47.1) 3.3 (7.3) (50.3) (48.2) (4.4) 18.1 11.9
Income (loss) from
discontinued
operations............. (3.1) (1.8) 0.3 (0.1) (1.7) 1.7 1.4 0.5
----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... (50.2)% 1.5% (7.0)% (50.4)% (49.9)% (2.7)% 19.5% 12.4%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
In fiscal 1996, total revenues increased throughout the year from $4.7
million in the quarter ended July 31, 1995 to $14.7 million in the quarter
ended April 30, 1996. This growth reflects continued geographic expansion of
the Company's operations, growth of large customer account license sales and
greater market acceptance of the Company's products and related services.
License revenues continued to grow to 51.0% of total revenues in the fourth
quarter of fiscal 1996 from 40.7% in the same quarter of the previous year.
The decrease in other revenues is generally attributable to lower sales of
hardware products by the Company.
Gross profit increased significantly from the first half to the second half
of fiscal 1996, primarily due to increased license revenues. Gross profit
declined dramatically in the first quarter of fiscal 1996 as license revenues,
which bear higher gross margins than maintenance and service revenues,
comprised 4.2% of total revenues. Gross margin declined from the third quarter
of fiscal 1996 to the fourth quarter of fiscal 1996 due primarily to lower
gross margins on services and maintenance revenues resulting from an increased
level of implementation outsourcing and from year-end bonus payments.
The Company's quarterly operating results are subject to certain seasonal
fluctuations. The Company's revenues, particularly its license revenues, are
typically strongest in its third and fourth fiscal quarters ended January 31
and April 30, respectively, and weakest in its first and second fiscal
quarters ended July 31 and October 31, respectively. The Company's revenues
and operating results in its third fiscal quarter typically benefit from
purchase decisions made by the large concentration of customers with
28
<PAGE>
calendar year-end budgeting rules, while revenues and operating results in its
fourth fiscal quarter typically benefit from the efforts of the Company's
sales force to meet fiscal year-end sales quotas. The Company's revenues and
operating results are typically lower in its first and second fiscal quarters,
as the Company's sales force initiates sales activity directed to achieving
fiscal year-end goals. In addition, the Company's first and second fiscal
quarters include the months of July and August, when both sales and billable
customer services activity, as well as customer purchase decisions, are
reduced, particularly in Europe, due to summer vacation schedules. As a result
of these seasonal factors, the Company has historically experienced operating
losses in its first and/or second fiscal quarters and may continue to
experience losses in such quarters in the future, including the quarters
ending July 31, 1996 and October 31, 1996.
The Company has experienced, and expects to continue to experience,
significant fluctuations in quarterly operating results that may be caused by
many factors, including, among others: the size and timing of orders for the
Company's products; the lengthy sales and implementation cycle for the
Company's products and delays in the implementation process; introduction or
enhancement of products by the Company or its competitors; changes in pricing
policy of the Company or its competitors; increased competition; technological
changes in computer systems and environments; the ability of the Company to
timely develop, introduce and market new products and new versions of existing
products; quality control of products sold; market readiness to deploy demand
chain management products for distributed computing environments; market
acceptance of new products and product enhancements; seasonality of revenues;
customer order deferrals in anticipation of new products and product
enhancements; the Company's success in expanding its sales, support, service
and marketing organizations; personnel changes; fluctuations in foreign
currency exchange rates; mix of license and service and maintenance revenues
sold and general economic conditions. As a result of these and other factors,
the Company believes that period-to-period quarterly comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance.
The Company's future quarterly revenues are difficult to forecast in part
because the demand chain management software market is an emerging market that
is subject to rapid change. Further, because the Company generally ships
software products within a short period after receipt of an order, it
typically does not have a material backlog of unfulfilled orders. License
revenues in any quarter are substantially dependent on orders booked and
shipped in that quarter and cannot be predicted with any degree of certainty.
In addition, the Company typically recognizes a significant portion of license
revenues in the last two weeks of a quarter. Any significant shortfall of
license revenues in relation to the Company's expectations or any material
delay of customer orders would have an immediate adverse effect on its
business, operating results and financial condition. Due to the foregoing
factors, it is possible that in future periods the Company's revenues, and
thus its operating results, may be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would be materially and adversely affected. See "Risk Factors--Significant
Fluctuations in Quarterly Operating Results and Seasonality; Potential
Quarterly Losses."
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed and met its capital
expenditure requirements through cash flows from operations and long-term
borrowings. Since 1993, the Company has also financed its operations through
the issuance of capital stock to the principal stockholders for aggregate
proceeds of $8.4 million. In fiscal 1996, net cash provided by operating
activities of $1.0 million in addition to cash proceeds from the issuance of
common stock of $1.2 million was partly utilized in reducing the Company's
long-term debt by $0.5 million. In fiscal 1995 and 1994, the Company's cash
used in operating activities was financed primarily through the issuance of
preferred stock and long-term debt. See "Certain Transactions."
The increase in accounts receivable, net of allowance for doubtful accounts,
increased to $13.1 million at April 30, 1996, from $7.6 million at April 30,
1995, primarily due to significant license agreements signed near the end of
fiscal 1996.
29
<PAGE>
The additions to property and equipment in fiscal 1994 related primarily to
furnishing new office space in Sweden and the United States while the
corresponding additions in fiscal 1996 relating to furnishing new office space
in the United Kingdom.
The Company finances working capital in part through a bank credit
agreement. Under the terms of such agreement, the Company's current line of
credit allows for borrowings of up to the equivalent of $9.9 million,
available in Swedish kronor, U.S. dollars and British pounds sterling. As of
April 30, 1996, the Company had cash and cash equivalents of $0.6 million,
working capital of $5.9 million and $7.3 million outstanding under its lines
of credit. The Company currently has no significant capital spending or
purchase commitments other than normal commitments under facilities and
capital leases.
The Company believes that the net proceeds from this offering, together with
its current cash balances, its lines of credit and the cash flows generated
from operations, if any, will be sufficient to meet its anticipated cash needs
for working capital and capital expenditures for at least the next 12 months.
The Company intends to invest the Company's cash in excess of current
operating requirements in investment grade, short-term, interest-bearing debt
securities. See "Use of Proceeds."
EFFECT OF RECENT PRONOUNCEMENTS
Accounting for Impairment of Long-Lived Assets
In March 1995, the FASB issued SFAS No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indications of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company will adopt SFAS 121 in the
first quarter of the financial year ending April 30, 1997 and, based on
current circumstances, does not believe the effect of adoption will be
material.
Accounting for Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 is effective for fiscal years beginning on or
after December 15, 1995. SFAS No. 123 requires that the compensation cost of
issuing stock options be measured at fair value using an option-pricing model.
The Company can either recognize the compensation cost in its consolidated
financial statements or, if the recognition option is not chosen, disclose the
pro forma effects in the notes to the consolidated financial statements. The
Company plans to adopt the disclosure option, commencing in the fiscal year
ending April 30, 1997. Therefore, SFAS No. 123 will have no effect on the
Company's net earnings, stockholders' equity or cash flows.
30
<PAGE>
BUSINESS
IMI develops, markets and supports client/server application software that
enables manufacturers, distributors and wholesalers to more effectively manage
the "demand chain." Demand chain management encompasses the execution of
multiple customer-centric order fulfillment processes, including order
management, distribution logistics, inventory replenishment and demand
planning. The Company believes that its principal product, System ESS, is the
only software solution designed specifically to meet the complex or high-
volume demand chain management requirements of large manufacturers,
distributors and wholesalers. System ESS allows customers to leverage the
value of their existing systems by integrating with legacy and new
client/server manufacturing, planning, and financial information systems.
Current customers of IMI include large manufacturers, such as Bristol-Myers
Squibb Company, Campbell Soup Company, Canon U.S.A., Inc., Dannon Company,
Inc., Eastman Kodak Company, Kellogg Company, Matsushita Electrical
Corporation of America, and Unisys Corporation, as well as several retail and
wholesale distributors.
INDUSTRY BACKGROUND
In recent years, there has been a fundamental shift in market power from
manufacturers and distributors to retailers and consumers. This shift has
resulted from the convergence of a number of trends, including the rapid
proliferation in the number and variety of product offerings, shorter product
life cycles, the emergence of more informed and demanding consumers, and the
evolution of the retailing industry from local stores to large national and
regional chains of department stores, "superstores" and specialty category
stores. These trends have continued to change the way manufacturers,
distributors and wholesalers must conduct their businesses to compete
effectively. Historically, manufacturers dictated the terms of trade with
retailers and consumers and, consequently, organized their businesses
primarily to increase manufacturing efficiency and output. Today, customers
increasingly are choosing suppliers based on their ability to match product
flow to actual customer demand. As a result, manufacturers and distributors
are reorganizing their businesses to focus on satisfying customer demand
through effective order fulfillment.
Effective order fulfillment is a complex logistics challenge, requiring
manufacturers and distributors to manage broadening product portfolios,
multinational distribution, reduced delivery response times, frequent and
customer-specific product promotions, lower inventory levels, rapidly changing
consumer behavior, and more complex manufacturing strategies, involving global
sourcing and assembly from a network of internal and outsourced manufacturers
and suppliers. To compete more effectively, manufacturers, distributors and
wholesalers must synchronize their internal planning and execution functions
with external participants in the demand chain, including consumers,
retailers, distributors, manufacturing subcontractors and suppliers. The
efficient management and operation of this "virtual enterprise" (see example
below) requires capturing information from customer orders--most effectively
by using electronic commerce to facilitate communication to and from
customers--and delivering it to support manufacturing resource planning
("MRP"), financial reporting and decision support systems. Managing the flow
of this complex order information is critical to monitoring such variables as
product profitability across customers and geographies, planning the timing
and impact of promotional activities, and meeting demand on a customer-by-
customer and product-by-product basis.
31
<PAGE>
[ARTWORK APPEARS HERE]
In order to cope with the logistics challenges of delivering the right
product to the right location at the right time and at the right price,
manufacturers, distributors and wholesalers, as well as industry consultants
and enterprise application software vendors, have in recent years emphasized
the need to integrate and more effectively manage what is commonly known as
the "supply chain." The supply chain refers to the movement of products from
raw material suppliers to manufacturers, to distributors, to wholesalers, to
retailers, and ultimately to consumers. In an attempt to achieve the effective
integration and management of their supply chains, many companies began to
replace their legacy manufacturing and distribution systems with client/server
ERP systems which support MRP, financial reporting, and some degree of
logistics management functionality. These software solutions traditionally
focus on manufacturing efficiency and financial reporting.
Existing ERP systems tend to focus on supply chain management from a
manufacturer-centric, or supply-driven, point of view and, in attempting to
meet the changing requirements of today's customer-centric or demand-driven
environment, fail to achieve many of the following fundamental strategic
objectives for manufacturers, distributors and wholesalers:
. Automating the Order Fulfillment Process. A high level of system
functionality is required for effective fulfillment of orders placed by
hundreds or thousands of customers regarding specialized products under
differing promotional and packaging schemes. Typically, integrated ERP
systems are not optimized to meet these complex needs, leading to
delayed shipments or added administrative costs. In particular, existing
ERP systems typically cannot disaggregate large orders into their
individual components, or "order lines."
. Management of a Heterogeneous Customer Base. As market power has shifted
to retailers and consumers, manufacturers, distributors and wholesalers
now are forced to accommodate highly specific customer order fulfillment
procedures and other requirements that are dictated by the retailer or
consumer. Integrated ERP systems have been designed to maximize the
output efficiency of the manufacturer and supplier and typically lack
the capabilities necessary to track customer demand and respond
efficiently to highly variable order requirements.
. Scalability. The volume and complexity of customer orders necessitates a
highly scalable order fulfillment solution. The Company believes that
the leading integrated ERP systems do not meet the transaction volume
requirements of many manufacturers, distributors and wholesalers, which
can require a solution capable of efficiently processing in excess of 10
million complex order lines per year.
32
<PAGE>
. Globalized Logistics. Worldwide enterprises must manage their businesses
across multiple legal entities, in multiple currencies and multiple
languages, with product sourcing from a variety of physical locations,
including company-owned manufacturing facilities and warehouses, public
warehouses and third-party suppliers. In order to support logistics
across this type of global network, ERP systems typically require
redundant systems in multiple locations.
. Adaptability for Electronic Commerce. The virtual enterprise concept can
only be implemented successfully if there is compatibility between
internal and external information systems. Increasingly, electronic data
interchange ("EDI") and other modes of electronic communication, such as
the Internet, may provide links between an enterprise and its customers
and suppliers. ERP systems often lack the ease of connectivity required
for electronic commerce.
. Timely Implementation. The order fulfillment process is a complex and
mission-critical application. Companies require high-performance
functionality 24 hours per day, seven days per week. Many buyers of ERP
systems have spent one or more years, and considerable resources,
attempting to implement a client/server solution without significant
success.
THE IMI SOLUTION
IMI develops, markets and supports client/server application software that
enables manufacturers, distributors and wholesalers to more effectively manage
the demand chain. The Company believes demand chain management is the next
stage in the evolution of logistics management, linking the various elements
of the supply chain from a customer-centric, or demand-driven, perspective.
System ESS has been designed specifically for the sophisticated order
fulfillment requirements of manufacturers, distributors and wholesalers,
enabling them to match product flow to actual customer demand, thereby
enhancing revenue opportunities and reducing administrative and
logistics/distribution costs. The key strengths of System ESS include the
following:
. Order Line Independence. System ESS was designed to allow the automation
and tracking of complex orders by treating each line of an order
independently. This "order line independence" allows a customer order to
be serviced automatically by any number of sales organizations, from any
number of dispersed inventory locations, for any number of customer
destinations. Moreover, order line independence allows the individual
order lines in a customer order to be fulfilled simultaneously or
sequentially. With System ESS, a customer can place a single order that
mixes supply modes, shipping dates and destinations, pricing structures,
discount schedules, special promotions, and terms of payment. In
addition, System ESS enables companies to automate the order fulfillment
process, reducing order cycle time and administrative costs, and
presents information in a form which is optimized for detailed
measurement and planning.
. Customer-driven Software Architecture. Each business process function
within System ESS is highly flexible, accommodating a heterogeneous mix
of customer attributes, including pricing structures, delivery methods,
order placement and billing procedures, and promotional activities.
Robust customer definition processes in System ESS enable companies to
manage diverse customer accounts efficiently and deliver tailored
services for maximum customer satisfaction.
. Scalability. System ESS is based on a three-tier distributed
architecture that provides for enterprise-wide scalability. Currently,
System ESS is scaled in some implementations to 800 or more simultaneous
users. Its efficient use of distributed computing also has enabled users
of System ESS to execute and manage over 10 million complex order lines
annually. The Company believes that the current version of System ESS is
capable of executing substantially higher volumes without significant
loss of efficiency.
33
<PAGE>
. Globalized Logistics. System ESS enables companies to manage more
efficiently the complexities of global sales and distribution from a
single enterprise database. System ESS allows a company to implement a
system for customer order fulfillment on a global basis, while
maintaining business structure flexibility with respect to order
execution procedures, such as warehousing and distribution. Moreover,
the functionality of System ESS supports the complexities of cross-
border transactions, such as multiple currencies, import/export laws and
documentation requirements.
. Integration with Complementary Products and Technologies. System ESS has
been designed specifically to maximize the value of existing and new
complementary systems performing manufacturing, finance or decision
support functions as well as to integrate with EDI systems to facilitate
electronic commerce with customers and suppliers. System ESS currently
uses the Oracle relational database management system as its database
server and supports the leading UNIX-based servers and Windows clients.
The Company currently is developing support for Windows NT servers.
System ESS has been designed to allow customers the freedom to choose
the most functional and advanced component applications for creating
complete, robust enterprise business systems.
. Timely Implementation. The Company has designed its product and service
offerings to enable customers to configure and implement the Company's
software solution on a timely basis, usually within six to 12 months,
depending on the required amount of integration with legacy systems,
thereby reducing costs and increasing the customer's return on
investment. System ESS implementation assistance is provided for
customers through the Company's existing service organization and from
leading systems integrators.
STRATEGY
The Company's objective is to be the leading global supplier of demand chain
management software solutions to manufacturers, distributors and wholesalers.
The key elements of IMI's strategy to achieve this leading position are as
follows:
Target Vertical Markets. The Company has to date focused its marketing,
sales and product development efforts towards establishing quality reference
customers in specific vertical markets, particularly the consumer packaged
goods market and the high-volume wholesale industry. The Company is
increasingly targeting other vertical markets which are characterized by a
need for highly flexible solutions that can support large and complex
transaction volumes, including the health care, automotive parts, electronics
and industrial products sectors.
Expand Sales, Support, Service and Marketing Organizations. IMI currently
sells and supports System ESS through direct sales and support organizations
in North America and Europe. IMI plans to continue to invest significantly in
expanding its sales, support, service and marketing organizations in North
America, Europe and Asia Pacific. As IMI increasingly targets large,
multinational customers and as existing customers migrate their System ESS
installations to other divisions internationally, the Company intends to
provide sales and support services on a worldwide basis.
Expand Usage Within Existing Customer Base. A substantial majority of the
Company's customers are large multinational enterprises that initially have
licensed System ESS for use within one or more specific divisions. IMI
believes that a significant opportunity exists within its established customer
base to expand usage of its software by licensing new sites and additional
users.
Enhance Core Product Functionality. The Company intends to continue to focus
its product development resources on the development and enhancement of demand
chain management software solutions. IMI has over 20 years of experience in
developing logistics management software. The Company
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intends to continue to increase product functionality. IMI currently is
funding development efforts to increase order volume throughput, support
Windows NT servers, support Internet and Intranet applications, and introduce
object-oriented technology.
Integrate with Complementary Products. The Company believes that the ability
to offer a software product that can integrate seamlessly with selected third
party components to provide a comprehensive solution tailored for a particular
vertical market is a key competitive advantage. The Company intends to
continue to integrate System ESS with complementary planning, manufacturing,
finance and decision support systems developed by others, including Oracle,
Manugistics, Inc., Business Objects S.A., and Datalogix, Inc.
Establish Partnerships to Leverage Third Party Strengths. In addition to its
direct sales and support organizations, the Company has and will continue to
establish partnerships with third parties to assist the Company in developing
customer relationships and in successfully customizing and implementing System
ESS.
PRODUCTS AND SERVICES
IMI provides a solution for developing demand chain management systems:
System ESS, a client/server integrated order fulfillment system and a set of
robust development tools. In addition, the Company and its third party systems
integrator partners provide a complete range of customer services, including
training, consulting and maintenance.
[SYSTEM ESS DEMAND CHAIN MANAGEMENT HONEYCOMB APPEARS HERE]
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<PAGE>
SYSTEM ESS
System ESS is an open systems, client/server demand chain management
solution that provides full capabilities for managing and executing the entire
order fulfillment process, including order management, physical logistics,
demand replenishment, price and promotion, demand chain monitoring, global
organization, electronic commerce and decision support. System ESS can operate
on major UNIX server platforms and the Company is currently developing a new
version of System ESS that operates on the Windows NT server platform. The
System ESS client operates on the Windows 3.11, Windows 95 and Windows NT
platforms. System ESS provides support for six languages, and the Company
currently is developing support for five additional languages. System ESS
makes full use of relational database technology, storing each field in its
own column, using descriptive column names and identifying Primary Key/Foreign
Key relations. Because System ESS makes optimal use of relational database
technology, additional third party tools and complementary applications are
easily integrated with System ESS.
System ESS solution components include:
Order Management. System ESS performs the core customer interaction
functions, including customer order receipt, validation, pricing and
invoicing. The order management process initiates and concludes the entire
integrated order fulfillment process and enables users to monitor,
troubleshoot and proactively expedite order exceptions throughout the order
cycle. System ESS flexibly manages a diverse set of order types, including
standard orders, samples, templates, export, assemble to order, stock
transfers and quotes.
Physical Logistics. System ESS manages the transactional processes involving
inbound and outbound product movement. The physical logistics management
process defines the configuration and interaction of all components in the
distribution network, such as warehouses and finished goods. Through tight
integration with order management and sophisticated product
reservation/allocation methods, System ESS physical logistics management
enables companies to efficiently manage the logistics of fulfilling a customer
order. In addition to a comprehensive outbound (pick-pack-ship) and inbound
(finished goods receipt and putaway) logistics solution, System ESS provides a
solution for customer returns, cross-docking, cycle count/physical inventory,
and transportation scheduling.
Demand Replenishment. System ESS performs detailed inventory management
functions involving the sourcing and replenishment of goods in the
distribution network. System ESS establishes a "pull-driven" environment which
optimizes inventory levels and shipment of goods precisely when a customer
needs them. Its inventory and replenishment features are tightly integrated
with the order management process, synchronizing inventory replenishment with
customer demand. System ESS demand replenishment process integrates with the
physical logistics process to automatically trigger and execute stock
transfers throughout the distribution network, and replenishment orders and
drop shipments from outside suppliers. Demand replenishment also supports
vendor managed inventory and continuous replenishment programs.
Price and Promotion. System ESS administers and executes all product pricing
and promotion strategies. Specifically, the System ESS price management
process manages the product price list according to geography, customer
classification or other user-defined parameters, as well as executing and
tracking a wide variety of product discounts, surcharges, accruals and
rebates. System ESS automates business-critical promotion transactions among
manufacturers, field sales organizations and customers to maximize invoice
accuracy and minimize administrative costs due to invoice inaccuracies.
Demand Chain Monitoring. System ESS defines and monitors the attributes of
all customers and products to support the order fulfillment process. A
customer definition consists of all relevant information needed for fulfilling
orders for a highly variable customer base, ranging from nationwide chains
such as Wal-Mart and Kmart to independent, single store operations. Typical
System ESS customer definitions include information such as order placement,
handling and invoice procedures, packaging and
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delivery requirements, credit and terms and conditions. Product definitions
include information necessary for automating fulfillment of orders relating to
a wide variety of goods. Typical product profiles include information such as
product variation and packaging, replacement/substitution of goods, lot
control, kit and assembly information and product restrictions.
Global Organization. System ESS allows a company to define its enterprise
sales and distribution structures, and manage multiple legal entities,
regardless of where they are physically located. It enables companies to
maintain flexible business structures that support product flow to global
customers, while efficiently handling business transactions worldwide.
Electronic Commerce. System ESS provides a complete electronic messaging
architecture that is integrated with all requisite business processes between
customers and suppliers, including orders, order changes and acknowledgments,
as well as shipping confirmations and invoices. In addition, through its
recently introduced Internet Workbench, System ESS provides order status and
tracking for participants in the demand chain, such as buyers, field
representatives and customers. System ESS also supports ISO/Edifact,
ANSI/X.12, and UCS EDI standards. The Company currently is developing
capabilities for Internet-based order placement.
Decision Support. System ESS continuously captures highly detailed data
regarding every customer purchase and related events and stores such data in
an information repository suitable for decision support processes. System ESS
provides decision support capabilities through a set of Microsoft Windows-
based client/server tools called the Customer Service Workbench, which
provides tight integration between the System ESS information repository and
electronic mail, spreadsheets, and event-trigger facilities. Other functions
include integration with Business Objects and the Company's proprietary
Economic Value Analyzer, a decision support tool that continuously monitors
the return on working capital and contains functions for volume, price and
capital simulations.
SYSTEM ESS PRICING
The license price for System ESS is determined based upon the number of
servers and defined users in the customer's system. During fiscal 1996 license
fees for System ESS generally ranged from $0.5 million to $3.0 million, and
averaged $1.5 million. The Company expects that license fees will continue to
increase in size as the Company's products become more sophisticated and
manage larger and more geographically dispersed locations. See "Risk Factors--
Lengthy Sales and Implementation Cycle; Increasing Size of Orders."
The Company derived approximately 68%, 74% and 84% of its total revenue in
fiscal 1994, 1995 and 1996, respectively, from the licensing of System ESS and
providing complementary services, and the Company expects to derive a
substantial percentage of its total revenues from licenses of System ESS in
future periods. See "Risk Factors--Dependence on Principal Product."
SYSTEM ESS TOOLS
The Company supports System ESS with a range of software tools developed by
the Company or by third parties. These tools are used by the Company to
develop, deliver and maintain System ESS and by the Company's customers to
implement, develop extensions to and support System ESS.
TRIM. TRIM is a 4GL application development tool which is optimized for
applications involving large transaction volumes and large numbers of
concurrent users. TRIM is licensed by the Company from Trifox, Inc. and was
used by the Company to develop System ESS. TRIM is also sold as an
applications development tool to customers requiring the ability to develop
custom applications. See "Proprietary Rights."
SDCM. The Software Development and Configuration Manager ("SDCM") tool
allows the Company to develop, deliver and maintain System ESS. SDCM also
allows customers to develop customized System ESS functionality in a multi-
user environment, control the modification of programs, documentation and
databases, as well as manage data security and system integrity in the
implementation of System ESS upgrades.
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Event Manager and Event Express. Event Manager and Event Express allow
customers to easily integrate System ESS with other management information
systems, such as financial reporting and manufacturing resource planning
systems.
CUSTOMER SERVICE AND SUPPORT
The Company believes that providing a high level of customer service and
technical support is essential to customer satisfaction and timely
implementation of System ESS. As of April 30, 1996, IMI had 151 employees in
its customer service and support organization providing software maintenance
and support, training, and consulting services.
IMI provides the following services and support to its customers:
Implementation and Technical Services. IMI provides implementation services
ranging from business process reengineering to integration and customer-
specific functionality, as well as technical services. In addition, the
Company has established its Demand Chain Alliance ("DCA") Program, which
trains and certifies third party providers. DCA participants include: Computer
Sciences Corporation, Computer Task Group Limited, and SHL Systemhouse, Inc.
in the United States; and Hoskyns Group plc, Unisys Norge A/S, and ECsoft plc
in Europe. These companies provide systems integration and expertise to IMI
customers and aid in the implementation and ongoing technical consulting of
System ESS software solutions. The implementation of System ESS typically
requires six to 12 months. There can be no assurance that delays in the
implementation process of System ESS for any given customer will not have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risk Factors--Lengthy Sales and Implementation
Cycles; Increasing Size of Orders" and "--Reliance on and Need to Develop
Additional Relationships with Third Parties."
Training Services. IMI customers can receive, for a fee, training either at
the customer's premises or at one of IMI's offices. Course offerings are
divided into four primary blocks: System ESS, Oracle Financials, System
Administration and System Development.
Customer Support. The Company has fully-staffed support centers in the
United States, the United Kingdom and Sweden. IMI provides 24 hour support
through telephone and electronic mail, and uses logging/tracking systems for
quality assurance.
CUSTOMERS
The Company's target customers are multinational manufacturers, distributors
and wholesalers in the consumer packaged goods, health care, electronics,
automotive parts, and industrial products sectors, as well as other high-
volume wholesalers. As of May 31, 1996, the Company licensed the current
version of System ESS to 28 customers, representing over 8,300 licensed users
worldwide. The following table sets forth the license date and territory with
respect to each of the Company's customers as of April 30, 1996:
<TABLE>
<CAPTION>
1993 AND PRIOR FISCAL YEARS FISCAL 1994 FISCAL 1995 FISCAL 1996
- --------------------------- ----------------------------- ---------------------- ------------------------------------
<S> <C> <C> <C>
Ahlsell (Sweden) Bristol-Myers Squibb (USA) Alpina (Columbia) Alko (Finland)
Eastman Kodak (Nordic) Matsushita (USA) Campbell Soup (USA) Canon (USA)
EMMA Healthcare (Sweden) Norsk Medisinaldepot (Norway) Coats & Clark (USA) Carlton United Breweries (Australia)
Granges Metall (Sweden) United Tiles (Nordic) Dannon (USA) First Brands (USA)
Tour & Andersson SLL Healthcare (Sweden) Hartz Mountain (USA)
(Sweden)
SLO (Finland) Hormel Foods (USA)
Kellogg (worldwide)
Kiiltoo (Finland)
MoDo Merchants (UK)
Posten Logistik (Sweden)
Unisys (worldwide)
</TABLE>
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<PAGE>
New license sales are often for large dollar amounts, typically ranging from
$0.5 million to $3.0 million, and averaging $1.5 million and, therefore,
individual customers have often accounted for more than 10% of total revenues
in particular quarterly periods. For the year ended April 30, 1994, the
Company recorded revenues from two customers which comprised 27% and 11% of
total revenues, respectively. For the year ended April 30, 1995, the Company
recorded revenues from two customers which comprised 13% and 12% of total
revenues, respectively. For the year ended April 30, 1996, the Company had no
single customer representing more than 10% of total revenues. The Company
believes that the loss of any of these customers would not have a material
adverse effect upon the Company's business, operating results or financial
condition. Although the Company does not expect any of its current customers
to account for 10% or more of its total revenues in 1997, the Company expects
that individual customers (the identity of which will likely change on a
quarterly basis) will continue to account for 10% or more of the Company's
total quarterly revenues in future periods.
The following case studies describe how certain customers have adopted and
are implementing System ESS. Each of these customers is seeking to implement
customer-centric order fulfillment systems to enhance revenues through more
responsive customer service and reduce costs through improved operational
efficiency. In each case, the customer selected System ESS after a competitive
evaluation. There can be no assurance that new or existing customers will
achieve any of the potential benefits described below.
Eastman Kodak Company. Eastman Kodak Company ("Kodak") is engaged primarily
in developing, manufacturing, and marketing consumer and commercial imaging
products. In Europe, Kodak maintained separate distribution systems for each
of its business units in Sweden, Norway, Finland and Denmark. It operated four
warehouses and sourced products for distribution from five manufacturing
facilities throughout Europe. Kodak wanted to improve its level of customer
service while at the same time rationalizing its distribution network and
lowering total distribution and administrative costs. It decided to migrate to
client/server technology, while maintaining interfaces to legacy systems
providing financial and manufacturing information. To achieve its objectives
Kodak had to coordinate these activities across separate legal entities in
each country, utilizing multiple currencies and different languages. After a
competitive evaluation, Kodak licensed System ESS from IMI in 1991. The system
was operational in 12 months and has enabled Kodak to improve its customer
service levels while reducing distribution-based headcount by approximately
30% and lowering inventory carrying and warehousing costs (three of an
original total of four warehouses have been closed). Using System ESS, Kodak
can now source products for individual order lines on the same customer
purchase order from central or local warehouses, different manufacturing
facilities in different countries or from external suppliers. The system
handles over 450,000 complex order lines per year and serves 200 users in
eight different entities in four different countries using four different
languages.
Campbell Soup Company. The Campbell Soup Company ("Campbell") is a leading
manufacturer of high quality, branded convenience food products, including
Campbell's Soup, Pace (Mexican foods) and Pepperidge Farm (baked goods and
convenience foods). In its North American business units, Campbell recognized
that its customer service and product replenishment systems were not
effectively coping with the growing demands of retailers. Existing
administrative and control systems could not handle the increasing complexity
of the order fulfillment process, including order control, pricing, promotion,
invoicing, settlement and product returns, resulting in higher administrative
and operational costs. After a competitive evaluation Campbell selected System
ESS as the core of its new customer service solution. The Company believes
that System ESS, when implemented, will allow Campbell to (i) improve and
streamline its order fulfillment process; (ii) reduce average order cycle
time; (iii) increase the percentage of error free invoices; and (iv) reduce
the annual number of transactions with customer deductions.
Ahlsell AB. Ahlsell AB ("Ahlsell"), a member of the Trelleborg Group, is a
leading Swedish wholesaler serving the building industry with products for
plumbing/heating, electrical and refrigeration. Ahlsell serves 35,000 small
business customers, operates 70 retail stores, and has annual
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revenues of approximately $500 million. In the late 1980's, Ahlsell wanted to
improve customer service levels while reducing distribution and administrative
costs. However, Ahlsell operated on a decentralized basis, both geographically
throughout Sweden and internally, without integration of its logistics and
financial information systems. Its challenge was compounded by extremely large
order processing demands, requiring it to process an average of approximately
9 million order lines per year. System ESS was fully operational in fiscal
1992, and currently handles over 800 concurrent users operating on one of the
world's largest commercial UNIX Oracle application databases. Following the
implementation of System ESS, Ahlsell has reduced its warehouses from 10 to 1,
which stocks 50,000 different items. In addition, it offers its customers
50,000 items which are not held in inventory, but can be purchased from third
party suppliers, mixed with stock orders and drop-shipped. Ahlsell has
improved product availability and achieved 24-hour in-country delivery while
reducing administrative costs by approximately 75% and lowering inventory
levels.
SALES AND MARKETING
The Company sells and supports its products through direct sales and support
organizations in Sweden, the United States and the United Kingdom. The Company
maintains corporate headquarters in Stockholm, Sweden and has sales and/or
support services offices in Tarrytown, New York; Boston, Massachusetts;
Marlton, New Jersey; Chicago, Illinois; Los Angeles, California; London,
United Kingdom; and Gothenburg and Linkoping, Sweden. At April 30, 1996, the
Company employed 38 sales and marketing personnel. The Company intends to
increase expenditures to expand its direct sales and marketing organizations
in the United States, Europe and Asia Pacific. To support its direct sales
force, the Company conducts marketing programs that include public relations,
direct mail, trade shows, product seminars, user group conferences and ongoing
customer communication programs. See "Risk Factors--Dependence upon Successful
Expansion of Sales, Support, Service and Marketing Organizations."
The Company also relies on informal arrangements with a number of consulting
and systems integration firms to enhance its marketing, sales and customer
support efforts, particularly with respect to implementation and support of
its products as well as lead generation and assistance in the sale process.
The Company expects to continue to rely significantly upon such third parties
for marketing and sales, lead generation, product implementation, customer
support services and end user training. See "Risk Factors--Reliance on and
Need to Develop Additional Relationships with Third Parties."
In addition, the Company has an informal joint marketing and sales
arrangement with Oracle pursuant to which the two companies jointly market to
potential customers in the consumer packaged goods market. The Company
believes that its relationship with Oracle increases the Company's opportunity
in this market because of Oracle's extensive penetration with consumer
packaged goods companies and its large sales, marketing, service and support
organizations. Under this arrangement, the Company pays to Oracle a percentage
of the Company's license revenue from customers in the consumer packaged goods
market to whom licenses are jointly marketed by Oracle and the Company. This
fee is not payable with respect to certain specified customers or potential
customers with whom the Company has had previous contact. The Company believes
that its relationship with Oracle is beneficial to the Company and the parties
have commenced discussions concerning the formalization of their relationship.
See "Risk Factors-- Relationship with Oracle Corporation."
Because the licensing of the Company's products generally involves a
significant capital expenditure by the customer, the Company's sales process
is subject to the delays and lengthy approval processes that are typically
involved in such expenditures. For these and other reasons, the sales cycle
associated with the licensing of the Company's products varies substantially
from customer to customer and typically lasts between six and 12 months,
during which time the Company may devote significant time and resources to a
prospective customer, including costs associated with multiple site visits,
product demonstrations and feasibility studies, and experience a number of
significant delays, over which the Company has no control. See "Risk Factors--
Lengthy Sales and Implementation Cycle; Increasing Size of Orders."
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PRODUCT DEVELOPMENT
The Company has devoted significant resources to product development since
its inception and has increased such investments in recent years. The
Company's product development expenses for the year ended April 30, 1994, 1995
and 1996 were $5.5 million, $7.0 million and $6.8 million, respectively. As of
April 30, 1996, the Company employed 80 people in product development. The
Company intends to increase its investments in product development in future
periods.
The Company believes that its future success depends upon its ability to
continue to enhance existing products, respond to changing customer
requirements and develop and introduce new or enhanced products that keep pace
with technological developments and emerging industry standards. Customer
requirements include, but are not limited to, operability across distributed
and changing heterogeneous hardware platforms, operating systems, relational
databases and networks. For example, as certain of the Company's customers
start to utilize Windows NT or other operating platforms, it will be necessary
for the Company to enhance its System ESS products to operate on such
platforms in order to meet these customers' requirements. The Company is
currently developing a new version of System ESS that operates on the Windows
NT server platform, supports Internet-based electronic commerce and supports
five additional languages. However, there can be no assurance that the Company
will be successful in developing this enhanced version of System ESS or new
products on a timely basis, or that such enhancements or new products, when
introduced, will achieve market acceptance or will adequately address the
changing needs of the marketplace. See "Risk Factors--Rapid Technological
Change and Requirement for Frequent Product Transitions."
COMPETITION
The Company's products are targeted at the emerging market for demand chain
management software, which is intensely competitive and characterized by rapid
technological change. The Company's competitors are diverse and offer a
variety of solutions directed at various segments of the supply and demand
chain as well as the enterprise as a whole. These competitors include
(i) enterprise application software vendors, such as SAP, which currently
offer sophisticated client/server ERP solutions, (ii) companies offering
standardized or customized products on mainframe and/or mid-range computer
systems, (iii) internal development efforts by corporate information
technology departments, (iv) smaller independent companies which have
developed or are attempting to develop advanced logistics and execution
software which complement or compete with the Company's software solutions,
and (v) other business application software vendors who may broaden their
product offerings by internally developing, or by acquiring or partnering with
independent developers of, advanced logistics and execution software. In
connection with specific customer evaluations, certain ERP and other
application software vendors have from time to time jointly marketed the
Company's products as a complement to their own systems. To the extent such
vendors develop or acquire systems with functionality comparable or superior
to System ESS, their significant installed customer base, long-standing
customer relationships and ability to offer a broad solution could provide a
significant competitive advantage over the Company. In addition, many of the
Company's competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources, greater name recognition
and a larger installed base of customers than the Company. In order to be
successful in the future, the Company must continue to respond promptly and
effectively to the challenges of technological change and competitors'
innovations. The Company's competitors may be able to respond more quickly to
new or emerging technologies and changes in customer requirements or devote
greater resources to the development, promotion and sale of their products
than the Company. The Company also expects to face additional competition as
other established and emerging companies enter the market for demand chain
management software and new products and technologies are introduced. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing the ability of their products to address the needs of the
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<PAGE>
Company's prospective customers. Accordingly, it is possible that new
competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share. Increased competition could result in
price reductions, fewer customer orders, reduced gross margins and loss of
market share, any one of which could materially adversely affect the Company's
business, operating results and financial condition.
The principal competitive factors affecting the market for the Company's
products include vendor and product reputation, architecture, functionality
and features, speed, costs and ease of implementation, quality of support and
product quality, price and performance. Based on these factors, the Company
believes that it has competed effectively to date. There can be no assurance
that the Company will be able to compete successfully against current and
future competitors, and the failure to do so could have a material adverse
effect upon the Company's business, operating results and financial condition.
See "Risk Factors--Competition."
PROPRIETARY RIGHTS
The Company relies on a combination of copyright, trademark and trade secret
laws, confidentiality procedures and license arrangements to establish and
protect its proprietary rights. As part of its confidentiality procedures, the
Company licenses its software pursuant to signed license agreements that
impose restrictions on the licensee's ability to utilize the software and
generally enters into non-disclosure agreements with its employees,
distributors and corporate partners, and limits access to and distribution of
its software, documentation and other proprietary information. Despite these
precautions, it may be possible for a third party to copy the Company's
products or otherwise obtain and use the Company's proprietary technology
without authorization. Policing unauthorized use of the Company's products is
difficult, and, while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be
a persistent problem. In addition, the laws of certain countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States or Sweden. Accordingly, there can be no assurance that the
Company's protection of its proprietary rights will be adequate or that the
Company's competitors will not independently develop similar technology or
duplicate the Company's products.
The Company is not aware that any of its products infringe the proprietary
rights of third parties. There can be no assurance, however, that third
parties will not claim such infringement by the Company with respect to
current or future products. The Company expects that software product
developers increasingly will be subject to such claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in the industry segment overlaps. Any such claims,
with or without merit, could result in costly litigation that could absorb
significant management time, which could have a material adverse effect on the
Company's business, operating results and financial condition. Such claims
might require the Company to enter into royalty or license agreements. Such
royalty or license agreements, if required, may not be available on terms
acceptable to the Company or at all, which could have a material adverse
effect upon the Company's business, financial condition or results of
operations. See "Risk Factors--Dependence on Proprietary Technology; Risks of
Infringement."
EMPLOYEES
As of April 30, 1996, the Company employed a total of 287 full-time
employees, including 201 in Sweden, 64 in the United States and 22 in the
United Kingdom. The Company believes its future success will depend in part
upon its ability to attract and retain highly skilled management, marketing,
sales, consulting and product development personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
able to retain its key employees or that it will be successful in attracting,
assimilating and retaining such personnel in the future. Of the Company's 287
full-time employees, 38 are in sales and marketing, 151 in technical support
and maintenance, 80 are in product development and 18 are in general
administrative functions. IMAB voluntarily complies with the Swedish
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Act of Board Representation for Employees, which provides employees of certain
companies the right to elect representatives to the board of directors of such
companies. Two employees (and two deputy employee representatives) are elected
as representatives to IMAB's board of directors. The Company does not have any
collective bargaining agreements with its employees and believes that its
employee relations are good. See "Risk Factors--Dependence on and Need to Hire
Additional Personnel in All Areas."
FACILITIES
The Company's principal administrative, sales, marketing, product
development and support facilities are located in Stockholm, Sweden, where the
Company leases approximately 50,000 square feet under a lease agreement that
expires in September 1997. The Company also leases office space for its five
sales and service offices in the United States, two in Sweden and one in the
United Kingdom. The Company believes that its facilities are adequate for its
current needs and that suitable additional space will be available as
required. See Note 11 of Notes to Consolidated Financial Statements for
information regarding the Company's obligations under its facilities leases.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding that would have a
material adverse effect on the Company's business, operating results or
financial condition.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information as of the date of this
Prospectus with respect to each person who is an executive officer or director
of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stig G. Durlow (1)...... 45 Chairman of the Board, President and Chief Executive Officer
Carl Joelsson........... 52 Vice President, World Wide Services
Mats Lillienberg........ 35 Vice President, Product Development
Lars-Goran Peterson..... 51 Vice President, Finance, Chief Financial Officer and Secretary
Jeffrey A. Harris
(1)(2)................. 40 Director
William H. Janeway...... 53 Director
Martin Leimdorfer
(1)(2)................. 60 Director
Geoffrey W. Squire (2).. 49 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Stig G. Durlow joined the Company as Vice President, Nordic Operations in
1994 and in February 1995 was promoted to President and Chief Executive
Officer of the Company. Mr. Durlow has served as a director of the Company and
as Chairman of the Board since May 1996. Mr. Durlow started his professional
career at IBM Sweden in 1974 as a Systems Engineer. He held various sales and
marketing positions in Sweden and in 1991 became the Director of Systems
Strategies for IBM Europe in Paris. Most recently he was responsible for the
Industrial Sector for IBM in the Nordic countries as well as the Public Sector
in Sweden. Mr. Durlow holds a M.Sc. degree in Electrical Engineering from
Chalmers University of Technology, Gothenburg, Sweden.
Carl Joelsson joined the Company in 1988 as President of Industri-Matematik
Projektledning AB, a subsidiary of the Company which provides implementation
services and support for the Company's customers. Mr. Joelsson was also the
project leader for developing System ESS and installing the system at Ahlsell
AB. Mr. Joelsson is currently Vice President, World Wide Services. From 1980
to 1988, Mr. Joelsson was President of Joeldata AB, a software consulting
company.
Mats Lillienberg joined the Company in 1984 as a System Analyst responsible
for development of enhancements to System ESS products and currently is Vice
President, Product Development. Before joining the Company, Mr. Lillienberg
worked for Kommun Data AB as a Programmer Analyst for two years. Mr.
Lillienberg holds a U.C. degree in Automatic Data Processing and Economics
from Stockholm University.
Lars-Goran Peterson joined the Company in February 1992 and has served as
its Chief Financial Officer since January 1994. Mr. Peterson served in various
other capacities with the Company between February 1992 and January 1994.
Before joining the Company, Mr. Peterson was Chief Financial Officer of AB
Calvert & Co., a wholesale distributor of tube and steel, from 1982 to 1992.
Prior to joining AB Calvert & Co., Mr. Peterson served as Chief Financial
Officer of Nordiska Industri AB, a manufacturer and wholesale distributor of
textiles, from 1972 to 1982.
Jeffrey A. Harris has served as a director of IMAB since 1991 and as a
director of the Company since 1995. Mr. Harris has been a Managing Director of
E.M. Warburg, Pincus & Co., Inc. ("E.M. Warburg")
44
<PAGE>
since 1988, where he has been employed since 1983. Mr. Harris is a director of
Newfield Exploration Company, Comcast UK Cable Partners Limited, Knoll, Inc.
and several privately held companies.
William H. Janeway has served as a director of IMAB since 1991 and of the
Company since May 1995. Mr. Janeway has been a Managing Director of E.M.
Warburg since 1988. Prior to joining E.M. Warburg, Mr. Janeway was the Vice
President and Director of Corporate Finance from 1979 to 1988 at F. Eberstadt
& Co., Inc. Mr. Janeway is a director of Vanstar Corporation, Maxis, Inc.,
OpenVision Technologies, Inc., Zilog, Inc. and several privately-held
companies.
Martin Leimdorfer founded IMAB in 1967. Dr. Leimdorfer was President and
Chief Executive Officer of IMAB from 1967 to 1995. He has been a director of
IMAB since its formation and a director of the Company since its formation in
1995. Dr. Leimdorfer is a member of the Royal Swedish Academy of Engineering
Sciences and serves on the boards of the Swedish Trade Council and the Swedish
Institute for Industrial and Economics Research. He holds a M.Sc. degree from
the Royal Institute of Technology, Stockholm, Sweden, and a Ph.D. from
Chalmers University of Technology, Gothenburg, Sweden.
Geoffrey W. Squire has served as a director of IMAB since 1994 and as a
director of the Company since May 1996. Mr. Squire is a director and Chief
Executive Officer of OpenVision Technologies, Inc. From 1984 to 1987, Mr.
Squire was Managing Director and Senior Vice President of Oracle and from 1987
to 1990, Chief Executive Officer of Oracle Europe. In 1990, he was promoted to
Executive Vice President of Oracle and President of Worldwide Operations. In
1992, he was appointed to Oracle's five-person Executive Committee with
responsibility as Chief Executive, International Operations. Mr. Squire has
sat on the Council of the United Kingdom Computing Services and Software
Association since 1990. In 1995, Mr. Squire was elected as the founding
President of the European Information Services Association.
COMPENSATION OF DIRECTORS
Non-employee directors are paid $10,000 per year plus $1,000 for each board
meeting they attend. The Company does not pay additional amounts for committee
participation. All directors are reimbursed for their reasonable out-of-pocket
expenses incurred in attending the meetings of the Board of Directors and
committees thereof. Non-employee directors are eligible to receive non-
statutory options under the Company's Stock Option Plan. See "Management--
Stock Option Plan."
AUDIT AND COMPENSATION COMMITTEES
The Company's Board of Directors appointed its Audit Committee in May 1996.
The Audit Committee consists of Messrs. Harris and Squire and Dr. Leimdorfer.
The Audit Committee makes recommendations to the Board of Directors regarding
the selection of independent auditors, reviews the result and scope of the
audit and other services provided by the Company's independent accountants and
reviews and evaluates the Company's audit and control functions. Prior to May
1996, the Company's Board of Directors undertook the responsibilities of the
Audit Committee. During fiscal 1996, the Compensation Committee consisted of
Mr. Harris and Dr. Leimdorfer. The Compensation Committee makes
recommendations regarding the Company's Option Plan and Restricted Stock Plan
and makes decisions concerning salaries and incentive compensation for
employees of the Company.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
During fiscal 1996, the Compensation Committee of the Company's Board of
Directors consisted of Mr. Harris and Dr. Leimdorfer. No executive officer of
the Company serves as a member of the Board of Directors or Compensation
Committee of any entity which has one or more executive officers serving as a
member of the Company's Board of Directors or Compensation Committee. During
fiscal 1996, Mr. Harris served as the Secretary of the Company and Dr.
Leimdorfer served as President of the Company. Dr. Leimdorfer has a consulting
arrangement with the Company under which he was paid approximately $306,000 in
fiscal 1996 for services rendered. See "Certain Transactions."
45
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth summary information regarding compensation
paid by the Company for services during the fiscal year ended April 30, 1996,
to the Company's Chief Executive Officer and Chief Financial Officer (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION AWARDS
------------------------------------- -------------------
OTHER ANNUAL RESTRICTED
NAME SALARY ($) BONUS ($) COMPENSATION (2) STOCK (3)
---- ---------- --------- ---------------- -------------------
<S> <C> <C> <C> <C>
Stig G. Durlow, Chairman
of the Board, President
and Chief Executive
Officer................ $187,579 $86,214 -- 600,000
Lars-Goran Peterson,
Vice President,
Finance, Chief
Financial Officer and
Secretary.............. $101,353 -- -- 192,000
</TABLE>
- --------
(1) Amounts reflect Swedish kronor converted into U.S. dollars at an exchange
rate of $1.00 = SEK 6.94. See "Exchange Rates."
(2) Excludes certain perquisites and other benefits, the amount of which did
not exceed 10% of the Named Executive Officer's total annual salary and
bonus.
(3) Represents shares of Common Stock purchased under the Company's Restricted
Stock Program. See "Management--Restricted Stock Program."
EMPLOYMENT AGREEMENTS
The Company is party to employment agreements with Stig G. Durlow and Lars-
Goran Peterson that provide for an annual salary and other provisions that are
customary in the Swedish labor market. In addition, Mr. Durlow's employment
agreement provides for a bonus based upon the Company's fiscal year
profitability. Each of Messrs. Durlow and Peterson receive a car allowance and
Mr. Durlow is entitled to contributions to a pension plan.
STOCK OPTION PLAN
In May 1995, the Company adopted the Industri-Matematik International Corp.
Stock Option Plan (the "Option Plan"), under which 3,000,000 shares of Common
Stock were reserved for issuance upon exercise of options granted to key
employees, members of the Company's Board of Directors, consultants and other
advisors of the Company. The Option Plan provides for grants of incentive
stock options to key employees (including officers and employee directors) and
nonstatutory stock options for members of the Board of Directors, consultants
and other advisors of the Company who are not employees of the Company. The
Option Plan is administered by a Committee appointed by the Board of Directors
of the Company which determines recipients and types of awards to be granted,
including the exercise price, number of shares subject to the award, vesting
and other conditions.
The terms of stock options granted under the Option Plan may not exceed 10
years. The exercise price of options granted under the Option Plan is
determined by the Committee; provided, however, that the exercise price of an
incentive stock option cannot be less than equal to the fair market value of
the Common Stock on the date the option is granted. The exercise price of any
incentive stock option granted to a recipient who owns more than 10% of the
voting power of all classes of the Company's stock cannot be less than equal
to 110% of the fair market value of the Common Stock on the date the option is
granted.
Options outstanding under the Option Plan generally vest and become
exercisable assuming continued services as an employee, director or consultant
at the rate of 20% of the shares subject to an option on the first anniversary
of the Option Agreement and 20% every year thereafter for four years.
46
<PAGE>
Shares subject to options which have lapsed or terminated may again be
subject to options granted under the Option Plan. Furthermore, the Committee
may amend an option to accelerate the dates after which an option may be
exercised in whole on in part. Upon any change of control in the Company,
including (a) the merger or consolidation of the Company with any other
corporation, the sale of substantially all of the assets of the Company, the
sale by the shareholders of the Company of a majority of the voting stock of
the Company, or the liquidation or dissolution of the Company, or (b) any
action taken by the Company's shareholders or by the Company's Board which the
Board determines to constitute a change of control, each option or portion
thereof which is not yet exercisable vests and becomes exercisable in full and
the termination date for each option which has a termination date falling
within 90 days after a change of control is extended until the earlier of the
90th day after the change of control or the day before the tenth anniversary
of the date such option was granted.
The Committee, in its discretion, may in connection with the grant of any
option under the Option Plan, grant to the optionee a stock appreciation right
(an "SAR"). Such SAR allows the optionee to receive, in the sole discretion of
the Committee, shares and/or cash equal to the excess of the fair market value
of an option on the date of exercise over the exercise price on the date of
the exercise of the option. Neither options nor SARs may be transferred by the
optionee other than by will or the laws of descent and distribution.
As of April 30, 1996, options to purchase an aggregate of 939,975 shares of
Common Stock were granted by the Company to nine people, and 2,060,025 shares
of Common Stock remained available for future grant. The Option Plan will
terminate April 30, 2005, unless terminated sooner by the Board of Directors.
RESTRICTED STOCK PROGRAM
In May 1995, the Company instituted a restricted stock program (the
"Restricted Stock Program") whereby shares of the Company's Common Stock were
purchased by certain key employees of the Company's operating subsidiary in
Sweden in exchange for nonrecourse promissory notes. The shares were issued
through a wholly owned subsidiary of the Company, Software Finance Corporation
("SFC"). Principal on the promissory notes is due either nine or ten years
after issuance with interest being due and payable annually, generally at the
beginning of each fiscal year.
Under the terms of the restricted stock program, SFC has an option to
repurchase the shares issued to each employee provided it pays the annual
option price. The exercise price to be paid by SFC upon exercise of a purchase
option shall be the fair market value, provided that if the option to purchase
is exercised prior to the end of a stated period, then the exercise price
shall be the initial purchase price for a percentage of the shares after the
first anniversary of the option agreement, decreasing by 20% each subsequent
year, until the exercise price is the fair market value. SFC pays an annual
option premium to the restricted stock shareholders at a rate substantially
equal to the interest due on the non-recourse promissory note.
SFC has the right and obligation to apply against the payment of any
principal due on the promissory note any amounts payable by SFC to the
recipient of the Shares as the exercise price under the Option Agreement. The
Company has the ability and intent to prevent the recipients from selling the
purchased securities. Accordingly, the Company has not recognized any
compensation expense in respect of the restricted stock in its statements of
operations. The restricted stock shares issued under this program and
dividends paid are subject to a pledge and security interest held by SFC.
Under the Restricted Stock Program a total of 1,256,985 shares have been
purchased by eight people at a weighted average price of $2.09 per share for
total proceeds of $2,626,000.
47
<PAGE>
EMPLOYEE BENEFIT PLANS
The Company provides retirement benefits for substantially all employees in
the United States and in other locations outside of Sweden. In the United
States and the United Kingdom, the Company sponsors defined contribution
plans. The Company's Swedish subsidiary, IMAB, has a supplemental defined
contribution plan for certain key management. IMAB also participates in
several pension plans (non-contributory for employees), which cover
substantially all employees of its Swedish operations. The plans are
administered by a national organization, Pensionsregistreringsinstitutet, in
which most companies in Sweden participate. The level of benefits and
actuarial assumptions are established by the national organization and,
accordingly, IMAB may not change benefit levels or actuarial assumptions.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation contains certain provisions
permitted under the GCL which eliminate the personal liability of directors
for monetary damages for a breach of director's fiduciary duty, except for:
(i) breach of a director's duty of loyalty, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) the unlawful payment of dividends, stock purchase or stock redemption,
or (iv) any transaction from which the director derives any improper personal
benefit. The Certificate of Incorporation provides that a director's liability
shall be eliminated or limited to the fullest extent permitted by the GCL, as
amended from time to time. The Certificate of Incorporation and the Company's
By-laws also contain provisions indemnifying the Company's directors and
officers to the fullest extent permitted by the GCL. The Company has also
entered into agreements to indemnify its directors and executive officers. The
Company believes that these provisions and agreements will assist the Company
in attracting and retaining qualified individuals to serve as directors and
officers.
48
<PAGE>
CERTAIN TRANSACTIONS
Warburg became an IMAB stockholder in 1991 in connection with a transaction
in which IMAB, then a public company in Sweden, became privately owned and
delisted its shares from the Stockholm Stock Exchange.
In June, 1992, the Company issued a term promissory note to Warburg in the
principal amount of $2.5 million (the "1992 Note"). In April, 1993 the
principal amount of the 1992 Note was converted into 1,355,250 additional
shares of IMAB capital stock.
In June, 1993, the Company issued a second term promissory note to Warburg
in the principal amount of $2 million (the "1993 Note"). In January, 1994, the
principal amount of the 1993 Note was converted into 1,471,875 shares of IMAB
capital stock.
In July, 1994, the Company issued a third term promissory note to Warburg in
the principal amount of $2.5 million (the "1994 Note"). In April, 1995, the
principal amount of the 1994 Note, together with accrued interest thereon, was
converted into 1,319,265 shares of IMAB capital stock.
On May 1, 1995, the then shareholders of IMAB exchanged all of their IMAB
shares for shares of the Company's capital stock (the "Exchange"). No cash
consideration was paid to or by the Company in connection with the Exchange.
Following the Exchange, IMAB became a wholly-owned subsidiary of the Company.
In October, 1995, the same shareholders acquired a total of 612,468 shares of
the Company's Common Stock for an aggregate purchase price of $1,224,936.
At various times during 1995 and 1996 certain employees of the Company
(including certain of its executive officers) purchased an aggregate of
1,256,985 shares of the Company's Common Stock under the Company's Restricted
Stock Program for an aggregate consideration of $2,626,000, or an average
purchase price of $2.09 per share. See "Management--Stock Option Plan," "--
Restricted Stock Program" and "--Executive Compensation."
In July 1996, Dr. Martin Leimdorfer and Warburg entered into a registration
and expenses agreement with the Company under which the Company agreed to
include certain of their shares of Common Stock in this Registration
Statement. In addition, Dr. Leimdorfer and Warburg are entitled to certain
registration rights in the future. See "Description of Capital Stock--
Registration Rights."
The Company has a consulting arrangement with Dr. Leimdorfer which expires
on October 31, 1996. Pursuant to this arrangement, Dr. Leimdorfer earns base
compensation plus contingent compensation based on the Company achieving
certain financial performance targets. Dr. Leimdorfer received $306,000 in
fiscal 1996 pursuant to this arrangement.
The Company has entered into indemnification agreements with its directors
and officers. See "Management--Limitation on Liability and Indemnification
Matters."
All future transactions between the Company and its officers, directors,
principal stockholders and their affiliates will be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors.
49
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the beneficial
ownership of the voting Common Stock of the Company as of the date of this
Prospectus and as adjusted to reflect the sale of the shares of Common Stock
offered hereby, by (i) each person known by the Company to own beneficially 5%
or more of the outstanding shares of Common Stock, (ii) the Selling
Stockholders, (iii) each director of the Company who beneficially owns shares
of Common Stock, (iv) each Named Executive Officer and (v) all directors and
executive officers as a group and as adjusted to reflect the sale of the
Common Stock offered hereby. Except as otherwise indicated, the persons or
entities listed below have sole voting and investment power with respect to
all shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED NUMBER BENEFICIALLY OWNED
PRIOR TO OF AFTER
OFFERING (1)(2) SHARES OFFERING (1)(2)(5)
------------------ BEING ------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ ---------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Warburg, Pincus Investors,
L.P.(1)(3)(5)................... 6,882,051 55.5% 6,882,051 44.1%
Martin Leimdorfer................ 4,267,017 34.4% 800,000 3,467,017 22.2%
William H. Janeway(1)(4)(5)...... 6,882,051 55.5% 6,882,051 44.1%
Jeffrey A. Harris(1)(4)(5)....... 6,882,051 55.5% 6,882,051 44.1%
Stig G. Durlow(6)................ 600,000 4.8% 600,000 3.8%
Lars-Goran Peterson(6)........... 192,000 1.5% 192,000 1.2%
All executive officers and
directors as a group
(8 persons)(7).................. 12,181,068 98.2% 11,381,068 72.9%
</TABLE>
- --------
(1) Based on 12,406,053 shares of voting Common Stock outstanding prior to
this offering, assuming conversion of outstanding Preferred Stock into
Common Stock. Does not include 12,088,200 shares of nonvoting Class B
Common Stock owned by Warburg, which represents all outstanding Class B
Common Stock. Including such shares, Warburg will hold 68.5% of the
Company's outstanding stock, and Stig G. Durlow, Lars-Goran Peterson, Dr.
Martin Leimdorfer and all executive officers and directors as a group will
hold 2.2%, 0.7%, 12.5% and 84.7%, respectively, of the Company's
outstanding stock after this offering. See "Description of Capital Stock."
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by that
person which are currently exercisable or exercisable within 60 days of
the date of this Prospectus are deemed outstanding. Such shares, however,
are not deemed outstanding for the purposes of computing the percentage
ownership of each other person.
(3) The sole General Partner of Warburg is Warburg, Pincus & Co. ("WP"), a New
York general partnership. Lionel I. Pincus is the managing partner of WP
and may be deemed to control WP. E.M. Warburg, Pincus & Company ("EMWP &
Co."), a New York general partnership that has the same general partners
as WP, manages Warburg. WP has a 20% interest in the profits of Warburg
and, through its wholly-owned subsidiary, E.M. Warburg, EMWP & Co. owns
1.13% of the limited partnership interests in Warburg. Mr. Janeway and Mr.
Harris, directors of the Company, are Managing Directors of E.M. Warburg
and General Partners of WP and EMWP & Co. As such, Mr. Janeway and Mr.
Harris may be deemed to have an indirect pecuniary interest (within the
meaning of Rule 16a-1 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) in an indeterminate portion of the shares
beneficially owned by Warburg, EMWP & Co. and WP. See footnote (2) above.
The named person's address is 466 Lexington Avenue, 10th Floor, New York,
New York, 10017.
(4) All of the shares indicated are owned of record by Warburg and are
included because of Mr. Janeway's and Mr. Harris' affiliation with
Warburg. Messrs. Janeway and Harris disclaim beneficial ownership of these
shares, except to the extent of their respective pecuniary interests
therein. Messrs. Janeway and Harris's address is 466 Lexington Avenue,
10th Floor, New York, New York 10017. See footnotes (2) and (3) above.
(5) Assumes that the Underwriters' over-allotment option is not exercised. If
the over-allotment option were exercised in full, Warburg would own
6,282,051 shares, or 40.3% of the Company's outstanding voting Common
Stock after this offering.
(6) Represents shares of Common Stock purchased under the Restricted Stock
Program, "See Management--Restricted Stock Program."
(7) Includes 60,000 shares purchased by Carl Joelsson and 180,000 shares
purchased by Mats Lillienberg under the Restricted Stock Program. "See
Management--Restricted Stock Program."
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
After giving effect to the filing of a Amended and Restated Certificate of
Incorporation upon the closing of this offering, the authorized capital stock
of the Company consists of 75,000,000 shares of Common Stock, $.01 par value,
12,500,000 of which are designated Class B Common Stock, $.01 par value, and
15,000,000 shares of Preferred Stock, $.01 par value.
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by, the provisions of the Company's Certificate of
Incorporation, which is included as an exhibit to the Registration Statement
of which this Prospectus is a part, and by the provisions of applicable law.
COMMON STOCK
As of May 31, 1996, there were 12,406,053 shares of Common Stock outstanding
held of record by 10 stockholders. There will be 27,694,253 shares of Common
Stock outstanding, including 12,088,200 shares of Class B Common Stock, after
giving effect to the sale of Common Stock offered hereby.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for the payment of dividends. In the event of a liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and liquidation preferences of any outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights or rights to convert their
Common Stock into any other securities. There are no redemption or sinking
fund provisions applicable to the Common Stock. See "Dividend Policy."
CLASS B COMMON STOCK
Following the completion of this offering, 12,088,200 shares of Class B
Common Stock will be outstanding and held by Warburg. The Class B Common Stock
has the same rights, preferences, privileges and restrictions as the Common
Stock, except that the Class B Common Stock has no voting rights. The shares
of Class B Common Stock will, upon any transfer of such shares by Warburg, be
automatically converted into a like number of shares of Common Stock, subject
to adjustment upon certain events with respect to the Common Stock. In
addition the holder of Class B Common Stock has the right to convert such
shares to Common Stock at any time, provided that after conversion, such
holder may not control more than 49% of the Common Stock.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 15,000,000 shares of Preferred Stock in one or more series and to
determine or alter the designation, powers, preferences, privileges and
relative participating, optional or special rights and the qualifications,
limitations or restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or
all of which may be greater than the rights of the Common Stock. The Board of
Directors, without stockholder approval, can issue Preferred Stock with
voting, conversion or other rights that could adversely affect the voting
power and other rights of the holders of Common Stock. Preferred Stock could
thus be issued quickly with terms calculated to delay or prevent a change in
control of the Company or make removal of management more difficult.
Additionally, the issuance of Preferred Stock may have the effect of
decreasing the market price of the Common Stock and may adversely affect the
voting rights of
51
<PAGE>
the holders of Common Stock. Following completion of this offering, there will
be no shares of Preferred Stock outstanding, and the Company has no plans to
issue any of the Preferred Stock.
REGISTRATION RIGHTS
After this offering, the holders of 22,437,268 shares of Common Stock will
be entitled to certain rights with respect to the registration of such shares
under the Securities Act. Under the terms of the agreement between the Company
and the holders of such registrable securities, if the Company proposes to
register any of its securities under the Securities Act, such holders are
entitled to notice of such registration and are entitled to include shares of
such Common Stock therein. Such stockholders benefitting from these rights may
also require the Company to file registration statements under the Securities
Act at the Company's expense with respect to their shares of Common Stock, and
the Company is required to use its reasonable efforts to effect such
registration. Further, holders may require the Company to file additional
registration statements on Form S-3 at the Company's expense. These rights are
subject to certain conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in such
registration in certain circumstances.
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION, BYLAWS AND
DELAWARE LAW
The Company's Certificate of Incorporation and Bylaws, as applicable, among
other things, (i) permit vacancies on the Board of Directors that may occur
between annual meetings and any newly created seats to be filled only by the
Board of Directors and not by the stockholders, subject to any rights of
holders of the Preferred Stock that may be granted by the Board of Directors
in the future, (ii) limit the rights of stockholders to call special meetings
of stockholders and (iii) provide that the Board of Directors, without action
by the stockholders, may issue and fix the rights and preferences of shares of
Preferred Stock. These provisions may have the effect of delaying, deferring
or preventing a change of control of the Company without further action by the
stockholders, may discourage bids for the Common Stock at a premium over the
market price of the Common Stock, may adversely affect the market price of,
and the voting and other rights of, the holders of the Common Stock and could
have the effect of discouraging certain attempts to acquire the Company or
remove incumbent management, including incumbent members of the Company's
Board of Directors, even if some or a majority of the Company's stockholders
deemed such an attempt to be in their best interests.
The Company is subject to Section 203 of the GCL ("Section 203"). Section
203 prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless (i) prior to such date, the board of directors
of the corporation approves either the business combination of the transaction
that resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
outstanding voting stock, excluding certain shares held by employee directors
and employee stock plans, or (iii) on or after the consummation date the
business combination is approved by the board of directors and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that is
not owned by the interested stockholder. For purposes of Section 203, a
"business combination" includes, among other things, a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is generally a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Boston
Equiserve Limited Partnership.
LISTING
The Company has applied to have its Common Stock approved for quotation and
trading on the Nasdaq National Market under the symbol "IMIC."
52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
RESTRICTED SHARES
Upon completion of this offering, the Company will have 27,694,253 shares of
Common Stock outstanding. Of these shares, the 4,000,000 shares sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act, except that any shares purchased by "affiliates" of
the Company, as that term is defined in Rule 144 under the Securities Act
("Affiliates"), may generally only be sold in compliance with the limitations
of Rule 144 described below. The remaining 23,694,253 shares of outstanding
Common Stock held by existing stockholders are deemed "Restricted Shares"
under Rule 144 of the Securities Act. Of these 23,694,253 Restricted Shares,
23,469,268 are held by Affiliates of the Company and will be eligible for sale
without restriction or further registration pursuant to Rule 144 under the
Securities Act upon the expiration of their respective two-year holding
periods, subject to the volume, manner of sale and other limitations of Rule
144 under the Securities Act. In addition, 224,985 Restricted Shares were
issued under the Company's Restricted Stock Program, are held by non-
affiliates and will be eligible for public sale 90 days following this
offering pursuant to Rule 701 under the Securities Act.
The Company intends to register pursuant to a registration statement on Form
S-8/S-3 939,975 shares of Common Stock subject to outstanding options and
2,060,025 shares reserved for future issuance under the Company's Stock Option
Plan and 1,256,985 shares issued pursuant to the Company's Restricted Stock
Program. Such shares of Common Stock (to the extent issued) will be eligible
for sale upon expiration of the lock-up agreements described below, subject to
vesting and exercisability restrictions. The Company expects to file this
registration statement as soon as practicable after the closing of this
offering, and such registration statement is expected to become effective upon
filing. Shares covered by these registration statements will thereupon be
eligible for sale in the public markets, subject to the lock-up agreements, if
applicable.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially
owned Restricted Shares for at least two years is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater
of 1% of the then outstanding shares of Common Stock, or the average weekly
trading volume in the Common Stock in the Nasdaq National Market during the
four calendar weeks preceding the date on which notice of such sale is filed
under Rule 144. In addition, under Rule 144(k), a person who is not an
Affiliate and has not been an Affiliate for at least three months prior to the
sale, and who has beneficially owned Restricted Shares for at least three
years may resell such shares without compliance with the foregoing
requirements. In calculating the two and three year holding periods described
above, a holder of Restricted Shares can include the holding periods of a
prior owner who was not an Affiliate. Rule 701 under the Securities Act
provides that shares of Common Stock acquired on the exercise of outstanding
options or under employee stock plans may be resold by persons other than
Affiliates, beginning 90 days after the date of this Prospectus, subject only
to the manner of sale provisions of Rule 144, and by Affiliates under Rule 144
without compliance with its two-year minimum holding period, subject to
certain limitations.
LOCK-UP AGREEMENTS
The Company and each of the directors, executive officers and stockholders
of the Company have agreed not to offer, sell or otherwise dispose of any
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of Alex. Brown & Sons
Incorporated, except that the Company may issue, and may grant options to
purchase shares of Common Stock under its Stock Option Plan and sell shares
pursuant to the Restricted Stock Program and may issue shares of stock upon
the exercise of currently outstanding stock options. Alex. Brown & Sons
Incorporated may, in its sole discretion and at any time without notice,
release all or any portion of the shares subject to lock-up agreements.
53
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, UBS Securities LLC and SoundView Financial
Group, Inc., have severally agreed to purchase from the Company and the
Selling Stockholders the following respective numbers of shares of Common
Stock at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated...................................
UBS Securities LLC................................................
SoundView Financial Group, Inc....................................
---------
Total........................................................... 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company and the Selling Stockholders have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the initial public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may re-allow, a concession not in excess of $ per
share to certain other dealers. After the initial public offering, the public
offering price and other selling terms may be changed by the Representatives
of the Underwriters.
One of the Selling Stockholders has granted to the Underwriters an option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 600,000 additional shares of Common Stock at the same price per
share as the Company and the Selling Stockholder will receive for the
4,000,000 shares of Common Stock that the several Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the above table bears to 4,000,000, and such Selling
Stockholder will be obligated, pursuant to the option, to sell such shares to
the Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on
the same terms as those on which the 4,000,000 shares are being offered. See
"Principal and Selling Stockholders."
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
54
<PAGE>
The Company and each of its directors, executive officers and stockholders
have agreed not to offer, sell or otherwise dispose of any such shares of
Common Stock for a period of 180 days after the date of this Prospectus,
without the prior written consent of Alex. Brown & Sons Incorporated except
that the Company may issue, and may grant options to purchase shares of Common
Stock under its current Stock Option Plan and sell shares pursuant to the
Restricted Stock Program and may issue shares of stock pursuant to currently
outstanding employee stock options. See "Shares Eligible For Future Sale."
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiations between the Company, the Selling
Stockholders and the Representatives of the Underwriters. Among the factors to
be considered in such negotiations will be prevailing market conditions, the
results of operations of the Company in recent periods, the market
capitalizations, market prices of securities and stages of development of
other companies which the Company and the Representatives of the Underwriters
believe to be comparable to the Company, estimates of the business potential
of the Company and its industry in general and the present state of the
Company's development.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Brobeck Hale and Dorr
International, London, England. The Company is being represented as to certain
matters of Swedish law by Advokatfirman Vinge KB. Certain legal matters will
be passed upon for the Underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated balance sheets as of April 30, 1996 and 1995, and the
consolidated statements of operations, changes in stockholders' equity and
cash flows for each of the three years in the period ended April 30, 1996
included in this Prospectus, have been included herein in reliance on the
report by Ohrlings Coopers & Lybrand AB, independent accountants, given upon
the authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 (File No. 333-05495) under the Securities
Act with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information contained in the Registration Statement,
certain portions of which have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement,
including the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or any other document referred
to herein are not necessarily complete and, in each instance, reference is
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected without charge at the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of all or any part thereof may be obtained from the Commission at
prescribed rates.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm and
quarterly reports containing unaudited financial statements for the first
three quarters of each fiscal year.
55
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of April 30, 1995 and 1996................. F-3
Consolidated Statements of Operations for the years ended April 30, 1994,
1995 and 1996............................................................ F-4
Consolidated Statements of Changes in Stockholders' Equity for the years
ended April 30, 1994, 1995 and 1996...................................... F-5
Consolidated Statements of Cash Flows for the years ended April 30, 1994,
1995 and 1996............................................................ F-6
Notes to the Consolidated Financial Statements............................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders of
Industri-Matematik International Corp.
We have audited the accompanying consolidated balance sheets of Industri-
Matematik International Corp. and subsidiaries as of April 30, 1995 and 1996,
and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended April 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Industri-
Matematik International Corp. and subsidiaries as of April 30, 1995 and 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended April 30, 1996 in conformity with
generally accepted accounting principles in the United States.
Ohrlings Coopers & Lybrand AB
Stockholm, Sweden
June 6, 1996
F-2
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
APRIL 30, EQUITY AT
------------------ APRIL 30,
1995 1996 1996
-------- -------- -------------
(UNAUDITED)
(NOTE 19)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 160 $ 558
Accounts receivable, less allowance for
doubtful accounts
of $205 and $321 at April 30, 1995 and
1996, respectively......................... 7,646 13,067
Accrued receivables......................... 2,836 1,190
Prepaid expenses............................ 973 1,160
Net assets of discontinued operations (Note
17)........................................ 725 1,111
Income taxes receivable..................... 249 48
Other current assets........................ 106 169
-------- --------
Total current assets...................... 12,695 17,303
Non current assets:
Property and equipment, net................. 1,663 1,873
Deferred income taxes....................... 978 1,988
Other non current assets.................... 172 160
-------- --------
Total non current assets.................. 2,813 4,021
-------- --------
Total assets.............................. $ 15,508 $ 21,324
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........... $ 1,412 $ 349
Accounts payable............................ 1,229 1,464
Accrued expenses and other current
liabilities................................ 3,207 3,777
Accrued payroll and employee benefits....... 2,611 3,365
Deferred revenue............................ 1,256 2,386
-------- --------
Total current liabilities................. 9,715 11,341
Long-term liabilities:
Long-term debt.............................. 6,725 7,950
Accrued pension liability................... 1,165 1,482
Deferred income taxes....................... -- 49
-------- --------
Total long-term liabilities............... 7,890 9,481
-------- --------
Total liabilities......................... 17,605 20,822
-------- --------
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred Stock; $.01 par value; 15,000,000
shares authorized; 14,630,250 shares issued
and outstanding (pro forma: no shares
outstanding)............................... 146 146 $ --
Common Stock; voting, $.01 par value;
62,500,000 shares authorized; 7,610,550 and
9,480,003 issued and outstanding (pro
forma: 12,406,053 shares issued and
outstanding)............................... 76 94 124
Class B Common Stock; non-voting, $.01 par
value; 12,500,000 shares authorized;
384,000 shares issued and outstanding (pro
forma: 12,088,200 shares issued and
outstanding)............................... 4 4 120
Additional paid-in capital.................. 11,490 15,323 15,323
Accumulated deficit......................... (12,620) (10,870) (10,870)
Cumulative translation adjustment........... (1,193) (1,569) (1,569)
Notes receivable from stockholders (Note
12)........................................ -- (2,626) (2,626)
-------- -------- -------
Total stockholders' equity................ (2,097) 502 502
-------- -------- -------
Total liabilities and stockholders'
equity................................... $ 15,508 $ 21,324 $21,324
======== ======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Revenues:
Licenses........................................... $ 5,254 $10,661 $15,474
Services and maintenance........................... 11,950 14,543 23,103
Other.............................................. 1,576 2,540 1,432
------- ------- -------
Total revenues................................... 18,780 27,744 40,009
Cost of revenues:
Licenses........................................... 721 2,172 2,717
Services and maintenance........................... 10,030 12,424 16,813
Other.............................................. 831 2,252 947
------- ------- -------
Total cost of revenues........................... 11,582 16,848 20,477
------- ------- -------
Gross profit..................................... 7,198 10,896 19,532
Operating expenses:
Product development................................ 5,517 7,009 6,822
Sales and marketing................................ 3,056 5,720 7,746
General and administrative......................... 3,688 4,192 3,579
------- ------- -------
Total operating expenses......................... 12,261 16,921 18,147
------- ------- -------
Income (loss) from operations....................... (5,063) (6,025) 1,385
Other income (expense):
Interest income.................................... 40 15 13
Interest expense................................... (229) (689) (744)
Miscellaneous income (expense)..................... (227) (384) (12)
------- ------- -------
Income (loss) from continuing operations before
income taxes....................................... (5,479) (7,083) 642
Provision (benefit) for income taxes................ 40 (941) (781)
------- ------- -------
Income (loss) from continuing operations............ (5,519) (6,142) 1,423
Income (loss) from discontinued operations (Note
17)................................................ (151) (246) 327
------- ------- -------
Net income (loss)................................... $(5,670) $(6,388) $ 1,750
======= ======= =======
Pro forma net income per share data: (Note 2)
Income (loss) from continuing operations............ $ 0.06
Income (loss) from discontinued operations.......... 0.01
-------
Pro forma net income per share...................... $ 0.07
=======
Pro forma shares used in per share calculation...... 25,278
=======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTES
CONVERTIBLE CLASS B ADDITIONAL CUMULATIVE RECEIVABLE TOTAL
PREFERRED COMMON COMMON PAID-IN ACCUMULATED TRANSLATION FROM STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL DEFICIT ADJUSTMENT STOCKHOLDERS EQUITY
----------- ------ ------- ---------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of 11,839,110
shares of Convertible
Preferred Stock,
7,610,550 shares of
Common Stock and
384,000 shares of Class
B Common Stock in
exchange for common
stock of IMAB, as if
exchange occurred on
May 1, 1993............ $119 $76 $ 4 $ 6,879 $ (562) $(1,003) $ 5,513
Issuance of 1,471,875
shares of Convertible
Preferred Stock........ 14 1,986 2,000
Currency translation
adjustment............. (64) (64)
Net loss............... (5,670) (5,670)
---- --- --- ------- -------- ------- ------- -------
Balance as of April
30, 1994............. 133 76 4 8,865 (6,232) (1,067) -- 1,779
Issuance of 1,319,265
shares of Convertible
Preferred Stock........ 13 2,625 2,638
Currency translation
adjustment............. (126) (126)
Net loss............... (6,388) (6,388)
---- --- --- ------- -------- ------- ------- -------
Balance as of April
30, 1995............. 146 76 4 11,490 (12,620) (1,193) -- (2,097)
Issuance of 1,256,985
shares of Common Stock
under Restricted Stock
Program................ 12 2,614 (2,626) 0
Issuance of 612,468
shares of Common Stock. 6 1,219 1,225
Currency translation
adjustment............. (376) (376)
Net income............. 1,750 1,750
---- --- --- ------- -------- ------- ------- -------
Balance as of April
30, 1996............. $146 $94 $ 4 $15,323 $(10,870) $(1,569) $(2,626) $ 502
==== === === ======= ======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)................................... $(5,670) $(6,388) $ 1,750
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization....................... 691 814 1,063
Provision for doubtful accounts..................... (2) 175 99
Deferred income taxes............................... -- (977) (876)
Gain (loss) on disposal of property and equipment... (4) 3 (3)
Write-down of property and equipment................ -- 655 --
Changes in operating assets and liabilities:
Accounts receivable................................ 674 (4,209) (5,070)
Accrued receivables and prepaid expenses........... (920) 2,361 1,789
Income taxes....................................... (259) (717) 224
Other assets....................................... 1,466 632 (36)
Accounts payable................................... (248) 310 135
Accrued expenses and other current liabilities..... 1,932 (977) 361
Accrued payroll and employee benefits and deferred
revenue........................................... 304 2,755 1,626
Accrued pension liability.......................... 172 192 214
------- ------- -------
Net cash provided by (used in) continuing
operations........................................ (1,864) (5,371) 1,276
Net cash provided by (used in) discontinued
operations........................................ 103 248 (322)
------- ------- -------
Net cash flows provided by (used in) operating
activities....................................... (1,761) (5,123) 954
------- ------- -------
Cash flows from investing activities:
Additions to property and equipment................. (997) (787) (1,269)
Proceeds from sale of property and equipment........ 45 11 17
------- ------- -------
Net cash flows provided by (used in) investing
activities....................................... (952) (776) (1,252)
------- ------- -------
Cash flows from financing activities:
Net borrowings (payments) under lines of credit..... (2,141) 627 5,281
Proceeds from issuance of long-term debt............ 2,637 3,331 528
Principal payments on long-term debt................ (167) (368) (6,299)
Proceeds from related party debt.................... 2,000 2,638 --
Issuance of Common Stock............................ -- -- 1,229
Other............................................... 365 (246) (48)
------- ------- -------
Net cash flows provided by financing activities... 2,694 5,982 691
------- ------- -------
Translation differences on cash and cash equivalents. (6) 2 5
------- ------- -------
Net increase (decrease) in cash and cash equivalents. (25) 85 398
Cash and cash equivalents at beginning of year....... 100 75 160
------- ------- -------
Cash and cash equivalents at end of year............. $ 75 $ 160 $ 558
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest............................................ $ 211 $ 432 $ 621
======= ======= =======
Income taxes........................................ $ 341 $ 572 $ (40)
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND ORGANIZATION
Industri-Matematik International Corp., a Delaware corporation, (the
"Company") and its subsidiaries (collectively, the "Companies"), develop,
market, implement and support client/server demand chain management software.
The Companies' primary software product, System ESS, has been designed to
provide for the complex and high throughput order fulfillment requirements of
manufacturers, distributors and wholesalers. The Company's three operating
subsidiaries are located and primarily conduct business in the United States,
Sweden and the United Kingdom.
The Company was formed on May 1, 1995 as the parent of Industri-Matematik AB
("IMAB"), a company domiciled in Sweden, pursuant to a corporate
reorganization. The reorganization was effected by issuing all the shares of
the Company's stock to the stockholders of IMAB based upon the number and
class of shares of IMAB owned by each in exchange for all of the outstanding
stock of IMAB. The reorganization was accounted for in a manner similar to a
pooling-of-interests. The consolidated accounts comprise the accounts of the
Companies as if they had been owned by the Company throughout the entire
reporting period.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
In fiscal 1996, the Company adopted plans for the sale of its business
segments operated by its 55% owned subsidiary, Pargon AB ("Pargon"), a company
domiciled in Sweden. In accordance with Accounting Principles Board Opinion
("APB") No. 30, the segments of Pargon have been presented as discontinued
operations in the accompanying consolidated financial statements. (See Note 17
for further discussion and disclosure).
Revenue Recognition
License revenues represent sales of the Companies' System ESS software.
Service revenues represent sales from consulting implementation and training
services. Annual maintenance and support revenues consist of ongoing support
and product updates. Other revenues primarily represent hardware sales.
The Companies recognize revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position ("SOP") 91-1, Software
Revenue Recognition. Software license fees are recognized upon the signing of
the license agreement and shipment to the customer of the product provided
that no significant vendor obligations remain and collection of the resulting
receivables is probable. Revenues relating to services are recognized as
services are performed. Annual payments for maintenance agreements are
generally received in advance and are non-refundable. Maintenance revenues are
recognized ratably over the term of the contract. Other revenues are
recognized when shipped or made available to the customer. Unrecognized
revenue relating to maintenance contracts are reflected as deferred revenue in
the accompanying consolidated balance sheets.
Product Development Costs
Software development costs are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed."
F-7
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Costs incurred in the product development of new software products are
expensed as incurred until technological feasibility has been established. To
date, the establishment of technological feasibility of the Company's products
and general release substantially coincide. As a result, the Companies have
not capitalized any software development costs since such costs have been
immaterial.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are computed using the
straight-line method based upon estimated useful lives of the assets ranging
from 3 to 5 years. Equipment purchased under capital leases is amortized on a
straight-line basis over the lesser of the estimated useful life of the asset
or the lease term.
Upon retirement or sale of property and equipment, cost and accumulated
depreciation on such assets are removed from the accounts and any gains or
losses are reflected in the statement of operations. Maintenance and repairs
are charged to expense as incurred.
Foreign Currency Translation
The functional currency of the Company's foreign subsidiaries in Sweden and
the United Kingdom is the applicable local currency. The translation from the
respective foreign currencies to U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for income statement accounts using a weighted average exchange rate during
the period. Gains or losses resulting from such translation are included as a
separate component of stockholders' equity. Gains or losses resulting from
foreign currency transactions are included in miscellaneous income (expense).
For the fiscal years ended April 30, 1994, 1995 and 1996 foreign exchange
gains (losses) of $162,000, ($105,000) and $65,000, respectively, were
recorded by the Companies.
Concentration of Credit Risk
Financial instruments which potentially subject the Companies to
concentrations of credit risk consist principally of accounts receivable with
customers. This risk, however, is limited due to the number of customers
comprising the Companies' customer base and their dispersion across the United
States, Scandinavia and the United Kingdom. The Companies' customers are
generally multi-national companies in the food and beverage, pharmaceutical,
consumer electronics, automotive parts and industrial sector industries. The
Companies perform ongoing credit evaluations of their customers and do not
require collateral. The Companies maintain allowances for potential credit
losses and such losses have been within management's expectations.
Cash and Cash Equivalents
The Companies consider all highly liquid, low risk debt instruments with
purchased maturity dates of three months or less from date of purchase to be
cash equivalents.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and contingent
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting years. Actual results could
differ from those estimates.
F-8
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pro Forma Net Income Per Share
For the year ended April 30, 1996, pro forma net income per share was based
on the weighted average number of common and common stock equivalents
outstanding during the period, computed in accordance with the treasury stock
method. The pro forma weighted average number of common shares assumes the
conversion of all Convertible Preferred stock into Common Stock and Class B
Common Stock and the three-for-one stock split upon the closing of the
Company's initial public offering using the if-converted method as of the
beginning of the year. Historical net income (loss) per share data has not
been presented as such information is not considered to be relevant or
meaningful.
Cash Flow Information
Cash flows in foreign currencies have been converted to U.S. dollars at an
approximate weighted average exchange rate or the exchange rates in effect at
the time of the cash flows, where determinable.
Fair Value of Financial Instruments
During 1994, the Financial Accounting Standards Board issued SFAS No. 107,
"Disclosure about Fair Value of Financial Instruments". This statement
requires the disclosure of estimated fair values for all financial instruments
for which it is practicable to estimate fair value. Financial instruments
including cash and cash equivalents, receivables and payables, deferred
revenue, and current portions of long-term debt are deemed to approximate fair
value due to their short maturity. The carrying amount of long-term debt with
banks and capitalized lease obligations are also deemed to approximate their
fair values.
Income taxes
Effective May 1, 1991, the Companies adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under
SFAS 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured by applying enacted
statutory tax rates that are applicable to the future years in which deferred
tax assets or liabilities are expected to be settled or realized, to the
differences between the financial statement carrying amount and the tax bases
of existing assets and liabilities. Under SFAS 109, the effect of a change in
tax rates on deferred tax assets and liabilities is recognized in net income
in the period in which the tax rate change is enacted. The statement also
requires a valuation allowance against net deferred tax assets if, based upon
the available evidence, it is more likely than not that some or all of the
deferred tax assets may not be realized.
Effect of Recent Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of", which requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. SFAS 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Companies will
adopt SFAS 121 in the first quarter of the fiscal year ending April 30, 1997,
and based on current circumstances, do not believe the effect of adoption will
be material.
In October 1995, the Financial Accounting Standard Board issued SFAS No.
123, "Accounting for Stock-Based Compensation". SFAS No. 123 is effective for
fiscal years beginning on or after December 15,
F-9
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1995. SFAS No. 123 requires that the compensation cost of issuing stock
options be measured at fair value using an option-pricing model. The Companies
can either recognize the compensation cost in the consolidated financial
statements or, if the recognition option is not chosen, disclose the proforma
effects in the notes to the consolidated financial statements. The Companies
plan to adopt the disclosure option in the fiscal year ending April 30, 1997.
Therefore, SFAS No. 123 will have no effect on the Companies' net earnings,
stockholders' equity or cash flows.
3. ACCOUNTS RECEIVABLE ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following table provides a summary of the activity in the accounts
receivable allowance for doubtful accounts for the years ended April 30, 1995
and 1996:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Balance at beginning of period.................... $ 29 $ 205
Charged to expense................................ 210 265
Deductions........................................ (34) (149)
---------- ----------
Balance at end of period.......................... $ 205 $ 321
========== ==========
</TABLE>
4. PREPAID EXPENSES
<TABLE>
<CAPTION>
APRIL 30,
---------------
1995 1996
---------------
(IN THOUSANDS)
<S> <C> <C>
Prepaid rent............................................. $ 260 $ 251
Prepaid leasing costs.................................... 206 205
Prepaid insurance costs.................................. 133 108
Other.................................................... 374 596
------ --------
$ 973 $ 1,160
====== ========
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost, less accumulated depreciation.
Property and equipment consists of:
<TABLE>
<CAPTION>
APRIL 30,
----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment...................................... $ 2,285 $ 2,877
Furniture and fixtures.................................. 768 1,272
Automobiles............................................. 334 571
------- -------
3,387 4,720
Less: accumulated depreciation and amortization......... (1,724) (2,847)
------- -------
$ 1,663 $ 1,873
======= =======
</TABLE>
F-10
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Included in property and equipment are assets leased under capital lease
obligations as follows:
<TABLE>
<CAPTION>
APRIL 30,
----------------
1995 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment...................................... $ -- $ 250
Furniture and fixtures.................................. 111 312
Automobiles............................................. 249 510
------ --------
360 1,072
Less accumulated amortization........................... (42) (255)
------ --------
$ 318 $ 817
====== ========
</TABLE>
The amortization expense on capital leases amounted to $42,000 and $214,000
for the years ended April 30, 1995 and 1996, respectively.
6. INCOME TAXES
Income (loss) from continuing operations before income taxes was distributed
geographically as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------
1994 1995 1996
------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.......................................... $ 72 $(1,583) $ 87
Foreign........................................... (5,551) (5,500) 555
------- ------- -----
Total........................................... $(5,479) $(7,083) $ 642
======= ======= =====
Components of the provision (benefit) for income taxes are as follows:
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------
1994 1995 1996
------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT:
Federal........................................... $ -- $ -- $ --
State............................................. 15 5 5
Foreign........................................... 25 33 100
------- ------- -----
Total current provision......................... 40 38 105
------- ------- -----
DEFERRED:
Federal........................................... $ -- $ (10) $ 58
State............................................. -- -- 2
Foreign........................................... -- (969) (946)
------- ------- -----
Total deferred provision (benefit).............. -- (979) (886)
------- ------- -----
Total provision (benefit) for income taxes..... $ 40 $ (941) $(781)
======= ======= =====
</TABLE>
F-11
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The approximate tax effects of temporary differences which give rise to net
deferred taxes are:
<TABLE>
<CAPTION>
APRIL 30,
----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred income taxes, noncurrent asset
Net operating loss carryforwards........................ $ 3,207 $ 5,260
Capitalization of product development costs............. 2,292 --
Alternative Minimum Tax Credits......................... 153 --
Depreciation............................................ (27) --
Deferred revenue........................................ (724) --
Other................................................... (12) (290)
------- -------
Total deferred income taxes, noncurrent asset........... 4,889 4,970
Valuation allowance..................................... (3,911) (2,982)
------- -------
Total net deferred income taxes, noncurrent asset....... 978 1,988
------- -------
Deferred income taxes, long-term liability
Net operating loss carryforwards........................ -- 43
Alternative Minimum Tax Credits......................... -- 153
Depreciation............................................ -- (32)
Deferred revenue........................................ -- (213)
------- -------
Total deferred income taxes, long-term liability........ -- (49)
------- -------
Total net deferred tax asset............................ $ 978 $ 1,939
======= =======
</TABLE>
A reconciliation of the provision (benefit) for income taxes to the amount
computed by applying the statutory rates is as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------------------------
1994 1995 1996
------------ ------------ ------------
$ % $ % $ %
------- --- ------- --- ------ ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Statutory rate................. $(1,918) 35% $(2,479) 35% $ 224 35%
Benefit of utilization of net
operating loss and tax credit
carryforwards................. -- -- -- -- (542) (85)
Valuation of temporary
differences................... 1,544 (28) 1,104 (16) (1,176) (183)
Deferred revenues.............. (62) 1 (267) 4 620 96
Foreign taxes.................. 389 (7) 376 (5) (33) (5)
Other.......................... 87 (1) 325 (5) 126 20
------- --- ------- --- ------ ----
Effective tax rate............. $ 40 0 % $ (941) 13% $ (781) (122)%
======= === ======= === ====== ====
</TABLE>
As of April 30, 1996, the Companies had net operating loss carryforwards of
approximately $18,912,000 available to offset future taxable income of which
$18,786,000 is related to net operating loss carryforwards in IMAB. Net
operating loss carryforwards available to offset alternative minimum taxable
income do not differ significantly from those available to offset regular
taxable income. The majority of these carryforwards are available for an
indefinite period.
F-12
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The deferred tax asset was reduced by a valuation allowance of $2,585,000 as
of April 30, 1994. The valuation allowance increased to $3,911,000 as of April
30, 1995. During the fiscal year ended April 30, 1996, the Companies, based on
their operating results and the strong market acceptance of the System ESS
product, reduced its valuation allowance by $1,001,000 to $2,910,000. This
change in judgment regarding the realizability of certain net operating losses
has been reflected in the benefit for income taxes for the year ended April
30, 1996. Realization of the residual tax asset of $1,939,000 as of April 30,
1996 is dependent on generating sufficient taxable income and corresponding
taxes in the future to offset the net operating loss carryforwards. Although
realization is not assured, management believes that it is more likely than
not that all of the deferred tax asset will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced.
The Companies have not recorded deferred income taxes applicable to
undistributed earnings of foreign subsidiaries that are indefinitely
reinvested in foreign operations.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
APRIL 30,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued purchases........................................ $ 1,418 $ 1,731
Accrued royalty.......................................... -- 1,372
Accrual for loss contract................................ 556 237
Accruals for contract expenses........................... 916 153
Value-added tax.......................................... 303 131
Other.................................................... 14 153
------- -------
$ 3,207 $ 3,777
======= =======
</TABLE>
8. ACCRUED PAYROLL AND EMPLOYEE BENEFITS
<TABLE>
<CAPTION>
APRIL 30,
---------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Accrued commissions...................................... $ 275 $ 776
Accrued payroll taxes.................................... 913 960
Accrued vacation pay..................................... 685 750
Accrued salaries and bonus............................... 738 879
------- -------
$ 2,611 $ 3,365
======= =======
</TABLE>
9. EMPLOYEE BENEFIT PLANS
The Companies provide retirement benefits for substantially all employees in
the United States and in foreign locations. In the U.S. and the U.K., the
Companies sponsor defined contribution plans. In addition, IMAB has a
supplemental defined contribution plan for certain key management.
F-13
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Companies' Swedish subsidiary, IMAB, participates in several pension
plans (non-contributory for employees), which cover substantially all
employees of its Swedish operations. The plans are administered by a national
organization, Pensionsregistreringsinstitutet ("PRI"), in which most companies
in Sweden participate. The level of benefits and actuarial assumptions are
established by the national organization and, accordingly, IMAB may not change
benefit levels or actuarial assumptions. The Company accounts for pensions in
accordance with SFAS No. 87, "Employers' Accounting for Pensions" using the
projected unit credit cost method.
The net periodic pension cost related to continuing operations is comprised
of the following:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................................... $ 97 $ 106 $ 164
Interest cost..................................... 54 72 85
Amortization of actuarial net loss or gain........ (7) (3) (9)
Amortization of transition obligation............. 3 3 3
------ ------ ------
Net periodic pension cost......................... $ 147 $ 178 $ 243
====== ====== ======
</TABLE>
The following table shows the plans funded status and amounts recognized in
the consolidated balance sheet:
<TABLE>
<CAPTION>
APRIL 30,
----------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation............................... $ 824 $ 1,316
Additional benefits due to salary increases............. 142 673
------- -------
Projected benefit obligation ("PBO").................... 966 1,989
Fair value of plan assets............................... -- --
------- -------
Unfunded PBO............................................ 966 1,989
Unrecognized actuarial (gain) or loss................... 227 (481)
Unrecognized transition obligation...................... (28) (26)
------- -------
Accrued pension liability............................... $ 1,165 $ 1,482
======= =======
</TABLE>
The actuarial assumptions used in computing the pension amounts above were:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
---------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Discount rate................................. 9.0% 8.5% 8.0%
Salary increase............................... 5.5% 5.0% 5.0%
Inflation..................................... 5.0% 4.0% 4.0%
</TABLE>
Defined Contribution Plans
Contributions by the Companies relating to their defined contribution plans
for the years ended April 30, 1994, 1995 and 1996 were $139,000, $149,000 and
$208,000 respectively.
F-14
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. DEBT AND SHORT-TERM BORROWINGS
A summary of the Companies' debt facilities is as follows:
<TABLE>
<CAPTION>
APRIL 30,
---------------
1995 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Revolving Lines of Credit (see below)......................... $ 1,928 $7,327
Bank loan due November 30,1995, Swedish Prime Rate plus 1%
(9.5% at April 30, 1995)..................................... 5,536 --
Obligations under capital leases, imputed interest rates of
11%-14% and 13.2%-20.8% in 1995 and 1996, respectively, terms
vary from 36 to 60 months, collateralized by the underlying
assets....................................................... 347 875
Finance company loan due September 1996, Swedish Market "K1"
plus 2.5% (11.61% and 8.81% at April 30, 1995 and 1996,
respectively), unsecured..................................... 277 97
Other financing, at various rates with varying scheduled
maturities in 1996........................................... 49 --
------- ------
Total Debt and Short-Term Borrowings.......................... 8,137 8,299
Less Current Portion of Debt and Short-Term Borrowings........ (1,412) (349)
------- ------
Long-Term Debt................................................ $ 6,725 $7,950
======= ======
</TABLE>
The Companies have various Revolving Credit Agreements in effect with one
bank in both the United States and Sweden with available borrowings
aggregating $3,976,000 and $9,900,000 as of April 30, 1995 and 1996,
respectively. During the fiscal year ended April 30, 1996, the Company
converted its bank loan due November 30, 1995 into two additional lines of
credit facilities bearing U.S. and British currencies. Although the
outstanding balances on such facilities are renewable annually and are payable
on demand, the Companies have the ability and intent to refinance the debt
from the proceeds of the issuance of the Company's common stock or other long-
term financing. Therefore, such amounts have been reclassified as long-term
debt in the consolidated balance sheets as of April 30, 1995 and 1996. The
unused lines totalled $2,048,000 and $2,562,000 at April 30, 1995 and 1996,
respectively.
Approximately $5,893,000 of the Company's assets in Sweden have been pledged
as collateral. The Companies pay a floating charge of .5% on the SEK Line of
Credit Facilities. The Swedish credit agreements contain a financial covenant
requiring that the equity ratio of IMAB shall not exceed 25%.
The following provides a summary of the terms and balances outstanding
relating to the Companies' revolving lines of credit:
<TABLE>
<CAPTION>
APRIL 30,
---------------
DESCRIPTION 1995 1996
----------- ------- -------
(IN THOUSANDS)
<S> <C> <C>
SEK 15,000,000 Facility renewable November 28, 1996 and
SEK 6,500,000 Facility due September 8, 1996, Swedish Prime
Rate plus 1% (weighted average interest rate of 7.69% and
7.88% at April 30, 1995 and 1996, respectively)............... $ 1,328 $ 3,003
US $2,700,000 Facility renewable June 27, 1996, U.S. Prime Rate
plus 1.75% (weighted average interest rate of 7.30% at April
30, 1996)..................................................... -- 319
GB(Pounds) 2,000,000 Facility renewable December 8, 1996,
British Prime Rate plus 1.75% (weighted average interest rate
of 7.88% at April 30, 1996)................................... -- 3,005
US $1,000,000 Facility renewable May 31, 1997, U.S. Prime Rate
plus .25% (weighted average interest rate of 8.87% and 8.27%
at April 30, 1995 and 1996, respectively)..................... 600 1,000
------- -------
Total Revolving Lines of Credit.............................. $ 1,928 $ 7,327
======= =======
</TABLE>
F-15
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. STOCKHOLDERS' EQUITY
The Company's Restated Certificate of Incorporation as currently in effect
authorizes 30,000,000 shares of Preferred Stock at par value of $0.01 of which
15,000,000 shares are designated Convertible Preferred Stock ("Preferred
Stock"), 35,000,000 shares designated as Common Stock at par value of $0.01
and 12,500,000 shares designated as Class B Common Stock. Holders of Common
Stock and Preferred Stock are entitled to one vote for each share held.
Holders of Class B Common Stock have no voting rights. All classes of stock
are entitled to receive dividends in the same amount per share.
Holders of Convertible Preferred Stock have the right, at any time upon
written notice to the Company, to elect to convert each share of Convertible
Preferred Stock held by them into Class B Common Stock. Such conversion will
take place automatically on the date of a completed public offering of the
Common Stock or Class B Common Stock. Upon any (a) liquidation, dissolution or
winding up of the Company or (b) transaction in which any party acquires a
controlling portion of the voting stock of the Company or substantially all of
the assets of the Company, the holders of Convertible Preferred Stock are
entitled, prior to any distribution to holders of Common Stock, to a payment
per share of Convertible Preferred Stock equal to its pro rata portion of such
distribution, but not less than $4.50 plus a 7% accrual compounding annually,
up to October 1, 1996. (See Notes 18 and 19)
Total stockholders' equity includes an amount of SEK 40,800,000
(approximately U.S. $6,000,000) in IMAB which is restricted as to usage
according to Swedish Company Law. The amount can only be used to cover a net
deficit, for an increase in share capital, or for other uses as agreed by the
courts.
12. STOCK OPTION PLAN AND RESTRICTED STOCK PROGRAM
Stock Option Plan
In May 1995, the Company adopted the Industri-Matematik International Corp.
Stock Option Plan (the "U.S. plan"). The U.S. plan provides for grants of
incentive stock options to key employees (including officers and employee
directors) of the Companies and non-incentive stock options to members of the
Company's Board of Directors, consultants and other advisors of the Company
who are not employees. The maximum term for either form of option is ten
years.
Total options of 939,975 were granted under this plan in the fiscal year
ended April 30, 1996 each with an exercise price of $2 which was equal to the
fair value on the date of grant. Accordingly, no compensation expense was
recorded. None of these options were exercised or forfeited in the fiscal year
ended April 30, 1996. As of April 30, 1996, a total of 2,060,025 shares of
Common Stock were reserved for future issuance under the stock option plan.
Restricted Stock Program
In May 1995, the Company instituted a restricted stock program whereby
shares of the Company's Common Stock were purchased by certain key employees
of the Company's operating subsidiary in Sweden in exchange for nonrecourse
promissory notes. The shares were issued through a wholly owned subsidiary of
the Company, Software Finance Corporation ("SFC"). Principal on the promissory
notes is due either nine or ten years after issuance with interest being due
and payable annually, generally at the beginning of each fiscal year.
Under the Restricted Stock Program the total number of shares issued were
1,256,985 at a weighted average price of $2.09 per share for total proceeds of
$2,626,000.
Under the terms of the restricted stock program, SFC has an option to
repurchase the shares issued to each employee provided it pays the annual
option price. The exercise price to be paid by SFC upon
F-16
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
exercise of a purchase option shall be the fair market value, provided that if
the option to purchase is exercised prior to the end of a stated period, then
the exercise price shall be the initial purchase price for a percentage of the
shares after the first anniversary of the option agreement, generally
decreasing by 20% each subsequent year, such that the exercise price is the
fair market value.
SFC pays an annual option premium to the restricted stock shareholders at a
rate substantially equal to the interest due on the non-recourse promissory
note. Accordingly, no amounts have been reflected in the consolidated
statement of operations relating to the interest on the promissory note and
the offsetting option premium. The restricted stock shares are included within
Common Stock and additional paid-in capital in Stockholders' equity while the
non-recourse promissory notes are classified as a contra-account as notes
receivable from Stockholders, also in Stockholders' equity.
SFC has the right and obligation to apply against the payment of any
principal due on the promissory note any amounts payable by SFC to the
recipient of the Shares as the exercise price under the Option Agreement. The
Company has the ability and intent to prevent the recipients from selling the
purchased securities. Accordingly, the Company has not recognized any
compensation expense in respect of the restricted stock in the statements of
operations. The restricted stock shares issued under this program and
dividends paid are subject to a pledge and security interest held by SFC.
13. COMMITMENTS AND CONTINGENCIES
Operating leases
The Companies lease office facilities and certain office equipment under
various noncancelable operating lease agreements.
Aggregate future minimum lease payments under noncancelable operating leases
are as follows as of April 30, 1996:
<TABLE>
<CAPTION>
FUTURE MINIMUM PAYMENTS
FISCAL YEAR ENDING APRIL 30, ON OPERATING LEASES
---------------------------- -----------------------
(IN THOUSANDS)
<S> <C>
1997................................................ $1,762
1998................................................ 1,341
1999................................................ 909
2000................................................ 574
2001................................................ 440
Thereafter.......................................... 0
------
Total future minimum lease payments................. $5,026
======
</TABLE>
Total rent expense under the leases was $303,000, $1,455,000 and $973,000
for the years ended April 30, 1994, 1995, and 1996, respectively.
Litigation
From time to time disputes have arisen with certain of the Company's
customers regarding the implementation of the Company's software products.
There is currently one dispute that is unresolved and for which a formal
complaint has been filed. The Company believes that the allegations of this
customer have no merit and plans to vigorously defend the action. While the
outcome of this matter cannot be
F-17
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
determined with certainty, the Company does not believe that the resolution of
this claim will have a material adverse effect on the Company's business,
operating results, liquidity or financial condition. The Company is not a
party to any other litigation that would have a material adverse effect on the
Company's business, operating results, liquidity or financial condition.
14. RELATIONSHIP WITH ORACLE
The Companies have an informal joint marketing and sales arrangement with
Oracle Corporation ("Oracle") pursuant to which the two companies jointly
market to potential customers in the consumer packaged goods market. Pursuant
to this arrangement, the Companies pay to Oracle a percentage of the Company's
license revenue from customers in the consumer packaged goods market to whom
licenses are jointly marketed by Oracle and the Companies. For the fiscal year
ended April 30, 1996, 58% of the Companies' license revenue and 24% of the
Companies' total revenue were derived from six customers introduced to the
Companies by Oracle pursuant to this arrangement. The Companies paid Oracle
approximately $1,500,000 in royalties for the fiscal year ended April 30,1996.
15. RELATED PARTY TRANSACTIONS
During the fiscal years ended April 30, 1994 and 1995, the Company issued
two promissory notes to the Companys' majority stockholder of $2.0 and $2.5
million, respectively. Such notes, together with accrued interest thereon were
converted into shares of the Company's Convertible Preferred Stock within the
same fiscal years as originally issued.
16. GEOGRAPHIC INFORMATION
The Companies' operations are located primarily in the United States,
Scandinavia and the United Kingdom. The following table sets forth the
geographic information relating to revenues by customer location and income
(loss) from operations and identifiable assets by operating subsidiary
location. For purposes of this presentation, Scandinavia is considered to
include Sweden, Norway, Denmark and Finland.
<TABLE>
<CAPTION>
INTER-
YEAR ENDED APRIL UNITED UNITED DISCONTINUED COMPANY TOTAL
30, STATES SCANDINAVIA KINGDOM OPERATIONS AND OTHER CONSOLIDATED
------------------- ------- ----------- ------- ------------ --------- ------------
REVENUES (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1996 $18,035 $16,765 $5,209 -- $ -- $40,009
======= ======= ====== ======= =======
1995 $ 8,550 $19,194 $ -- -- $ -- $27,744
======= ======= ====== ======= =======
1994 $ 4,122 $14,439 $ 226 -- $ (7) $18,780
======= ======= ====== ======= =======
YEAR ENDED APRIL
30,
-------------------
INCOME (LOSS) FROM
OPERATIONS
1996 $ 214 $ 2,033 $ (862) -- $ -- $ 1,385
======= ======= ====== ======= =======
1995 $(1,348) $(4,545) $ (132) -- $ -- $(6,025)
======= ======= ====== ======= =======
1994 $ 135 $(5,198) $ -- -- $ -- $(5,063)
======= ======= ====== ======= =======
APRIL 30,
- ---------------------
IDENTIFIABLE ASSETS
1996 $11,420 $13,209 $2,725 $1,111 $(7,141) $21,324
======= ======= ====== ====== ======= =======
1995 $ 5,901 $12,280 $2,206 $ 725 $(5,604) $15,508
======= ======= ====== ====== ======= =======
</TABLE>
F-18
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Major customers
For the year ended April 30, 1994, the Companies recorded revenues from two
customers which comprised 27% and 11% of total revenues, respectively. For the
year ended April 30, 1995, the Companies recorded revenues from two customers
which comprised 13% and 12% of total revenues, respectively. For the year
ended April 30, 1996, the Companies had no single customers with sales
comprising more than 10% of total revenues.
17. DISCONTINUED OPERATIONS
As discussed in Note 2, during fiscal 1996 the Company adopted plans for the
sale of its 55% owned subsidiary, Pargon AB, which operates in two segments
constituting the production and sale of microprocessor compilers and
consultancy services for relational data base management systems ("RDBMS").
The Microprocessor compiler segment include the development and supply through
direct sale of compilers for microprocessors used by manufacturers of domestic
appliances and cellular communications equipment. The RDBMS consultancy
segment relates to the supply of RDBMS consultancy services to public sector
institutions in Sweden.
These business segments are accounted for as discontinued operations in
accordance with APB No. 30 and therefore, their operations have been
separately presented in the consolidated financial statements. Revenues, cost
of revenues, operating expenses, other income and expense and provisions for
income taxes for the fiscal year 1994, 1995 and 1996 have been reclassified
for amounts associated with the discontinued operations.
Summary operating results associated with the discontinued operations of
Pargon AB for the years ended April 30, 1994, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------
1994 1995 1996
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................ $4,855 $6,080 $8,149
====== ====== ======
Gross profit........................................ $2,192 $2,578 $3,826
====== ====== ======
Operating expenses.................................. $2,133 $2,693 $2,928
====== ====== ======
Minority interest................................... $ 136 $ 63 $ 275
====== ====== ======
Income (loss) from discontinued operations before
income taxes....................................... $ (42) $ (168) $ 590
Provision for income taxes.......................... 109 78 263
------ ------ ------
Income (loss) from discontinued operations after
provision for income taxes......................... $ (151) $ (246) $ 327
====== ====== ======
</TABLE>
F-19
<PAGE>
INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net assets of the discontinued operations excluding intercompany
balances as of April 30, 1995 and 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30,
-------------
1995 1996
------ ------
<S> <C> <C>
Current assets............................................... $2,065 $2,899
Property and equipment....................................... 382 460
Other assets................................................. 18 14
------ ------
Total assets............................................... 2,465 3,373
------ ------
Current liabilities.......................................... 1,001 1,212
Other noncurrent liabilities................................. 84 152
Minority interest............................................ 655 898
------ ------
Total liabilities and minority interest.................... 1,740 2,262
------ ------
Net assets................................................. $ 725 $1,111
====== ======
</TABLE>
It is not yet possible to estimate the prospective gain or loss on the
disposition of the discontinued operations, however the Company does not
expect that such disposition will have a material effect on the Company's
financial condition and results of operations. Income from discontinued
operations for the period between the measurement date and April 30, 1996 was
approximately $379,000.
18. SUBSEQUENT EVENT
In May 1996, the Company's Board of Directors approved a three-for-one stock
split of its issued and outstanding Common Stock, Class B Common Stock and
Convertible Preferred Stock. The par value of the Company's Common Stock,
Class B Common Stock and Convertible Preferred Stock remains unchanged. All
per share, weighted average shares outstanding and option data presented in
the consolidated financial statements have been retroactively adjusted to
reflect the effects of the split unless otherwise indicated.
19. PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
Upon the completion of the Company's initial public offering, all of the
Company's Convertible Preferred Stock outstanding as of the date hereof under
the Company's Restated Certificate of Incorporation as currently in effect,
will be converted to Common Stock and Class B Common Stock at a rate of 20%
and 80%, respectively. The pro forma stockholders' equity reflects such
conversion of the Convertible Preferred Stock. (See Note 2)
F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
STOCKHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
The Company............................................................... 16
Use of Proceeds........................................................... 16
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Dilution.................................................................. 18
Exchange Rates............................................................ 19
Selected Consolidated Financial Data...................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 31
Management................................................................ 44
Certain Transactions...................................................... 49
Principal and Selling Stockholders........................................ 50
Description of Capital Stock.............................................. 51
Shares Eligible for Future Sale........................................... 53
Underwriting.............................................................. 54
Legal Matters............................................................. 55
Experts................................................................... 55
Additional Information.................................................... 55
Index to Consolidated Financial Statements................................ F-1
</TABLE>
-----------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4,000,000 Shares
LOGO
Common Stock
------------
PROSPECTUS
------------
Alex. Brown & Sons
INCORPORATED
UBS Securities
SoundView Financial Group, Inc.
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses of this offering
(other than the underwriting discounts and commissions);
<TABLE>
<S> <C>
SEC Registration Fee................................................ $ 20,621
NASD Filing Fee..................................................... 6,480
Blue Sky Fees and Expenses.......................................... 15,000
Accounting Fees and Expenses........................................ 400,000
Legal Fees and Expenses............................................. 450,000
Printing and Engraving Expenses..................................... 150,000
Premium for Directors and Officers Insurance........................ 250,000
Transfer Agent and Registrar Fees and Expenses...................... 5,000
Fee for Custodian for Selling Stockholders.......................... 5,000
Miscellaneous....................................................... 47,899
----------
Total........................................................... $1,350,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Section 145 of the GCL gives Delaware corporations the power to
indemnify each of their present and former officers or directors under certain
circumstances, if such person acted in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interest of the
corporation.
(b) The Amended and Restated Certificate of Incorporation of the Registrant
contains provisions that eliminate the personal liability of each director to
the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for breaches of such director's duty
of loyalty to the Registrant 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 174 of the GCL or (iv) for any
transaction from which such director derived an improper personal benefit.
(c) The Amended and Restated Certificate of Incorporation of Registrant
contains provisions to the general effect that each director and officer shall
be indemnified by the Registrant against liabilities and expenses in
connection with any threatened, pending or contemplated legal proceeding to
which he may be made a party or with which he may become involved by reason of
being or having been an officer or director of the Registrant or of any other
organization at the request of the Registrant. Indemnification is available
only if it is determined to be proper by the majority of disinterested
directors constituting a quorum, by the stockholders, or by independent legal
counsel in a written opinion. In order to be entitled to indemnification, the
indemnified person must have acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Registrant, and,
with respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. In the case of an action by or in the right
of the Registrant, indemnification is precluded if such person has been
adjudged to be liable, unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which the action was brought
shall determine that indemnification is proper. The Registrant also has the
power to obtain insurance indemnifying officers and directors of the
Registrant against any liability which it may deem proper, whether or not the
Registrant would otherwise have the power to indemnify such officer or
director pursuant to its Amended and Restated Certificate of Incorporation.
II-1
<PAGE>
The proposed Underwriting Agreement filed as Exhibit 1.1 to the Registration
Statement contains representations and warranties by the Registrant as to the
accuracy of the Registration Statement and the Prospectus and provides for
indemnification of the Registrant and its directors and officers and the
Selling Stockholders by the Underwriters and indemnification of the
Underwriters and their controlling persons by the Registrant and the Selling
Stockholders.
The Registrant maintains, on behalf of its directors and officers, insurance
protection against certain liabilities arising out of the discharge of their
duties and also insurance covering the Registrant against indemnification
payments to its directors and officers for certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of shares of capital stock issued and the number of options granted, by the
Registrant since its formation in May 1995. Further included is the
consideration, if any, received by the Registrant for such shares and options,
and information relating to the section of the Securities Act of 1933, as
amended (the "Securities Act"), or rule of the Securities and Exchange
Commission under which exemption from registration was claimed. All awards of
option did not involve any sale under the Securities Act and none of these
securities was registered under the Securities Act.
In connection with the incorporation of the Registrant, on May 1, 1995, all
of the then outstanding shares in IMAB were exchanged for shares of the
Company's capital stock (the "Exchange"). No cash consideration was paid to or
by the Company in connection with the Exchange.
In October 1995, an aggregate of 612,468 shares of the Company's capital
stock were purchased by two shareholders at a price of $2 per share.
At various times during 1995 and 1996, certain employees of the Company
(including certain of its executive officers) purchased the following shares
of the Company's Common Stock under the Company's Restricted Stock Program:
(i) during 1995 certain employees purchased an aggregate of 1,116,990 shares
of Common Stock at a purchase price of $2 per share, (ii) on January 2, 1996
Stig G. Durlow purchased 90,000 shares of Common Stock for $2.50 per share,
and (iii) on April 1, 1996, Per-Olof Ekholtz purchased 49,995 shares of Common
Stock for $3.33 per share.
No underwriters were engaged in connection with any of the foregoing sales
of securities. The shares of capital stock and securities issued in the above
transactions were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act or Regulation D,
Regulation S or Rule 701 promulgated under the Securities Act, relative to
sales by an issuer not involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
**3.1 Restated Certificate of Incorporation of the Registrant, as
currently in effect
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant, to be filed upon closing of the offering
**3.3 By-Laws of the Registrant, as currently in effect
3.4 Form of Restated By-Laws of the Registrant, to be effective
upon closing of the offering
*4.1 Specimen certificate representing the Common Stock
*5.1 Opinion of Brobeck Hale and Dorr International
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.1 Form of Registration and Expense Agreement
10.2 Form of Registration Rights Agreement
10.3 Industri-Matematik International Corp. Stock Option Plan
10.4 Form of Agreements of Restricted Stock Program
10.5 Employment Agreement between Stig G. Durlow and IMAB
(Certified English transaction)
10.6 Employment Agreement between Lars-Goran Peterson and IMAB
(Certified English translation)
10.7 Lease dated April 28, 1993 between Lansforsakringsbolagens
AB and Industri-Matematik AB and Amendment dated December 9,
1994 (Certified English translation)
10.8 Lease dated August 24, 1992 between Diosfastigheter AB and
Industri-Matematik AB (Certified English translation)
**11 Statement re Computation of Per Share Earnings
**22.1 List of Registrant's subsidiaries
**24.1 Consent of Coopers and Lybrand
*24.2 Consent of Brobeck Hale and Dorr International (included in
Exhibit 5.1)
**25.1 Power of Attorney (Included on Signature page of
Registration Statement)
**27 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules
Inapplicable
ITEM 17. UNDERTAKINGS
(a) The Registrant hereby undertakes that:
(1) For the purposes of determining any liabilities under the Securities
Act of 1933 (the "Act"), the information omitted from the form of
prospectus filed as a part of this Registration Statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described in Item 14, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defence of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW
YORK, STATE OF NEW YORK, ON THE 1ST DAY OF JULY, 1996.
Industri-Matematik International
Corp.
By: /s/ Stig G. Durlow
---------------------------------
STIG G. DURLOW
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PER-
SONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ Stig G. Durlow Chairman of the
- ------------------------------------- Board of Directors,
STIG G. DURLOW President and Chief
Executive Officer
(Principal
Executive Officer)
* Vice President,
- ------------------------------------- Chief Financial
LARS-GORAN PETERSON Officer and
Secretary
(Principal
Financial and
Accounting Officer)
* Director July 1, 1996
- -------------------------------------
MARTIN LEIMDORFER
* Director
- -------------------------------------
GEOFFREY W. SQUIRE
* Director
- -------------------------------------
WILLIAM H. JANEWAY
* Director
- -------------------------------------
JEFFREY A. HARRIS
*By: /s/ Stig G. Durlow
---------------------------
STIG G. DURLOW (AS ATTORNEY-IN-FACT)
II-4
<PAGE>
GRAPHICS ON PAGES TX]2 & 34
Description of Graphic: Graphic entitled "System ESS" with a sub-heading of
- ----------------------
"Demand Chain Management" depicts a cluster of seven hexagons in a "honeycomb"
configuration. Six of the hexagons are situated around a center hexagon
which contains an eighth, centered and internal hexagon. The internal hexagon
contains the word "CUSTOMER". The word "ELECTRONIC" appears above the internal
hexagon and the word "COMMERCE" appears below the internal hexagon. Within each
of the six outside hexagons are the words, in clock-wise order, "Order
Management," "Customer & Product Management," "Logistics Management," "Demand
Replenishment," "Global Organization Management," and "Price & Promotion
Management." Encircling and orbiting the cluster are six spheres, two of each
are labeled "Execution," "Planning" and "Decision Support," respectively,
linking the hexagons.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIONAL
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
**3.1 Restated Certificate of Incorporation of the
Registrant, as currently in effect
3.2 Form of Amended and Restated Certificate of
Incorporation of the Registrant, to be filed upon
closing of the offering
**3.3 By-Laws of the Registrant, as currently in effect
3.4 Form of Restated By-Laws of the Registrant, to be
effective upon closing of the offering
*4.1 Specimen certificate representing the Common Stock
*5.1 Opinion of Brobeck Hale and Dorr International
10.1 Form of Registration and Expense Agreement
10.2 Form of Registration Rights Agreement
10.3 Industri-Matematik International Corp. Stock Option
Plan
10.4 Form of Agreements of Restricted Stock Program
10.5 Employment Agreement between Stig G. Durlow and
IMAB (Certified English translation)
10.6 Employment Agreement between Lars-Goran Peterson
and IMAB (Certified English translation)
10.7 Lease dated April 28, 1993 between
Lansforsakringsbolagens AB and Industri-Matematik
AB and Amendment dated December 9, 1994 (Certified
English translation)
10.8 Lease dated August 24, 1992 between Diosfastigheter
AB and Industri-Matematik AB (Certified English
translation)
**11 Statement re Computation of Per Share Earnings
**22.1 List of Registrant's subsidiaries
**24.1 Consent of Coopers and Lybrand
*24.2 Consent of Brobeck Hale and Dorr International
(included in Exhibit 5.1)
**25.1 Power of Attorney (Included on signature page of
Registration Statement)
**27 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 1.1
DRAFT DATED
JUNE 24, 1996
4,000,000 Shares
Industri-Matematik International Corp.
Common Stock
($.01 Par Value)
UNDERWRITING AGREEMENT
----------------------
July __, 1996
Alex. Brown & Sons Incorporated
UBS Securities LLC
SoundView Financial Group, Inc.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Industri-Matematik International Corp., a Delaware corporation (the
"Company"), and Martin Leimdorfer (the "Firm Share Selling Stockholder")
propose to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as representatives (the
"Representatives") an aggregate of 4,000,000 shares of the Company's Common
Stock, $.01 par value (the "Firm Shares"), of which 3,200,000 shares will be
sold by the Company and 800,000 shares will be sold by the Firm Share Selling
Stockholder. The respective amounts of the Firm Shares to be so purchased by
the several Underwriters are set forth opposite their names in Schedule I
hereto. In addition, Warburg, Pincus Investors, L.P. (the "Option Share
Selling Stockholder") proposes to sell at the Underwriters' option an aggregate
of up to 600,000 additional shares of the Company's Common Stock (the "Option
Shares"). The Firm Share Selling Stockholder and the Option Share Selling
Stockholder are sometimes referred to herein collectively as the "Selling
Stockholders," and the Company and the Selling Stockholders are sometimes
referred to herein collectively as the "Sellers."
<PAGE>
As the Representatives, you have advised the Company and the Selling
Stockholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata
portion of the Option Shares if you elect to exercise the over-allotment option
in whole or in part for the accounts of the several Underwriters. The Firm
Shares and the Option Shares (to the extent the aforementioned option is
exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
-------------------------------------------------------------
Stockholders.
- ------------
(a) The Company represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form S-1
(File No. 333-______) with respect to the Shares has been prepared by the
Company in conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") thereunder and has
been filed with the Commission under the Act. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of the Rules and Regulations) contained therein and
the exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such registration
statement, together with any registration statement filed by the Company
pursuant to Rule 462 (b) of the Act, herein referred to as the "Registration
Statement," which shall be deemed to include all information omitted therefrom
in reliance upon Rule 430A and contained in the Prospectus referred to below,
has become effective under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
"Prospectus" means (a) the form of prospectus first filed with the Commission
pursuant to Rule 424(b) or (b) the last preliminary prospectus included in the
Registration Statement filed prior to the time it becomes effective or filed
pursuant to Rule 424(a) under the Act that is delivered by the Company to the
Underwriters for delivery to purchasers of the Shares, together with the term
sheet, if any, or abbreviated term sheet filed with the Commission pursuant to
Rule 424(b)(7) under the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein referred
to as a "Preliminary Prospectus." Any reference herein to the Registration
Statement, any Preliminary Prospectus or to the Prospectus shall be deemed to
refer to and include any supplements or amendments thereto, filed with the
Commission after the date of filing of the Prospectus under Rules 424(b) or
430A, and prior to the termination of the offering of the Shares by the
Underwriters.
(ii) The Company has been duly organized corporation
in good standing under the laws of the State of Delaware, with corporate power
and authority to own or lease its properties and conduct its business as
described in the Registration Statement. Each of the subsidiaries of the Company
as listed in Exhibit 21 to Item 16(a) of the Registration Statement as listed in
Exhibit A hereto (collectively, the "Subsidiaries") has been duly organized and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of
-2-
<PAGE>
its incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement.
The Subsidiaries are the only subsidiaries, direct or indirect, of the Company.
The Company and each of the Subsidiaries are duly qualified to transact business
in all jurisdictions in which the conduct of their business requires such
qualification. The outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company or another Subsidiary free and clear
of all liens, encumbrances and equities and claims; and no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the
Company, including all shares to be sold by the Selling Stockholders, have been
duly authorized and validly issued and, except for shares of Common Stock issued
under the Company's Restricted Stock Program, are fully paid and non-assessable;
the portion of the Shares to be issued and sold by the Company have been duly
authorized and, when issued and paid for as contemplated herein, will be validly
issued, fully paid and non-assessable; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue and sale thereof. Neither
the filing of the Registration Statement nor the offering or sale of the Shares
as contemplated by this Agreement gives rise to any rights, other than those
which have been waived or satisfied, for or relating to the registration of any
shares of Common Stock.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct, in all material
respects. All of the Shares conform in all material respects to the description
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms in all material respects to the requirements therefore set
forth in the corporate law of the jurisdiction of the Company's incorporation.
(v) The Commission has not issued an order
preventing or suspending the use of any Prospectus relating to the proposed
offering of the Shares, nor instituted proceedings for that purpose. The
Registration Statement contains, and the Prospectus and any amendments or
supplements thereto will contain, all statements which are required to be stated
therein by, and in all material respects conform or will conform, as the case
may be, to the requirements of the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and will not
contain, any untrue statement of a material fact and do not omit, and will not
omit, to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendments
and supplements thereto do not contain, and will not contain, any untrue
statement of material fact; and do not omit, and will not omit, to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Company by or
on behalf of any Underwriter through the Representatives, specifically for use
in the preparation thereof.
-3-
<PAGE>
(vi) The consolidated financial statements of the
Company and the Subsidiaries, together with related notes and schedules as set
forth in the Registration Statement, present fairly the financial position and
the results of operations and cash flows of the Company and the consolidated
Subsidiaries, at the indicated dates and for the indicated periods. Such
financial statements and related schedules have been prepared in accordance with
generally accepted principles of accounting, consistently applied throughout the
periods involved and all adjustments necessary for a fair presentation of
results for such periods have been made. The summary financial and statistical
data included in the Registration Statement presents fairly the information
shown therein and such data has been compiled on a basis consistent with the
financial statements presented therein and the books and records of the Company.
The pro forma financial information included in the Registration Statement and
the Prospectus present fairly the information shown therein, has been properly
compiled on the pro forma bases described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein.
(vii) Ohrings Coopers & Lybrand AB, who have certified
certain of the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants, as required by the
Act and the Rules and Regulations.
(viii) There is no action, suit, claim or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any of the Subsidiaries before any court or administrative agency or otherwise
which if determined adversely to the Company or any of its Subsidiaries might
result in any material adverse change in the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise) or
prospects of the Company and of the Subsidiaries taken as a whole or to prevent
the consummation of the transactions contemplated hereby, except as set forth in
the Registration Statement.
(ix) The Company and the Subsidiaries have good and
marketable title to all of the properties and assets reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except those reflected in such financial statements (or as described in the
Registration Statement) or which are not material in amount. The Company and the
Subsidiaries occupy their leased properties under valid and binding leases
conforming in all material respects to the description thereof set forth in the
Registration Statement.
(x) The Company and the Subsidiaries have filed all
Federal, State, local and foreign income tax returns which have been required to
be filed and have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have become due
and are not being contested in good faith. All tax liabilities have been
adequately provided for in the financial statements of the Company.
(xi) Since the respective dates as of which
information is given in the Registration Statement, as it may be amended or
supplemented, there has not been any material adverse change or any
development involving a prospective material adverse change in or affecting
the earnings,
-4-
<PAGE>
business, management, properties, assets, rights, operations, condition
(financial or otherwise), or prospects of the Company and its Subsidiaries taken
as a whole, whether or not occurring in the ordinary course of business, and
there has not been any material transaction entered into or any material
transaction that is probable of being entered into by the Company or the
Subsidiaries, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement, as it may be
amended or supplemented. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's financial
statements which are included in the Registration Statement as it may be amended
and supplemented.
(xii) Neither the Company nor any of the Subsidiaries
is or, with the giving of notice or lapse of time or both, will be, in violation
of or in default under its Charter or By-Laws or under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a party or
by which it, or any of its properties, is bound and which default is of material
significance in respect of the condition, financial or otherwise of the Company
and its Subsidiaries taken as a whole or the business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries taken as a whole. The execution and delivery of
this Agreement and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the
Company or any Subsidiary is a party, or of the Charter or By-laws of the
Company or any order, rule or regulation applicable to the Company or any
Subsidiary of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction, except for any such conflicts,
breaches or defaults which, individually or in the aggregate, would not have a
material adverse effect on the Company and the Subsidiaries, taken as a whole.
(xiii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the Commission,
the National Association of Securities Dealers, Inc. (the "NASD"), or such
additional steps as may be necessary to qualify the Shares for public offering
by the Underwriters under state securities or Blue Sky laws of foreign
securities laws) has been obtained or made and is in full force and effect.
(xiv) The Company and each of the Subsidiaries holds
all material licenses, certificates and permits from governmental authorities
which are necessary to the conduct of their businesses; and neither the Company
nor any of the Subsidiaries has infringed, or received any notice of
infringement of, nor to the Company's knowledge will the conduct of the
Company's business as described in the Registration Statement and in the
Prospectus infringe, any patents, patent rights, trade names, trademarks,
copyrights or trade secret, which infringement is material to the business of
the Company and the Subsidiaries taken as a whole. The Company knows of no
material infringement by others of patents, patent rights, trade names,
trademarks or copyrights owned by or licensed to the Company.
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(xv) Neither the Company nor, to the Company's
knowledge, any of its affiliates (as that terms is defined under the Act), has
taken or may take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the shares of
Common Stock to facilitate the sale or resale of the Shares.
(xvi) Neither the Company nor any Subsidiary is an
"investment company" within the meaning of such term under the Investment
Company Act of 1940 and the rules and regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xviii) The Company and each of its Subsidiaries carry,
or are covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in similar
industries.
(xix) The Company is in compliance in all material
respects with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any U.S. "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any U.S. "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including
the regulations and published interpretations thereunder (the "Code"); and each
U.S. "pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.
(xx) The Company and each of its Subsidiaries own or
possess licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights, mask work rights, technology know-how and other
intellectual property rights ("Intellectual Property") necessary to conduct the
business now or proposed to be conducted by the Company and each of its
Subsidiaries as described in the Prospectus, and, except as disclosed in the
Prospectus, neither the Company nor any of its Subsidiaries has received any
notice of infringement of or conflict with (or knows of such infringement of or
conflict with) asserted rights of others with respect to the Intellectual
Property which, individually or in the aggregate, is reasonably likely to result
in any material adverse effect upon the condition, financial or otherwise, of
the Company and each of its Subsidiaries taken as a whole or the earnings,
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business affairs or management of the Company and each of its Subsidiaries
taken as a whole; and, except as disclosed in the Prospectus and to the
knowledge of the Company and each of its Subsidiaries, do not in the conduct of
their business as now or proposed to be conducted as described in the
Prospectus, infringe or conflict with any Intellectual Property of any third
party, or any discovery, invention, product or process which is the subject of a
patent application filed by any thirty party, known to the Company or any of its
Subsidiaries, where such infringement or conflict is reasonably likely to result
in any material adverse effect upon the condition, financial or otherwise, of
the Company and each of its Subsidiaries taken as a whole or the earnings,
business affairs or management of the Company and each of its Subsidiaries taken
as a whole.
(xxi) The Company has full corporate power and
authority to enter into this Agreement and perform the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company.
(b) Each of the Selling Stockholders severally represents
and warrants as follows:
(i) Such Selling Stockholder now has and at the
Closing Date and the Option Closing Date, as the case may be (as such dates are
hereinafter defined), will have good and marketable title to the Firm Shares and
the Option Shares, as the case may be, to be sold by such Selling Stockholder,
free and clear of any liens, encumbrances, equities and claims, and full right,
power and authority to effect the sale and delivery of such Firm Shares and
Option Shares, as the case may be; and upon the delivery of, against payment
for, such Firm Shares and Option Shares, as the case may be, pursuant to this
Agreement, the Underwriters will acquire good and marketable title thereto, free
and clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Stockholder has full right, power
and authority to execute and deliver this Agreement, the Power of Attorney and
the Custody Agreement referred to below and to perform its obligations under
such Agreements. The execution and delivery of this Agreement and the
consummation by such Selling Stockholder of the transactions herein contemplated
and the fulfillment by such Selling Stockholder of the terms hereof will not
require any consent, approval, authorization, or other order of any court,
regulatory body, administrative agency or other governmental body (except as may
be required under the Act, state securities laws or Blue Sky laws or foreign
securities laws) and will not conflict with or result in a breach of any of the
terms and provisions of, or constitute a default under, the organizational
documents of such Selling Stockholder, if not an individual, or any indenture,
mortgage, deed of trust or other agreement or instrument to which such Selling
Stockholder is a party, or of any order, rule or regulation applicable to such
Selling Stockholder of any court or of any regulatory body or administrative
agency or other governmental body having jurisdiction.
(iii) Such Selling Stockholder has not taken and will
not take, directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock of the Company
and, other than as permitted by the Act, the Selling Stockholder will not
distribute any prospectus or other offering material in connection with the
offering of the Shares, except for any such conflicts,
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<PAGE>
breaches of defaults which, individually or in the aggregate, would not have a
material adverse effect on the Company and the Subsidiaries, taken as a whole.
(iv) Without having undertaken to determine
independently the accuracy or completeness of the representations and
warranties of the Company contained herein, such Selling Stockholder has no
reason to believe that the representations and warranties of the Company
contained in this Section 1 are not true and correct.
(v) Each Selling Stockholder represents that,
without having undertaken to determine independently the accuracy or
completeness of the information contained in the Registration Statement, such
Selling Stockholder is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely affect the
business of the Company or any of the Subsidiaries. The sale of the Firm Shares
and the Option Shares, as the case may be, by such Selling Stockholder pursuant
thereto is not prompted by any information concerning the Company or any of the
Subsidiaries which is not set forth in the Registration Statement. The
information pertaining to such Selling Stockholder under the captions "Principal
and Selling Stockholders" and "Certain Transactions" in the Prospectus is
complete and accurate in all material respects.
2. Purchase, Sale and Delivery of the Firm Shares.
----------------------------------------------
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to the conditions herein set forth, the
Company and the Firm Share Selling Stockholder (collectively, the "Firm Share
Sellers") agree to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $_____ per share, the
number of Firm Shares set forth opposite the name of each Underwriter in
Schedule I hereof, subject to adjustments in accordance with Section 9 hereof.
The number of Firm Shares to be purchased by each Underwriter from each Firm
Share Seller shall be as nearly as practicable in the same proportion to the
total number of Firm Shares being sold by each Firm Share Seller as the number
of Firm Shares being purchased by each Underwriter bears to the total number of
Firm Shares to be sold hereunder. The obligations of the Company and the Firm
Share Selling Stockholder shall be several and not joint.
(b) Certificates in negotiable form for the total number of
the Shares to be sold hereunder by the Selling Stockholders have been placed in
custody with Boston Equiserve Limited Partnership as custodian (the "Custodian")
pursuant to the Letter of Transmittal and Custody Agreement (the "Custody
Agreement") executed by each Selling Stockholder for delivery of all Firm Shares
and any Option Shares to be sold hereunder by the Selling Stockholders. Each of
the Selling Stockholders specifically agrees that the Firm Shares and any Option
Shares, as the case may be, represented by the certificates held in custody for
the Selling Stockholders under the Custody Agreement are subject to the
interests of the Underwriters hereunder, that the arrangements made by the
Selling Stockholders for such custody are to that extent irrevocable, and that
the obligations of the Selling Stockholders hereunder shall not be terminable by
any act or deed of the Selling Stockholders (or by any other person, firm or
corporation including the Company, the Custodian or the Underwriters) or by
operation of law (including the death of an individual Selling Stockholder or
the dissolution of a Selling Stockholder which is a
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<PAGE>
corporation or partnership) or by the occurrence of any other event or events,
except as set forth in the Custody Agreement. If any such event should occur
prior to the delivery to the Underwriters of the Firm Shares or the Option
Shares hereunder, certificates for the Firm Shares or the Options Shares, as the
case may be, shall be delivered by the Custodian in accordance with the terms
and conditions of this Agreement as if such event has not occurred. The
Custodian is authorized to receive and acknowledge receipt of the proceeds of
sale of the Shares held by it against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to
York Clearing House funds by certified or bank cashier's checks drawn to the
order of the Company for the shares to be sold by it and to the order of
"Boston Equiserve Limited Partnership, as Custodian" for the shares to be sold
by the Firm Share Selling Stockholder, in each case against delivery of
certificates therefor to the Representatives for the several accounts of the
Underwriters. Such payment and delivery are to be made at the offices of Alex.
Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland, at
10:00 a.m., Baltimore time, on the third business day after the date of this
Agreement in accordance with the Rules and Regulations, or at such other time
and date not later than five business days thereafter as you and the Company
shall agree, such time and date being herein referred to as the "Closing Date."
(As used herein, "business day" means a day on which the New York Stock
Exchange is open for trading and on which banks in New York are open for
business and not permitted by law or executive order to be closed.) The
certificates for the Firm Shares will be delivered in such denominations and in
such registrations as the Representatives request in writing not later than the
second full business day prior to the Closing Date, and will be made available
for inspection by the Representatives at least one business day prior to the
Closing Date.
(d) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Option Share Selling Stockholder hereby to purchase the Option Shares
at the price per share set forth in the first paragraph of this Section 2. The
option granted hereby may be exercised in whole or in part by giving written
notice (i) at any time before the Closing Date and (ii) only once thereafter
within 30 days after the date of this Agreement, by you, as Representatives of
the several Underwriters, to the Company, the Attorneys and the Custodian,
setting forth the number of Option Shares as to which the several Underwriters
are exercising the option, the names and denominations in which the Option
Shares are to be registered and the time and date at which such certificates are
to be delivered. The time and date at which certificates for Option Shares are
to be delivered shall be determined by the Representatives but shall not be
earlier than three, nor later than 10, full business days after the exercise of
such option, nor in any event prior to the Closing Date (such time and date
being herein referred to as the "Option Closing Date"). If the date of exercise
of the option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The number of
Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the number of
Firm Shares being purchased by such Underwriter bears to the total number of
Firm Shares, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
You, as Representatives of the several Underwriters, may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company and the Attorneys. To the extent, if any, that the option is
exercised, payment for the Option
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<PAGE>
Shares shall be made on the Option Closing Date in New York Clearing House
funds by certified or bank cashier's check drawn to the order of, as the case
may be, "Boston Equiserve Limited Partnership, as Custodian" for the Option
Shares to be sold by the Option Share Selling Stockholder against delivery of
certificates therefor at the offices of Alex. Brown & Sons Incorporated,
135 East Baltimore Street, Baltimore, Maryland.
(e) If on the Closing Date or Option Closing Date, as the
case may be, any Selling Stockholder fails to sell the Firm Shares or Option
Shares which such Selling Stockholder has agreed to sell, the Company agrees
that it will sell or arrange for the sale of that number of shares of Common
Stock to the Underwriters which represents Firm Shares or the Option Shares, as
the case may be, which such Selling Stockholder has failed to so sell, or such
lesser number as may be requested by the Representatives.
3. Offering by the Underwriters. It is understood that the several
----------------------------
Underwriters are to make a public offering of the Firm Shares as soon as the
Representatives deem it advisable to do so. The Firm Shares are to be
initially offered to the public at the initial public offering price set forth
in the Prospectus. The Representatives may from time to time thereafter change
the public offering price and other selling terms. To the extent, if at all,
that any Option Shares are purchased pursuant to Section 2 hereof, the
Underwriters will offer them to the public on the foregoing terms.
It is further understood that you will act as the
Representatives for the Underwriters in the offering and sale of the Shares in
accordance with a Master Agreement Among Underwriters entered into by you and
the several other Underwriters.
4. Covenants of the Company and the Selling Stockholders.
-----------------------------------------------------
(a) The Company covenants and agrees with the several
Underwriters that:
(i) The Company will (A) use its best efforts to
cause the Registration Statement to become effective or, if the procedure in
Rule 430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus
in a form approved by the Representatives containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430A of the Rules and Regulations and (B) not file any amendment to the
Registration Statement or supplement to the Prospectus of which the
Representatives shall not previously have been advised and furnished with a copy
or to which the Representatives shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(ii) The Company will advise the Representatives
promptly (A) when the Registration Statement or any post-effective amendment
thereto shall have become effective, (B) of receipt of any comments from the
Commission, with respect to the Registration Statement (C) of any request of the
Commission for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, and (D) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the
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<PAGE>
institution of any proceedings for that purpose. The Company will use its
best efforts to prevent the issuance of any such stop order preventing or
suspending the effectiveness of the Registration Statement or the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(iii) The Company will cooperate with the
Representatives in endeavoring to qualify the Shares for sale under the
securities laws of such jurisdictions as the Representatives may reasonably have
designated in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction where it
is not now so qualified or required to file such a consent. The Company will,
from time to time, prepare and file such statements, reports, and other
documents, as are or may be required to continue such qualifications in effect
for distribution of the Shares for so long a period as the Representatives may
reasonably request.
(iv) The Company will deliver to, or upon the order
of, the Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith including all post-effective amendments thereto, if any, filed prior
to the Option Closing Date, and will deliver to the Representatives such number
of copies of the Registration Statement (including such number of copies of the
exhibits filed therewith that may reasonably be requested) and of all amendments
thereto, as the Representatives may reasonably request.
(v) If during the period in which a Prospectus is
required under the Act to be delivered by an Underwriter or dealer, any event
shall occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the light
of the circumstances existing at the time the Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Prospectus to comply with any applicable law, the Company
promptly will prepare and file with the Commission an appropriate amendment to
the Registration Statement or supplement to the Prospectus.
(vi) The Company will make generally available to
its security holders, as soon as it is practicable to do so, but in any event
not later than 15 months after the effective date of the Registration Statement,
an earning statement (which need not be audited) in reasonable detail, covering
a period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earning statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations, and will advise you in writing when such statement has been so made
available.
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<PAGE>
(vii) The Company will, for a period of five years
from the Closing Date, deliver to the Representatives copies of annual reports
and copies of all other documents, reports and information furnished by the
Company to its stockholders or filed with any securities exchange pursuant to
the requirements of such exchange or with the Commission pursuant to the Act or
the Exchange Act. The Company will deliver to the Representatives similar
reports with respect to significant subsidiaries, as that term is defined in the
Rules and Regulations, which are not consolidated in the Company's financial
statements.
(viii) No offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other securities
convertible into or exchangeable or exercisable for shares of Common Stock or
derivative of Common Stock (or agreement for such) will be made for a period of
180 days after the date of this Agreement, directly or indirectly, by the
Company otherwise than hereunder or with the prior written consent of Alex
Brown & Sons Incorporated.
(ix) The shares have been qualified for trading,
subject to notice of issuance, on the Nasdaq National Market.
(x) The Company has caused each executive officer,
director and stockholder of the Company to furnish to you, on or prior to the
date of this agreement, a letter or letters, in form and substance satisfactory
to the Underwriters, pursuant to which each such person shall agree not to
offer, sell, sell short or otherwise dispose of any shares of Common Stock of
the Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Common Shares or derivative of
Common Shares owned by such person or request the registration for the offer or
sale of any of the foregoing (or as to which such person has the right to direct
the disposition of) for a period of 180 days after the date of this Agreement,
directly or indirectly, except with the prior written consent of Alex Brown &
Sons Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its
sale of the Shares as set forth in the Prospectus and shall file such reports
with the Commission with respect to the sale of the Shares and the application
of the proceeds therefrom as may be required in accordance with Rule 463 under
the Act.
(xii) The Company shall not invest, or otherwise use
the proceeds received by the Company from its sale of the Shares in such a
manner as would require the Company or any of the Subsidiaries to register as
an investment company under the Investment Company Act of 1940, as amended
(the "1940 Act").
(xiii) The Company will maintain a transfer agent and,
if necessary under the jurisdiction of incorporation of the Company, a
registrar for the Common Stock.
(xiv) The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.
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<PAGE>
(b) Each of the Selling Stockholders covenants and agrees
with the several Underwriters that:
(i) No offering, sale, short sale or other
disposition of any shares of Common Stock of the Company or other capital stock
of the Company or other securities convertible, exchangeable or exercisable for
Common Stock or derivative of Common Stock owned by the Selling Stockholder or
request the registration for the offer or sale of any of the foregoing (or as to
which the Selling Stockholder has the right to direct the disposition of) will
be made for a period of 180 days after the date of this Agreement, directly or
indirectly, by such Selling Stockholder otherwise than hereunder or with the
prior written consent of Alex Brown & Sons Incorporated.
(ii) In order to document the Underwriters'
compliance with the reporting and withholding provisions of the Tax Equity and
Fiscal Responsibility Act of 1982 and the Interest and Dividend Tax Compliance
Act of 1983 with respect to the transactions herein contemplated, each of the
Selling Stockholders agrees to deliver to you prior to or at the Closing Date a
properly completed and executed United States Treasury Department Form W-8 or W-
9 (or other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(iii) Such Selling Stockholder will not take,
directly or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the stabilization
or manipulation of the price of any securities of the Company.
5. Costs and Expenses.
------------------
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting
fees of the Company; the fees and disbursements of counsel for the Company and
the Selling Stockholders; the cost of printing and delivering to, or as
requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the Agreement Among
Underwriters, the Underwriters' Selling Memorandum, the Underwriters'
Questionnaire, the Underwriters' Invitation Letter, the Listing Application,
the Blue Sky Survey and any supplements or amendments thereto; the filing fees
of the Commission; the filing fees and expenses (including legal fees and
disbursements) incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale
of the Shares; the Listing Fee of the Nasdaq National Market; and the expenses,
including the fees and disbursements of counsel for the Underwriters, incurred
in connection with the qualification of the Shares under State securities or
Blue Sky laws. The Selling Stockholders have agreed with the Company to bear
certain expenses related to the sale by them of a portion of the Firm Shares or
all or a portion of the Option Shares, as the case may be. To the extent, if
at all, that any of the Selling Stockholders engage special legal counsel
(other than Brobeck Hale and Dorr International) to represent them in
connection with this offering, the fees and expenses of such counsel shall be
borne by such Selling Stockholder. Any transfer taxes imposed on the sale of
the Shares to the several Underwriters will be paid by the Sellers pro rata.
The Company agrees to pay all costs and expenses of the Underwriters, including
the fees and disbursements of counsel for the Underwriters, incident to the
offer and sale of directed shares of the Common Stock by the
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Underwriters to employees and persons having business relationships with the
Company and its Subsidiaries. The Sellers shall not, however, be required to pay
for any of the Underwriters expenses (other than those related to qualification
under NASD regulation and State securities or Blue Sky laws) except that, if
this Agreement shall not be consummated because the conditions in Section 6
hereof are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 (b) and (c) hereof, or by reason of any
failure, refusal or inability on the part of the Company or the Selling
Stockholders to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company and the
Selling Stockholders shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
6. Conditions of Obligations of the Underwriters.
---------------------------------------------
The several obligations of the Underwriters to purchase the
Firm Shares on are subject to the accuracy, as of the Closing Date or the Option
Closing Date, as the case may be, of the representations and warranties of the
Company and the Selling Stockholders contained herein, and to the performance by
the Company and the Selling Stockholders of their covenants and obligations
hereunder and to the following additional conditions:
(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and any and all filings required
by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and
any request of the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No stop
order suspending the effectiveness of the Registration Statement, as amended
from time to time, shall have been issued and no proceedings for that purpose
shall have been taken or, to the knowledge of the Company or the Selling
Stockholders, shall be contemplated by the Commission and no injunction,
restraining order, or order of any nature by a Federal or state court of
competent jurisdiction shall have been issued as of the Closing Date which would
prevent the issuance of the Shares.
(b) The Representatives shall have received on the Closing
Date or the Option Closing Date, as the case may be, the opinion of Brobeck Hale
and Dorr International, counsel for the Company and the Selling Stockholders,
dated the Closing Date or the Option Closing Date, as the case may be, addressed
to the Underwriters (and stating that it may be relied upon by counsel to the
Underwriters) to the effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own or lease its properties
and conduct its business as described in the Registration
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Statement; each of the non-Swedish Subsidiaries ("the Non-Swedish Subsidiaries")
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with corporate
power and authority to own or lease its properties and conduct its business as
described in the Registration Statement; the Company and each of the Non-Swedish
Subsidiaries are duly qualified to transact business in all jurisdictions in
which the conduct of their business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the business of
the Company and the Non-Swedish Subsidiaries taken as a whole; and the
outstanding shares of capital stock of each of the Non-Swedish Subsidiaries have
been duly authorized and validly issued and are fully paid and non-assessable
and are owned by the Company or a Subsidiary; and, to the best of such counsel's
knowledge, the outstanding shares of capital stock of each of the Subsidiaries
is owned free and clear of all liens, encumbrances and equities and claims, and
no options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into any shares
of capital stock or of ownership interests in the Non-Swedish Subsidiaries are
outstanding.
(ii) The Company has authorized and outstanding
capital stock as set forth under the caption "Capitalization" in the Prospectus;
the authorized shares of the Company's Common Stock have been duly authorized;
the outstanding shares of the Company's Common Stock, including the Shares to be
sold by the Selling Stockholders, have been duly authorized and validly issued
and, except for shares of Common Stock issued under the Company's Restricted
Stock Program, are fully paid and non-assessable; all of the Shares conform in
all material respects to the description thereof contained in the Prospectus;
the certificates for the Shares, assuming they are in the form filed with the
Commission, are in due and proper form as required by the corporate law of the
State of Delaware; the shares of Common Stock, including the Option Shares, if
any, to be sold by the Company pursuant to this Agreement have been duly
authorized and will be validly issued, fully paid and non-assessable when issued
and paid for as contemplated by this Agreement; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue or sale
thereof.
(iii) Except as described in or contemplated by the
Prospectus, to the knowledge of such counsel, there are no outstanding
securities of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the Company
and there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into or evidencing the right to purchase
or subscribe for any shares of such stock; and except as described in the
Prospectus, to the knowledge of such counsel, no holder of any securities of the
Company or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell or
otherwise issue to them, or to permit them to underwrite the sale of, any of the
Shares or the right to have any Common Shares or other securities of the Company
included in the Registration Statement or the right, as a result of the filing
of the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
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(iv) The Registration Statement has become effective
under the Act and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(v) The Registration Statement, all Preliminary
Prospectuses, the Prospectus and each amendment or supplement thereto comply as
to form in all material respects with the requirements of the Act and the
applicable rules and regulations thereunder (except that such counsel need
express no opinion as to the financial statements, related schedules and other
financial or statistical information included therein).
(vi) The statements under the captions "Management,"
"Description of Capital Stock," "Risk Factors--Shares Eligible for Future Sale"
and "Shares Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein or matters of
law, fairly summarize in all material respects the information called for with
respect to such documents and matters.
(vii) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are not so filed
or described as required, and such contracts and documents as are summarized in
the Registration Statement or the Prospectus are fairly summarized in all
material respects.
(viii) Such counsel knows of no material legal or
governmental proceedings pending or threatened against the Company or any of
the Subsidiaries except as set forth in the Prospectus.
(ix) The execution and delivery of this Agreement and
the consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Charter or By-laws of the Company, or any
agreement or instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound.
(x) This Agreement has been duly authorized,
executed and delivered by the Company.
(xi) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated (other than as may be required by the NASD or as required by State
securities and Blue Sky laws or foreign securities laws as to which such counsel
need express no opinion) except such as have been obtained or made, specifying
the same.
(xii) The Company is not, and will not become, as a
result of the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the Prospectus,
required to register as an investment company under the 1940 Act.
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(xiii) Each Selling Stockholder that is a corporation
or partnership is validly existing as a corporation or partnership, as the case
may be, in good standing under the laws of the jurisdiction of its incorporation
or organization, and is duly qualified to transact business and is in good
standing in each jurisdiction in which such qualification is required, except
where the failure to so qualify or be in good standing would not have a
materially adverse effect upon the business of the Company and the Subsidiaries
taken as a whole.
(xiv) Each of this Agreement, the Power of Attorney
and the Custody Agreement has been duly authorized, executed and delivered on
behalf of the Selling Stockholders.
(xv) Each Selling Stockholder has full legal right,
power and authority, and any approval required by law (other than as required
by State securities and Blue Sky laws as to which such counsel need express no
opinion), to sell,assign, transfer and deliver the portion of the Shares to be
sold by such Selling Stockholder.
(xvi) The Custody Agreement and the Power of Attorney
executed and delivered by each Selling Stockholder is valid and binding.
(xvii) The Underwriters (assuming that they are bona
fide purchasers within the meaning of the Uniform Commercial Code) have acquired
good and marketable title to the Shares being sold by each Selling Stockholder
on the Closing Date, and the Option Closing Date, as the case may be, free and
clear of all liens, encumbrances, equities and claims.
In rendering such opinion, Brobeck Hale and Dorr International may
rely as to matters governed by the laws of states other than Delaware or
Federal laws on local counsel in such jurisdictions reasonably acceptable to the
Representatives and Wilson Sonsini Goodrich & Rosati, P.C. In addition to the
matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that (i) the Registration Statement, at the time it became effective
under the Act (but after giving effect to any modifications deemed to be a part
thereof pursuant to Rule 430A under the Act) and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to the
Rules and Regulations and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements, in the light
of the circumstances under which they are made, not misleading (except that
such counsel need express no view as to financial statements, related schedules
and other financial or statistical information therein). With respect to such
statement, Brobeck Hale and Dorr International may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification.
(c) The Representatives shall have received from
Advokatfirman Vinge KB, Swedish counsel for each of the Company and the Firm
Share Selling Stockholder, an opinion, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to the Underwriters (and stating
that it may be relied upon by counsel to the Underwriters) to the effect that:
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(i) Each of the Company's direct and indirect
Swedish subsidiaries (the "Swedish Subsidiaries") has been duly incorporated and
is validly existing in good standing as a corporation under the laws of the
Kingdom of Sweden, with corporate power and authority to own or lease its
properties and to conduct its business as described in the Prospectus; and the
Company is duly qualified to transact business in Sweden, except to the extent
that the failure to be so qualified would not have a material adverse effect on
the Company and the Subsidiaries, taken as a whole.
(ii) The outstanding shares of capital stock of each
of the Swedish Subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable and are owned by the Company or a Subsidiary; and,
to the best of such counsel's knowledge, the outstanding shares of capital stock
of each of the Swedish Subsidiaries is owned free and clear of all liens,
encumbrances and equities and claims, and no options, warrants or other rights
to purchase, agreements or other obligations to issue or other rights to convert
any obligations into any shares of capital stock or of ownership interests in
the Swedish Subsidiaries are outstanding.
(iii) This Agreement has been duly authorized,
executed and delivered by the Firm Share Selling Stockholder.
(iv) The execution and delivery by the Company of,
and the performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable Swedish law or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon the Company
or any of the Swedish Subsidiaries that is material to the Company and the
Subsidiaries, taken as a whole, or that would otherwise prejudice the
consummation of the transactions contemplated by this Agreement, or, to the best
of such counsel's knowledge, any judgment, order or decree of any Swedish
governmental body, agency or court in the Kingdom of Sweden having jurisdiction
over the Company or any of the Swedish Subsidiaries; and no consent, approval,
authorization, filing or order of, or qualification with, any Swedish
governmental body or agency, is required for the performance by the Company of
its obligations under this Agreement.
(v) The execution and delivery by the Firm Share
Selling Stockholder of, and the performance by the Firm Share Selling
Stockholder of its obligations under, this Agreement will not contravene any
provision of applicable Swedish law or, to the best of such counsel's knowledge,
any agreement or other instrument binding upon the Firm Share Selling
Stockholder, or that would otherwise prejudice the consummation of the
transactions contemplated by this Agreement, or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental body, agency or
court in the Kingdom of Sweden having jurisdiction over the Firm Share Selling
Stockholder, and no consent, approval, authorization, filing or order of, or
qualification with, any Swedish governmental body or agency is required for the
performance by the Firm Share Selling Stockholder of its obligations under this
Agreement.
(vi) Such counsel does not know of any legal or
governmental proceedings in the Kingdom of Sweden pending or threatened to which
the Company or any of the Swedish Subsidiaries is a party or to which any of the
properties of the Company or any of the Swedish Subsidiaries is subject that is
material to the Company and the Subsidiaries, taken as a whole.
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<PAGE>
(vii) In order to ensure the legality, validity,
enforceability or admissibility in evidence of this Agreement in Sweden, it is
not necessary that any document be filed, recorded or enrolled with any public
authority, governmental agency or governmental department of the Kingdom of
Sweden.
(viii) The Firm Share Selling Stockholder has the
legal right and power, and all authorization and approval required by Swedish
law, to enter into this Agreement, to deposit the Firm Shares sold by him with
the Custodian under the Custody Agreement and to sell, transfer and deliver
the Firm Shares sold by him.
(ix) The Firm Share Selling Stockholder has the
power to submit and has taken all necessary action to submit, to the non-
exclusive jurisdiction of any United States federal or state court in the County
of Baltimore, State of Maryland (except that the Swedish bankruptcy courts have
exclusive jurisdiction in respect of all property of the Firm Share Selling
Stockholder at the bankruptcy of the Firm Share Selling Stockholder) with
respect to legal proceedings in the United States; and there is no provision of
Swedish law which would render service of process effected in the manner set
forth in such sections invalid with respect to legal proceedings in the United
States relating to or arising under this Agreement and the transactions
contemplated hereby.
(x) Under the laws of the Kingdom of Sweden and
under current practice of courts in the Kingdom of Sweden, (A) the Underwriters
would be permitted to commence proceedings against the Firm Share Selling
Stockholder in the competent Swedish courts based on actions under this
Agreement, and (B) such courts in the Kingdom of Sweden would accept
jurisdiction over any such action or proceedings;
(xi) The choice of the law of the State of Maryland
as the law expressed to govern this Agreement is valid and binding on the Firm
Share Selling Stockholder, and the courts of the Kingdom of Sweden will give
effect to each such choice of law upon proof of the relevant provisions of such
foreign laws, subject, however, to the qualification that foreign laws will not
be applied to the extent contrary to Swedish public policy and that Swedish law
will be applied in a bankruptcy proceeding in respect of, or an execution
against, the Firm Share Selling Stockholder;
(xii) Under the laws of the Kingdom of Sweden, the
Firm Share Selling Stockholder would not be entitled to plead, or cause to be
pleaded on its behalf, sovereign immunity from the jurisdiction of, or the
execution or enforcement of any judgment of, any court of the Kingdom of Sweden
or any United States federal or state court of the County of Baltimore, State of
Maryland.
(xiii) The Agreement of the Firm Share Selling
Stockholder under Section 8 of this Agreement does not contravene Swedish
public policy;
(xiv) The following statements with respect to
Swedish law set forth in the Prospectus are accurate in all material respects:
(i) the statements regarding the enforceability of civil liabilities against
Swedish persons under the caption "Risk Factors--Enforceability of U.S.
Judgments against Non-U.S. Officers and Directors;" (ii) the statements under
"Management--Employment
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Agreements;" and (iii) the statements regarding Swedish law under
"Management--Employee Benefit Plans;" and (iv) the statements regarding Swedish
law under "Business-Employees."
(xv) Such counsel has reviewed the Swedish language
documents and agreements (to be listed in an attachment to such counsel's
opinion) to which the Company or any of its Subsidiaries is a party and has
prepared and delivered to you a brief summary of each such document or
agreement; such summaries accurately state the subject matter of such documents
or agreements and do not misstate any material facts; such counsel has prepared
and delivered to you English language translations of certain material
agreements (also to be listed in an attachment to such counsel's opinion) and
such translations are fair and accurate in all material respects; and
(xiv) The formation of the Company and the transfers
to the Company of all issued and outstanding share capital of
Industri-Matematik A.B. did not subject the Company or any of the Subsidiaries
to any tax liability under the laws of the Kingdom of Sweden.
In giving such opinion, such counsel may state that it has not
investigated the laws of any jurisdiction other than the Kingdom of Sweden as
they stand and have been interpreted in published case law of the courts in the
Kingdom of Sweden as of the date of such opinion, and that it does not express
or imply an opinion on the laws of any jurisdiction other than the Kingdom of
Sweden.
(d) The Representatives shall have received from Wilson
Sonsini Goodrich & Rosati, P.C., counsel for the Underwriters, an opinion dated
the Closing Date or the Option Closing Date, as the case may be, substantially
to the effect specified in subparagraphs (ii), (iii) and (iv) of Paragraph (b)
of this Section 6, and that the Company is a duly organized and validly existing
corporation under the laws of the State of Delaware. In rendering such opinion
Wilson Sonsini Goodrich & Rosati, P.C. may rely as to all matters governed other
than by the laws of the States of California and Delaware or Federal laws on the
opinion of counsel referred to in Paragraphs (b) and (c)of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that (i) the Registration Statement, or any
amendment thereto, as of the time it became effective under the Act (but after
giving effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the case
may be, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Prospectus, or any supplement thereto, on
the date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact, necessary in
order to make the statements, in the light of the circumstances under which they
are made, not misleading (except that such counsel need express no view as to
financial statements, related schedules and other financial or statistical
information therein). With respect to such statement, Wilson Sonsini Goodrich &
Rosati, P.C. may state that their belief is based upon the procedures set forth
therein, but is without independent check and verification.
(e) The Representatives shall have received at or prior to
the Closing Date from Wilson Sonsini Goodrich & Rosati, P.C. a memorandum or
summary, in form and substance satisfactory
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to the Representatives, with respect to the qualification for offering and sale
by the Underwriters of the Shares under the State securities or Blue Sky laws of
such jurisdictions within the United States as the Representatives may
reasonably have designated to the Company; and the Representatives shall have
received at or prior to the Closing Date from Brobeck Hale and Dorr
International, a memorandum or summary, in form and substance satisfactory to
the Representatives, with respect to the qualification for offering and sale by
the Underwriters of the Shares under the securities laws of such jurisdictions
outside of the United States as the Representatives may reasonably have
designated to the Company.
(f) The Representatives shall have received, on each of the
dates hereof, the Closing Date and (i) on the date of this Agreement, a letter,
dated the date hereof, from Ohrlings Coopers & Lybrand AB addressed to the
Representatives, confirming that they are independent certified public
accountants within the meaning of the Securities Act and the applicable
published Rules and Regulations for the respective periods reported on by such
firm, and stating, on the basis of performing the procedures set forth in the
letter signed by such firm and carried out through a date not more than five
days prior to the date hereof, the conclusions and findings of such firm with
respect to the financial information and other matters covered by its letter
delivered to the Representatives concurrently with the execution of this
Agreement, and (ii) on the Closing Date or the Option Closing Date, as the case
may be, a signed letter from Ohrlings Coopers & Lybrand, AB dated the date
hereof, the Closing Date or the Option Closing Date, as the case may be, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the letter signed by such firm and dated and delivered to the
Representatives on the date hereof, that nothing has come to their attention
during the period from the date five days prior to the date hereof, to a date
not more than five days prior to the Closing Date or the Option Closing Date, as
the case may be, which would require any change in their letter dated the date
hereof if it were required to be dated and delivered on the Closing Date or the
Option Closing Date, as the case may be. All such letters shall be in form and
substance satisfactory to the Representatives.
(g) The Representatives shall have received on the Closing
Date or the Option Closing Date, as the case may be, a certificate or
certificates of the Chief Executive Officer and the Chief Financial Officer of
the Company to the effect that, as of the Closing Date or the Option Closing
Date, as the case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness of the
Registrations Statement has been issued, and no proceedings for such purpose
have been taken or are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the
Company contained in Section 1 hereof are true and correct as of the Closing
Date or the Option Closing Date, as the case may be;
(iii) All filings required to have been made pursuant
to Rules 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the
Registration Statement and the Prospectus and, in his or her opinion, as of
the effective date of the Registration Statement, the statements contained in
the Registration Statement were true and correct, and such Registration
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Statement and Prospectus did not omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and since the
effective date of the Registration Statement, no event has occurred which should
have been set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment;
(v) Since the respective dates as of which
information is given in the Registration Statement and Prospectus, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business; and
(vi) He or she does not know of any litigation
instituted or threatened against the Company of a character required to be
disclosed in the Registration statement which is not so disclosed; he or she
does not know of any material contract required to be filed as an exhibit to
the Registration Statement which is not so filed.
(h) The Company and the Selling Stockholders shall have
furnished to the Representatives such further certificates and documents
confirming the representations and warranties, covenants and conditions
contained herein and related matters as the Representatives may reasonably
have requested.
(i) The Firm Shares and Option Shares, if any, have been
approved for designation upon notice of issuance on the Nasdaq National Market.
(j) The Lockup Agreements described in Section 4(i)(x) are
in full force and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Wilson Sonsini
Goodrich & Rosati, P.C., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company and the Selling Stockholders of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be. In such event, the Selling
Stockholders, the Company and the Underwriters shall not be under any obligation
to each other (except to the extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Sellers. The obligations
--------------------------------------------
of the Sellers to sell and deliver the portion of the Shares required to be
delivered as and when specified in this Agreement are subject to the conditions
that at the Closing Date or the Option Closing Date, as the case may be, no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
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8. Indemnification.
---------------
(a) The Company and the Selling Stockholders, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities to which such Underwriter or
any such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and will reimburse each Underwriter and each such
controlling person upon demand for any legal or other expenses reasonably
incurred by such Underwriter or such controlling person in connection with
investigating or defending any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
offering of the Shares, whether or not such Underwriter or controlling person is
a party to any action or proceeding; provided, however, that the Company and the
Selling Stockholders will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. In no event, however, shall the
liability of any Selling Stockholder for indemnification under this Section 8(a)
exceed the net proceeds received by such Selling Stockholder from the
Underwriters in the offering. In addition, no Selling Stockholder shall be
liable under the indemnity agreement contained in this paragraph unless and
until you, as Representatives of the Underwriters, have made written demand on
the Company for payment under this paragraph and the amount specified in such
demand is not paid in full by the Company within 30 days after receipt of the
demand by the Company. This indemnity agreement will be in addition to any
liability which the Company or the Selling Stockholders may otherwise have.
(b) Each Underwriter severally and not jointly will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the Registration Statement, the Selling Stockholders,
and each person, if any, who controls the Company or the Selling Stockholders
within the meaning of the Act, against any losses, claims, damages or
liabilities to which the Company or any such director, officer, Selling
Stockholder or controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, Selling Stockholder or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that each
Underwriter will be liable in each case to the extent, but only
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to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration Statement, any
Preliminary Prospectus, the Prospectus or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was materially prejudiced by the failure to give
such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own counsel
at its own expense. Notwithstanding the foregoing, the indemnifying party shall
pay as incurred (or within 30 days of presentation) the fees and expenses of the
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party shall have failed to assume the defense and employ counsel
acceptable to the indemnified party within a reasonable period of time after
notice of commencement of the action. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees and expenses of more than
one separate firm for all such indemnified parties. Such firm shall be
designated in writing by you in the case of parties indemnified pursuant to
Section 8(a) and by the Company and the Selling Stockholders in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment. In
addition, the indemnifying party will not, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
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<PAGE>
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling Stockholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contributions were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 8(d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration
Statement, any Preliminary Prospectus, the Prospectus or any supplement or
amendment thereto, each party against whom contribution may be sought under
this Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing party
and consents to the service of such process and agrees that
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<PAGE>
any other contributing party may join him or it as an additional defendant in
any such proceeding in which such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses
for which an indemnified party is entitled to indemnification or contribution
under this Section 8 shall be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers or any persons
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. Default by Underwriters. If on the Closing Date or the
-----------------------
Option Closing Date, as the case may be, any Underwriter shall fail to purchase
and pay for the portion of the Shares which such Underwriter has agreed to
purchase and pay for on such date (otherwise than by reason of any default on
the part of the Company or a Selling Stockholder), you, as Representatives of
the Underwriters, shall use your best efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company and the Selling Stockholders such amounts as may be agreed upon
and upon the terms set forth herein, the Firm Shares or Option Shares, as the
case may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representatives, shall not have
procured such other Underwriters, or any others, to purchase the Firm Shares or
Option Shares, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares with
respect to which such default shall occur does not exceed 10% of the Firm Shares
or Option Shares, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of Firm
Shares or Option Shares, as the case may be, which they are obligated to
purchase hereunder, to purchase the Firm Shares or Option Shares, as the case
may be, which such defaulting Underwriter or Underwriters failed to purchase, or
(b) if the aggregate number of shares of Firm Shares or Option Shares, as the
case may be, with respect to which such default shall occur exceeds 10% of the
Firm Shares or Option Shares, as the case may be, covered hereby, the Company
and the Selling Stockholders or you as the Representatives of the Underwriters
will have the right, by written notice given within the next 36-hour period to
the parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or of the Company or of the Selling
Stockholders except to the extent provided in Section 8 hereof. In the event of
a default by any Underwriter or Underwriters, as set forth in this Section 9,
the Closing Date or Option Closing Date, as the case may be, may be postponed
for such period, not exceeding seven days, as you, as Representatives, may
determine in order that the required changes in the Registration Statement or in
the Prospectus or in any other documents or arrangements may be effected. The
term "Underwriter" includes any person substituted for a defaulting Underwriter.
Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
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<PAGE>
10. Notices. All communications hereunder shall be in writing and,
-------
except as otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to Alex. Brown &
Sons Incorporated, 2-6 Austin Friars, 2nd Floor, London, EC2N 2HE, Attention:
Michael Halloran with a copy to Alex. Brown & Sons Incorporated, 135 East
Baltimore Street, Baltimore, Maryland 21202. Attention: General Counsel; if to
the Company or the Selling Stockholders, to Industri-Matematik International
Corp., Kungsgatan 12-14, P.O. Box 7733, 5-103 95 Stockholm, Sweden, with a copy
to Brobeck Hale and Dorr International, Veritas House, 125 Finsbury Pavement,
London, EC2A INQ, Attention: Donald J. Quiney, Esq.; if to the Firm Share
Selling Stockholder a copy, to Tannenbaum Dubin & Robinson, LLP, 1140 Avenue of
the Americas, New York, New York 10036, Attention: Marvin S. Robinson, Esq.
11. Termination. This Agreement may be terminated by you by notice
-----------
to the Sellers as follows:
(a) at any time prior to the earlier of (i) the time the
Shares are released by you for sale by notice to the Underwriters, or
(ii) 11:30 a.m. on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the
following has occurred: (i) since the respective dates as of which information
is given in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole or the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak or escalation of hostilities or
declaration of war or national emergency or other national or international
calamity or crisis or change in economic or political conditions if the effect
of such outbreak, escalation, declaration, emergency, calamity, crisis or change
on the financial markets of the United States would, in your reasonable
judgment, make it impracticable to market the Shares or to enforce contracts for
the sale of the Shares, or (iii) suspension of trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree or
other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in your opinion materially and adversely
affects or may materially and adversely affect the business or operations of the
Company, (v) declaration of a banking moratorium by United States or New York
State authorities, (vi) the suspension of trading of the Company's common stock
by the Commission on the Nasdaq National Market or (vii) the taking of any
action by any governmental body or agency in respect of its monetary or fiscal
affairs which in your reasonable opinion has a material adverse effect on the
securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Company,
as to any obligation of the Underwriters to purchase the Option Shares, upon the
occurrences at any time prior to the Option
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<PAGE>
Closing Date of any of the events described in subparagraph (b) above or as
provided in Sections 6 and 9 of this Agreement.
12. Successors. This Agreement has been and is made solely for the
----------
benefit of the Underwriters, the Company and the Selling Stockholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign merely because
of such purchase.
13. Information Provided by Underwriters. The Company, the Selling
------------------------------------
Stockholders and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information in the section of paragraph
under the caption "Underwriting" insofar as it relates to the concession to
dealers and the discount to certain other dealers.
14. Submission to Jurisdiction. The Firm Share Selling Stockholder
--------------------------
hereby agrees to submit to the non-exclusive jurisdiction of any United States
federal or state court in the County of Baltimore, State of Maryland with
respect to legal proceedings in the United States relating to or arising under
this Agreement and the transactions contemplated hereby. The Firm Share Selling
Stockholder has designated and appointed Tannenbaum Dubin & Robinson, LLP,
currently having its address at 1140 Avenue of the Americas, New York, New York
10036, as its authorized agent upon which process may be served in any legal
proceeding relating to or arising out of this Agreement or the transactions
contemplated hereby which may be instituted in any United States federal or
State court in the County of Baltimore, State of Maryland. The Firm Share
Selling Stockholder agrees that service of process upon said Tannenbaum Dubin &
Robinson, LLP shall be deemed in every respect effective service of process upon
the Firm Share Selling Stockholder in any such legal proceeding. The Firm Share
Selling Stockholder represents and warrants that said Tannenbaum Dubin &
Robison, LLP has agreed to act as said agent for service of process. The Firm
Share Selling Stockholder further agrees to take any and all action, including
the execution and filing of any and all documents and instruments, as may be
necessary to continue such designation and appointment of said Tannenbaum Dubin
& Robinson, LLP in full force and effect so long as this Agreement shall remain
in full force and effect. Notwithstanding the foregoing, any action relating to
or arising under this Agreement or the transactions contemplated hereby may be
instituted by any Underwriter or any person controlling any Underwriter in any
competent court in Sweden.
The Firm Share Selling Stockholder hereby irrevocably waives, to the
fullest extent permitted by applicable law, all immunity (whether on the basis
of sovereignty or otherwise) from jurisdiction, attachment (both before and
after judgment) and execution to which it might otherwise be entitled in any
legal proceeding which may be instituted in any United States federal or state
court in The County of Baltimore, State of Maryland or in any other country or
jurisdiction by any Underwriter or any person controlling any Underwriter, and
the Company will not raise or claim or cause to be pleaded any such immunity at
or in respect of any such legal proceeding.
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<PAGE>
15. Miscellaneous. The reimbursement, indemnification and
-------------
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or its directors or officers and (c) delivery of and
payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of Maryland, as applied to agreements among
Maryland residents entered into and to be performed entirely within Maryland,
without reference to principles of conflict of laws or choice of laws.
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<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Stockholders,
the Company and the several Underwriters in accordance with its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly
appointed as Attorney-in-Fact by such Selling Stockholder pursuant to a
validly existing and binding Power of Attorney which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
By:
----------------------------------
President
MARTIN LEIMDORFER
WARBURG, PINCUS INVESTORS, L.P.
By:
----------------------------------
Attorney-in-Fact
As Attorney-in-Fact acting on behalf
and in the name of each of the
Selling Stockholders
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
UBS SECURITIES LLC
SOUNDVIEW FINANCIAL GROUP, INC.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By:
--------------------------------
Authorized Officer
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<PAGE>
SCHEDULE I
Schedule of Underwriters
Number of Firm
Shares to be
Underwriter Purchased
------------------------------- -----------------
Alex. Brown & Sons Incorporated
UBS Securities LLC
SoundView Financial Group, Inc.
TOTAL 4,000,000
=========
<PAGE>
EXHIBIT 3.2
Industri-Matematik International Corp.
Amended and Restated Certificate of Incorporation
Industri-Matematik International Corp., a Delaware corporation, hereby
certifies as follows:
The Certificate of Incorporation for Industri-Matematik International
Corp. (the "Corporation") was filed in the office of the Secretary of State of
the State of Delaware on April 17, 1995. The Certificate of Incorporation was
amended and restated on June 5, 1996. The Certificate of Incorporation is
hereby amended and restated pursuant to Section 242 and Section 245 of the
Delaware General Corporation Law. All amendments to the Certificate of
Incorporation reflected herein have been duly authorized and adopted by the
Corporation's Board of Directors and stockholders in accordance with the
provisions of Sections 242 and 245.
This Amended and Restated Certificate of Incorporation restates and
amends the Certificate of Incorporation of the Corporation. The text of the
Certificate of Incorporation is amended hereby to read as herein set forth in
full:
ARTICLE I
The name of the corporation (the "Corporation") is:
Industri-Matematik International Corp.
ARTICLE II
The name and address of its registered agent and registered office in the
State of Delaware is Industri-Matematik International Corp., Suite 748, One
Commerce Center, Wilmington, New Castle County, Delaware 19801.
ARTICLE III
The nature of the business and purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
<PAGE>
ARTICLE IV
Section 1. General. This Corporation is authorized to issue two
classes of stock to be designated, respectively, Common Stock and Preferred
Stock. The total number of shares of Common Stock this Corporation is
authorized to issue is 75,000,000 shares, par value $0.01, of which 12,500,000
are hereby designated "Class B Common Stock," and the total number of shares of
Preferred Stock this Corporation is authorized to issue is 15,000,000 shares,
par value $0.01. Preferred Stock may be issued from time to time in one or
more series.
Section 2. Common Stock.
(a) General. The voting, dividend and liquidation rights of
the holders of the Common Stock are subject to and qualified by the rights of
the holders of the Preferred Stock of any series as may be designated by the
Board of Directors upon any issuance of the Preferred Stock of any series.
(b) Voting. The holders of the Common Stock are entitled to
one vote for each share held at all meetings of stockholders (and written
actions in lieu of meeting). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Corporation entitled to
vote, irrespective of the provisions of Section 242 (b)(2) of the General
Corporation Law of Delaware.
(c) Dividends. Dividends may be declared and paid on the
Common Stock from funds lawfully available therefor as and when determined by
the Board of Directors and subject to any preferential dividend rights of any
then outstanding Preferred Stock.
(d) Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
Section 3. Class B Common Stock. Subject to the conversion and voting
rights of the Class B Common Stock described below, the rights (including, but
not limited to, rights to dividends), preferences, privileges and restrictions
of the Common Stock and the Class B Common Stock shall be identical in all
respects, except as follows:
(a) Voting Rights. Holders of Class B Common Stock shall not
be entitled to vote such shares for the election of directors or on any other
matter except changes or amendments to this Article IV; provided, however, that
no such change or amendment shall increase the rights of or, under any
circumstances, provide additional voting rights to the holders of Class B Common
Stock.
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<PAGE>
(b) Conversion.
(i) Right to Convert. The holder of any shares of Class B
Common Stock shall have the right, at such holder's option, at any time or from
time to time, to convert any shares of Class B Common Stock held by such holder,
so long as, after giving effect to such conversion, the total number of Voting
Shares (as defined in Section 3(b)(vii)(C) hereof) held by such holder,
including any Affiliate (as defined in Section 3(b)(vii)(A) hereof) of such
holder, shall be less than or equal to forty-nine percent (49%) (by voting
power) of the total number of Voting Shares then issued and outstanding, into
such whole number of shares of Common Stock as shall be obtained by multiplying
the number of shares of Class B Common Stock being converted by the Class B
Common Stock Conversion Rate (as hereinafter defined), by surrender of the
certificates representing the shares of Class B Common Stock so to be converted
in the manner provided in Section 3(b)(iii) hereof. The Class B Common Stock
Conversion Rate shall be one (1) divided by the Class B Common Stock Conversion
Price (as hereinafter defined). The Class B Common Stock Conversion Price shall
initially be one (1); provided, however, that such Class B Common Stock
Conversion Price shall be subject to adjustment as set forth in Section 3(b)(v)
hereof. No conversion of shares of Class B Common Stock that would have the
effect of giving the holder, including any Affiliate of such holder, a number of
Voting Shares greater than forty-nine percent (49%) (by voting power) of the
total number of Voting Shares then issued and outstanding shall be effected
pursuant to this Section 1(b)(i). The holder of any shares of Class B Common
Stock exercising the aforesaid right to convert such shares into shares of
Common Stock shall be entitled to payment of all declared but unpaid dividends,
if any, payable on or with respect to such shares of Class B Common Stock up to
and including the Conversion Date (as hereinafter defined).
(ii) Conversion Upon Transfer. Upon any Transfer (as defined in
Section 3(b)(vii)(B) hereof) of any shares of Class B Common Stock by the
original holder or Affiliate of the original holder, other than a Transfer to an
Affiliate of such original holder, such shares of Class B Common Stock so
Transferred shall, by virtue of, and simultaneously with, the occurrence of the
Transfer, without any action on the part of the transferee, be automatically
converted into such whole number of fully paid and nonassessable shares of
Common Stock as shall be obtained by multiplying the number of shares of Class B
Common Stock so Transferred by the Class B Common Stock Conversion Rate. The
holder of any shares of Class B Common Stock converted into Common Stock
pursuant to this Section 3(b)(ii) shall be entitled to payment on or with
respect to such shares of Class B Common Stock up to and including the
Conversion Date.
(iii) Mechanics of Conversion. The holder of any shares of
Class B Common Stock may exercise the conversion rights pursuant to Section
3(b)(i) hereof as to any part thereof by delivering to the Corporation during
regular business hours, at the office of the Corporation or at such other place
as may be designated by the Corporation, the certificate or certificates for the
shares to be converted, duly endorsed or assigned in blank, accompanied by a
written notice stating that the holder elects to convert such shares and stating
the name or names (with address) in which the certificate or certificates for
the shares of Common Stock are to be issued. Conversion shall be deemed to have
been effected (A) with respect to conversion under Section 3(b)(i) hereof, on
the date when the aforesaid delivery is made and (B) with respect to
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<PAGE>
conversion under Section 3(b)(ii) hereof, on the date of occurrence of the
Transfer, and such date, in either case, is referred to herein as the
"Conversion Date". As promptly as practicable after the Conversion Date, and in
the case of Section 3(b)(ii) hereof, upon the delivery to the Corporation during
regular business hours, at the office of the Corporation or at such other place
as may be designated by the Corporation, of the certificate or certificates for
the shares to be converted, duly endorsed or assigned in blank, the Corporation
shall issue and deliver to or upon the written order of such holder, to the
place designated by such holder, a certificate or certificates for the number of
full shares of Common Stock as provided in Section 3(b)(i) and (ii) hereof, and
a check or cash in payment of all declared but unpaid dividends (to the extent
permissible under law), if any, payable with respect to the shares of Class B
Common Stock so converted up to and including the Conversion Date. The person in
whose name the certificate or certificates for Common Stock are to be issued
shall be deemed to have become a stockholder of record on the applicable
Conversion Date unless the transfer books of the Corporation are closed on that
date, in which event he shall be deemed to have become a stockholder of record
on the next succeeding date on which the transfer books are open, but the Class
B Common Stock Conversion Rate shall be that in effect on the Conversion Date.
Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Class B Common Stock surrendered for
conversion, the Corporation shall issue and deliver to or upon the written order
of the holder of the certificate as surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of shares of Class B
Common Stock representing the unconverted portion of the certificate so
surrendered, which new certificate shall entitle the holder thereof to dividends
on the shares of Class B Common Stock represented thereby to the same extent as
if the certificate theretofore covering such unconverted shares had not been
surrendered for conversion.
(iv) No Fractional Shares. No fractional shares of Common Stock
or scrip shall be issued upon conversion of shares of Class B Common Stock. The
number of full shares of Common Stock issuable upon conversion of Class B Common
Stock surrendered by a holder thereof for conversion shall be computed on the
basis of the aggregate number of shares of Class B Common Stock so surrendered,
rounded to the next higher whole number.
(v) Adjustments to Conversion Price. The Class B Common Stock
Conversion Price shall be subject to adjustment from time to time as follows:
(A) If the number of shares of Common Stock outstanding
is increased by a stock dividend payable in shares of Common Stock or by
a subdivision or split-up of shares of Common Stock, then, following the
record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the
Class B Common Stock Conversion Price shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of each
share of Class B Common Stock shall be increased in proportion to such
increase in outstanding shares of Common Stock.
- 4 -
<PAGE>
(B) If the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date for such combination, the
Class B Common Stock Conversion Price shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of each
share of Class B Common Stock shall be decreased in proportion to such
decrease in outstanding shares of Common Stock.
(C) In the event of any capital reorganization,
or any reclassification of the capital stock of the Corporation (other than
a change in par value or from par value to no par value or from no par
value to par value or as a result of a stock dividend or subdivision,
split-up or combination of shares) or the consolidation or merger of the
Corporation with or into another person (other than a consolidation or
merger in which the Corporation is the continuing corporation and which
does not result in any change in the Common Stock) or of the sale or other
disposition of all or substantially all the properties and assets of the
Corporation as an entirety to any other person, such shares of Class B
Common Stock shall after such reorganization, reclassification,
consolidation, merger, sale or other disposition be convertible into the
kind and number of shares of stock or other securities or property of the
Corporation resulting from such consolidation or surviving such merger or
to which such properties and assets shall have been sold or otherwise
disposed to which the holder of the number of shares of Common Stock
deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation, merger, sale or other disposition) upon
conversion of such share would have been entitled upon such reorganization,
reclassification, consolidation, merger, sale or other disposition. The
provisions of this Section 3(b)(v)(C) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales or other
dispositions.
(D) All calculations under this paragraph (v)
shall be made to the nearest one tenth (1/10) of a share.
(vi) Reservation of Shares. The Corporation shall at all
times when the Class B Common Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the purpose of effecting
the conversion of the Class B Common Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Class B Common Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of Class B Common Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for the purpose.
(vii) Definitions.
(A) "Affiliate" shall mean, as to any person or
entity, a person or entity that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, such person or entity.
- 5 -
<PAGE>
(B) "Transfer" or "Transferred" shall mean to
dispose, sell or in any other way directly or indirectly transfer, assign,
distribute, encumber or otherwise dispose of, either voluntarily or
involuntarily.
(C) "Voting Shares" shall mean any shares of
the Corporation's capital stock entitled to vote in any election of
directors of the Corporation.
Section 4. Preferred Stock. The Board of Directors is hereby
authorized to fix or alter the voting powers, designations, preferences and
qualifications, limitations or restrictions granted to or imposed upon
additional series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof. Subject to compliance with applicable
protective rights which have been or may be granted to Preferred Stock or series
thereof in Certificates of Designation or the Corporation's Certificate of
Incorporation, the rights, privileges, preferences and restrictions of any such
additional series may be subordinate to or pari passu with (including, without
limitation, inclusion of provisions with respect to liquidation and acquisition
and dividend preferences, or approval of matters by vote or written consent),
the rights of any present or future class or series of Preferred Stock or
Common Stock.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the Bylaws of the Corporation may be made, altered, amended or repealed by the
stockholders or by the Board of Directors.
ARTICLE VII
Elections of directors need not be by written ballot.
ARTICLE VIII
Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
-6-
<PAGE>
Section 2. The Corporation shall indemnify to the fullest extent permitted
by law each person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
criminal, civil, administrative or investigative (other than an action by or in
the right of the Corporation), by reason of the fact that he, his testator or
intestate is or was, or has agreed to become, a director or officer of the
Corporation or any predecessor of the Corporation or serves or is or was
serving, or has agreed to serve, at the request of the Corporation or any
predecessor to the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee") or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 8
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
Section 3. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorney's fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
-7-
<PAGE>
Section 4. Indemnification for Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that an
Indemnitee has been successful, on the merits or otherwise, in defense of any
action, suit or proceeding referred to in Sections 2 and 3 of this Article, or
in defense of any claim, issue or matter therein, or on appeal from any such
action, suit or proceeding, he shall be indemnified against all expenses
(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith. Without limiting the foregoing, if any action,
suit or proceeding is disposed of, on the merits or otherwise (including a
disposition without prejudice), without (i) the disposition being adverse to the
Indemnitee, (ii) an adjudication that the Indemnitee was liable to the
Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv)
an adjudication that the Indemnitee did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and (v) with respect to any criminal proceeding, an adjudication
that the Indemnitee had reasonable cause to believe his conduct was unlawful,
the Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
Section 5. Notification and Defense of Claim. As a condition precedent
to his right to be indemnified, the Indemnitee must notify the Corporation in
writing as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 5. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
Section 6. Advance of Expenses. Subject to the provisions of Section 7
below, in the event that the Corporation does not assume the defense pursuant to
Section 5 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
- -------- -------
in advance of the final disposition of such matter shall be made
- 8 -
<PAGE>
only upon receipt of an undertaking by or on behalf of the Indemnitee to repay
all amounts so advanced in the event that it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified by the Corporation as
authorized in this Article. Such undertaking may be accepted without reference
to the financial ability of such person to make such repayment.
Section 7. Procedure for Indemnification. In order to obtain
indemnification or advancement of expenses pursuant to Section 2, 3, 4 or 6 of
this Article, the Indemnitee shall submit to the Corporation a written request,
including in such request such documentation and information as is reasonably
available to the Indemnitee and is reasonably necessary to determine whether and
to what extent the Indemnitee is entitled to indemnification or advancement of
expenses. Any such indemnification or advancement of expenses shall be made
promptly, and in any event within 60 days after receipt by the Corporation of
the written request of the Indemnitee, unless with respect to requests under
Section 2, 3 or 6 the Corporation determines within such 60-day period that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
2 or 3, as the case may be. Such determination shall be made in each instance by
(a) a majority vote of a quorum of directors of the Corporation consisting of
persons who are not at that time parties to the action, suit or proceeding in
question ("disinterested directors"), (b) if no such quorum is obtainable, a
majority vote of a committee of two or more disinterested directors, (c) a
majority vote of a quorum of the outstanding shares of stock of all classes
entitled to vote for directors, voting as a single class, which quorum shall
consist of stockholders who are not at that time parties to the action, suit or
proceeding in question, (d) independent legal counsel (who may be regular legal
counsel to the Corporation), or (e) a court of competent jurisdiction.
Section 8. Remedies. The right to indemnification or advances as granted
by this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 7. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 7 that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including attorneys' fees) incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such proceeding shall also be indemnified by the Corporation.
Section 9. Subsequent Amendment. No amendment, termination or repeal of
this Article or of the relevant provisions of the General Corporation Law of
Delaware or any other applicable laws shall affect or diminish in any way the
rights of any Indemnitee to indemnification under the provisions hereof with
respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
- 9 -
<PAGE>
Section 10. Other Rights. The indemnification and advancement of
expenses provided by this Article shall not be deemed exclusive of any other
rights to which an Indemnitee seeking indemnification or advancement of expenses
may be entitled under any law (common or statutory), agreement or vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding office
for the Corporation, and shall continue as to an Indemnitee who has ceased to be
a director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
Section 11. Partial Indemnification. If an Indemnitee is entitled
under any provision of this Article to indemnification by the Corporation for
some or a portion of the expenses (including attorneys' fees), judgments, fines
or amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with any action, suit, proceeding or investigation and any
appeal therefrom but not, however, for the total amount thereof, the Corporation
shall nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
Section 12. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise (including any employee benefit plan) against any
expense, liability or loss 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 such person against such expense, liability or loss under the General
Corporation Law of Delaware.
Section 13. Merger or Consolidation. If the Corporation is merged into
or consolidated with another corporation and the Corporation is not the
surviving corporation, the surviving corporation shall assume the obligations of
the Corporation under this Article with respect to any action, suit, proceeding
or investigation arising out of or relating to any actions, transactions or
facts occurring prior to the date of such merger or consolidation.
Section 14. Savings Clause. If this Article or any portion thereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
-10-
<PAGE>
Section 15. Definition. Terms used herein and defined in Section 145(h)
and Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
Section 16. Subsequent Legislation. If the General Corporation Law of
Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
Delaware, as so amended.
ARTICLE VII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in any manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, said Corporation has caused this Certificate to be
signed by Stig G. Durlow, the Chairman of the Board of the Corporation, and
attested by Lars-Goran Peterson, the Secretary of the Corporation. The
signatures below shall constitute the affirmation or acknowledgement, under
penalties of perjury, that the facts herein stated are true.
Dated:______, 1996
Industri-Matematik International Corp.
---------------------------------------
Stig G. Durlow
Chairman of the Board
ATTEST:
- -------------------------------
Lars-Goran Peterson
Secretary
-11-
<PAGE>
EXHIBIT 3.4
Amended and Restated Bylaws
of
Industri-Matematik International Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I
Corporate Offices.......................... - 1 -
1.1 Registered Office........................................... - 1 -
1.2 Other Offices............................................... - 1 -
Article II
Meetings of Stockholders...................... - 1 -
2.1 Place of Meetings........................................... - 1 -
2.2 Annual Meeting.............................................. - 1 -
2.3 Special Meeting............................................. - 1 -
2.4 Notice of Stockholders' Meetings............................ - 2 -
2.5 Manner of Giving Notice; Affidavit of Notice................ - 2 -
2.6 Quorum...................................................... - 2 -
2.7 Adjourned Meeting; Notice................................... - 2 -
2.8 Voting...................................................... - 2 -
2.9 Waiver of Notice............................................ - 3 -
2.10 Stockholder Action by Written Consent Without a Meeting..... - 3 -
2.11 Record Date for Stockholder Notice; Voting; Giving
Consents................................................... - 3 -
2.12 Proxies..................................................... - 4 -
2.13 List of Stockholders Entitled to Vote....................... - 4 -
Article III
Directors.............................. - 4 -
3.1 Powers...................................................... - 4 -
3.2 Number of Directors......................................... - 5 -
3.3 Election, Qualification and Term of Office of Directors..... - 5 -
3.4 Resignation and Vacancies................................... - 5 -
3.5 Place of Meetings; Meetings by Telephone.................... - 6 -
3.6 First Meetings.............................................. - 6 -
3.7 Regular Meetings............................................ - 6 -
3.8 Special Meetings; Notice.................................... - 6 -
3.9 Quorum...................................................... - 7 -
3.10 Waiver of Notice............................................ - 7 -
3.11 Adjourned Meeting; Notice................................... - 7 -
3.12 Board Action by Written Consent Without a Meeting........... - 7 -
3.13 Fees and Compensation of Directors.......................... - 7 -
- i -
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
3.14 Approval of Loans to Officers............................... - 7 -
3.15 Removal of Directors........................................ - 8 -
Article IV
Committees............................ - 8 -
4.1 Committees of Directors..................................... - 8 -
4.2 Committee Minutes........................................... - 9 -
4.3 Meetings and Action of Committees........................... - 9 -
Article V
Officers............................. - 9 -
5.1 Officers.................................................... - 9 -
5.2 Election of Officers........................................ - 9 -
5.3 Subordinate Officers........................................ - 9 -
5.4 Removal and Resignation of Officers......................... - 9 -
5.5 Vacancies in Offices........................................ - 10 -
5.6 Chairman of the Board....................................... - 10 -
5.7 President................................................... - 10 -
5.8 Vice President.............................................. - 10 -
5.9 Secretary................................................... - 10 -
5.10 Treasurer................................................... - 11 -
5.11 Assistant Secretary......................................... - 11 -
5.12 Assistant Treasurer......................................... - 11 -
5.13 Authority and Duties of Officers............................ - 11 -
Article VI
Indemnity............................. - 12 -
6.1 Indemnification of Directors and Officers................... - 12 -
6.2 Indemnification of Others................................... - 12 -
6.3 Insurance................................................... - 12 -
Article VII
Records and Reports....................... - 13 -
7.1 Maintenance and Inspection of Records....................... - 13 -
7.2 Inspection by Directors..................................... - 13 -
- ii -
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
7.3 Annual Statement to Stockholders............................ - 13 -
7.4 Representation of Shares of Other Corporations.............. - 14 -
Article VIII
General Matters.......................... - 14 -
8.1 Checks...................................................... - 14 -
8.2 Execution of Corporate Contracts and Instruments............ - 14 -
8.3 Stock Certificates; Partly Paid Shares...................... - 14 -
8.4 Special Designation on Certificates......................... - 15 -
8.5 Lost Certificates........................................... - 15 -
8.6 Construction; Definitions................................... - 15 -
8.7 Dividends................................................... - 15 -
8.8 Fiscal Year................................................. - 16 -
8.9 Seal........................................................ - 16 -
8.10 Transfer of Stock........................................... - 16 -
8.11 Stock Transfer Agreements................................... - 16 -
8.12 Registered Stockholders..................................... - 16 -
Article IX
Amendments............................ - 16 -
Article X
Dissolution........................... - 17 -
Article XI
Custodian............................ - 17 -
11.1 Appointment of a Custodian in Certain Cases................. - 17 -
11.2 Duties of Custodian......................................... - 18 -
- iii -
<PAGE>
Amended and Restated Bylaws of
Industri-Matematik International Corp.
Article I
Corporate Offices
1.1 Registered Office. The registered office of the corporation shall be
in the City of Wilmington, County of New Castle, State of Delaware.
1.2 Other Offices. The board of directors may at any time establish other
offices at any place or places where the corporation is qualified to do
business.
Article II
Meetings of Stockholders
2.1 Place of Meetings. Meetings of stockholders shall be held at any
place, within or outside the State of Delaware, designated by the board of
directors. In the absence of any such designation, stockholders' meetings shall
be held at the registered office of the corporation.
2.2 Annual Meeting. The annual meeting of stockholders shall be held each
year on a date and at a time designated by the board of directors. At the
meeting, directors shall be elected and any other proper business may be
transacted.
2.3 Special Meeting. A special meeting of the stockholders may be called
at any time by the board of directors, by the chairman of the board, by the
president or by one or more holders holding shares representing in the aggregate
the right to cast not less than ten percent (10%) of the votes at the meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, the
chief executive officer or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be given to the stockholders
entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5,
that a meeting will be held at the time requested by the person or persons who
called the meeting, not less than thirty-five (35) nor more than sixty (60) days
after the receipt of the request. If the notice is not given within twenty (20)
days after the receipt of the request, the person or persons requesting the
meeting may give the notice. Nothing contained in this paragraph of this
- 1 -
<PAGE>
Section 2.3 shall be construed as limiting, fixing, or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4 Notice of Stockholders' Meetings. All notices of meetings with
stockholders shall be in writing and shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting. The notice shall specify the place, date, and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called.
2.5 Manner of Giving Notice; Affidavit of Notice. Written notice of any
meeting of stockholders, if mailed, is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the corporation. An affidavit of the secretary or an
assistant secretary or of the transfer agent of the corporation that the notice
has been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
2.6 Quorum. At any meeting of the stockholders, the holders of a
majority, present in person or by proxy, of all of the shares of the stock
entitled to vote at the meeting shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or classes is required, a
majority, present in person or by proxy, of the shares of such class or classes
entitled to take action with respect to that vote on that matter shall
constitute a quorum. If a quorum shall fail to attend any meeting, the chairman
of the meeting may adjourn the meeting to another place, date or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, those present at such adjourned meeting shall
constitute a quorum (but in no event shall a quorum consist of less than one-
third of the shares entitled to vote at the meeting), and all matters shall be
determined by a majority of the votes cast at such meeting, except as otherwise
required by law.
2.7 Adjourned Meeting; Notice. When a meeting is adjourned to another
time or place, unless these bylaws otherwise require, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business that might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.8 Voting. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
- 2 -
<PAGE>
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
2.9 Waiver of Notice. Whenever notice is required to be given under any
provision of the General Corporation Law of Delaware or of the certificate of
incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or these
bylaws.
2.10 Stockholder Action by Written Consent Without a Meeting. Unless
otherwise provided in the certificate of incorporation, any action required by
this chapter to be taken at any annual or special meeting of stockholders of a
corporation, or any action that may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior notice, and
without a vote if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 Record Date for Stockholder Notice; Voting; Giving Consents. In order
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or entitled to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on
- 3 -
<PAGE>
which notice is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held.
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by a
written proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.
2.13 List of Stockholders Entitled to Vote. The officer who has charge of
the stock ledger of a corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Article III
Directors
3.1 Powers. Subject to the provisions of the General Corporation Law of
Delaware and any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the
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corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the board of directors.
3.2 Number of Directors. The number of directors of the corporation shall
be determined by resolution of the board of directors or by the stockholders.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 Election, Qualification and Term of Office of Directors. Except as
provided in Section 3.4 of these bylaws, directors shall be elected at each
annual meeting of stockholders to hold office until the next annual meeting.
Directors need not be stockholders unless so required by the certificate of
incorporation or these bylaws, wherein other qualifications for directors may be
prescribed. Each director, including a director elected to fill a vacancy,
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 Resignation and Vacancies. Any director may resign at any time upon
written notice to the corporation. When one or more directors so resigns and
the resignation is effective at a future date, a majority of the directors then
in office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a
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decree summarily ordering an election as provided in Section 211 of the General
Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 Place of Meetings; Meetings by Telephone. The board of directors of
the corporation may hold meetings, both regular and special, either within or
outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 First Meetings. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
3.7 Regular Meetings. Regular meetings of the board of directors may be
held without notice at such time and at such place as shall from time to time be
determined by the board.
3.8 Special Meetings; Notice. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board, the president, any vice president, the secretary or any two (2)
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
facsimile or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, facsimile or by telegram, it shall be
delivered personally or by telephone or to the telegraph company at least forty-
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eight (48) hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the director or
to a person at the office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director. The notice need
not specify the purpose or the place of the meeting, if the meeting is to be
held at the principal executive office of the corporation.
3.9 Quorum. At all meetings of the board of directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 Waiver of Notice. Whenever notice is required to be given under any
provision of the General Corporation Law of Delaware or of the certificate of
incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these bylaws.
3.11 Adjourned Meeting; Notice. If a quorum is not present at any meeting
of the board of directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
3.12 Board Action by Written Consent Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these bylaws, any action
required or permitted to be taken at any meeting of the board of directors, or
of any committee thereof, may be taken without a meeting if all members of the
board or committee, as the case may be, consent thereto in writing and the
writing or writings are filed with the minutes of proceedings of the board or
committee.
3.13 Fees and Compensation of Directors. Unless otherwise restricted by
the certificate of incorporation or these bylaws, the board of directors shall
have the authority to fix the compensation of directors.
3.14 Approval of Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiary, including any officer or employee who
is a director of the corporation or its subsidiary, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without
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interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 Removal of Directors. Unless otherwise restricted by statute, by the
certificate of incorporation or by these bylaws, any director or the entire
board of directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
Article IV
Committees
4.1 Committees of Directors. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, with
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors or in the bylaws of the
corporation, shall have and may exercise all the powers and authority of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), (ii) adopt an agreement of merger or consolidation under Sections
251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (v) amend
the bylaws of the corporation; and, unless the board resolution establishing the
committee, the bylaws or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of Delaware.
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4.2 Committee Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
4.3 Meetings and Action of Committees. Meetings and actions of committees
shall be governed by, and held and taken in accordance with, the provisions of
Article III of these bylaws, Section 3.5 (place of meetings and meetings by
telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and
notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11
(adjournment and notice of adjournment), and Section 3.12 (action without a
meeting), with such changes in the context of those bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members; provided, however, that the time of regular meetings of committees may
also be called by resolution of the board of directors and that notice of
special meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The board of
directors may adopt rules for the government of any committee not inconsistent
with the provisions of these bylaws.
Article V
Officers
5.1 Officers. The officers of the corporation shall be a president, one
or more vice presidents, a secretary, and a treasurer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more assistant vice presidents, assistant secretaries, assistant treasurers,
and any such other officers as may be appointed in accordance with the
provisions of Section 5.3 of these bylaws. Any number of offices may be held by
the same person.
5.2 Election of Officers. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Sections 5.3
or 5.5 of these bylaws, shall be chosen by the board of directors, subject to
the rights, if any, of an officer under any contract of employment.
5.3 Subordinate Officers. The board of directors may appoint, or empower
the president to appoint, such other officers and agents as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these bylaws or as
the board of directors may from time to time determine.
5.4 Removal and Resignation of Officers. Subject to the rights, if any,
of an officer under any contract of employment, any officer may be removed,
either with or without cause, by an affirmative vote of the majority of the
board of directors at any regular or special meeting of the board or, except in
the case of an officer chosen by the board of directors, by any officer upon
whom such power of removal may be conferred by the board of directors.
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Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies in Offices. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
5.6 Chairman of the Board. The chairman of the board, if such an officer
be elected, shall, if present, preside at meetings of the board of directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the board of directors or as may be prescribed by these
bylaws. If there is no president, then the chairman of the board shall also be
the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 5.7 of these bylaws.
5.7 President. Subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if there be such
an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. He shall preside at all meetings of the shareholders and, in
the absence or nonexistence of a chairman of the board, at all meetings of the
board of directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 Vice President. In the absence or disability of the president, the
vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these bylaws, the president or the chairman of the board.
If there is no treasurer, then one of the vice presidents shall also be elected
the chief financial officer of the corporation and shall have the powers and
duties prescribed in Section 5.10 of these bylaws.
5.9 Secretary. The secretary shall keep or cause to be kept, at the
principal executive office of the corporation or such other place as the board
of directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if special,
how authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
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The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 Treasurer. The treasurer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
5.11 Assistant Secretary. The assistant secretary, or, if there is more
than one, the assistant secretaries in the order determined by the stockholders
or board of directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the secretary or in the event of his
or her inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors or the stockholders may from time to time prescribe.
5.12 Assistant Treasurer. The assistant treasurer, or, if there is more
than one, the assistant treasurers, in the order determined by the stockholders
or board of directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the treasurer or in the event of
his or her inability or refusal to act, perform the duties and exercise the
powers of the treasurer and shall perform such other duties and have such other
powers as the board of directors or the stockholders may from time to time
prescribe.
5.13 Authority and Duties of Officers. In addition to the foregoing
authority and duties, all officers of the corporation shall respectively have
such authority and perform such duties in the management of the business of the
corporation as may be designated from time to time by the board of directors or
the stockholders.
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Article VI
Indemnity
6.1 Indemnification of Directors and Officers. The corporation shall, to
the maximum extent and in the manner permitted by the General Corporation Law of
Delaware, indemnify each of its directors and officers against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.1, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 Indemnification of Others. The corporation shall have the power, to
the extent and in the manner permitted by the General Corporation Law of
Delaware, to indemnify each of its employees and agents (other than directors
and officers) against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.2, an "employee" or
"agent" of the corporation (other than a director or officer) includes any
person (i) who is or was an employee or agent of the corporation, (ii) who is or
was serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was an employee or agent of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
6.3 Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and 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 under the provisions of the General Corporation Law of Delaware.
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Article VII
Records and Reports
7.1 Maintenance and Inspection of Records. The corporation shall, either
at its principal executive office or at such place or places as designated by
the board of directors, keep a record of its shareholders listing their names
and addresses and the number and class of shares held by each shareholder, a
copy of these bylaws as amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 Inspection by Directors. Any director shall have the right to examine
the corporation's stock ledger, a list of its stockholders, and its other books
and records for a purpose reasonably related to his position as a director. The
Court of Chancery is hereby vested with the exclusive jurisdiction to determine
whether a director is entitled to the inspection sought. The Court may summarily
order the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
7.3 Annual Statement to Stockholders. The board of directors shall present
at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
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7.4 Representation of Shares of Other Corporations. The chairman of the
board, the president, any vice president, the treasurer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
board of directors or the president or a vice president, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
Article VIII
General Matters
8.1 Checks. From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 Execution of Corporate Contracts and Instruments. The board of
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.3 Stock Certificates; Partly Paid Shares. The shares of a corporation
shall be represented by certificates, provided that the board of directors of
the corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation. Notwithstanding the adoption of
such a resolution by the board of directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the corporation by
the chairman or vice-chairman of the board of directors, or the president or
vice-president, and by the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
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The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 Special Designation on Certificates. If the corporation is authorized
to issue more than one class of stock or more than one series of any class, then
the powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock; provided, however, that, except as otherwise provided in Section 202
of the General Corporation Law of Delaware, in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 Lost Certificates. Except as provided in this Section 8.5, no new
certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the corporation and cancelled at
the same time. The corporation may issue a new certificate of stock or
uncertificated shares in the place of any certificate theretofore issued by it,
alleged to have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate or uncertificated shares.
8.6 Construction; Definitions. Unless the context requires otherwise, the
general provisions, rules of construction, and definitions in the Delaware
General Corporation Law shall govern the construction of these bylaws. Without
limiting the generality of this provision, the singular number includes the
plural, the plural number includes the singular, and the term "person" includes
both a corporation and a natural person.
8.7 Dividends. The directors of the corporation, subject to any
restrictions contained in the certificate of incorporation, may declare and pay
dividends upon the shares of its capital stock pursuant to the General
Corporation Law of Delaware. Dividends may be paid in cash, in property, or in
shares of the corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such
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<PAGE>
reserve. Such purposes shall include but not be limited to equalizing
dividends, repairing or maintaining any property of the corporation, and meeting
contingencies.
8.8 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors and may be changed by the board of
directors.
8.9 Seal. The seal of the corporation shall be in such form as the board of
directors may from time to time prescribe. The seal may be used by causing it or
a facsimile thereof to be reproduced upon or impressed directly on the
instrument or writing to be sealed, or upon an adhesive substance to be affixed
thereto. The seal on any corporate obligation for the payment of money may be a
facsimile, engraved or printed.
8.10 Transfer of Stock. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate, and record the
transaction in its books.
8.11 Stock Transfer Agreements. The corporation shall have power to enter
into and perform any agreement with any number of shareholders of any one or
more classes of stock of the corporation to restrict the transfer of shares of
stock of the corporation of any one or more classes owned by such stockholders
in any manner not prohibited by the General Corporation Law of Delaware.
8.12 Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, shall be entitled to
hold liable for calls and assessments the person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of another person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
Article IX
Amendments
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
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<PAGE>
Article X
Dissolution
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent becoming effective in accordance
with Section 103 of the General Corporation Law of Delaware, the corporation
shall be dissolved. If the consent is signed by an attorney, then the original
power of attorney or a photocopy thereof shall be attached to and filed with the
consent. The consent filed with the Secretary of State shall have attached to it
the affidavit of the secretary or some other officer of the corporation stating
that the consent has been signed by or on behalf of all the stockholders
entitled to vote on a dissolution; in addition, there shall be attached to the
consent a certification by the secretary or some other officer of the
corporation setting forth the names and residences of the directors and officers
of the corporation.
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<PAGE>
Article XI
Custodian
11.1 Appointment of a Custodian in Certain Cases. The Court of Chancery,
upon application of any stockholder, may appoint one or more persons to be
custodians and, if the corporation is insolvent, to be receivers, of and for the
corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 Duties of Custodian. The custodian shall have all the powers and
title of a receiver appointed under Section 291 of the General Corporation Law
of Delaware, but the authority of the custodian shall be to continue the
business of the corporation and not to liquidate its affairs and distribute its
assets, except when the Court of Chancery otherwise orders and except in cases
arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of
Delaware.
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<PAGE>
Certificate of Adoption of Restated Bylaws of
Industri-Matematik International Corp.
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Industri-Matematik International Corp. and that the
foregoing Bylaws, comprising eighteen (18) pages, were adopted as the Bylaws of
the corporation on May 23, 1996, by the Board of Directors of this corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ___ day
of _____, 1996.
_______________________________
Lars-Goran Peterson, Secretary
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<PAGE>
EXHIBIT 10.1
REGISTRATION AND EXPENSES AGREEMENT
This Registration and Expenses Agreement (this "Agreement") is made as of
July _, 1996 among Industri-Matematik International Corp. (the "Company"),
Martin Leimdorfer ("Leimdorfer") and Warburg, Pincus Investors,L.P. ("Warburg
Pincus"). Leimdorfer and Warburg Pincus are sometimes referred to individually
as a "Selling Stockholder" and collectively as the "Selling Stockholders."
WHEREAS, the Company proposes to make an underwritten initial public
offering (the "Offering") of its Common Stock pursuant to a Registration
Statement (the "Registration Statement") filed with the Securities and Exchange
Commission (the "SEC").
WHEREAS, each of the Selling Stockholders owns shares of the Company's
common stock, par value $.01 (the "Common Stock"), and desires to sell a portion
of such shares under the Registration Statement in connection with the Offering.
WHEREAS, the Company believes it is in the best interests of the Company
and its stockholders to include the Selling Stockholders' shares in the
Registration Statement because the sale of the shares held by the Selling
Stockholders pursuant to the Registration Statement will accomplish an orderly
distribution of such shares and will significantly increase the public float and
liquidity of the Company's shares of Common Stock on the markets where the
Company's Common Stock will be traded.
WHEREAS, the Company is prepared to enter into an underwriting agreement
(the "Underwriting Agreement") with the Selling Stockholders and Alex. Brown &
Sons Incorporated, UBS Securities LLC and SoundView Financial Group, Inc., as
representatives of the several underwriters (the "Underwriters") with respect to
the Offering, pursuant to which the Company and the Selling Stockholders will
agree to indemnify and provide contribution to the Underwriters under certain
circumstances.
WHEREAS, the Company is prepared to enter into such Underwriting Agreement
and this Agreement to pay certain expenses of registering the Selling
Stockholders' shares and to indemnify and provide contribution to the Selling
Stockholders in the event that the Selling Stockholders are required to
indemnify or provide contribution to the Underwriters under the Underwriting
Agreement in consideration of the Selling Stockholders indemnifying the Company
as provided herein and entering into a 180-day lockup agreement with respect to
the balance of the shares not sold by the Selling Stockholders under the
Registration Statement.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the parties agree as follows:
1. Expenses. The Company shall be responsible for and pay all
Registration Expenses (as hereinafter defined) incurred in connection with the
registration to be effected pursuant to the Registration Statement. Each of the
Selling Stockholders shall be responsible for and pay all Selling Expenses (as
hereinafter defined) relating to the sale of the shares of Common Stock of such
Selling
<PAGE>
Stockholder. For purposes of this Agreement, (i) "Registration Expenses" shall
mean all expenses incurred by the Company in filing the Registration Statement
and complying herewith, including, without limitation, all registration,
qualification and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses incident to or required by
the registration contemplated hereby; and (ii) "Selling Expenses" shall mean all
underwriting discounts, selling commissions and stock transfer taxes applicable
to the Selling Stockholder Shares registered on behalf of the Selling
Stockholders, all internal administrative and expenses of either Selling
Stockholder and all fees and disbursements of counsel for either Selling
Stockholder.
2. Indemnification and Contribution. The Company and the Selling
Stockholders agree to provide each other with indemnification and contribution
as follows:
a. By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Selling Stockholder, the partners, officers and
directors of each Selling Stockholder, any underwriter (as defined in the
Securities Act of 1933, as amended (the "Securities Act") for such Selling
Stockholder and each person, if any, who controls such Selling Stockholder or
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act") against any losses, claims, damages
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law (including
payments made to any underwriter by any Selling Stockholder, partner, officer or
director or controlling person of a Selling Stockholder pursuant to the
indemnification or contribution provisions of the Underwriting Agreement),
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively, "Violations"):
(i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto;
(ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Selling Stockholder, partner, officer,
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this subsection 1(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises
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<PAGE>
out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Selling Stockholder, partner, officer, director,
underwriter or controlling person of such Selling Stockholder.
b. By Selling Stockholders. To the extent permitted by law, each
Selling Stockholder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, each underwriter, any other Selling Stockholder selling securities under
such registration statement or any of such other Selling Stockholder's partners,
directors or officers or any person who controls such underwriter or other
Selling Stockholder within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages or liabilities (joint or several) to
which the Company or any such director, officer, controlling person, underwriter
or other such Selling Stockholder, partner, director, officer or controlling
person of such underwriter or other Selling Stockholder may become subject under
the Securities Act, the Exchange Act or other federal or state law (including
payments made to any underwriter by the Company or any other Selling
Stockholder, or any director, partner, officer, or controlling person of the
Company or any other Selling Stockholder pursuant to the indemnification or
contribution provisions of the Underwriting Agreement), insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Selling Stockholder expressly for use in
connection with such registration; and each such Selling Stockholder will
reimburse any legal or other expenses reasonably incurred by the Company, any
such director, officer, controlling person, underwriter or other Selling
Stockholder, partner, officer, director or controlling person of such other
Selling Stockholder or underwriter in connection with the investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 2(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Selling
Stockholder, which consent shall not be unreasonably withheld; and provided
further, that the total amounts payable in indemnity by a Selling Stockholder
under this Section 2(b) or for contribution under Section 2(e) below in respect
of any Violation shall not exceed the net proceeds received by such Selling
Stockholder in the registered offering out of which such Violation arises. To
the extent a Selling Stockholder shall make payments pursuant to Section 8 of
the Underwriting Agreement, such amounts shall serve as a credit against the
aggregate maximum amount payable by such Selling Stockholder pursuant to this
Section 2(b).
c. Notice. Promptly after receipt by an indemnified party under this
Section 2 of notice of the commencement of any action (including any government
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party to desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such
3
<PAGE>
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2, but the omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.
d. Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and any Selling Stockholder are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
SEC at the time the registration statement in question becomes effective or the
amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of any
indemnified party if a copy of the Final Prospectus was furnished to the
indemnified party and the indemnified party was required to, but did not,
furnish the Final Prospectus to the person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the Securities Act.
e. Contribution. In order to provide for such and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Selling Stockholder or any partner, officer, director or
controlling person of any such Selling Stockholder, makes a claim for
indemnification pursuant to this Section 2 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 2 provides for indemnification in such case, or
(ii) contribution under the Securities Act may be required on the part of any
such Selling Stockholder or any such partner, officer, director or controlling
person in circumstances for which indemnification is provided under this Section
2; then, and in each such case, the Company and such Selling Stockholder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) (i) in proportion to the amount
of information provided by each party for use in the registration statement and
the access of each party to, and ability of each party to correct, the
information resulting in the violation or (ii) if the allocation provided for in
clause (i) above is not permitted by applicable law so that such Selling
Stockholder is responsible for the proportion represented by the percentage that
the public offering price of its Registrable Securities offered by and sold
under the registration statement bears to the public offering price of all
securities offered by and sold under such registration statement, and the
Company and other Selling Stockholders are responsible for the remaining
portion; provided, however, that, in any such case, (A) no such Selling
Stockholder will be required to contribute an amount in excess of the net
proceeds received by such Selling Stockholder from all such securities offered
and sold by such Selling Stockholder pursuant to such registration statement;
and (B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
f. Survival. The obligations of the Company and Selling Stockholders
under this Section 2 shall survive the completion of the Offering and be
applicable only with respect to Violations arising in connection with the
Offering.
4
<PAGE>
3. Underwriting Agreement. If the Underwriters, the Company and the
attorneys-in-fact for the Selling Stockholders decide to consummate the Offering
by entering into the Underwriting Agreement, the Company and the Selling
Stockholders agree to be bound by such Underwriting Agreement, including the
indemnification provisions of Section 8, the lockup provisions of Section 4 and
the provisions of Section 5 of the Underwriting Agreement.
4. Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed
under the internal laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within the State of
New York, without reference to principles of conflict of laws or choice of laws.
b. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
c. Headings. The headings and captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which are incorporated herein by this reference.
d. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms to the maximum extent possible.
e. Entire Agreement. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire understanding and agreement of the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, correspondence, agreements, understandings, duties or obligations
among the parties with respect to the subject matter hereof.
f. Further Assurances. From and after the date of this Agreement,
upon the request of a party, the other parties shall execute and deliver such
instruments, documents or other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
---------------------------------------------
Lars-Goran Peterson
Chief Financial Officer and Secretary
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co., Inc., its General Partner
By:
-------------------------------------
Managing Director
MARTIN LEIMDORFER
---------------------------------------------
Martin Leimdorfer
6
<PAGE>
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Agreement is dated as of July __, 1996, and is entered into by and
among Industri-Matematik International Corp., a Delaware corporation (the
"Company"), Warburg, Pincus Investors, L.P. ("Warburg") and Martin Leimdorfer
("Leimdorfer") (Warburg and Leimdorfer are referred to collectively as the
"Stockholders").
WHEREAS, the Company and the Stockholders desire to provide for certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Commission" means the U.S. Securities and Exchange Commission, or any
----------
other Federal agency at the time administering the Securities Act.
"Common Stock" means (i) the Common Stock, $.01 par value per share, of the
------------
Company, and (ii) the Class B Common Stock, par value $.01 per share, of the
Company.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended,
------------
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Registration Statement" means a registration statement filed by the
----------------------
Company with the Commission for a public offering and sale of Common Stock
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Registration Expenses" means the expenses described in Section 5.
---------------------
"Registrable Shares" means (i) the shares of Common Stock, and any shares
------------------
of Common Stock issued or issuable upon the conversion or exercise of any other
securities, owned by the Stockholders as at the date hereof and (ii) any other
shares of Common Stock issued in respect of such shares (because of stock
splits, stock dividends, reclassifications, recapitalizations, or similar
events); provided, however, that shares of Common Stock which are Registrable
-------- -------
Shares shall cease to be Registrable Shares (i) upon any sale pursuant to a
Registration Statement or Rule 144 under the Securities Act or (ii) upon any
sale in any manner to a person or entity
<PAGE>
which, by virtue of Section 14 of this Agreement, is not entitled to the rights
provided by this Agreement. Wherever reference is made in this Agreement to a
request or consent of holders of a certain percentage of Registrable Shares, the
determination of such percentage shall include shares of Common Stock issuable
upon conversion of the Registrable Shares even if such conversion has not yet
been effected.
"Securities Act" means the U.S. Securities Act of 1933, as amended, or any
--------------
similar Federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Stockholders" means the Stockholders and any persons or entities to whom
------------
the rights granted under this Agreement are transferred by any Stockholders,
their successors or assigns pursuant to Section 14 hereof.
2. Required Registrations.
----------------------
2.1 At any time after the earlier of the date which is one hundred eighty
(180) days after the closing of the Company's initial public offering,
Leimdorfer may request once and Warburg may request twice, in writing, that the
Company effect the registration on Form S-1 or Form S-2 (or any successor form)
of Registrable Shares owned by such Stockholder or Stockholders having an
aggregate offering price of at least $30,000,000 (based on the then current
market price or fair value). If the holders initiating the registration intend
to distribute the Registrable Shares by means of an underwriting, they shall so
advise the Company in their request. In the event such registration is
underwritten, the right of other Stockholders to participate shall be
conditioned on such Stockholders' participation in such underwriting. Upon
receipt of any such request, the Company shall promptly give written notice of
such proposed registration to all Stockholders. Such Stockholders shall have
the right, by giving written notice to the Company within ten (10) business days
after the Company provides its notice, to elect to have included in such
registration such of their Registrable Shares as such Stockholders may request
in such notice of election; provided that if the underwriter (if any) managing
the offering determines that, because of marketing factors, all of the
Registrable Shares requested to be registered by all Stockholders may not be
included in the offering, then all Stockholders who have requested registration
shall participate in the registration pro rata based upon the number of
Registrable Shares which they have requested to be so registered. Thereupon,
the Company shall, as expeditiously as possible, use its best efforts to effect
the registration on Form S-1 or Form S-2 (or any successor form) of all
Registrable Shares which the Company has been requested to so register.
2.2 At any time after the Company becomes eligible to file a Registration
Statement on Form S-3 (or any successor form relating to secondary offerings),
Leimdorfer may request once and Warburg may request twice, in writing, that the
Company effect the registration on Form S-3 (or such successor form), of
Registrable Shares having an aggregate offering price of at least $5,000,000
(based on the then current public market price). Upon receipt of any such
request, the Company shall promptly give written notice of such proposed
registration to all
2
<PAGE>
Stockholders. Such Stockholders shall have the right, by giving written notice
to the Company within ten (10) business days after the Company provides its
notice, to elect to have included in such registration such of their Registrable
Shares as such Stockholders may request in such notice of election; provided
that if the underwriter (if any) managing the offering determines that, because
of marketing factors, all of the Registrable Shares requested to be registered
by all Stockholders may not be included in the offering, then all Stockholders
who have requested registration shall participate in the registration pro rata
based upon the number of Registrable Shares which they have requested to be so
registered. Thereupon, the Company shall, as expeditiously as possible, use its
best efforts to effect the registration on Form S-3 (or such successor form) of
all Registrable Shares which the Company has been requested to so register.
2.3 The Company shall not be required to effect more than (i) three (3)
registrations pursuant to paragraph 2.1 above and (ii) one (1) registration in
any six (6) month period pursuant to paragraph 2.2 above. In addition, the
Company shall not be required to effect any registration (other than on Form S-3
or any successor form relating to secondary offerings) within six (6) months
after the effective date of any other Registration Statement of the Company.
2.4 If at the time of any request to register Registrable Shares pursuant
to this Section 2, the Company is engaged or has fixed plans to engage within
sixty (60) days of the time of the request in a registered public offering as to
which the Stockholders may include Registrable Shares pursuant to Section 3 or
is engaged in any other activity which, in the good faith determination of the
Company's Board of Directors, would be adversely affected by the requested
registration to the material detriment of the Company, then the Company may at
its option direct that such request be delayed for a period not in excess of six
(6) months from the effective date of such offering or the date of commencement
of such other material activity, as the case may be, such right to delay a
request to be exercised by the Company not more than once in any two (2) year
period.
3. Incidental Registration.
-----------------------
3.1 Whenever the Company proposes to file a Registration Statement
(including, without limitation, pursuant to Section 2) at any time and from time
to time, it will, prior to such filing, give written notice to all Stockholders
of its intention to do so and, upon the written request of a Stockholder or
Stockholders given within ten (10) business days after the Company provides such
notice (which request shall state the intended method of disposition of such
Registrable Shares), the Company shall use its best efforts to cause all
Registrable Shares which the Company has been requested by such Stockholder or
Stockholders to register to be registered under the Securities Act to the extent
necessary to permit their sale or other disposition in accordance with the
intended methods of distribution specified in the request of such Stockholder or
Stockholders; provided that the Company shall have the right to postpone or
withdraw any registration effected pursuant to this Section 3 without obligation
to any Stockholder.
3.2 In connection with any registration under this Section 3 involving an
underwriting, the Company shall not be required to include any Registrable
Shares in such registration unless
3
<PAGE>
the holders thereof accept the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it (provided that such terms must
be consistent with this Agreement). If in the opinion of the managing
underwriter it is appropriate because of marketing factors to limit the number
of Registrable Shares to be included in the offering, then the Company shall be
required to include in the registration only that number of Registrable Shares,
if any, which the managing underwriter believes should be included therein;
provided that no persons or entities other than the Company, the Stockholders
and persons or entities holding registration rights granted in accordance with
Section 10 hereof shall be permitted to include securities in the offering. If
the number of Registrable Shares to be included in the offering in accordance
with the foregoing is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the holders of
Registrable Shares who have requested registration and other holders of
securities entitled to include them in such registration shall participate in
the registration pro rata based upon their total ownership of shares of Common
Stock (giving effect to the conversion into Common Stock of all securities
convertible thereinto). If any holder would thus be entitled to include more
securities than such holder requested to be registered, the excess shall be
allocated among other requesting holders pro rata in the manner described in the
preceding sentence.
4. Registration Procedures.
-----------------------
If and whenever the Company is required by the provisions of this Agreement
to use its best efforts to effect the registration of any of the Registrable
Shares under the Securities Act, the Company shall:
4.1 file with the Commission a Registration Statement with respect to such
Registrable Shares and use its best efforts to cause that Registration Statement
to become and remain effective;
4.2 as expeditiously as possible prepare and file with the Commission any
amendments and supplements to the Registration Statement and the prospectus
included in the Registration Statement as may be necessary to keep the
Registration Statement effective, in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution of all
securities purchased by it and, in the case of any other offering, until the
earlier of the sale of all Registrable Shares covered thereby or one hundred and
twenty (120) days after the effective date thereof;
4.3 as expeditiously as possible furnish to each selling Stockholder such
reasonable numbers of copies of the prospectus, including any preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the selling Stockholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the selling Stockholder; and
4.4 as expeditiously as possible use its best efforts to register or
qualify the Registrable Shares covered by the Registration Statement under the
securities or Blue Sky laws of such states
4
<PAGE>
as the selling Stockholders shall reasonably request, and do any and all other
acts and things that may be necessary or desirable to enable the selling
Stockholders to consummate the public sale or other disposition in such states
of the Registrable Shares owned by the selling Stockholder; provided, however,
-------- -------
that the Company shall not be required in connection with this paragraph 4.4 to
qualify as a foreign corporation or execute a general consent to service of
process in any jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and, after having done, so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
5. Allocation of Expenses.
----------------------
The Company will pay all Registration Expenses of all registrations under
this Agreement; provided, however, that if a registration under Section 2 is
-------- -------
withdrawn at the request of the Stockholders requesting such registration (other
than as a result of information concerning the business or financial condition
of the Company which is made known to the Stockholders after the date on which
such registration was requested) and if the requesting Stockholders elect not to
have such registration counted as a registration requested under Section 2, the
requesting Stockholders shall pay the Registration Expenses of such registration
pro rata in accordance with the number of their Registrable Shares included in
such registration. For purposes of this Section 5, the term "Registration
Expenses" shall mean all expenses incurred by the Company in complying with this
Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and expenses of counsel for the
Company and the fees and expenses of one counsel selected by the selling
Stockholders to represent the selling Stockholders, state Blue Sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration, but excluding underwriting discounts, selling commissions and
the fees and expenses of selling Stockholders' own counsel (other than the
counsel selected to represent all selling Stockholders).
6. Indemnification and Contribution.
--------------------------------
6.1 In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such Registrable Shares, each underwriter of
such Registrable Shares, and each other person, if any, who controls such seller
or underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several, to which
such seller, underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
5
<PAGE>
statement or alleged untrue statement of any material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to such Registration
Statement, or arise out of or are based upon the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in the context in which they were made, not misleading; and
the Company will reimburse such seller, underwriter and each such controlling
person for any legal or any other expenses reasonably incurred by such seller,
underwriter or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
-------- -------
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or omission made in such Registration Statement, preliminary prospectus or final
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by or on
behalf of such seller, underwriter or controlling person specifically for use in
the preparation thereof.
6.2 In the event of any registration of any of the Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares, severally and not jointly, will indemnify and hold harmless the Company,
each of its directors, officers, employees and agents and each underwriter (if
any) and each person, if any, who controls the Company or any such underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities, joint or several, to which the Company,
such directors, officers, employees, agents, underwriter or controlling person
may become subject under the Securities Act, Exchange Act, state securities or
Blue Sky laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein, in the context in which they were made, not misleading, if
the statement or omission was made in reliance upon and in conformity with
information relating to such seller furnished in writing to the Company by or on
behalf of such seller specifically for use in connection with the preparation of
such Registration Statement, prospectus, amendment or supplement; provided,
--------
however, that the obligations of such Stockholders hereunder shall be limited to
- -------
an amount equal to the proceeds to each Stockholder of Registrable Shares sold
in connection with such registration.
6.3 Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
--------
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the
6
<PAGE>
Indemnified Party (whose approval shall not be unreasonably withheld); and,
provided, further, that the failure of any Indemnified Party to give notice as
- -------- -------
provided herein within a reasonable period of time that the Indemnified Party
has notice of the claim, if prejudicial to the ability of the Indemnifying Party
to defend the claim, shall relieve the Indemnifying Party of its obligations
under this Section 6. The Indemnified Party may participate in such defense at
such party's expense; provided, however, that the Indemnifying Party shall pay
-------- -------
such expense if representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or potential
differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding, and the Indemnifying Party has
not replaced such counsel within a period of ten (10) business days after
receipt of written notice from the Indemnified Party as to such conflict of
interest. No Indemnifying Party, in the defense of any such claim or litigation
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
6.4 In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Shares exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 6 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
6; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
-------- -------
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11(f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
7. Indemnification with Respect to Underwritten Offering.
-----------------------------------------------------
In the event that Registrable Shares are sold pursuant to a Registration
Statement in an underwritten offering pursuant to Section 2, the Company agrees
to enter into an underwriting agreement containing customary representations and
warranties with respect to the business and
7
<PAGE>
operations of an issuer of the securities being registered and customary
covenants and agreements to be performed by such issuer, including without
limitation customary provisions with respect to indemnification by the Company
of the underwriters of such offering.
8. Information by Holder.
---------------------
Each Stockholder including Registrable Shares in any registration shall
furnish to the Company such information regarding such Stockholder and the
distribution proposed by such Stockholder as the Company may reasonably request
in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Agreement.
9. "Stand-Off" Agreement.
---------------------
Each Stockholder, if requested by the Company and the managing underwriter
of an offering by the Company of Common Stock or other securities of the Company
pursuant to a Registration Statement, shall agree not to sell publicly or
otherwise transfer or dispose of any Registrable Shares or other securities of
the Company held by such Stockholder for a specified period of time (not to
exceed one hundred eighty (180) days) following the effective date of such
Registration Statement.
10. Limitations on Subsequent Registration Rights.
---------------------------------------------
The Company shall not, without the prior written consent of Stockholders
holding more than fifty percent (50%) of the Registrable Shares, enter into any
agreement (other than this Agreement) with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include securities of the Company in any Registration Statement,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only on terms substantially
similar to the terms on which holders of Registrable Shares may include shares
in such registration, or (b) to make a demand registration which could result in
such registration statement being declared effective prior to the earliest date
on which a holder of Registrable Securities would be able to make a demand
registration hereunder.
11. Rule 144 Requirements.
---------------------
After the earliest of (i) the closing of the sale of securities of the
Company pursuant to a Registration Statement, (ii) the registration by the
Company of a class of securities under Section 12 of the Exchange Act, or (iii)
the issuance by the Company of an offering circular pursuant to Regulation A
under the Securities Act, the Company agrees to:
11.1 comply with the requirements of Rule 144(c) under the Securities Act
with respect to current public information about the Company;
8
<PAGE>
11.2 use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements); and
11.3 furnish to any holder of Registrable Shares upon request (i) a written
statement by the Company as to its compliance with the requirements of said Rule
144(c), and the reporting requirements of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the Company, and
(iii) such other reports and documents of the Company as such holder may
reasonably request to avail itself of any similar rule or regulation of the
Commission allowing it to sell any such securities without registration.
12. Mergers, Etc.
------------
The Company shall not, directly or indirectly, enter into any merger,
consolidation or reorganization in which the Company shall not be the surviving
corporation unless the proposed surviving corporation shall, prior to such
merger, consolidation or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Shares" shall be deemed to be references to the
securities which the Stockholders would be entitled to receive in exchange for
Registrable Shares under any such merger, consolidation or reorganization;
provided, however, that the provisions of this Section 12 shall not apply in the
- -------- -------
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if all Stockholders are entitled to receive in
exchange for their Registrable Shares consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be immediately sold
to the public without registration under the Securities Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within ninety (90) days of completion of the transaction for resale to
the public pursuant to the Securities Act.
13. Termination.
-----------
All of the Company's obligations to register Registrable Shares under this
Agreement shall terminate on the tenth anniversary of this Agreement.
14. Transfers of Rights.
-------------------
This Agreement, and the rights and obligations of each Stockholder
hereunder, may be assigned by such Stockholder to any person or entity to which
Registrable Shares are transferred by such Stockholder, and such transferee
shall be deemed a "Stockholder" for purposes of this Agreement; provided that
the transferee provides written notice of such assignment to the Company.
9
<PAGE>
15. General.
-------
15.1 Notices. All notices, requests, consents, and other communications
-------
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at Kungsgaten 12-14, Box 7733, 103 95 Stockholm, Sweden,
Attention: Stig G. Durlow, President, or at such other address or addresses as
may have been furnished in writing by the Company to the Stockholders, with a
copy to Brobeck Hale and Dorr International, Veritas House, 125 Finsbury
Pavement, London EC2A 1NQ, England, Attention: Donald J. Guiney, Esq.;
If to a Stockholder, at his or its address set forth below, or at such
other address or addresses as may have been furnished to the Company in writing
by such Stockholder, with a copy to Tannenbaum Dubin & Robinson, LLP, 1140
Avenue of the Americas, New York, NY 10036, Attention: Marvin S. Robinson, Esq.,
and with a copy to Brobeck Hale and Dorr International, Veritas House, 125
Finsbury Pavement, London EC2A 1NQ, England, Attention: Donald J. Guiney, Esq.
Notices provided in accordance with this Section 15(a) shall be deemed
delivered upon personal delivery or two (2) business days after deposit in the
mail.
15.2 Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
15.3 Amendments and Waivers. Any term of this Agreement may be amended and
----------------------
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of more than fifty percent (50%)
of the Registrable Shares; provided, that this Agreement may be amended with the
--------
consent of the holders of less than all Registrable Shares only in a manner
which affects all Registrable Shares in the same fashion. No waivers of or
exceptions to any term, condition or provision of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
15.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
15.5 Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
15.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
10
<PAGE>
Executed as of the date first written above.
INDUSTRI-MATEMATIK INTERNATIONAL CORP.:
By:
-----------------------------------
Lars-Goran Peterson
Chief Financial Officer and Secretary
STOCKHOLDERS:
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co., its General Partner
By:
-----------------------------------
Managing Director
Address:
466 Lexington Avenue, 10th floor
New York, NY 10017
U.S.A.
MARTIN LEIMDORFER
-----------------------------
Martin Leimdorfer
Address:
Strandvagen 11
S-11456 Stockholm
Sweden
11
<PAGE>
EXHIBIT 10.3
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
STOCK OPTION PLAN
SECTION I
Purpose
The purpose of the Industri-Matematik International Corp. Stock Option
Plan is to provide favorable opportunities for (a) certain selected employees
and (b) certain selected non-employee members of the Board of Directors,
consultants, and other advisors of Industri-Matematik International Corp. and
its subsidiaries to purchase or receive shares of Class A Common Stock of
Industri-Matematik International Corp. to provide an increased incentive for
these individuals to contribute to the future success and prosperity of
Industri-Matematik International Corp. and thereby enhance the value of the
Class A Common Stock for the benefit of its shareholders.
SECTION II
Definitions and Construction
2.1. The following capitalized terms used in this Stock Option Plan shall
have the respective meanings set forth in this Section.
Board shall mean the Board of Directors of IMIC.
Cause shall mean, with respect to an Optionee, (a) the breach by the
Optionee of any agreement between the Company and the Optionee, (b) willful
misconduct on the part of the Optionee
<PAGE>
that is materially and demonstrably detrimental to the Company, or (c) the
commission by the Optionee of one or more acts which constitute an indictable
crime under Federal, state, or local law, each as may be determined in good
faith by written resolution adopted by a majority of the members of the Board.
Change of Control shall mean (a) the merger or consolidation of IMIC with
any other corporation, the sale of substantially all of the assets of IMIC, the
sale by the shareholders of IMIC of a majority of the voting stock of IMIC to a
third party (which may be a minority shareholder of IMIC prior to the sale), or
the liquidation or dissolution of IMIC, or (b) any action taken by IMIC's
shareholders or by the Board which the Board determines to constitute a Change
of Control of IMIC.
Code shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
Committee shall mean the committee appointed by the Board to administer the
Plan which shall be composed of at least two persons.
Common Stock shall mean the Class A Common Stock, no par value, of IMIC.
Company shall mean Industri-Matematik International Corp. and any of its
Subsidiaries.
2
<PAGE>
Disability shall mean disability within the meaning of Section 22(e)(3) of
the Code, as determined by the Committee.
Exercise Price shall mean the price of a share of Common Stock payable by
the Optionee on exercise of an Option.
Fair Market Value on a specified day shall mean, if the Common Stock is
publicly traded, the reported closing price on that day, or if there was no sale
of Common Stock reported on that day, then the reported closing price on the
next preceding day on which there was such a sale, but if the Common Stock is
not publicly traded, the Committee shall make a good faith determination of Fair
Market Value.
IMIC shall mean Industri-Matematik International Corp.
ISO shall mean an incentive stock option within the meaning of Section 422
of the Code.
Non-ISO shall mean a stock option which is not an ISO.
Option shall mean a stock option granted under the Plan.
Optionee shall mean an individual who has been granted one or more Options.
Parent Corporation shall mean a parent corporation, as defined in Section
424(e) of the Code.
3
<PAGE>
Plan shall mean this Industri-Matematik International Corp. Stock Option
Plan.
Retirement shall mean retirement on or after age sixty-five or, with the
advance consent of the Committee, at an earlier age.
Stock Appreciation Right shall mean a right to receive cash or Common Stock
upon the exercise of an Option in accordance with Section 6.7.
Subsidiary shall mean a subsidiary corporation, as defined in Section
424(f) of the Code.
Termination Date shall mean the last day on which an Option may be
exercised, which date is fixed by the Committee but which shall not be later
than the day preceding the tenth anniversary of the date on which the Option is
granted.
2.2. When used in this Plan, unless the context clearly indicates to the
contrary, the masculine gender shall include the feminine and neuter genders and
the singular shall include the plural, and if a defined term is intended, it
shall be capitalized.
SECTION III
Administration
3.1. Except as otherwise provided in the Plan, and subject to Section 3.2,
the Committee shall administer the Plan and shall have full power to grant
Options, construe and inter-
4
<PAGE>
pret the Plan, establish and amend rules and regulations for its administration,
and perform all other acts relating to the Plan including the delegation of
administrative responsibilities which it believes reasonable and proper.
3.2. Subject to the provisions of the Plan, the Board shall establish the
policies and criteria pursuant to which the Committee shall grant Options and
administer the Plan. Subject to the provisions of the Plan, and pursuant to the
policies and criteria established by the Board, the Committee, in its
discretion, shall determine which employees of the Company shall be granted
Options, which members of the Board, consultants, and other advisors of the
Company shall be granted Options, the number of shares covered by any such
Options, and the terms and conditions of the Options.
3.3. The Committee may at any time, with the consent of the Optionee, in
its sole discretion cancel any Option and issue to the Optionee a new Option for
an equivalent or lesser number of shares of Common Stock, and at a lower
Exercise Price.
3.4. Any decision made, or action taken, by the Committee or the Board
arising out of or in connection with the interpretation and administration of
the Plan shall be final and conclusive.
5
<PAGE>
SECTION IV
Shares Subject to the Plan
4.1. The total number of shares of Common Stock available for grants of
Options under the Plan shall be 1,000,000, subject to adjustment in accordance
with Section VIII. These shares may be either authorized but unissued or
reacquired shares of Common Stock. If an Option or portion thereof shall expire
or terminate for any reason without having been exercised in full, the
unpurchased shares covered by such Option shall be available for future grants
of Options. An Option or portion thereof exercised through the exercise of a
Stock Appreciation Right pursuant to Section 6.7 shall be treated, for the
purposes of this Section IV, as though the Option or portion thereof had been
exercised through the purchase of Common Stock, with the result that the shares
of Common Stock subject to the Option or portion thereof that was so exercised
shall not be available for future grants of Options.
SECTION V
Eligibility
5.1. Options may be granted to key employees of the Company or to persons
who have been engaged to become key employees of the Company. Key employees
will comprise, in general, those who contribute to the management, direction,
and overall success of the Company.
6
<PAGE>
5.2. Options also may be granted to members of the Board, consultants,
and other advisors of the Company who are not employees of the Company. Such
Optionees will comprise, in general, those who, while not employees of the
Company, have an ongoing relationship with the Company and make significant
contributions to the overall success of the Company.
SECTION VI
Terms of Options
6.1.a. All Options shall be evidenced by written agreements
executed by the Company and the Optionee. Such Options shall be subject to the
applicable provisions of the Plan and shall contain such provisions as are
required by the Plan and any other provisions the Committee may prescribe. All
agreements evidencing Options shall specify the total number of shares subject
to each grant, the Exercise Price, and the Termination Date. Those Options that
comply with the requirements for an ISO set forth in Section 422 of the Code and
that the Committee wishes to designate as an ISO shall be designated ISOs, and
all other Options (including any Option that would otherwise qualify as an ISO
but which the Committee does not wish to designate as an ISO) shall be
designated Non-ISOs. No ISO shall be granted to any Optionee who is not an
employee of the Company on the date the Option is granted.
6.1.b. The written agreement referred to in Section 6.1.a also
shall provide that unless the shares of Common
7
<PAGE>
Stock acquired on the exercise of the Option are then currently registered under
the Securities Act of 1933, as amended, if counsel to IMIC advises that the same
is required, prior to delivery of the shares acquired upon the exercise of the
Option the Optionee shall agree to hold such shares for investment only and not
with a view to resale or distribution thereof to the public, and such Optionee
shall deliver to IMIC a letter to that effect in a form specified by counsel to
IMIC together with any additional documents specified by counsel. In the event
that issuance of shares of Common Stock on exercise of the Option is subject to
laws, rules, and/or regulations of a jurisdiction other than the United States
of America, the Optionee simultaneously shall comply with requirements of
counsel to IMIC to satisfy the same.
6.2. The Exercise Price for an ISO shall not be less than the Fair Market
Value of a share of Common Stock on the date the Option is granted.
6.3.a. The Committee shall determine the dates after which Options
may be exercised in whole or in part. If Options are exercisable in
installments, installments or portions thereof that are exercisable and not
exercised shall accumulate and remain exercisable. The Committee also may amend
an Option to accelerate the dates after which Options may be exercised in whole
or in part. However, no Option or portion thereof shall be exercisable after
the Termination Date.
8
<PAGE>
6.3.b. Notwithstanding any contrary provisions of Section 6.3.a, upon
a Change of Control (i) each Option or portion thereof which, by its terms, is
not yet exercisable shall vest and become exercisable in full, and (ii) each
Option which has a Termination Date falling within 90 days after a Change of
Control shall have its Termination Date extended until the earlier of the 90th
day after the Change of Control or the day before the tenth anniversary of the
date such Option was granted.
6.4. Notwithstanding any contrary provisions of Sections 6.2 and 6.3.a,
no ISO shall be granted to any employee who, at the time the Option is granted,
owns (directly, or within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of IMIC or of any
Subsidiary or Parent Corporation thereof, unless (a) the Exercise Price under
such Option is at least 110% of the Fair Market Value of a share of Common Stock
on the date the Option is granted and (b) the Termination Date of such Option is
a date not later than the day preceding the fifth anniversary of the date on
which the Option is granted.
6.5. An Option or portion thereof shall be exercised by delivery of a
written notice of exercise to IMIC and payment of the full price of the shares
being purchased pursuant to the Option. An Optionee may exercise an Option with
respect to less than the full number of shares for which the Option may then be
exercised, but an Optionee must exercise the Option in full
9
<PAGE>
shares of Common Stock. The price of Common Stock purchased pursuant to an
Option or portion thereof may be paid:
6.5.a. In United States dollars in cash or by check, bank draft, or
money order payable to the order of IMIC;
6.5.b. Through the delivery of shares of Common Stock with an
aggregate Fair Market Value on the date of exercise equal to the Exercise Price,
or
6.5.c. By any combination of the above methods of payment.
The Committee shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate including, without limitation, any limitation or prohibition
designed to avoid certain accounting consequences which may result from the use
of Common Stock as payment upon exercise of an Option.
6.6. IMIC, in its discretion, may require an Optionee to pay to IMIC at
the time of exercise the amount that IMIC deems necessary to satisfy its
obligation to withhold Federal, state, or local income or other taxes incurred
by reason of the exercise. Upon the exercise of an Option requiring tax
withholding, an Optionee may make a written election to have shares of Common
Stock withheld by IMIC from the shares otherwise to be received. The number of
shares so withheld shall have an
10
<PAGE>
aggregate Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The approval of any such election by an Optionee
shall be at the sole discretion of the Committee. Where the exercise of an
Option does not give rise to an obligation to withhold income taxes on the date
of exercise, IMIC, in its discretion, may require an Optionee to place shares of
Common Stock purchased under the Option in escrow for the benefit of IMIC until
such time as income tax withholding is required on amounts included in the gross
income of the Optionee as a result of the exercise of an Option. At such time,
IMIC in its discretion may require an Optionee to pay to IMIC the amount that
IMIC deems necessary to satisfy its obligation to withhold Federal, state, or
local income or other taxes incurred by reason of the exercise of the Option, in
which case the shares of Common Stock will be released from escrow to the
Optionee. Alternatively, subject to acceptance by the Committee, in its sole
discretion, an Optionee may make a written election to have shares of Common
Stock held in escrow applied toward IMIC's obligation to withhold Federal,
state, or local income or other taxes incurred by reason of the exercise of the
Option, based on the Fair Market Value of the shares on the date of the
termination of the escrow arrangement. Upon application of such shares toward
IMIC's withholding obligation, any shares of Common Stock held in escrow and, in
the judgment of the Committee, not necessary to satisfy such obligation shall be
released from escrow to the Optionee.
11
<PAGE>
6.7. At or after the grant of an Option, the Committee, in its
discretion, may provide an Optionee with an alternate means of exercising an
Option, or a designated portion thereof, by granting the Optionee a Stock
Appreciation Right. A Stock Appreciation Right is a right to receive, upon
exercise of an Option or any portion thereof, in the Committee's sole
discretion, an amount of cash equal to, and/or shares of Common Stock having a
Fair Market Value on the date of exercise equal to, the excess of the Fair
Market Value of a share of Common Stock on the date of exercise over the
Exercise Price, multiplied by the number of shares of Common Stock that the
Optionee would have received had the Option or portion thereof been exercised
through the purchase of shares of Common Stock at the Exercise Price, provided
that (a) such Option or portion thereof has been designated as exercisable in
this alternative manner, (b) such Option or portion thereof is otherwise
exercisable, and (c) the Fair Market Value of a share of Common Stock on the
date of exercise exceeds the Exercise Price.
6.8. Each Option, during the Optionee's lifetime, shall be exercisable
only by the Optionee, and neither it nor any right hereunder shall be
transferable otherwise than by Will or the laws of descent and distribution or
be subject to attachment, execution, or other similar process. In the event of
any attempt by the Optionee to alienate, assign, pledge, hypothecate, or
otherwise dispose of an Option or of any right under the Plan, except as
provided for in the Plan, or in the event of any levy
12
<PAGE>
or any attachment, execution, or similar process upon the rights or interest
conferred by the Plan, IMIC may terminate the Option by notice to the Optionee
and the Option shall thereupon become null and void.
6.9.a. If an Optionee's employment with the Company is terminated
for Cause, each Option held by such Optionee together with all rights under the
Plan shall terminate on the date of termination of employment to the extent not
previously exercised.
6.9.b. If a non-employee Optionee engages in conduct which
constitutes Cause, each Option held by such Optionee together with all rights
under the Plan shall terminate on the date the Board determines that the
Optionee has engaged in conduct constituting Cause to the extent not previously
exercised.
6.10. If an Optionee's employment with the Company terminates for any
reason other than for Cause, or if a non-employee Optionee shall cease to have
an ongoing relationship with the Company as a member of the Board, consultant,
or other advisor to the Company for any reason other than for Cause, each Option
held by such Optionee shall remain exercisable, to the extent it was exercisable
at the time of termination of employment or cessation of ongoing relationship,
until the earliest of:
6.10.a. The Termination Date;
13
<PAGE>
6.10.b. The death of the Optionee, or such later date not more than
six months after the death of the Optionee as may be provided pursuant to
Section 6.11;
6.10.c. Two months after the date of termination of the Optionee's
employment or the date of cessation of ongoing relationship of the Optionee by
reason of Retirement;
6.10.d. Six months after the date of termination of the Optionee's
employment or the date of cessation of ongoing relationship of the Optionee by
reason of Disability;
6.10.e. Two months after the date of the termination by the Company
of the Optionee's employment or the date of cessation by the Company of ongoing
relationship of the Optionee other than for Cause; or
6.10.f. One month after the date of the termination by the Optionee
of the Optionee's employment or the date of cessation by the Optionee of ongoing
relationship of the Optionee other than by reason of Retirement, Disability, or
death.
After such date all Options shall terminate, together with all rights under the
Plan, to the extent not previously exercised.
6.11. In the event of the death of the Optionee while employed by, or in
an ongoing relationship with, the Company, an Option may be exercised at any
time or from time to time prior to
14
<PAGE>
the earlier of the Termination Date and a date six months after the date of the
Optionee's death by the person or persons to whom the Optionee's rights under
each Option shall pass by Will or by the applicable laws of descent and
distribution to the extent that the Optionee was entitled to exercise it on the
date of the Optionee's death. In the event of the death of the Optionee while
entitled to exercise an Option pursuant to Section 6.10, the Committee, in its
discretion, may permit such Option to be exercised at any time or from time to
time prior to the Termination Date during a period of up to six months from the
death of the Optionee, as determined by the Committee, by the person or persons
to whom the Optionee's rights under each Option shall pass by Will or by the
applicable laws of descent and distribution to the extent that the Option was
exercisable at the time of cessation of the Optionee's employment. Any person
or persons to whom an Optionee's rights under an Option have passed by Will or
by the applicable laws of descent and distribution shall be subject to all terms
and conditions of the Plan and the Option applicable to the Optionee.
6.12. Any Optionee who disposes of shares of Common Stock acquired upon
the exercise of an ISO either (a) within two years after the date of the grant
of the ISO under which the Common Stock was acquired or (b) within one year
after the transfer of such shares to the Optionee, shall notify IMIC of such
disposition and of the amount realized upon such disposition.
15
<PAGE>
SECTION VII
Limitation on Grants of ISOs
7.1. To the extent the aggregate Fair Market Value of the Common Stock
subject to an Option which is exercisable for the first time during any one
calendar year by an employee exceeds $100,000, such Option or portion of the
Option may not be treated as an ISO.
SECTION VIII
Adjustments
8.1. If (a) IMIC shall at any time be involved in a transaction to which
Section 424(a) of the Code is applicable, (b) IMIC shall declare a dividend
payable in, or shall subdivide or combine, its Common Stock, or (c) any other
event shall occur which in the judgment of the Committee necessitates action by
way of adjusting the terms of the outstanding Options, the Committee may take
any such action as in its judgment shall be necessary to preserve the Optionee's
rights substantially proportionate to the rights existing prior to such event
and to the extent that such action shall include an increase or decrease in the
number of shares of Common Stock subject to outstanding Options, the number of
shares available under Section IV shall be increased or decreased, as the case
may be, proportionately. The judgment of the Committee with respect to any
matter referred to in this Section VIII shall be conclusive and binding upon
each Optionee.
16
<PAGE>
SECTION IX
Amendment and Termination of Plan
9.1. The Board may at any time, or from time to time, suspend or
terminate the Plan in whole or in part or amend it in such respects as the Board
may deem appropriate, provided that no such amendment shall be made which would,
without approval of the shareholders of IMIC:
9.1.a. Materially modify the eligibility requirements for receiving
Options;
9.1.b. Materially increase the total number of shares of Common
Stock which may be issued pursuant to Options, except as is provided for in
accordance with Section VIII; or
9.1.c. Materially increase in any way the benefits accruing to
Optionees.
9.2. No amendment, suspension, or termination of this Plan, without the
Optionee's consent, shall alter or impair any of the rights or obligations under
any Option theretofore granted to an Optionee under the Plan.
SECTION X
Government and Other Regulations
10.1. The obligation of IMIC to issue, or transfer and deliver, shares for
Options exercised under the Plan or to deliver cash with respect to a Stock
Appreciation Right, shall be
17
<PAGE>
subject to all applicable laws, regulations, rules, orders, and approvals which
shall then be in effect and required by governmental entities and any stock
exchanges on which Common Stock may be traded.
SECTION XI
Miscellaneous Provisions
11.1. The right of the Company to terminate (whether by dismissal,
discharge, retirement, or otherwise) the Optionee's employment or ongoing
relationship with it at any time at will or as otherwise provided by any
agreement between the Company and the Optionee is specifically reserved.
Neither the Optionee nor any person entitled to exercise the Optionee's rights
in the event of the Optionee's death shall have any of the rights of a
shareholder with respect to the shares subject to each Option except to the
extent that, and until, such shares shall have been issued upon the exercise of
each Option.
11.2. Any expenses of administering the Plan shall be borne by IMIC.
11.3. Payments received from Optionees upon the exercise of Options shall
be used for the general corporate purposes of IMIC except that any stock
received or withheld in payment may be retired or retained in IMIC's treasury
and reissued.
11.4. In addition to such other rights of indemnification as they may have
as members of the Board or the Committee,
18
<PAGE>
the members of the Committee and the Board shall be indemnified by IMIC against
all costs and expenses reasonably incurred by them in connection with any
action, suit, or proceeding to which they or any of them may be party by reason
of any action taken or failure to act under or in connection with the Plan or
any Option granted under the Plan, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by IMIC or paid by them in satisfaction of a judgment in any
such action, suit, or proceeding, except a judgment based upon a finding of bad
faith, provided that upon the institution of any such action, suit, or
proceeding, a Committee or Board member, in writing, shall give IMIC notice
thereof and an opportunity, at its own expense, to handle and defend the same
before such Committee or Board member undertakes to handle and defend it on such
member's own behalf.
SECTION XII
Shareholder Approval and Effective Dates
12.1. The Plan shall become effective when it is adopted by the Board.
However, if the Plan is not approved within one year after the Plan is adopted
by the Board by the vote at a meeting of the shareholders of IMIC of the holders
of a majority of the outstanding shares of IMIC entitled to vote, the Plan and
all Options shall terminate at the time of that meeting of shareholders, or, if
no such meeting is held, after the passage of one year from the date the Plan
was adopted by the
19
<PAGE>
Board. Options may not be granted under the Plan after the day before the 10th
anniversary of adoption by the Board.
<PAGE>
EXHIBIT 10.4
STOCK PURCHASE AGREEMENT
This document, when executed by the Purchaser named below and Software
Finance Corp., constitutes a binding Stock Purchase Agreement between such
Purchaser and Software Finance Corp. with respect to the sale by Software
Finance Corp. to Purchaser of the securities referred to below. Each of the
Purchaser and Software Finance Corp. agrees to be bound by all of the provisions
contained in the annexed Terms and Conditions which is incorporated herein by
reference.
Name and Address of Purchaser: Stig Durlow, Golfvagen 17, S-182 31, Danderyd,
Sweden
Date of Stock Purchase Agreement: May 1, 1995
Purchased Securities: 170,000 shares of Class A Common Stock of Industri-
Matematik International Corp.
Purchase Price: $1,020,000
Payment of Purchase Price: Pursuant to annexed Note attached hereto
____________________________________
PURCHASER
SOFTWARE FINANCE CORP.
By:_________________________________
<PAGE>
Terms and Conditions
Section 1
Payment of Purchase Price;
Delivery of Purchased Securities
1.1. In consideration of the sale of the Purchased Securities and in payment
of the Purchase Price therefor, simultaneously with the execution of the Stock
Purchase Agreement, the Purchaser has executed and delivered to Software Finance
Corp. the Note annexed to the Stock Purchase Agreement.
1.2. In accordance with, and to secure the payment due under, the Note, the
Purchased Securities will be pledged to Software Finance Corp.
Section 2
Representation and Warranty
Software Finance Corp. represents and warrants to the Purchaser that the
Purchased Securities are transferred to him free and clear of all liens,
encumbrances, equities, charges, and claims.
Section 3
Miscellaneous Provisions
3.1. Each of the Purchaser and Software Finance Corp. hereby consents to the
jurisdiction of the Supreme Court of the State of New York for the County of New
York and the United States District Court for the Southern District of New York
for all purposes in connection with this Stock Purchase Agreement, and further
consents that any process or notice of motion in connection therewith may be
served by certified or registered mail or by personal service, within or without
the State of New York, provided a reasonable time for appearance is allowed.
3.2. The Stock Purchase Agreement contains the entire understanding between
the Purchaser and Software Finance Corp. with respect to the subject matter
thereof and supersedes all prior agreements with respect to the subject matter
thereof.
3.3. The Stock Purchase Agreement shall be binding upon and inure to the
benefit of Purchaser and his heirs, distributees, trustees, executors,
administrators, personal representatives, or similar fiduciaries and Software
Finance Corp. and its successors, and assigns.
3.4. The Stock Purchase Agreement shall be interpreted and construed in
accordance with the laws of the State of New York as an agreement made and to be
performed entirely within such State.
<PAGE>
NON-RECOURSE PROMISSORY NOTE AND SECURITY AGREEMENT
FOR VALUE RECEIVED, Stig Durlow ("Purchaser"), hereby promises to pay to the
order of Software Finance Corp., the principal sum of $1,020,000 at such place
as the holder of this Note may designate in writing, with interest until the
actual payment date on the unpaid principal from May 1, 1995.
Principal due under this Note shall be paid on April 30, 2004. Interest on
the unpaid principal balance shall be paid in advance (a) for the period
commencing on the date hereof until December 31, 1995, (b) on the first business
day of calendar years 1996 through 2003 for that calendar year, and (c) on the
first business day of calendar year 2004 for the period commencing January 1,
2004, until April 30, 2004.
Interest on the unpaid principal balance ("Interest Rate") shall be at an
initial annual rate of 9.5%, which rate shall be adjusted on the first business
day of each calendar year during the term of this Note to equal .5% plus the
Prime Rate of interest as listed in The New York Times (or an equivalent
newspaper of general circulation in New York City) in its late edition under the
heading "Key Rates" in the "Yesterday" column on the last business day such
column appears prior to each anniversary date of this Note, provided that any
adjustment to the Interest Rate shall apply to all interest accruing on this
Note until another such adjustment is required.
Software Finance Corp. shall have the right and obligation to apply against
the payment of any principal due on this Note any amounts payable by Software
Finance Corp. or its assignee to Purchaser as the "exercise price" pursuant to
an Option Agreement dated the date of this Note.
Purchaser and Software Finance Corp. acknowledge that Software Finance Corp.
may require long term financing from time to time. In order to provide Software
Finance Corp. with financial continuity, Purchaser agrees that the principal due
on this Note may be prepaid by Purchaser only (a) in accordance with the
following schedule:
<TABLE>
<CAPTION>
Anniversary
Dates After Which
Percentage of Note May Percentage of
Be Prepaid Note Prepayable
---------------------- ---------------
<S> <C>
First 40
Second 60
Third 80
Fourth and thereafter 100
</TABLE>
or (b) in the event Industri-Matematik International Corp. ("IMIC") has a change
in control (the merger or consolidation of IMIC with any other corporation, the
sale of substantially all of the assets of IMIC, the sale by the shareholders of
IMIC of a majority of IMIC Common, or the liquidation or dissolution of IMIC).
Upon any such prepayment, the security interest of and pledge to Software
Finance Corp. referred to below for the same percentage of the Purchased
Securities shall terminate and Software Finance Corp. shall deliver to Purchaser
certificates for such shares of Purchased Securities.
Notwithstanding the above, the unpaid principal and interest due on this Note
shall forthwith become due and payable without written demand: (a) in the event
of the failure to pay when due any installment of interest or principal on this
Note for a period of 90 days or (b) 60 days after (i) the date that Purchaser's
employment with any member of the Group (IMIC and its subsidiaries) terminates,
irrespective of the reason therefor, or (ii) the date Purchaser dies or becomes
disabled (a condition resulting from the inability of the Purchaser as
determined by the Board of Directors of IMIC to substantially carry out the
duties customarily performed by him for the Group because of psychological,
emotional, or physical reasons for a period of three continuous months or for a
period of three months not necessarily continuous in any six month period). All
payments shall be applied first to interest and then to principal.
This Note has been executed and delivered pursuant to a Stock Purchase
Agreement dated the date of this Note ("Agreement") between the Purchaser and
Software Finance Corp. The principal due on this Note represents the purchase
price due for the Purchased Securities referred to in the Agreement and
identified on Schedule A to this Note.
Purchaser has no personal liability for payment of principal or interest due
on this Note; this Note is without recourse to the Purchaser, provided that
Purchaser hereby grants to Software Finance Corp. a security interest in the
Purchased Securities and all proceeds thereof, including cash dividends and
additional securities payable in respect of the Purchased Securities, as
security for the payment of principal and interest due on this Note. In order to
effectuate such security interest, the Purchaser hereby pledges and delivers the
Purchased Securities endorsed in blank to Software Finance Corp. and agrees that
Purchaser will not sell, transfer, or otherwise dispose of the Purchased
Securities prior to the due date of this Note unless Purchaser can make a
prepayment pursuant to the provisions of this Note.
So long as Purchaser is not in default of any of his obligations to pay
principal or interest due on this Note, Purchaser shall have all voting rights
and other rights in the Purchased Securities. Following any such default, all
voting and other rights in respect of the Purchased Securities shall inure to
and be exercisable by Software Finance Corp. or any holders or purchasers
thereof. In addition, in the event of such default, Software Finance Corp. shall
have all rights as a secured party under the New York Uniform Commercial Code
and this Note.
Whenever an attorney is used to obtain payment under, or to otherwise
enforce, this Note or to enforce, declare, or adjudicate any rights or
obligations under this Note, whether by suit or by other means whatsoever, the
costs and expenses thereof, including reasonable attorneys' fees and expenses,
shall be payable by the non-prevailing party.
All notices shall be deemed given when a writing is received at, or delivered
to the Purchaser at Golfvagen 17, S-182 31, Danderyd, Sweden, or such other
address as the Purchaser may designate in writing.
If any payment on this Note becomes due and payable on a Saturday, Sunday, or
other day on which commercial banks in New York are authorized or required by
New York law to close, the maturity hereof shall be extended to the next
succeeding business day.
This Note (a) may not be changed, waived, discharged, or terminated except by
an instrument in writing signed by the party against whom enforcement of such
change, waiver, discharge, or termination is sought, (b) shall be binding upon
the Purchaser and his distributees, trustees, executors, administrators,
personal representatives, or similar fiduciaries or his successors and assigns,
and (c) shall inure to the benefit of and be enforceable by Software Finance
Corp. and its successors and assigns.
This Note shall be interpreted and construed in accordance with the laws of
the State of New York applicable to agreements made and to be performed entirely
within such State.
<PAGE>
All parties now and hereafter liable with respect to this Note, whether as
maker, principal, surety, endorser, or otherwise, hereby waive presentment for
payment, demand, notice of nonpayment or dishonor, protest, and notice of
protest to the Purchaser or any other person.
Dated: May 1, 1995
___________________________________
Stig Durlow
ACCEPTED AND AGREED:
SOFTWARE FINANCE CORP.
By:____________________________________
SCHEDULE A TO NON-RECOURSE PROMISSORY NOTE AND SECURITY AGREEMENT
170,000 Shares of Class A Common Stock, no par value, of Industri-Matematik
International Corp. represented by Certificate No. 6.
<PAGE>
NON-RECOURSE PROMISSORY NOTE
FOR VALUE RECEIVED, Software Finance Corp. ("Purchaser"), hereby promises to
pay to the order of Industri-Matematik International Corp., the principal sum of
$1,020,000 at such place as the holder of this Note may designate in writing,
with interest until the actual payment date on the unpaid principal from May 1,
1995.
Principal due under this Note shall be paid on April 30, 2004. Interest on
the unpaid principal balance shall be paid on April 30th in each year commencing
April 30, 1996.
Interest on the unpaid principal balance ("Interest Rate") shall be at an
initial annual rate of 9.5%, which rate shall be adjusted on each May 1st during
the term of this Note to equal .5% plus the Prime Rate of interest as listed in
The New York Times (or an equivalent newspaper of general circulation in New
York City) in its late edition under the heading "Key Rates" in the "Yesterday"
column on the last business day such column appears prior to each May 1st during
the term of this Note, provided that any adjustment to the Interest Rate shall
apply to all interest accruing on this Note until another such adjustment is
required.
The unpaid principal and interest due on this Note shall forthwith
become due and payable without written demand in the event of the failure to pay
when due any installment of interest or principal on this Note for 90 days.
The principal due on this Note may be prepaid without penalty in whole
or in part at any time or from time to time with interest to the date of
prepayment.
This Note has been executed and delivered pursuant to a Stock Purchase
Agreement dated the date of this Note ("Agreement") between the Purchaser and
Industri-Matematik International Corp. The principal due on this Note
represents the purchase price due for the Purchased Securities referred to in
the Agreement.
Whenever an attorney is used to obtain payment under, or to otherwise
enforce, this Note or to enforce, declare, or adjudicate any rights or
obligations under this Note, whether by suit or by other means whatsoever, the
costs and expenses thereof, including reasonable attorneys' fees and expenses,
shall be payable by the non-prevailing party.
All notices shall be deemed given when a writing is received at, or
delivered to the Purchaser at One Commerce Center, Suite 748, 12th and Orange
Streets, Wilmington, Delaware 19801, or such other address as the Purchaser may
designate in writing.
If any payment on this Note becomes due and payable on a Saturday,
Sunday, or other day on which commercial banks in New York are authorized or
required by New York law to close, the maturity hereof shall be extended to the
next succeeding business day.
This Note (a) may not be changed, waived, discharged, or terminated
except by an instrument in writing signed by the party against whom enforcement
of such change, waiver, discharge, or termination is sought, (b) shall be
binding upon the Purchaser and its successors and assigns, and (c) shall inure
to the benefit of and be enforceable by IMIC and its successors and assigns.
This Note shall be interpreted and construed in accordance with the
laws of the State of New York applicable to agreements made and to be performed
entirely within such State.
All parties now and hereafter liable with respect to this Note,
whether as maker, principal, surety, endorser, or otherwise, hereby waive
presentment for payment, demand, notice of nonpayment or dishonor, protest, and
notice of protest to the Purchaser or any other person.
Dated: May 1, 1995
SOFTWARE FINANCE CORP.
By:
-----------------------------------
ACCEPTED AND AGREED:
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
By:
------------------------------------
<PAGE>
OPTION AGREEMENT
This document, when executed by the Stock Owner named below and
Software Finance Corp., constitutes a binding Option Agreement between such
Stock Owner and Software Finance Corp. granting to Software Finance Corp. an
option to purchase the securities referred to below during the Initial Option
Period and Renewal Option Periods. Each of the Stock Owner and Software Finance
Corp. agrees to be bound by all of the provisions contained in the annexed
Schedule I, Schedule II, and Terms And Conditions Applicable To Option
Agreement, all of which are incorporated herein by reference.
Name and Address of Stock Owner: Stig Durlow, Golfvagen 17, S-182 31, Danderyd,
Sweden
Date of Option Agreement: June 15, 1995, as at May 1, 1995
Securities subject to Option: 170,000 shares of IMIC Stock*
Initial Option Period: May 1, 1995, to December 31, 1995
Renewal Option Periods: 8 successive 1 year periods and the period January 1,
2004, to April 30, 2004
Initial Period Option Price: $.42 per share
Initial Period Exercise Price: $6 per share
Renewal Period Option Price: to be computed in accordance with Schedule I
Renewal Period Exercise Price: to be computed in accordance with Schedule II
-------------------------------------------
STOCK OWNER
SOFTWARE FINANCE CORP.
By
-----------------------------------------
*Defined in the Terms and Conditions Applicable To Option Agreement.
<PAGE>
SCHEDULES
[All capitalized terms used in the following Schedules are set forth in the
Option Agreement or defined in the Terms and Conditions Applicable to Option
Agreement.]
I. Option Price
The Initial Period Option Price and the Renewal Period Option Price have
been calculated by, and are mutually agreeable to, the Stock owner and SFC.
The Renewal Period Option Price shall be a percentage of the Initial Period
Exercise Price equal to 3% over the interest rate for United States Treasury
Notes with a maturity of 10 years as listed in The New York Times (or an
equivalent newspaper of general circulation in New York City) in its late
edition under the heading "Key Rates" in the "Yesterday" column on the third
business day prior to the applicable first day.
II. Renewal Period Exercise Price
The exercise price to be paid by SFC in each Renewal Option Period upon
exercise of a purchase option pursuant to the Option Agreement shall be the
Market Price as at the close of business on the last business day preceding the
date on which the option is exercised, provided that if the option to purchase
is exercised prior to the end of the fourth Renewal Option Period, the exercise
price for the following percentages of the Securities subject to the option
shall be the Initial Period Exercise Price:
Exercise Prior to
Last Day of Renewal Percentage of Securities at
Option Period Initial Exercise Price
------------------- ---------------------------
<TABLE>
<CAPTION>
<S> <C>
Second 60
Third 40
Fourth 20
</TABLE>
Notwithstanding the foregoing, in the event of a change of control of IMIC (the
merger or consolidation of IMIC with any other corporation, the sale of
substantially all of the assets of IMIC, the sale by the shareholders of IMIC of
a majority of IMIC Common, or the liquidation or dissolution of IMIC), the
exercise price shall be the Market Price.
<PAGE>
TERMS AND CONDITIONS
APPLICABLE TO OPTION AGREEMENT
Section A
Definitions
Unless the context of these Terms and Conditions requires a different
meaning:
BOARD shall mean the Board of Directors of IMIC.
CLOSING shall mean the consummation of a sale of Purchased Stock
pursuant to the provisions of the Option Agreement.
CLOSING DATE shall mean the date on which a Closing is held.
DISABLED shall mean a condition resulting from the inability of the
Stock Owner as determined by the Board to substantially carry out the duties
customarily performed by him for the Group because of psychological, emotional,
or physical reasons for a period of six continuous months.
GROUP shall mean IMIC and its subsidiaries.
IMIC shall mean Industri-Matematik International Corp., a Delaware
corporation.
IMIC STOCK shall mean Class A Common Stock, no par value, of IMIC.
MARKET PRICE shall mean (i) so long as IMIC Stock is not publicly
traded, a price determined by the Board, and (ii) when IMIC Stock is publicly
traded, the closing price of IMIC Stock on the stock market on which it is
traded on the applicable date provided that if there were no trades on such
date, the average of the bid and ask prices on the applicable date.
OPTION PRICE shall mean the amount determined for each Option Period
payable by SFC to the Stock Owner as consideration for the option granted
pursuant to the Option Agreement.
REPRESENTATIVE shall mean a trustee, executor, administrator, personal
representative, or similar fiduciary.
SFC shall mean Software Finance Corp., a Delaware corporation.
Section B
Construction
When used in these Terms and Conditions, unless the context clearly
indicates to the contrary, the masculine gender shall include the feminine and
neuter genders and the singular shall include the plural, and if a defined term
is intended, it shall be capitalized.
Section 1
Option Price Payment, Option Exercise, and
Market Price Determination
1.1. SFC shall pay the Option Price to the Stock Owner as follows:
the Initial Period Option Price shall be paid simultaneously with the execution
of this Option Agreement and each Renewal Period Option Price shall be paid on
or before the first day of each Renewal Option Period for such Option Period.
1.2. SFC and the Stock Owner acknowledge that SFC, as a major IMIC
shareholder, wishes to limit ownership of IMIC Stock to individuals or entities
who are in a position to actively influence IMIC's success and to assure that it
has control over as many shares of IMIC Stock as possible in the event of a bid
for IMIC Stock or any other restructuring of the ownership of IMIC. The Stock
Owner, as a person in such position and interested in assuring SFC control, has
granted an option to SFC to permit SFC to purchase the Securities if the Stock
Owner desires to transfer the Securities to an individual or entity not in such
position or if the Stock Owner is no longer in such position. Accordingly, SFC
may exercise its option as to all or part of the Securities during the Initial
Option Period or in a Renewal Option Period within (a) the 30 day period after
the later of the date that (i) the Stock Owner notifies SFC that he intends to
transfer or (ii) the Stock Owner transfers the Securities to any other
individual or entity or (b) the 60 day period after (i) the date the Stock Owner
dies or becomes Disabled or (ii) the date that the Stock Owner's employment with
the Group is terminated irrespective of the reason therefor. SFC must exercise
its option to purchase securities by notice to the Stock Owner or his
Representative.
1.3. The Market Price determined by the Board, in the absence of a
showing by the Stock Owner of bad faith in the determination thereof, shall be
binding and conclusive on SFC, the Stock Owner, and the Stock Owner's heirs,
distributees, and Representatives.
1.4. The exercise price payable by SFC upon exercise of an option
pursuant to the Option Agreement shall be paid in cash at the Closing pursuant
to Paragraph 2.1.
Section 2
Closings, Defaults, and Remedies
2.1. All Closings in connection with an exercise of an option to
purchase Securities pursuant to Section 1 shall be held on a date and at a place
designated by SFC or its assignee with the Stock Owner, or in the event of his
death, a Representative. If the Stock Owner is deceased and no Representative
of the Stock Owner has been appointed, SFC or its assignee may petition for the
appointment of a Representative for the Stock Owner.
2.2. At a Closing pursuant to Section 1 (a) SFC shall pay the
Exercise Price in cash and (b) the Stock Owner or his Representative shall pay
the transfer tax, if any, due by reason of such purchase, and deliver to the
purchaser at the Closing the purchased Securities endorsed in blank.
2.3.A. If, pursuant to Section 1, SFC or its assignee exercises an
option to purchase the Securities and the Stock Owner or his Representative
fails to attend the Closing in accordance with Paragraph 2.1, SFC or its
assignee shall give notice of an adjourned Closing Date which adjourned Closing
Date shall be not less than 5 days nor more than 15 days after such notice. If
the Stock Owner or his Representative fails to attend the Closing on the
adjourned Closing Date, SFC or its assignee at any time thereafter, and on
notice to the Stock Owner or his Representative shall have the right to deposit
the balance due at Closing for the purchased Securities with the attorneys for
SFC as "Escrowees". Upon such deposit, the purchased Securities shall be deemed
purchased and transferred of record to SFC or its assignee, all as of the
original Closing Date. Upon delivery by the Stock Owner or his Representative
to the Escrowees of the items referred to in Paragraph 2.2, together with a
general release in favor of SFC, its assignee, if any, and the Escrowees, the
amounts deposited with the Escrowees shall be paid to the Stock Owner or his
Representative.
2.3.B. The rights and remedies of the parties set forth in Paragraph
2.3.A are in addition to all of the rights and remedies a party has at law and
equity arising out of such matters, including without limitation, damages for
breach of contract, specific
T/C 1
<PAGE>
enforcement, injunction, and declaratory relief. The Stock Owner agrees that
the ownership of the Securities subject to the option is unique and that
monetary damages may not be adequate to compensate a purchaser for damages
arising out of the breach of any agreement to purchase the Securities as set
forth in the Option Agreement.
2.3.C. In the event that SFC fails to pay the Renewal Period Option
Price for any Renewal Option Period by March 31 of that Renewal Option Period,
the Option Agreement shall terminate.
Section 3
Miscellaneous Provisions
3.1. Each of the Stock Owner and SFC hereby consents to the
jurisdiction of the Supreme Court of the State of New York for the County of New
York and the United States District Court for the Southern District of New York
for all purposes in connection with the Option Agreement, and further consents
that any process or notice of motion in connection therewith may be served by
certified or registered mail or by personal service in accordance with the
provisions of Section 3.3 of these terms and conditions, within or without the
State of New York, provided a reasonable time for appearance is allowed.
3.2. Whenever an attorney is used to obtain payment under, or to
otherwise enforce, the Option Agreement or to enforce, declare, or adjudicate
any rights or obligations under the Option Agreement, whether by arbitration,
suit, or by any other legal means whatsoever, the costs and expenses thereof,
including reasonable attorneys' fees and expenses, shall be payable by the non-
prevailing party.
3.3. All notices under the Option Agreement including the exercise of
any option shall be (a) deemed given when first received or seven days after
having been sent, whichever is earlier, (b) in writing, (c) sent by certified
mail, return receipt requested and confirmed by regular mail, or sent by
telecopier and confirmed by regular mail, or delivered personally, (d) addressed
to SFC, One Commerce Center - Ste. 748, 12th and Orange Streets, Wilmington,
Delaware 19801 and to the Stock Owner at the address set forth in the Option
Agreement or to such other address as the Stock Owner or SFC may direct by a
written notice sent as herein provided, and (e) if sent to SFC, unless SFC
directs otherwise, to Marvin S. Robinson, Esq., Tannenbaum Dubin & Robinson,
LLP, 1140 Avenue of the Americas, New York, New York 10036.
3.4. If any part or parts of the Option Agreement are found to be
void, the remaining provisions shall nevertheless be binding with the same
effect as though the void part were deleted.
3.5. The Option Agreement contains the entire understanding between
the Stock Owner and SFC with respect to the subject matter thereof and
supersedes all prior agreements with respect to the subject matter thereof.
3.6. The Option Agreement and all of its rights thereunder, may be
assigned by SFC.
3.7. The Option Agreement shall be binding upon and inure to the
benefit of Stock Owner and his heirs, distributees, and Representatives and SFC
and its successors and assigns.
3.8. The Option Agreement shall be interpreted and construed in
accordance with the laws of the State of New York as an agreement made and to be
performed entirely within such State.
<PAGE>
EXHIBIT 10.5
Proposal, 10 August 1995
CONTRACT OF EMPLOYMENT
1. Parties
-------
1.1 Industri-Matematik AB, org. no. 556102-7680, Box 7733, 103 95 Stockholm,
(the "Company").
1.2 Stig Durlow, civil registration no. 500629-3037, Golfvagen 17, 182 31
Danderyd, ("Durlow").
2. Scope and form of employment
----------------------------
2.1 Durlow is employed by the Company in a post as the Company's managing
director and group manager from 13 February 1995 inclusive. Durlow's
employment applies until further notice. Durlow's employment in the Company
started on 1 May 1994.
2.2 It is required that Durlow will travel both within the country and abroad
to the extent that the post requires.
3. Work tasks and authority
------------------------
3.1 In his post, Durlow shall manage and arrange the Company's activity within
the framework for the instructions for the board of directors and shall
hereby be responsible for the continuous management of the Company's
operation.
3.2 As MD, with responsibility to the board of directors of the Company, MD
Durlow shall thus
- manage the operation of the Company's business in accordance with the
purposes of the Company's activity in accordance with the articles of
association and according to the guidelines and goals established by
the board of directors.
- ensure that the Companies Act and other acts, as well as the
provisions of the articles of association, are complied with,
- ensure that the operation of the company's business takes place
according to business economics and also generally sound principles in
an administrative, commercial and personnel-related respect.
3.3 The managing director cannot delegate work tasks within his field of
activity to another without the written consent of the board of directors.
3.4 Durlow is also liable to be available for board of director's tasks within
the group.
4. Salary and other remuneration
-----------------------------
4.1 For his post in the Company from 13 February 1995 inclusive Durlow shall
receive a fixed monthly salary of SEK 100,000 to be paid in arrears on the
Company's standard salary payment date every month ("Fixed Salary").
<PAGE>
4.2 In addition, Durlow shall receive a variable salary ("Variable Salary") in
accordance with appendix 1. The Variable Salary shall be paid immediately
----------
after the company's annual report is approved by the Company's auditors.
4.3 No special compensation shall be payable to Durlow for work on overtime,
for travelling time or for any tasks for the board of directors or similar
commitment.
5. Company car and compensation for expenses in the position
---------------------------------------------------------
5.1 Durlow shall have a right to a company car in accordance with the Company's
policy. In the event that a deviation from the policy is made in the matter
of choice of car, the Company's costs shall not be increased.
5.2 The parties are aware that Durlow will be subject to benefit tax for the
car.
5.3 Costs for travel, subsistence and equivalent shall be paid by the Company
to the extent that these have been necessary for Durlow's exercise of his
undertakings in the Company and against presentation of relevant receipts.
6. Holiday
-------
Durlow shall have a right to an annual holiday amounting to a total of
thirty (30) [hand-written] working days. Salary and other compensation
according to the agreement includes holiday pay. In general, the rules of
the Holiday Act apply.
7. Pension and insurance
---------------------
7.1 The pensionable age for Durlow according to this agreement is dependent
upon Durlow's period of employment in the Company. If Durlow has been
continuously employed in the Company on 13 February 1996, the pensionable
age thereafter is 64 years of age. Under the same conditions Durlow's
pensionable age is as follows:
After 13 February 1997 - 63 years
" 13 February 1998 - 62 years
" 13 February 1999 - 61 years
" 13 February 2000 - 60 years
7.2 The Company undertakes, at the time according to point 7.1 when Durlow,
through having been continuously employed in the Company has qualified for
a lower pensionable age, to begin to pay premiums with regard to Durlow's
pension insurances from 13 February 1996 inclusive with full use of the so-
called alternative rule (35/25 percent rule), but that the pension level
which this rule gives at 65 years of age shall be already achieved at the
pensionable age which is stated in point 7.1. (The basis for this
regulation is found in appendix 2 to this agreement.)
----------
The pension benefits according to the first paragraph shall include a
family pension corresponding to the ITP plan.
The alternative rule which is referred to in the first paragraph means,
inter alia, that a tax deduction is granted to the Company for pension
premiums with a maximum of 35 percent of the income for the part which does
not exceed twenty times the relevant base amount and with a maximum of 25
percent of the part of the income which exceeds twenty but not thirty times
the said base amount.
7.3 The pension solution according to this agreement before 65 years of age
shall not affect Durlow's pension level from the time when Durlow has
reached the normal pensionable age
<PAGE>
of 65 years. Durlow's pension level shall at least correspond to the so-
called ITP plan valid at the time.
7.4 If the requirements for the regulation in points 7.2 - 7.3 are changed in
future to a significant extent with regard to the Company's costs and/or
the out-turn for Durlow, a renegotiation of the agreement shall take place
with the aim of meeting as closely as possible the Parties' original
intentions in accordance with point 7.1 of this agreement.
7.5 The Company shall be liable for the cost for insurances for Durlow in
accordance with documented rules for employment in the Company.
8. Competition
-----------
8.1 It is incumbent upon Durlow during the period of validity of this agreement
and for one year after the cessation of employment not to operate activity
in competition with the Company either as a consultant or in the capacity
of owner, joint-owner, member of a board of directors, advisor or employee,
without the chairman of the board of directors of the Company providing
written permission for the same.
8.2 If Durlow breaches the above ban on competition, the same shall on demand
give to the Company a penalty of a sum corresponding to six times the fixed
monthly salary according to point 4.1 in each individual case. The giving
of a penalty does not affect the Company's right also to claim other
sanctions due to the breach of contract.
9. Secrecy
-------
Both during the period of employment and thereafter it is incumbent upon
Durlow to observe complete professional secrecy regarding such of the
Company's affairs which as a result of his employment he may obtain
knowledge of and which as a result of the nature of the matter should not
come to the knowledge of the third party. This includes information about
the Company's activity and financial affairs. The undertaking with regard
to professional secrecy shall also apply after the cessation of this
agreement.
10. Rights
------
10.1 Through this agreement the Company obtains the right of ownership and the
exclusive right of disposal of all materials and all results - including
incorporeal rights - which Durlow produces during the employment.
10.2 Durlow does not have a right to use on his own account materials or results
specified in point 10.1 during the employment or after the cessation of the
employment unless there is a written agreement on the same with the
Company.
11. Cessation of the employment
---------------------------
11.1 This agreement applies with a cancellation period of 24 months on the
Company's part and 12 months on Durlow's part.
11.2 Cancellation shall be performed in writing and signed by the chairman of
the board of directors of the Company.
11.3 During the cancellation period Durlow shall be at the Company's disposal.
However, the Company has a right to release Durlow from further official
duty with immediate effect.
<PAGE>
However, this does not affect Durlow's right to a salary and other benefits
according to this agreement to an extent further than what is stated in
point 11.4 below.
11.4 On cancellation on the Company's part according to points 11.1 and 11.2,
Durlow is entitled during the cancellation period to a cancellation salary
amounting to an amount which for each year corresponds to the average total
salary of the two previous years. The salary shall be paid monthly.
On condition that Durlow is released from further official duty, however,
during the last 12 months of the cancellation period a deduction may be
made from the salary by an amount corresponding to the compensation which
is paid by another employer or equivalent compensation from his own
activity.
On cancellation on Durlow's part, Durlow is entitled to a cancellation
salary for one year. The salary shall amount in total to Durlow's average
annual salary calculated based on the total salary for the last two years.
During the cancellation period, regardless of which party terminates the
employment, other employment benefits are payable without change as well as
the salary above.
11.5 The Company has a right to cancel the agreement if Durlow grossly neglects
his undertakings according to law or this agreement. With the exception of
what has been agreed according to points 8, 9 and 10, the agreement is
thereby made to cease with immediate effect.
11.6 Durlow's employment in the Company ceases automatically at the end of the
month Durlow reaches the pensionable age according to this agreement.
11.7 On cessation of the employment, Durlow shall hand over to the chairman of
the board of directors of the company all materials and all personal notes
with regard to the Company and its business activity which he may have in
his possession and which he acquired in his capacity as an employee of the
Company.
12. Changes, etc.
-------------
12.1 The parties note that the matter of salary with regard to the period 1 May
1994 - 12 February 1995 is regulated in a letter dated 4 May 1995.
12.2 Changes of and additions to this agreement shall be drawn up in writing and
signed by both parties.
13. Dispute
-------
A dispute on account of this agreement shall be decided by an arbitration
board according to law regarding an arbitrator valid at any time, upon
which the rules of the Code of Procedure on division of legal costs shall
obtain application for the costs for the procedure. The arbitration board
shall consist of an arbitrator. The arbitration procedure shall take place
in Stockholm.
----------------------
This agreement has been drawn up in two original copies of which the parties
have each taken their own.
<PAGE>
Stockholm, 22 August 1995
INDUSTRI-MATEMATIK AB
[Signature] [Signature]
Martin Leimdorfer Stig Durlow
<PAGE>
Appendix 1
Variable Salary
- ---------------
The variable salary contains two components, (1) one which is linked to the
Company's turnover, and (2) one which is linked to the Company's results
according to the definition below. In both cases this refers to the business in
Industri-Matematik AB without taking into consideration the subsidiary company
Paragon AB.
(1) For the financial year 1995/96, the part of the variable salary which is
linked to turnover shall be payable at SEK 400,000 on achieving the budgeted
turnover for this year, SEK 275 million, and in the event of deviations from the
same it shall vary in the interval SEK 0 - 800,000. If the actual turnover
exceeds or falls below the budgeted value within the interval SEK 207 - 330
million, the variable salary shall be changed upwards or downwards
proportionally against the deviation in the out-turn from the budgeted value so
that the variable salary is equal to zero at a turnover of SEK 207 million and
equal to SEK 400,000 at a turnover of SEK 275 million. This component of the
variable salary shall thus amount to 0.5882% of the amount by which the turnover
exceeds SEK 207 million, up to a turnover of SEK 275 million, and 0.7273% of the
amount by which the turnover exceeds SEK 275 million, up to a turnover of SEK
330 million. In total this component of variable salary shall as a maximum
amount to SEK 800,000.
(2) For the financial year 1995/96, the part of the variable salary which is
linked to the results before tax (calculated after net interest earnings,
depreciations and allocations, but before costs or incomes of a one-off nature),
is payable at SEK 200,000 on achieving the budgeted result before tax for this
year, with regard to these calculations rounded off to SEK 0. If the result out-
turn exceeds or falls below the budgeted value within the interval +/- SEK 20
million, the variable salary shall be altered upwards or downwards
proportionally against the deviation in the out-turn from the budgeted value, so
that the variable salary is equal to zero with a loss result of SEK 20
million and equal to SEK 400,000 with a profit result of SEK 20 million. (This
component of the variable salary shall thus amount to 1.0% of the amount by
which the result exceeds a loss of SEK 20 million, but shall as a maximum amount
to SEK 400,000.).
In total the Variable Salary according to this agreement for the financial year
1995/96 shall thus amount to SEK 600,000 on achieving the budgeted out-turn with
the above calculated turnover and result values, and shall vary in the interval
SEK 0 - 1,200,000, depending on the actual out-turn.
For future years an agreement shall be reached on new values for a Variable
Salary in connection with the principles recorded here.
Should the company's budget be changed, primarily due to an acquisition or
separation of activities, the calculations made here shall be changed to a
corresponding extent for the period to which the change refers.
I certify that the preceding is a fair and accurate English translation of the
original document.
/s/ Lars-Goran Peterson
-------------------
Lars-Goran Peterson
Vice President, Chief Financial Officer and Secretary
Industri-Matematik International Corp.
<PAGE>
EXHIBIT 10.6
CONTRACT OF EMPLOYMENT
The following contract of employment has this day been concluded between
Industri-Matematik AB (IM) and Lars-Goran Peterson (LGP), birth registration
number 450708-5431:
1. Scope and undertakings
- -------------------------
1.1 IM shall employ LGP in the function as business area manager with effect
from 1 May 1992 until further notice. This function may be changed in the
future.
1.2 LGP shall devote all his work power to IM and undertakes during the period
of employment not to assume other employment or commission outside IM or in
general to operate other financial activity without obtaining IM's written
consent beforehand.
2. Salary
- ---------
2.1 The fixed salary amounts to SEK 34,000 per month. The stated salary applies
until further notice and shall be adjusted annually according to an agreement.
Special compensation for overtime work shall not be payable.
3. Other benefits
- -----------------
3.1 IM shall as soon as possible place at LGP's disposal a company car in
accordance with IM's company car policy.
3.2 In the event of illness, LGP is entitled to compensation from IM in
accordance with the norms which apply for salaried employees in IM.
3.3 Holidays shall amount to 32 working days per holiday year.
3.4 For business trips, LGP shall receive travel expenses in accordance with
valid provisions for IM.
4. Pension
- ----------
4.1 The company shall take out pension insurance on LGP's account. The annual
premium shall as a maximum amount to a sum corresponding to the ITP plan for
salaried employees.
5. Secrecy and ban on competition
- ---------------------------------
5.1 LGP undertakes, during the period of employment and after the cessation of
the period of employment, to observe professional secrecy with regard to IM's
activity and financial conditions. When the period of employment ceases, LGP
shall immediately hand over to IM all documentation and personal notes belonging
to IM or concerning IM's business activity which LGP has in his possession.
5.2 LGP undertakes during the period of employment, and for twelve months after
the employment has ceased, not to carry out work or directly or indirectly to
operate such activity as competes with IM's activity.
6. Termination
- --------------
6.1 On termination of the employment a mutual termination period of twelve
months shall apply.
<PAGE>
6.2 On termination from the other party's side, LGP, if IM so requires, is
liable to leave his post immediately. If LGP does not need to be at IM's
disposal during the termination period, LGP is entitled, with the exception of
what is stated in 6.3, to receive throughout the termination period a salary and
other benefits to the extent which was payable when termination occurred.
6.3 If LGP grossly neglects his duties according to this agreement, IM shall be
entitled, without observing the termination period, to end the employment
immediately.
If a dispute concerning this agreement's origin, interpretation or application
should arise, the dispute shall be decided in accordance with valid Swedish law
at a Swedish court.
This contract of employment has been drawn up in two copies of which the parties
have each taken their own.
Stockholm, 07-09-1992
INDUSTRI-MATEMATIK AB
[Signature] [Signature]
Martin Leimdorfer Lars-Goran Peterson
I certify that the preceding is a fair and accurate English translation of the
original document.
/s/ Lars-Goran Peterson
-------------------
Lars-Goran Peterson
Vice President, Chief Financial Officer and Secretary
Industri-Matematik International Corp.
<PAGE>
INDUSTRI-MATEMATIK
AGREEMENT
The following agreement has been concluded between Industri-Matematik
International (IMI) and Lars-Goran Peterson (LGPE), civil registration number
450708-5431:
1. From 01-01-1996 inc. a basic salary shall amount to SEK 57,500 per month.
2. Pensionable pay shall amount to SEK 701,500 per annum from 01-01-1996 inc.
3. Pension premiums shall be cost-neutral with regard to the SPP/ITP plan for
salaried employees.
4. Lars-Goran Peterson has a right within the framework of the ITP plan to
discuss an alternative pension solution with the company's insurance
broker.
INDUSTRI-MATEMATIK INTERNATIONAL
[Signature] [Hand-written] 18-04-96
Stig Durlow Date
The agreement according to the above is approved:
/s/Lars-Goran Peterson [Hand-written] 18-04-96
Lars-Goran Peterson Date
<PAGE>
EXHIBIT 10.7
[Logo] Lansfastigheter [County Properties]
SUPPLEMENT to lease agreement 2003-000901, Kungsgatan 12-14
- -----------------------------------------------------------
The leased area is increased by 790 sq.m. on floor 5 from 1 January 1995 inc.
The number of parking spaces is increased by 2 spaces from 1 January 1995 inc.
(total 32 spaces).
The rent is increased by SEK 1,145,000 excl. VAT.
The lessor shall attend to measures in accordance with a Memorandum dated
23-11-1994 and supplementation of cooling in training premises in accordance
with a previously submitted quotation.
The lease agreement is extended until 30-09-1997.
With reference to this, the lessee shall pay SEK 75,000/quarter excl. VAT during
the period 30-09-1996 - 30-09-1997.
Stockholm, 9 December 1994
LANSFORSAKRINGSBOLAGENS AB INDUSTRI-MATEMATIK AB
c/o Lansfastigheter AB
[Signature] [Signature]
Hans Lenneryd Lars-Goran Persson [Hand-written] PETERSON
- --------------------------------------------------------------------------------
Lansfastigheter AB, Riddargatan 7A, Box 5182, 102 44 Stockholm
<PAGE>
Tel: 08-663 08 20, Fax: 663 87 02, Postal giro 6 63 57-5, Bank giro 402-6001
- --------------------------------------------------------------------------------
<PAGE>
[Logo] LANSFASTIGHETER
Stockholm, 21 December 1993
Industri-Matematik AB
Box 7733
103 95 Stockholm
- ----------------
Att: Jan Berglund
- -----------------
Re: lease contract, Kungsgatan 12-14, Stockholm
- -----------------------------------------------
It is herewith confirmed that financing of the additional works with regard to
the above premises shall be performed by debiting together with the rent as
follows:
Quotation 1,650,000.00
Extra orders 265,000.00
Vican 243,000.00
BRV 106,434.00 (total SEK 290,000.00)
./.LFAB's share of quotation -1,000,000.00
-------------
Interest, 10% on 1,264,343.00
1/10-21/12 1993 31,611.00
-------------
Total sum 1,296,045.00
- --------------------------------------------------------
Divided over a 10-year period and with 10% interest, the debiting will be SEK
50,370/quarter. VAT will be added. The first debiting will be performed in
quarter 1/94.
If removal from the premises occurs within 10 years calculated from 1 January
1994, the remaining debt falls due for immediate payment.
We request that you confirm the above agreement on the enclosed copy of the
letter.
Yours faithfully,
LANSFASTIGHETER AB
[Signature]
Bengt Wibert
MD
- --------------------------------------------------------------------------------
Lansfastigheter AB, Riddargatan 7A, Box 5182, 102 44 Stockholm
Tel: 08-663 08 20, Fax: 663 87 02, Postal giro 6 63 57-5, Bank giro 402-6001
- --------------------------------------------------------------------------------
<PAGE>
[Logo] LEASE CONTRACT
SVERIGES FASTIGHETSAGARE FOR PREMISES No.
The undersigned has this day concluded the following lease agreement: Cross in
box means that the subsequent text applies
- --------------------------------------------------------------------------------
Lessor Lansforsakringsbolagens AB
Lessee Industri-Matematik AB Civ.reg./org.no. 556102-7680
Address of Local authority District/area
premises Stockholm Kakenhusen 25
Size and use Premises with associated space leased, unless
of premises specified otherwise, in existing state to be used as offices
Size and scope Retail area Office area Storage area Other space
of premises floor m/2/ floor m/2/ floor m/2/floor m/2/ floor m/2/
x Scope of the leased premises has been marked on enclosed
drawing(s). Appendix 2
vehicular access space for space for parking space(s)
garage space(s) for loading and sign sign cabinet for
car(s) for x 30 car(s) outhouse unloading
Fittings Premises leased On termination of the leasing
Appendix
relationship the lessee,
x without fitting specially unless agreed otherwise shall
with fittings specially in- remove fittings belonging to
tended for the business in- him and return the premises
tended for the business in an acceptable condition.
Contract period From inc. To inc.
01-10-1993 30-09-1996
Cancellation period Cancellation of this before the agreed expiry of
contract shall be made in the lease period, otherwise
writing at least 9 months the contract is extended by 3
years at a time.
Rent SEK x rent excl. additions
5,740,000.00 excl. VAT per annum comprising total rent marked below
Index Appendix
clause x Change of rent stated above performed in accordance with
enclosed index clause. 1
Heating and Necessary heating of the premises to be provided by
Hot water to be available
hot water x lessor lessee x All year round not at all
Cost x Fuel/Heating supplement XXXXXXXXXXXXXX included Appendix
Waste cost x Waste supplement XXXXXXXXXXXX included
Appendix
Cooling x Costs for operation of XXXXXX ventilation
Ventilation installations XXXXXXX included Appendix
Electricity Included in the rent x lessee has his own
subscription
Stair cleaning x Included in the rent provided and paid for
by the lessee
Packaging and normal office waste bulky
waste removal x Included in the rent x provided and paid for
by the lessee (but
incumbent on the lessor
to provide waste bin and
necessary waste space)
<PAGE>
Lubrication and
sanding x Included in the rent provided and paid for by the
lessee
Property tax x Included in the rent compensation for same to be paid in
accordance with a separate agreement
Unforseen costs After signing of the agreement -- for an agreement valid for
more than three years -- unforseen costs arising for the
property due to
a) Introduction or increase of tax applying especially to the
property, charge or levy which parliament, the government,
local authority or public authority may decide
b) general rebuilding measures or equivalent for the property
which do not only involve the premises and which is
incumbent upon the lessor to carry out as a result of a
decision by parliament, the government, local authority or
public authority.
The lessee with effect from the introduced cost increase
shall pay compensation to the lessor for the share of the
total annual cost increase for the property accruing to the
share of the premises.
The premises' share is percent (if the share is not stated
it is calculated in relation to the outgoing rent in the
property in the cost increase period).
With tax according to a) above, VAT and property tax is not
involved to the extent that compensation for the same is paid
in accordance with a special agreement above.
Compensation is paid in accordance with the rules below on
payment of the rent.
Value-added tax x The property owner/lessor is liable for tax for VAT for
(VAT) leasing the premises. The lessee shall pay over and above the
rent the VAT valid at any time.
If the property owner/lessor according to a decision by the
tax authority is liable for tax for VAT for leasing the
premises, the lessee shall pay over and above the rent the
additional valid VAT.
What is paid at the same time with the rent is calculated on
the rent sum exactly, according to rules for VAT on rent
valid at any time, where appropriate according to the lease
contract outgoing supplements and other compensations.
Sveriges Fastighetsagareforbund form no. 12A drawn up in 1981 in consultation
with the Swedish Retail Federation/Companies' National Organization.
Reproduction forbidden
<PAGE>
Cross in box means that subsequent text applies
Payment The rent is paid without request post giro no. bank giro no.
of rent in advance at the latest on the
last weekday before beginning of each
x calendar quarter calendar month by payment to
Interest
Payment
reminder In the event of late payment of rent the lessee shall pay
both interest according to the Interest Act and compensation for a
written payment reminder according to the Act on compensation for
collection costs, et. Compensation for a reminder shall be payable
by a sum which applies on each occasion according to the statutory
regulation on compensation for collection costs, etc.
The lessor shall carry out and However, the lessee is
pay for the necessary maintenance responsible for
of the premises and fittings Appendix
provided by him.
x The lessor shall carry out and The lessee is responsible
pay for internal maintenance for maintenance
of surfaces of floors, walls and also covers Appendix
ceiling and of fittings provided
by him.
The distribution of the responsibility Appendix
for maintenance is stated in a
special appendix.
The lessee does not have a right to receive a reduction in rent
for obstacles or disadvantage in the right of use for a period
during which the lessor allows the usual maintenance of the
property or the leased premises to be carried out. However, it is
incumbent upon the lessor to inform the lessee in good time of the
nature and scope of the work and when and during what hours the
work shall be executed.
In the event that removal applies to retail premises/craft
premises with an activity dependent upon customer flow, the clause
shall be valid only if a special agreement on the same is
concluded.
It is incumbent upon at his own liability and his own cost to
be responsible for the measures which
may be required by an insurance company
or local planning and building
committee, environmental and health
protection committee, fire authority or
other public authority for exploitation
of the premises for the intended use.
The lessee shall consult with the lessor
lessor x lessee before measures are adopted.
If the lessee makes changes to the premises without the necessary
building permit and as a result of this according to the rules in
PBL the lessor is forced to pay a building charge or additional
charge,the lessee shall pay a corresponding amount to the lessor.
Signs
awnings
window
[illegible] The lessee has a right after consultation with the lessor to set
up a sign usual for the activity, on condition that the lessor has
no authorised cause to refuse and that the lessee has obtained the
necessary permission for authorities concerned. On moving out it
is incumbent upon the lessee to return the facade of the building
in an acceptable condition.
For more extensive property maintenance, such as facade
renovation, it is incumbent upon the lessee, at his own cost and
without compensation, to dismantle and replace signs, awnings, and
advertisements.
The lessor undertakes not to establish automats and sign cabinets
on the outer walls of the premises leased to the lessee without
the lessee's permission and grants the lessee an optional right to
establish automats and sign cabinets on the walls in question.
Lessor x Lessee is responsible for damage due to the effect
of sign windows, entrance doors and signs
<PAGE>
<TABLE>
<S> <C>
x The lessee is liable for taking out and maintaining glass insurance referring to all sign
windows and entrance doors belonging to the premises.
Locking
devices It is incumbent upon the
lessor x lessee to equip the premises with such locking and safety devises as are required
for the validity of the lessee's business or company insurance.
Force majeure The lessor is released from liability to fulfil his part of the agreement and from liability to pay
damages if his undertakings can not be fulfilled at all or can only be fulfilled at an abnormally
high cost due to war or riot, due to such work stoppage, blockade, conflagration, explosion or
action by a public authority over which the lessor has no control and could not have foreseen .
Security A precondition for the validity of this agreement is a security in the form of Appendix
bank guarantee surety to be provided at the latest by
Special
provisions The premises are adapted according to drawings from Bergstrom & Nilsson Appendix
Architects Office, dated 22.04.93/revised 29.04.93. See also
Possible preparations and payments lessee adjustment of MSEK 1. record of If
possible lessee has a right to allocate the premises from 17-09-1993. 29.04.93
Signature This contract which may be registered without special permission
has been drawn up in two identical copies of which the parties
have each taken their own. Previous agreement between the
parties with regard to these premises cease to apply from when
this agreement comes into force.
Place/date Place/date
Stockholm, 28/4/1993 Stockholm, 29/4/1993
Lessor Lessee
LANSFORSAKRINGSBOLAGENS AB INDUSTRI-MATEMATIK AB
[Signature] [Signature]
BO ENNERBERG MARTIN LEIMDORFER
Agreement
on removal Due to an agreement concluded this day
the contract ceases to apply from inc.
until the day the lessee undertakes to move out.
Place/date Lessor Lessee
Transfer
The above lease contract is transferred from inc.
to
Retiring lessee Entering lessee Civ.reg./org.no.
Above transfer Place/date Lessor
approved
</TABLE>
<PAGE>
[Logo] INDEX CLAUSE Appendix no.
SVERIGES FASTIGHETSAGARE for premises
Instructions, see reverse page
Refers to Lease contract no. Property
Kakanhusen 25
Lessor Lansforsakringsbolagens AB
Lessee Industri-Matematik AB
Clause Of the base rent sum stated in the contract - SEK 5,740,000, 75%
or SEK 4,305,000 shall constitute the base rent. During the
lease period, with regard to changes in the consumer price index
(total index with 1980 as a base year), additions to the base
rent sum shall be payable with a certain percentage for the base
rent according to the grounds below.
The base rent is considered to be adjusted to the index figure
for October in the calendar year from which a new rent according
to the lease contract shall begin to be applied, i.e. year 1993.
--
This index figure (base figure) is: ___________
x This index figure (base figure) is not known at present.
Should the index figure for any subsequent October have risen by
at least three (3.0) units in relation to the base figure, an
addition shall be payable of the percentage by which the index
figure has changed in relation to the base figure. In future an
addition shall be payable in relation to the index changes on
which the change is rent is calculated on the basis of the
percentage change between the base figure and the index figure
for a respective October. In order that a change in rent shall
be made in future, it is required that an index for any October
is increased or reduced by at least three (3.0) units in
relation to the index figure which applied on the last occasion
when the rent was changed according to this clause.
However, outgoing rent shall never be set lower than the rent
amount specified in the contract. The change in rent is always
made from 1 January inc. after the October index has caused a
recalculation.
Signature Place, date Place, date
Stockholm, 28/4/1993 Stockholm, 29/4/1993
Lessor Lessee
LANSFORSAKRINGSBOLAGENS AB INDUSTRI-MATEMATIK AB
[Signature] [Signature]
Bo Ennerberg Lessee MARTIN LEIMDORFER
<PAGE>
Instructions
1.
Whether the whole rent or a certain share of the same shall be index-linked is a
matter of negotiation and may depend on the lease conditions in general (such
as, for example, the size of the rental in SEK/m/2/ and year and other
commitments which are incumbent upon the lessee, etc.)
2. Base figure
Regardless of when the agreement is signed, unless agreed otherwise the index
for October of the calendar year in which the lease agreement starts constitutes
the base figure. If the agreement is signed before the index figure is known,
this may be specified afterwards. With the present conditions the October index
becomes known around 20 November. The base figure is specified as is reported
by SCB, i.e. with the decimal point.
3. Comparative case
The comparison between the index figure is made as soon as the year's October
index becomes known. In order to avoid adjustments in the event of very minor
changes, the clause is based on the index figure changing by at least three
(3.0) units.
4. The percentage change
The percentage by which the index figure has risen can be calculated according
to the following formula:
where X = the sought for percentage figure
X = A 100 where A = the number of units (with a decimal) by which the
----- index figure has risen
6 where B = base figure (with a decimal)
Calculation of the index difference is performed with a decimal. The sought for
percentage figure (X) is similarly calculated with a decimal, after which
rounding off takes place to the nearest whole number. (E.g. 6.0-6.4 is reduced
to 6 and 6.5-6.9 is increased to 7). The calculated addition is rounded off in
the same way to a whole number of Swedish kronor.
5. First recalculation of the rent
In order that the clause shall be triggered the first time, it is required that
the index figure for any October has risen by at least three (3.0) units in
relation to the base figure.
6. Continued recalculation of the rent
It is also required henceforth - in order that recalculation of the rent shall
be performed - that the index figure changes again by at lease three (3.0)
units in relation to the index figure which last caused a recalculation of the
rent.
7. Example of the application of the clause
Assume that the agreement is signed in December 1986 and that the new rent shall
begin to apply from 1 October 1987 and that the base rent is SEK 75,000, the
index for October 1987 constitutes the base figure. This is assumed to be 164.5.
October 1988 assumed
index figure 171.9 The index figure is 7.4 units higher than the base
figure 164.5. With the help of the formula under point
4 the percentage increase is calculated in the
following way:
X=7.4. 100 X=4.4
------------
164.5
From 1 January 1989 an addition to the base rent
constitutes 4% (rounded off figure according to the
clause text), i.e. 3,000.00.
If the new rent of 75,000.00 should instead begin to
apply from 1 January 1987 (and generally with the same
conditions), the rent is unchanged for two years, i.e.
1987 and 1988, and its first changed from 1 January
1989 by 4%.
October 1989 assumed The index figure has risen by 7.8 units in relation to
index figure 179.7 the index figure which caused a recalculation of the
rent (171.9). The index figure is 15.2 units higher
than the base figure. The percentage increase according
to the formula is:
X=15.2. 100 X=9.2
---------
164.5
<PAGE>
From 1 January 1990 the addition to the base rent is 9%,
i.e. SEK 6,750.00.
October 1990 assumed No change now occurs because the index figure only,
index figure 182.2 rose by 2.5 units in relation to the index figure which
last caused a recalculation of the rent (179.9)
October 1991 assumed
index figure 178.5 No change occurs. The index figure has only fallen by
1.2 units in relation to the index figure which last
caused a recalculation of the rent (179.9)
October 1992 assumed
index figure 187.6 The index figure has now risen by 7.9 units in relation
to the index figure which last caused a recalculation of
the rent (179.9). The index figure is 23.1 units higher
than the base figure. A new recalculation of the rent
shall thus be performed. In relation to the base figure,
the index figure has now risen by 23.1 units, i.e.
14.0%. The addition to the base rent for 1993 will thus
be 14%, i.e. SEK 10,500.00.
I certify that the preceding is a fair and accurate English translation of the
original document.
/s/ Lars-Goran Peterson
-------------------
Lars-Goran Peterson
Vice President, Chief Financial Officer and Secretary
Industri-Matematik International Corp.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 10.8
Dios LEASE CONTRACT
(Premises)
<S> <C>
Lessor Contract number
Diosfastigheter AB 14001-0306
- ------------------------------------------------------------------------------------------------------------------------------------
Lessee Org. no./Civil reg. no.
Industri-Matematik 556102-7680
- ------------------------------------------------------------------------------------------------------------------------------------
Address of premises Postal address District, plot, area
Kungsgatan 12 411 19 Gothenburg within Vallgraven 61:1
- ------------------------------------------------------------------------------------------------------------------------------------
Address for communications (only to be stated if different from the address of the premises)
- ------------------------------------------------------------------------------------------------------------------------------------
Scope of the premises, see attached drawing and room description appendix 3 and 4
Total area: Retail outlet area: Office area: Storage area: Other area:
above ground m/2/ 1250 m/2/ m/2/ m/2/
approx. 1250 m/2/ below ground m/2/ m/2/ m/2/ m/2/
- ------------------------------------------------------------------------------------------------------------------------------------
Use of premises Heating charge area
Offices m/2/
- ------------------------------------------------------------------------------------------------------------------------------------
Lease period from inc. to inc. Cancellation period Extension period
01-01-95 31-12-97 12 months before expiry of lease period 3 years
- ------------------------------------------------------------------------------------------------------------------------------------
Annual or basic rent Quarterly rent Monthly rent
SEK 1,150,000.00 SEK 287,500.00
- ------------------------------------------------------------------------------------------------------------------------------------
During the lease period the rent shall be recalculated according to the enclosed index clause, appendix 1
- ------------------------------------------------------------------------------------------------------------------------------------
Over and above the annual or basic rent will be added: Property tax
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Value-added tax
XXXXXXXXXXXXXXXXXXXXXXXXXX
Charge for electricity XXXXXXXXXXXXXXX
Rent for ...... garage XXXXXXXXXXXXXXX
or car parking places XXXXXXXXXXXXXXXX
- ------------------------------------------------------------------------------------------------------------------------------------
Payment of rent shall be made without a request on the last weekday before the beginning of each quarter or month at the latest.
- ------------------------------------------------------------------------------------------------------------------------------------
The lessee's share of the property tax amounts to SEK ... and is calculated pursuant to outgoing rents in the property.
The share of the property tax shall not change during the lease and extension periods.
The general provisions printed on the reverse side and the following special provisions apply for this contract.
- -the index enumeration shall be performed in accordance with appendix 1, but the increase shall be maximised at 4% annually for 9
years.
- -For the period 01-01-95 - 30-09-95 rent shall be paid in accordance with a special agreement (appendix 2)
In general what is prescribed in 12 chap. of the Real Property Code applies. In particular, the rule concerning forfeiture of the
leasehold right should be observed.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The above contract which is drawn up in two identical copies is herewith
approved.
Uppsala and Gothenburg [Hand-written] 31 AUGUST 1994
DIOSFASTIGHETER AB
[Signature] [Signature]
Lessor Lessee
I certify that the preceding is a fair and accurate English translation o' the
original document.
/s/ Lars-Goran Peterson
-------------------
Lars-Goran Peterson
Vice President, Chief Financial Officer and Secretary
Industri-Matematik International Corp.
