<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1997
REGISTRATION NO. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE NO. 51-0374596
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
--------------
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, AND
TELEPHONE NUMBER, INCLUDING AREA TELEPHONE NUMBER, INCLUDING AREA CODE,
CODE, OF REGISTRANT'S PRINCIPAL OF AGENT FOR SERVICE)
EXECUTIVE OFFICES)
--------------
WITH COPIES TO:
CHRISTOPHER A. GREW, ESQ. BARRY E. TAYLOR, ESQ.
ERIC R. DOERING, ESQ. ROBERT G. O'CONNOR, ESQ.
BROBECK HALE AND DORR INTERNATIONAL RAMSEY HANNA, ESQ.
HASILWOOD HOUSE WILSON SONSINI GOODRICH & ROSATI, P.C.
60 BISHOPSGATE 650 PAGE MILL ROAD
LONDON EC2N 4AJ, 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 the only securities being registered on this Form are being offered pursu-
ant to dividend or interest reinvestment plans, please check the following
box. [_]
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, other than securities offered only in connection with dividend or inter-
est reinvestment plans, 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 effec-
tive 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. [_]
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
OFFERING PROPOSED
PRICE MAXIMUM
TITLE OF EACH AMOUNT PER AGGREGATE AMOUNT OF
CLASS OF SECURITIES TO BE SHARE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) (2) PRICE (2) FEE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value....................... 8,136,250 $24.50 $199,338,125 $60,406
</TABLE>
===============================================================================
(1) Includes 1,061,250 shares which the Underwriters have the option to
purchase from the Company and one of the Selling Stockholders to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee, based on the average of the high and low prices for the
Common Stock as reported on The Nasdaq National Market on September 30,
1997, in accordance with Rule 457(c) promulgated under the Securities Act
of 1933.
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.
================================================================================
<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 OCTOBER 7, 1997
7,075,000 SHARES
[LOGO OF INDUSTRI-MATEMATIK INTERNATIONAL]
COMMON STOCK
--------
Of the 7,075,000 shares of Common Stock offered hereby, 3,500,000 shares are
being sold by Industri-Matematik International Corp. ("IMI" or the "Company")
and 3,575,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). See "Principal and Selling Stockholders." The Company
will not receive any proceeds from the sale of shares by the Selling
Stockholders. The Company's Common Stock is quoted on the Nasdaq National
Market under the symbol "IMIC." On October 3, 1997, the last reported sale
price of the Common Stock was $25.75 per share. See "Price Range of Common
Stock."
--------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
- --------------------------------------------------------------------------------
Total(3)...................... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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 $425,000.
(3) The Company and one of the Selling Stockholders have granted to the
Underwriters a 30-day option to purchase up to 1,061,250 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,
Proceeds to the Company and Proceeds to the 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. It is
expected that delivery of the shares of Common Stock will be made at the
offices of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about ,
1997.
--------
BT ALEX. BROWN
DEUTSCHE MORGAN GRENFELL
SOUNDVIEW FINANCIAL GROUP, INC.
UBS SECURITIES
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMPANY'S COMMON STOCK ON THE NASDAQ
NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and
copies made at the public reference facilities maintained by the Commission at
450 Fifth Street N.W., Washington, D.C. 20549, and at the following regional
offices of the Commission: New York Regional Office, Seven World Trade Center,
New York, New York 10048, and Chicago Regional Office, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such materials can be obtained from
the Public Reference Section of the Commission, 450 Fifth Street N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock of the Company is
quoted on the Nasdaq National Market ("Nasdaq"). Reports, proxy statements and
other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., at Reports Section, 1735
K Street, N.W., Washington, DC 20006. The Commission also maintains a Web site
at http://www.sec.gov which contains reports, proxy statements and other
information regarding registrants that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
are hereby incorporated by reference in this Prospectus: (i) the Company's
Annual Report on Form 10-K for the fiscal year ended April 30, 1997; (ii) the
Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1997;
and (iii) the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the Commission on September
16, 1996.
All reports and other documents subsequently filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of this
offering shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such reports and documents. Any
statement contained or incorporated or deemed to be incorporated herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
herein by reference into such documents). Requests for such documents should
be submitted in writing to the Company's Corporate Secretary, Marvin S.
Robinson, Esq. at Tannenbaum Dubin & Robinson, LLP, 1140 Avenue of the
Americas, New York, NY, 10036, telephone (212) 302-2900.
----------------
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, or incorporated
by reference into, this Prospectus. This Prospectus contains forward-looking
statements which 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 under "Risk Factors."
THE COMPANY
IMI develops, markets and supports software that enables manufacturers,
distributors, wholesalers and retailers to more effectively fulfill their
customers' orders. The Company's demand chain management solution, System ESS,
provides the execution of multiple order fulfillment processes, including order
management, distribution management, inventory replenishment and demand
planning. System ESS has been designed specifically to meet the complex and
high-volume demand chain management requirements of manufacturers,
distributors, wholesalers and retailers, enabling them to better match product
flow to actual customer demand, thereby enhancing revenue opportunities and
reducing administrative and logistics/distribution costs. 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,
wholesalers and retailers in the consumer packaged goods, consumer durables,
business equipment, medical, automotive and industrial products sectors, as
well as other high-volume wholesalers and retailers. The Company sells and
supports its products through direct sales and support organizations in the
United States, Europe and Asia/Pacific, as well as through third party systems
integrators. Current customers of IMI include Black & Decker Corp., British
Airways PLC, Campbell Soup Company, Canon U.S.A., Inc., Estee Lauder Co., GE
Plastics, Hartz Mountain, Kellogg Company, NIKE Inc., Pioneer Standard
Electronics, Inc., ProSource Distribution Services, Inc., Skyway Freight
Systems, Inc., Starbucks Corporation and Unisys Corporation.
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 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. 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. 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, wholesalers and
retailers. 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>
<S> <C>
Common Stock offered by the Company............. 3,500,000 shares
Common Stock offered by the Selling Stockhold-
ers............................................ 3,575,000 shares
Common Stock to be outstanding after the offer-
ing............................................ 31,759,514 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. See "Use of
Proceeds."
Nasdaq National Market symbol................... IMIC
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED APRIL 30, ENDED JULY 31,
------------------------ ----------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Total revenues..................... $27,744 $40,009 $59,612 $ 9,217 $15,706
Gross profit....................... 10,896 19,532 34,200 3,943 8,038
Income (loss) from operations...... (6,025) 1,385 4,869 (1,592) 412
Net income (loss).................. (6,388) 1,750 6,902 (1,062) 630
Pro forma net income (loss) per
share(2).......................... $ 0.07 $ 0.25 $ (0.04) $ 0.02
Shares used in pro forma per share
calculation(2).................... 25,223 28,063 24,502 28,446
</TABLE>
<TABLE>
<CAPTION>
JULY 31, 1997
----------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $16,661 $102,305
Working capital........................................ 31,826 117,470
Total assets........................................... 50,481 136,125
Capital lease obligations, less current portion........ 420 420
Total stockholders' equity............................. 35,998 121,642
</TABLE>
- --------
(1) Based on 16,171,314 shares of Common Stock and 12,088,200 shares of Class B
Common Stock, which will be converted into Common Stock upon the closing of
this offering, outstanding as of September 30, 1997. Excludes options
outstanding as of September 30, 1997 to purchase 985,828 shares of Common
Stock at a weighted average exercise price per share of $5.93.
(2) For the years ended April 30, 1996 and 1997 and the three months ended July
31, 1996 and 1997, pro forma net income per share was based upon the
weighted average number of common and common stock equivalents outstanding
during the period, computed in accordance with the treasury stock method.
Historical net income (loss) per share data for the year ended April 30,
1995 has not been presented as such information is not considered to be
relevant or meaningful.
(3) Adjusted to reflect the sale of 3,500,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $25.75 per share
(the last reported sale price of the Common Stock on October 3, 1997) and
after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company. See "Use of Proceeds"
and "Capitalization."
----------------
Except as otherwise indicated, all information in this Prospectus (i) assumes
that the Underwriters' over-allotment option is not exercised and (ii) reflects
the conversion of all of the Company's currently outstanding shares of Class B
Common Stock into Common Stock upon the closing of this offering. See
"Description of Capital Stock" and "Underwriting."
4
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following Risk Factors,
in addition to the other information contained in this Prospectus and
incorporated herein by reference concerning the Company and its business,
before purchasing the shares of Common Stock offered hereby. This Prospectus
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Exchange Act that involve certain risks and uncertainties. Discussions
containing such forward-looking statements may be found in the material set
forth below and under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as in this
Prospectus generally, including documents incorporated by reference herein.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. The Company's actual results could differ materially from those
anticipated in such forward-looking statements as a result of certain factors,
including those set forth in the following Risk Factors. The forward-looking
statements contained herein are made as of the date of this Prospectus and the
Company assumes no obligation to update such forward-looking statements or to
update the reasons why actual results could differ materially from those
anticipated in such forward-looking statements.
Significant Fluctuations in Quarterly Operating Results and Seasonality. 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; the Company's
success in expanding its sales, support, service and marketing organizations;
the ability of the Company to establish and maintain relationships with third
party implementation providers; 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; personnel changes; the
structure and timing of future acquisitions, if any; fluctuations in foreign
currency exchange rates; mix of license 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
consulting services organization, and the timing of such expansion and the
rate at which new sales and consulting personnel 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.
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
5
<PAGE>
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 could experience operating losses in such quarters
in the future.
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. The Company has historically recognized 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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Financial Results."
No Assurance of Profitability. Although the Company achieved net income of
$1.8 million and $6.9 million for fiscal 1996 and 1997, respectively, and net
income of $630,000 for the three months ended July 31, 1997, 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 continue 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."
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. License fees for System ESS
have averaged approximately $1.3 million and there have been several licenses
significantly in excess of that amount. The Company expects that individual
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 three 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 18 months for customer training, integration of System ESS with the
customer's other existing systems and the development of product extensions to
add customer specific functionality. The Company and/or a third party
consultant provide
6
<PAGE>
such post delivery implementation services pursuant to a separate service
agreement. A successful implementation requires a close working relationship
between the Company, the customer and, generally, third party consultants who
assist in the implementation process. Any inability of the Company to achieve
such close working relationships, or any inability of the Company's consulting
services organization or third party consultants to perform implementation
services on a timely basis, may result in delays in the customer
implementation process. There can be no assurance that any such delays in the
implementation process of System ESS will not result in adverse customer
reactions, harm the Company's reputation, or otherwise have a material adverse
effect on the Company's business, operating results and financial condition.
See "--Risks Associated With Expanding Multinational Operations,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Products and Services" and "--Sales and Marketing."
Dependence upon Relationship with Oracle Corporation. An important part of
the Company's operating results depend upon its marketing and sales
relationship with Oracle Corporation ("Oracle"). For the fiscal year ended
April 30, 1997, the Company generated 63% of its license revenues and 36% of
its total revenues through various joint marketing efforts with Oracle. Prior
to 1997, the Company engaged in an informal joint marketing and sales
arrangement with Oracle pursuant to which the two companies jointly marketed
to customers in the consumer packaged goods industry. In January 1997, the
Company entered into a joint marketing agreement with Oracle for the consumer
packaged goods industry (the "Oracle Agreement") pursuant to which the parties
agreed for a term of three years to jointly market and license the Oracle
Solution Suite, which incorporates the Company's System ESS software and
Oracle software together with other complementary software owned by third
parties. The Oracle Agreement provides for additional development of component
software, integration of the software components and marketing and support of
the Oracle Solution Suite. In addition, Oracle has agreed not to develop or
use in the consumer packaged goods industry any other software with similar
functionality to System ESS. Pursuant to the Oracle Agreement, Oracle has
agreed to pay the Company the total license fees that Oracle receives from the
customer for System ESS less specified percentages. In the United States,
Oracle and its distributors have the exclusive right to sub-license System ESS
software as part of the Oracle Solution Suite in the consumer packaged goods
industry. Outside of the United States, Oracle and its distributors have a
non-exclusive right to sub-license System ESS in the consumer packaged goods
industry. In addition, the Company has retained the worldwide right to market
System ESS to customers in the consumer packaged goods industry as a "point"
solution and in any other manner which does not provide combined software
substantially similar to the Oracle Solution Suite. The Company and Oracle
have periodically entered into separate agent agreements authorizing Oracle to
sub-license the Company's System ESS software to customers in the consumer
packaged goods industry and other industries. Pursuant to such agent
agreements, Oracle pays to the Company a specified percentage of the license
fee for System ESS. In industries other than consumer packaged goods, the
Company also from time to time directly competes with Oracle's order
management software product. See "--Competition" and "Business--Competition."
In the consumer packaged goods industry, the Company actively markets and
sells System ESS as a "point" solution and as part of the Oracle Solution
Suite. The Company's sales of System ESS in the consumer packaged goods
industry are dependent in part upon the effectiveness of Oracle's efforts
under the Oracle Agreement, which the Company cannot control. There can be no
assurance that Oracle will not otherwise curtail or discontinue the Oracle
Agreement at the end of the initial three year term or that the Oracle
Agreement will be beneficial to the Company, which could have a material
adverse effect on the business, operating results and financial condition of
the Company. In industries other than consumer packaged goods, there can be no
assurance that Oracle will continue to recommend the Company and its products
to potential customers or enter into separate agent agreements with the
Company, either of which could have a material adverse effect on the business,
operating results and financial condition of 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
7
<PAGE>
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 which offer client/server enterprise resource planning
("ERP") solutions, such as SAP AG ("SAP"), Baan Company N.V. ("Baan"), J.D.
Edwards & Company ("J.D. Edwards"), System Software Associates, Inc. ("SSA")
and, in vertical markets other than consumer packaged goods, Oracle, (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 execution
software which complements or competes 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 execution software. 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 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."
Need to Hire Additional Personnel in All Areas and Dependence on Key
Employees. The Company believes its future success and ability to achieve
revenue growth will depend in significant part upon its ability to attract and
retain highly skilled management, sales, support, service, marketing and
product development personnel. Competition for such personnel is intense, and
recruiting such personnel is becoming increasingly difficult because of the
strong world-wide economy. In addition, 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 does not
have, and does not intend to obtain, key man life insurance on any of its
executive management personnel. 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 "Management--Executive Officers and Directors."
Reliance on and Need to Develop Additional Relationships with Third
Parties. The Company relies on informal relationships 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. Such firms have included Andersen Worldwide S.C. ("Andersen
Consulting"), Computer Sciences Corporation, Computer Task Group Limited,
International Business Machines Corporation ("IBM") and MCI Systemhouse, Inc.
in the United States and Cap Gemini S.A., and ECsoft Group plc in Europe. The
Company expects to continue to rely significantly upon such third parties for
product implementation, customer support services, end user training and lead
generation. The Company will need to expand its relationships with these
parties and
8
<PAGE>
enter into relationships with additional third parties in order to support
license 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 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--Products and Services" and "--Sales and Marketing."
Risks Associated with Expanding Multinational Operations. The Company's
future success and ability to achieve revenue growth depends upon the
successful continued international 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's products currently are marketed
in the United States, Europe and Asia/Pacific. Such international expansion has
required that the Company establish additional offices and hire additional
personnel. This has required and is expected to continue to 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 continue 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
condition could be materially and adversely affected. Further, the Company
intends to continue 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 continue to expand its international operations and, in general, its
business, operating results and financial condition. See "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. The Company
increased the size of its direct sales force from 31 people at July 31, 1996
to 52 people at July 31, 1997 and the number of customer service and support
personnel from 177 people at July 31, 1996 to 278 people at July 31, 1997. The
Company plans to continue to expand internationally and to continue to increase
the number of its sales, support, service, marketing and product development
personnel significantly in the remainder of fiscal 1998, 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
9
<PAGE>
future expansion, if any, could have a material adverse effect on the
Company's business, financial condition or operating results.
Dependence on Principal Product. License and service and maintenance
revenues related to System ESS have represented a substantial majority of the
Company's revenues in recent years and are expected to represent substantially
all 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 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. The System ESS client operates on
UNIX, Windows 3.1, Windows 95 and Windows NT platforms. System ESS can
currently operate on server platforms from Hewlett-Packard Corporation, IBM,
Digital Equipment Corporation, Sun Microsystems, Inc. and Sequent Corporation
running either UNIX or Windows NT operating systems. The Company continues to
enhance System ESS to operate on such platforms in order to meet these
customers' requirements. In April 1997, the Company introduced a new version
of System ESS that operates on a Windows NT server platform, supports
Internet-based electronic commerce through World Wide Web browsers and Java-
based clients and supports seven languages in total. However, there can be no
assurances that the Company will be successful in continuing to develop
enhanced versions 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
10
<PAGE>
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 agreements 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. 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 illegally 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, operating results and financial condition. See "Business--
Proprietary Rights."
11
<PAGE>
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
and, to a lesser extent, the U.K. pound sterling and the Dutch guilder. The
Company incurs a majority of its expenses in Swedish kronor, including nearly
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 Company does not currently
undertake hedging transactions to cover its currency exposure, but the Company
may choose to hedge a portion of its currency exposure in the future as it
deems appropriate. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Possible Volatility of Stock Price. The market price for the Common Stock
has in the past been and in the future could be subject to significant
fluctuations in response to 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. See "Price Range of Common
Stock."
Control by Management and Current Stockholders; Indemnification of Officers
and Directors. Following completion of this offering and the conversion of all
of the outstanding shares of Class B Common Stock into Common Stock upon the
completion of this offering, the Company's executive officers and directors,
and their affiliates, in the aggregate, will own beneficially 60.4% of the
Company's outstanding Common Stock. In particular, Warburg, Pincus Investors,
L.P. ("Warburg") will own beneficially 46.6% 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."
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 Preferred Stock and to determine
the price, preferences, privileges and restrictions, including voting
12
<PAGE>
rights, of such 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.
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
amounts of the Company's Common Stock in the public market following this
offering could have an adverse effect on the trading price of the Company's
Common Stock. Upon completion of this offering, the Company will have
outstanding 31,759,514 shares of Common Stock, assuming no exercise of
outstanding options or other issuances under employee stock plans following
September 30, 1997. The Company, each of its directors and its executive
officers and Warburg, who will beneficially own approximately 60.4% shares of
Common Stock following the offering (assuming no exercise of the Underwriters'
over-allotment option), have each agreed that, for a period ending on the 90th
day after the date of this Prospectus, subject to certain exceptions, they will
not, without the prior written consent of BT Alex. Brown Incorporated, sell,
offer to sell, distribute, or otherwise dispose of any shares of Common Stock
or any options, rights, or warrants with respect to any Common Stock. Following
the expirations of such lock-up agreements, all of such shares will be eligible
for immediate sale in the public market, subject in some cases to compliance
with Rule 144 of the Securities Act. Furthermore, 17,877,268 shares of Common
Stock held by certain stockholders will be entitled to certain registration
rights. If such stockholders, 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 effect the Company's
ability to raise additional capital when or if required. See "Underwriting."
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 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.
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
pay dividends in the absence of sufficient distributable reserves or for other
reasons. None of the
13
<PAGE>
Company's subsidiaries in Sweden, the United Kingdom, the Netherlands, Germany,
Australia or the United States are 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" and "Dividend Policy."
Significant Unallocated Net Proceeds. The Company has not yet identified
specific uses for 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."
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.
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 (46) (8) 676-5000 and its principal U.S.
office is located at Five Greentree Center, Suite 201, Marlton, New Jersey
08053, telephone number (1) (609) 988-3922.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock being offered by the Company are estimated to be approximately
$85.6 million, after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by the Company and
assuming a public offering price of $25.75 per share (the last reported sale
price of the Common Stock on October 3, 1997). The principal purpose of this
offering is to obtain additional working capital. The Company expects to use
the net proceeds 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
Stockholders.
The Company believes that the net proceeds from this offering, together with
its current cash balances, short-term investment balances, and cash flows
generated from operations, if any, will be sufficient to satisfy the Company's
working capital and capital expenditure requirements for at least the next 12
months. Any material acquisitions of complementary businesses, products or
technologies could require the Company to obtain additional equity or debt
financing.
PRICE RANGE OF COMMON STOCK
The Common Stock trades on Nasdaq under the symbol "IMIC." The following
table sets forth for the periods indicated the high and low sale prices per
share for the Company's Common Stock as reported by Nasdaq.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED APRIL 30, 1997
Second Quarter (from September 25, 1996)......................... 13 1/8 9 1/4
Third Quarter.................................................... 13 1/4 7 1/8
Fourth Quarter................................................... 9 3/4 5 7/8
FISCAL YEAR ENDED APRIL 30, 1998
First Quarter.................................................... 17 3/8 8 7/8
Second Quarter (through October 3, 1997)......................... 25 7/8 11 3/8
</TABLE>
On October 3, 1997, the closing sale price for the Common Stock as reported
by Nasdaq was $25.75 per share.
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. 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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<PAGE>
CAPITALIZATION
The following table sets forth as of July 31, 1997 (i) the actual
capitalization of the Company, and (ii) the capitalization of the Company as
adjusted to reflect the sale of the 3,500,000 shares of Common Stock offered
by the Company hereby at an assumed public offering price of $25.75 per share
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company and the conversion of all of the outstanding
shares of Class B Common Stock into Common Stock upon the closing of this
offering. See "Use of Proceeds."
<TABLE>
<CAPTION>
JULY 31, 1997
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of capital lease obligations.......... $ 461 $ 461
======= ========
Capital lease obligations, less current portion....... $ 420 $ 420
Stockholders' equity:
Preferred Stock; $.01 par value; 15,000,000 shares
authorized; none issued and outstanding (actual and
as adjusted) ...................................... -- --
Common Stock; voting, $.01 par value; 62,500,000
shares authorized; 15,803,317 shares issued and
outstanding (actual); 31,391,517 shares issued and
outstanding (as adjusted) (1)...................... 158 314
Class B Common Stock; non-voting, $.01 par value;
12,500,000 shares authorized; 12,088,200 shares
issued and outstanding (actual); none issued and
outstanding (as adjusted).......................... 121 --
Additional paid-in-capital............................ 43,923 129,532
Accumulated deficit................................... (3,476) (3,476)
Cumulative translation adjustment..................... (2,414) (2,414)
Notes receivable from stockholders.................... (2,314) (2,314)
------- --------
Total stockholders' equity ....................... 35,998 121,642
------- --------
Total capitalization ........................... $36,418 $122,062
======= ========
</TABLE>
- --------
(1) Excludes 985,828 shares of Common Stock issuable upon the exercise of
stock options outstanding as of September 30, 1997, at a weighted average
exercise price of $5.93 per share.
16
<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, incorporated by reference herein, and
the other financial information included elsewhere in this Prospectus. The
statement of operations for the years ended April 30, 1995, 1996, and 1997 and
the balance sheet data at April 30, 1995, 1996, and 1997 are derived from and
should be read in conjunction with the Consolidated Financial Statements of
the Company and the Notes thereto, incorporated by reference herein, which
have been audited by Ohrlings Coopers & Lybrand AB, independent auditors. The
consolidated statement of operations data for the three-month periods ended
July 31, 1996 and 1997 and the consolidated balance sheet data at July 31,
1997 are derived from unaudited condensed consolidated financial statements
that include, in the opinion of management, all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
information set forth therein.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED APRIL 30, ENDED JULY 31,
------------------------- ----------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OP-
ERATIONS DATA:
Revenues: (UNAUDITED)
Licenses.................... $10,661 $15,474 $26,147 $ 2,296 $ 5,791
Services and maintenance.... 14,543 23,103 31,747 6,779 9,784
Other....................... 2,540 1,432 1,718 142 131
------- ------- ------- ------- -------
Total revenues............ 27,744 40,009 59,612 9,217 15,706
Cost of revenues:
Licenses.................... 2,172 2,717 1,540 100 88
Services and maintenance.... 12,424 16,813 22,871 5,078 7,495
Other....................... 2,252 947 1,001 96 85
------- ------- ------- ------- -------
Total cost of revenues.... 16,848 20,477 25,412 5,274 7,668
------- ------- ------- ------- -------
Gross profit.............. 10,896 19,532 34,200 3,943 8,038
Operating expenses:
Product development......... 7,009 6,822 9,935 1,956 2,516
Sales and marketing......... 5,720 7,746 14,997 2,593 3,720
General and administrative.. 4,192 3,579 4,399 986 1,390
------- ------- ------- ------- -------
Total operating expenses.. 16,921 18,147 29,331 5,535 7,626
------- ------- ------- ------- -------
Income (loss) from
operations.................. (6,025) 1,385 4,869 (1,592) 412
Other income (expense):
Interest income............. 15 13 643 13 240
Interest expense............ (689) (744) (253) (127) (15)
Miscellaneous income
(expense).................. (384) (12) (21) (63) (65)
------- ------- ------- ------- -------
Income (loss) from continuing
operations before income
taxes....................... (7,083) 642 5,238 (1,769) 572
Provision (benefit) for
income taxes................ (941) (781) (190) (705) (58)
------- ------- ------- ------- -------
Income (loss) from continuing
operations.................. (6,142) 1,423 5,428 (1,064) 630
Income (loss) from
discontinued operations..... (246) 327 374 2 --
Gain on sale of discontinued
operations (net of income
tax of $372,000)(1)......... -- -- 1,100 -- --
------- ------- ------- ------- -------
Net income (loss)............ $(6,388) $ 1,750 $ 6,902 $(1,062) $ 630
======= ======= ======= ======= =======
Pro forma net income (loss)
per share data(2):
Income (loss) from continuing
operations.................. $ 0.06 $ 0.20 $ (0.04) $ 0.02
Income from discontinued
operations.................. 0.01 0.01 -- --
Gain on sale of discontinued
operations.................. -- 0.04 -- --
------- ------- ------- -------
Pro forma net income (loss)
per share................... $ 0.07 $ 0.25 $ (0.04) $ 0.02
======= ======= ======= =======
Pro forma shares used in per
share calculation........... 25,223 28,063 24,502 28,446
======= ======= ======= =======
<CAPTION>
APRIL 30,
-------------------------
1995 1996 1997 JULY 31, 1997
------- ------- ------- ----------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DA-
TA:
Cash and cash equivalents.... $ 160 $ 558 $ 9,023 $16,661
Short-term investments....... -- -- 9,952 9,888
Working capital.............. (3,478) (1,364) 30,831 31,826
Total assets................. 15,508 21,324 50,963 50,481
Capital lease obligations,
less current portion........ 267 624 554 420
Total stockholders' equity... (2,097) 502 34,754 35,998
</TABLE>
- --------
(1) During the fiscal year ended April 30, 1997, the Company sold all of its
interest in Pargon AB. The gain recognized on the sale represents the
excess of the sales price over the Company's book basis.
(2) For the years ended April 30, 1996 and 1997 and the three months ended
July 31, 1996 and 1997, pro forma net income per share was based upon the
weighted average number of common and common stock equivalents outstanding
during the period, computed in accordance with the treasury stock method.
Historical net income (loss) per share data for the year ended April 30,
1995 has not been presented as such information is not considered to be
relevant or meaningful.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act that
involve certain risks and uncertainties. Discussions containing such forward-
looking statements may be found in the material set forth below and under
"Risk Factors" and "Business," as well as in the Prospectus generally,
including the documents incorporated by reference herein. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements. The
Company's actual results could differ materially from those anticipated in
such forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" appearing elsewhere in this Prospectus
and in the documents incorporated by reference herein. These forward-looking
statements are made as of the date of this Prospectus and the Company assumes
no obligation to update such forward-looking statements or to update the
reasons why actual results could differ materially from those anticipated in
such forward-looking statements.
OVERVIEW
IMI develops, markets and supports software that enables manufacturers,
distributors, wholesalers and retailers to more effectively fulfill their
customers' orders. 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, wholesalers and retailers. Since that time, the Company's
operating expenses have increased substantially as the Company has made
significant investments 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 internationally,
the Company's revenues have grown in recent years, increasing from $27.7
million in fiscal 1995 to $59.6 million in fiscal 1997. Although the Company
has been profitable in its two most recent fiscal years and the three months
ended July 31, 1997, there can be no assurance that the Company will sustain
profitability on a quarterly or annual basis in the future.
Substantially all of the Company's revenues in the last three years has 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, wholesalers and retailers. The
Company expects that license and services revenues related to System ESS will
continue to constitute predominantly all of the Company's 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, which are
typically billed on a time and materials basis, 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."
18
<PAGE>
The Company has expanded its operations in all major geographic markets,
with a significant portion of its revenue growth occurring in the United
States. The following table illustrates the Company's revenues for the last
three fiscal years by customer location:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States........................................... $ 8,550 $18,212 $29,767
Europe.................................................. 19,194 19,846 23,853
Asia/Pacific............................................ -- 1,951 5,992
------- ------- -------
Total................................................. $27,744 $40,009 $59,612
======= ======= =======
</TABLE>
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
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.
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 and, to a lesser extent, the U.K. pound
sterling and the Dutch guilder. The Company incurs a majority of its expenses
in Swedish kronor, including nearly 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 to
cover its currency exposure, but the Company may choose to hedge a portion of
its currency exposure in the future as it deems appropriate.
19
<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>
THREE MONTHS
ENDED JULY
YEAR ENDED APRIL 30, 31,
----------------------- -------------
1995 1996 1997 1996 1997
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses............................. 38.4% 38.7% 43.9% 24.9% 36.9%
Services and maintenance............. 52.4 57.7 53.2 73.6 62.3
Other................................ 9.2 3.6 2.9 1.5 0.8
------ ------ ------ ------ -----
Total revenues..................... 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ -----
Cost of revenues:
Licenses............................. 7.8 6.8 2.6 1.1 0.6
Services and maintenance............. 44.8 42.0 38.3 55.1 47.7
Other................................ 8.1 2.4 1.7 1.0 0.5
------ ------ ------ ------ -----
Total cost of revenues............. 60.7 51.2 42.6 57.2 48.8
------ ------ ------ ------ -----
Gross profit....................... 39.3 48.8 57.4 42.8 51.2
------ ------ ------ ------ -----
Operating expenses:
Product development.................. 25.3 17.1 16.7 21.2 16.0
Sales and marketing.................. 20.6 19.4 25.1 28.1 23.7
General and administrative........... 15.1 8.9 7.4 10.7 8.9
------ ------ ------ ------ -----
Total operating expenses........... 61.0 45.4 49.2 60.0 48.6
Income (loss) from operations.......... (21.7) 3.4 8.2 (17.2) 2.6
Other income (expense):
Interest income...................... 0.1 -- 1.1 0.1 1.5
Interest expense..................... (2.5) (1.9) (0.4) (1.4) (0.1)
Miscellaneous income (expense)....... (1.4) -- -- (0.7) (0.4)
------ ------ ------ ------ -----
Income (loss) from continuing opera-
tions before income taxes............. (25.5) 1.5 8.9 (19.2) 3.6
Provision (benefit) for income taxes... (3.4) (2.0) (0.3) (7.7) (0.4)
------ ------ ------ ------ -----
Income (loss) from continuing opera-
tions................................. (22.1) 3.5 9.2 (11.5) 4.0
Income (loss) from discontinued opera-
tions................................. (0.9) 0.8 0.6 0.0 --
Gain on sale of discontinued opera-
tions................................. -- -- 1.8 -- --
------ ------ ------ ------ -----
Net income (loss)...................... (23.0)% 4.3% 11.6% (11.5)% 4.0%
====== ====== ====== ====== =====
</TABLE>
20
<PAGE>
QUARTERLY FINANCIAL RESULTS
The following table sets forth unaudited consolidated statement of
operations data for each of the quarters in the fiscal years ended April 30,
1996 and 1997 and the quarter ended July 31, 1997. 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 incorporated by reference herein, and
includes all adjustments necessary for a fair presentation of such information
when read in conjunction with the Consolidated Financial Statements and the
Notes thereto, incorporated by reference herein. The operating results for any
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31,
1995 1995 1996 1996 1996 1996 1997 1997 1997
-------- -------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
Licenses.......................... $ 197 $ 1,536 $ 6,258 $ 7,483 $ 2,296 $4,836 $7,501 $11,514 $5,791
Services and maintenance.......... 4,272 5,770 6,149 6,912 6,779 7,875 7,781 9,312 9,784
Other............................. 256 506 396 274 142 793 329 454 131
-------- ------- ------- ------- ------- ------ ------ ------- ------
Total revenues................... 4,725 7,812 12,803 14,669 9,217 13,504 15,611 21,280 15,706
Cost of revenues:
Licenses.......................... 3 152 1,016 1,546 100 653 294 493 88
Services and maintenance.......... 3,579 3,908 4,029 5,297 5,078 5,741 5,691 6,361 7,495
Other............................. 204 369 220 154 96 404 245 256 85
-------- ------- ------- ------- ------- ------ ------ ------- ------
Total cost of revenues........... 3,786 4,429 5,265 6,997 5,274 6,798 6,230 7,110 7,668
-------- ------- ------- ------- ------- ------ ------ ------- ------
Gross profit..................... 939 3,383 7,538 7,672 3,943 6,706 9,381 14,170 8,038
Operating expenses:
Product development............... 1,368 1,557 1,716 2,181 1,956 2,624 2,420 2,935 2,516
Sales and marketing............... 1,385 1,629 2,121 2,611 2,593 2,782 4,162 5,460 3,720
General and administrative........ 828 907 886 958 986 1,084 1,108 1,221 1,390
-------- ------- ------- ------- ------- ------ ------ ------- ------
Total operating expenses......... 3,581 4,093 4,723 5,750 5,535 6,490 7,690 9,616 7,626
-------- ------- ------- ------- ------- ------ ------ ------- ------
Income (loss) from operations...... (2,642) (710) 2,815 1,922 (1,592) 216 1,691 4,554 412
Other income (expense):
Interest income................... 4 -- 5 4 13 88 223 319 240
Interest expense.................. (189) (196) (188) (171) (127) (103) -- (23) (15)
Miscellaneous income (expense).... (16) 258 (259) 5 (63) (104) 167 (21) (65)
-------- ------- ------- ------- ------- ------ ------ ------- ------
Income (loss) from continuing
operations before income taxes.... (2,843) (648) 2,373 1,760 (1,769) 97 2,081 4,829 572
Provision (benefit) for income
taxes............................. (564) (301) 62 22 (705) (87) (120) 722 (58)
-------- ------- ------- ------- ------- ------ ------ ------- ------
Income (loss) from continuing
operations........................ (2,279) (347) 2,311 1,738 (1,064) 184 2,201 4,107 630
Income (loss) from discontinued
operations........................ (78) 134 189 82 2 365 7 -- --
Gain on sale of discontinued
operations........................ -- -- -- -- -- -- 1,100 -- --
-------- ------- ------- ------- ------- ------ ------ ------- ------
Net income (loss).................. $ (2,357) $ (213) $ 2,500 $ 1,820 $(1,062) $549 $3,308 $ 4,107 $ 630
======== ======= ======= ======= ======= ====== ====== ======= ======
</TABLE>
21
<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>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31,
1995 1995 1996 1996 1996 1996 1997 1997 1997
-------- -------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Licenses............... 4.2% 19.7% 48.9% 51.0% 24.9% 35.8% 48.1% 54.1% 36.9%
Services and
maintenance........... 90.4 73.8 48.0 47.1 73.6 58.3 49.8 43.8 62.3
Other ................. 5.4 6.5 3.1 1.9 1.5 5.9 2.1 2.1 0.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- ----- -----
Cost of revenues:
Licenses............... 0.1 1.9 7.9 10.5 1.1 4.8 1.9 2.3 0.6
Services and
maintenance........... 75.7 50.0 31.5 36.2 55.1 42.5 36.4 29.9 47.7
Other.................. 4.3 4.8 1.7 1.0 1.0 3.0 1.6 1.2 0.5
----- ----- ----- ----- ----- ----- ----- ----- -----
Total cost of
revenues............. 80.1 56.7 41.1 47.7 57.2 50.3 39.9 33.4 48.8
----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit.......... 19.9 43.3 58.9 52.3 42.8 49.7 60.1 66.6 51.2
Operating expenses:
Product development.... 28.9 19.9 13.4 14.9 21.2 19.4 15.5 13.8 16.0
Sales and marketing.... 29.4 20.9 16.6 17.8 28.1 20.6 26.7 25.7 23.7
General and
administrative........ 17.5 11.6 6.9 6.5 10.7 8.0 7.1 5.7 8.9
----- ----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses............. 75.8 52.4 36.9 39.2 60.0 48.0 49.3 45.2 48.6
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
operations............. (55.9) (9.1) 22.0 13.1 (17.2) 1.7 10.8 21.4 2.6
Other income (expense):
Interest income........ 0.1 -- -- -- 0.1 0.7 1.4 1.5 1.5
Interest expense....... (4.0) (2.5) (1.5) (1.1) (1.4) (0.8) -- (0.1) (0.1)
Miscellaneous income
(expense)............. (0.4) 3.3 (2.0) -- (0.7) (0.8) 1.1 (0.1) (0.4)
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
continuing operations
before income taxes.... (60.2) (8.3) 18.5 12.0 (19.2) 0.8 13.3 22.7 3.6
Provision (benefit) for
income taxes........... (12.0) (3.9) 0.4 0.1 (7.7) (0.6) (0.8) 3.4 (0.4)
----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) from
continuing operations.. (48.2) (4.4) 18.1 11.9 (11.5) 1.4 14.1 19.3 4.0
Income (loss) from
discontinued
operations............. (1.7) 1.7 1.4 0.5 -- 2.7 -- -- --
Gain on sale of
discontinued
operations............. -- -- -- -- -- -- 7.1 -- --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... (49.9)% (2.7)% 19.5% 12.4% (11.5)% 4.1% 21.2% 19.3% 4.0%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
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 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 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
22
<PAGE>
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
could experience operating losses in such quarters in the future.
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; the Company's
success in expanding its sales, support, service and marketing organizations;
the ability of the Company to establish and maintain relationships with third
party implementation providers; 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; personnel changes; the
structure and timing of future acquisitions, if any; fluctuations in foreign
currency exchange rates; mix of license and service and maintenance revenues
sold 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
consulting services organization, and the timing of such expansion and the
rate at which new sales and consulting personnel 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.
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. The Company has historically recognized 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."
23
<PAGE>
BUSINESS
IMI develops, markets and supports software that enables manufacturers,
distributors, wholesalers and retailers to more effectively fulfill their
customers' orders. The Company's demand chain management solution, System ESS,
provides the execution of multiple order fulfillment processes, including
order management, distribution management, inventory replenishment and demand
planning. System ESS has been designed specifically to meet the complex and
high-volume demand chain management requirements of large manufacturers,
distributors, wholesalers and retailers in the consumer packaged goods
industry, enabling them to better match product flow to actual customer
demand, thereby enhancing revenue opportunities and reducing administrative
and logistics/distribution costs. 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 Black & Decker, British Airways, Campbell
Soup, Canon U.S.A., Estee Lauder, GE Plastics, Hartz Mountain, Kellogg, NIKE,
Pioneer Standard Electronics, ProSource Distribution Services, Skyway Freight
Systems, Starbucks and Unisys.
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,
wholesalers and retailers 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"
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.
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, wholesalers and retailers, 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
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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, wholesalers and retailers:
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.
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.
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
years, and considerable resources, attempting to implement a client/server
solution without significant success.
THE IMI SOLUTION
IMI develops, markets and supports software that enables manufacturers,
distributors, wholesalers and retailers to more effectively fulfill their
customers' orders. 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, wholesalers and
retailers, 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:
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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. System ESS has been scaled in
some implementations to manage 700 or more simultaneous users. Its efficient
use of distributed computing also has enabled System ESS to execute and manage
over 15 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.
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 and Windows NT servers as well as Windows clients. 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, generally within six to 18 months,
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, wholesalers and
retailers. 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 distribution industry.
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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 consumer durables, business
equipment, medical, automotive 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, Europe and Asia/Pacific. IMI plans to continue to invest
significantly in expanding its sales, support, service and marketing
organizations in such geographic regions. As IMI increasingly targets large,
multinational customers and as existing customers migrate their System ESS
installations to other divisions internationally, the Company intends to
continue to expand its sales and support organizations to provide such
services on a worldwide basis. In fiscal 1997 the Company opened sales and
support offices in Australia, Germany and the Netherlands and now provides 24
hour, seven days per week support through telephone and electronic mail.
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 or
geographic regions. 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 intends to continue to
increase product functionality through both in-house development and selected
acquisitions.
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. Partnership
agreements have been signed with Oracle, Business Objects S.A., Frontec AB and
i2 Technologies 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. In connection with specific implementations, the Company has partnered
with Andersen Consulting, Computer Sciences Corporation, Computer Task Group,
IBM and MCI Systemhouse in the United States, and Cap Gemini and ECsoft Group
in Europe.
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
implementation, training, consulting and maintenance.
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, distribution
management, inventory replenishment, price and promotion, demand chain
monitoring, global organization management, electronic commerce and decision
support. System ESS can currently operate on server platforms from Hewlett-
Packard Corporation, IBM, Digital Equipment Corporation, Sun Microsystems,
Inc. and Sequent Corporation which run under either UNIX or Windows NT
operating systems. In April 1997, the Company introduced a new version of
System ESS that operates on a Windows NT server platform, supports Internet-
based electronic commerce through World Wide Web
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browsers and Java based clients and supports seven languages in total. 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.
At the time System ESS is delivered to a client and installed on a customer's
system, System ESS is fully capable, without additional modification, of
providing the functionality described below. In general, relatively little
modification to, or customization of, the standard System ESS software is
required in order for the software to meet the basic functionality requirements
of individual customers. Customers requiring additional functionality may enter
into a services agreement with the Company or a third party, which is typically
performed on a time and materials basis.
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.
Distribution Management. System ESS manages the transactional processes
involving inbound and outbound product movement. The distribution 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 distribution 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.
Inventory 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 to match customer needs on a timely
basis. Its inventory and replenishment features are tightly integrated with the
order management process, synchronizing inventory replenishment with customer
demand. The System ESS inventory 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. Inventory replenishment also supports vendor
managed inventory and continuous replenishment programs.
Price and Promotion. System ESS administers and executes a significant number
of 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.
Global Organization Management. 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.
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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 has developed capabilities for
Internet-based order placement through World Wide Web browsers and Java based
clients.
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.
In April 1997, the Company introduced a separate System ESS application
module for the management of product installation and service operations.
System ESS Service Management is currently being integrated with other
components of System ESS to enable users to manage after-sales activities such
as service orders, warranty tracking, call handling and field service.
In fiscal 1997, the Company acquired Ceratina International AB, a Swedish
warehouse management software company, together with its product "Open
Warehouse," a warehouse management package that is currently being sold as a
stand-alone product and is being integrated with System ESS. Open Warehouse is
an object-oriented software application that plans, manages and monitors the
day-to-day work in a warehouse optimizing personnel, space, and equipment
resources.
SYSTEM ESS PRICING
The license price for System ESS is determined based upon the number of
servers, the number of defined users and the projected number of order lines
to be processed per year in the customer's system. License fees for System ESS
have averaged approximately $1.3 million and there have been several licenses
significantly in excess of that amount. The Company expects that individual
license fees will continue to increase in size as the Company's products
become more sophisticated and manage larger and more geographically dispersed
locations. License and service and maintenance revenues related to System ESS
have represented a substantial majority of the Company's revenues in recent
years and are expected to represent substantially all of the Company's
revenues in the future. See "Risk Factors--Lengthy Sales and Implementation
Cycle; Increasing Size of Orders" and "--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. ("Trifox")
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."
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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.
Event Express. Event Express is a toolkit which allows customers to easily
integrate System ESS with other management information systems, such as
financial reporting and MRP systems.
Business Engineering Workbench. In April 1997, the Company introduced a
Microsoft Windows client-based tool to enhance the System ESS implementation
process. The Business Engineering Workbench includes Navigation Express, which
provides a comprehensive review of the key System ESS business concepts,
routine flows, and implementation codes and parameters, and Implementation
Express, which utilizes an upper case facility to graphically document all
System ESS business processes, routines, and functions.
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 July 31, 1997, IMI had 278 employees in
its customer service and support organization providing software maintenance
and support, training, and consulting services. The Company typically charges
its customers on a time and materials basis for implementation and training
services and a percentage of the license fee as an annual maintenance fee.
IMI provides the following services and support to its customers:
Implementation and Technical Services. The Company and/or third party
consultants provide post delivery services to the Company's customers pursuant
to a separate service agreement. These implementation services typically
involve assistance with the integration of System ESS with other existing
software applications and databases currently used by the customer and the
development of product extensions to add customer-specific functionality.
Existing software applications and databases will vary from customer to
customer, but may often include legacy management support, logistics or ERP
applications. The integration of System ESS with a customer's existing
applications allows the customer to more efficiently utilize System ESS by
linking data flows between System ESS and various existing applications. Such
integration is not, however, a prerequisite to the basic functionality of
System ESS. Product extensions are developed using the same software tools
used in System ESS and SDCM documents all of the additions made to System ESS
for each customer for future upgrades of System ESS.
The Company has established its Demand Chain Alliance Program ("DCAP"),
which trains and certifies third party providers. DCAP participants include
Andersen Consulting, Computer Sciences Corporation, Computer Task Group, IBM
and MCI Systemhouse in the United States, and Cap Gemini and ECsoft Group 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 Company expects a greater proportion of its
implementation services to be carried out by third parties under the
supervision of IMI. The implementation of System ESS, which, depending on the
customer, may include the integration of System ESS with existing customer
software, the development of product extensions to add customer specific
functionality and customer training, typically requires six to 18 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."
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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. Customers often purchase training
services for System ESS as a means of efficiently introducing those staff
members who will be users of the software to the basic operation of System
ESS, as well as to some of the software's more advanced features. Such
training services are not, however, necessary to allow System ESS to function.
Customer Support. The Company has fully-staffed support centers in the
United States, the United Kingdom, Sweden and Australia. IMI provides 24 hour,
seven days per week support through telephone and electronic mail, and uses
logging/tracking systems for quality assurance.
CUSTOMERS
The Company's target customers are multinational manufacturers, distributors
wholesalers and retailers in the consumer packaged goods, consumer durables,
business equipment, medical, automotive, and industrial products sectors, as
well as other high-volume wholesalers and retailers. As of July 31, 1997, the
Company licensed System ESS to over 50 customers. The following table sets
forth a list of the Company's customers as of July 31, 1997 organized by
industry segment with the geographic location of each customer's operations
(or deployment of System ESS, where relevant) indicated in parentheses:
CONSUMER PACKAGED GOODS BUSINESS EQUIPMENT THIRD PARTY LOGISTICS
Alpina (Columbia) Canon (U.S.) Posten Logistik (Sweden)
Campbell Soup (U.S.) Eastman Kodak (Nordic) Skyway Freight Systems
Carlton United Breweries Matsushita (U.S.) (U.S.)
(Australia)
Unisys (Worldwide)
Dannon (U.S.) WHOLESALERS/RETAILERS
Estee Lauder (U.S.) INDUSTRIAL PRODUCTS Ahlsell (Sweden)
First Brands (U.S.) Agway (U.S.) Alko (Finland)
Hartz Mountain (U.S.) Black & Decker (U.S.) MoDo Merchants (U.K.)
Hormel (U.S.) Coats & Clark (U.S.) Pioneer Standard
Kellogg (Worldwide) GE Plastics (Worldwide) Electronics (U.S.)
Kiiltoo (Finland) Granges Metall (Sweden) ProSource (U.S.)
Land O'Lakes (U.S.) Tour & Andersson (Sweden) SLO (Finland)
NIKE (Japan) Zurn Industries (U.S.) Spicers (U.K., France)
Paragon (U.S.) United Tiles (Nordic)
Pepsico (U.S.) MEDICAL
Ralcorp (U.S.) EMMA Healthcare (Sweden) OTHER
Smuckers (U.S.) Interpharm (Netherlands) British Airways (U.K.)
Starbucks (U.S.) ColorLine (Norway)
Norsk Medisinaldepot (Norway)
Tri Valley Growers SLL Healthcare (Sweden) Fel-Pro (U.S.)
(U.S.) Forlagscentralen (Norway)
Satair (Denmark)
New license fees average approximately $1.3 million, although there have
been several license fees significantly in excess of that amount and,
therefore, individual customers have often accounted for more than 10% of
total revenues in particular quarterly periods. 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 years ended April 30, 1996 and
April 30, 1997 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 fiscal 1998, the Company expects that individual customers
(the identity of which will likely change on a quarterly basis) may continue
to account for 10% or more of the Company's total quarterly revenues in future
periods.
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SALES AND MARKETING
The Company sells and supports its products through direct sales and support
organizations in Sweden, the United States, the United Kingdom, Germany, the
Netherlands and Australia. 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; Atlanta, Georgia;
Chicago, Illinois; Los Angeles, California; London and Manchester, United
Kingdom; Stuttgart, Germany; Utrecht, The Netherlands; Gothenburg, Hassleholm
and Linkoping, Sweden; and Melbourne, Australia. As of July 31, 1997, the
Company employed 52 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 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."
Prior to 1997, the Company engaged in an informal joint marketing and sales
arrangement with Oracle pursuant to which the two companies jointly marketed
to customers in the consumer packaged goods industry. In January 1997, the
Company entered into the Oracle Agreement pursuant to which the parties agreed
for a term of three years to jointly market and license the Oracle Solution
Suite, which incorporates the Company's System ESS software and Oracle
software together with other complementary software owned by third parties.
The Oracle Agreement provides for additional development of component
software, integration of the software components and marketing and support of
the Oracle Solution Suite. In addition, Oracle has agreed not to develop or
use in the consumer packaged goods industry any other software with similar
functionality to System ESS. Pursuant to the Oracle Agreement, Oracle has
agreed to pay the Company the total license fees that Oracle receives from the
customer for System ESS less specified percentages. In the United States,
Oracle and its distributors have the exclusive right to sub-license System ESS
software as part of the Oracle Solution Suite in the consumer packaged goods
industry. Outside of the United States, Oracle and its distributors have a
non-exclusive right to sub-license System ESS in the consumer packaged goods
industry. In addition, the Company has retained the worldwide right to market
System ESS to customers in the consumer packaged goods industry as a "point"
solution and in any other manner which does not provide combined software
substantially similar to the Oracle Solution Suite. The Oracle Agreement may
be renewed by the parties for successive three-year terms, unless sooner
terminated. The Oracle Agreement may be terminated by either party for cause
or by Oracle if the Company fails to perform certain technical support and
product development obligations. In the event the Oracle Agreement is
terminated, the customer licenses shall continue and, under certain
circumstances, the Company's technical support obligations, and Oracle's
related payment obligations, will continue for up to three years.
The Company and Oracle have periodically entered into separate agent
agreements authorizing Oracle to sub-license the Company's System ESS software
to customers in the consumer packaged goods industry and other industries.
Pursuant to such agent agreements, Oracle pays to the Company a specified
percentage of the license fee for System ESS. In industries other than
consumer packaged goods, the Company also from time to time directly competes
with Oracle's order management software product. See "Risk Factors--
Competition."
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In the consumer packaged goods industry, the Company actively markets and
sells System ESS as a "point" solution and as part of the Oracle Solution
Suite. The Company's sales of System ESS in the consumer packaged goods
industry are dependent upon the effectiveness of Oracle's efforts under the
Oracle Agreement, which the Company cannot control. There can be no assurance
that Oracle will not otherwise curtail or discontinue the Oracle Agreement at
the end of the initial three year term or that the Oracle Agreement will be
beneficial to the Company, which could have a material adverse effect on the
business, operating results and financial condition of the Company. In
industries other than consumer packaged goods, there can be no assurance that
Oracle will continue to recommend the Company and its products to potential
customers or enter into separate agent agreements with the Company, either of
which could have a material adverse effect on the business, operating results
and financial condition of the Company. See "Risk Factors--Dependence upon
Relationship with Oracle."
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 three 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." In
addition the Company's quarterly operating results are subject to certain
seasonal fluctuations. See "Risk Factors--Significant Fluctuations in
Quarterly Operating Results and Seasonality" and "Management's Discussion and
Analysis of Financial Conditions--Quarterly Financial Results."
PRODUCT DEVELOPMENT
The Company has devoted significant resources to product development since
its inception and has increased such investments in recent years. As of July
31, 1997, the Company employed 96 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
started to consider Windows NT or other operating platforms, it was necessary
for the Company to enhance its System ESS products to operate on such
platforms in order to anticipate such customers' requirements. In April 1997,
the Company introduced a new version of System ESS that operates on a Windows
NT server platform, supports Internet-based electronic commerce through World
Wide Web browsers and Java-based clients and supports seven languages in
total. However, there can be no assurance that the Company will be successful
in continuing to develop this enhanced versions 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
33
<PAGE>
software vendors which currently offer client/server ERP solutions, such as
SAP, Baan, J.D. Edwards, SSA and, in vertical markets other than consumer
packaged goods, Oracle, (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 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
execution software. 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 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. 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
34
<PAGE>
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."
35
<PAGE>
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)...... 47 Chairman of the Board, President and Chief Executive Officer
Carl Joelsson........... 53 Senior Vice President-Worldwide Service and Support
Mats Lillienberg........ 37 Senior Vice President-Product Development
Lars-Goran Peterson..... 52 Senior Vice President-Finance and Chief Financial Officer
David Simbari .......... 42 Senior Vice President-Worldwide Sales and Marketing
Per-Olof Ekholtz........ 50 Vice President-Product Marketing
Jeffrey A. Harris
(1)(2)................. 41 Director
William H. Janeway...... 54 Director
Martin Leimdorfer
(1)(2)................. 61 Director
Geoffrey W. Squire (2).. 50 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.
Carl Joelsson joined the Company in 1988 as President of Industri-Matematik
Projektledning AB, a subsidiary of IMAB and an indirect 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 Senior Vice
President-Worldwide Service and Support. 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 is currently Senior
Vice President-Product Development. Before joining the Company, Mr.
Lillienberg worked for Kommun Data AB as a Programmer Analyst for two years.
Lars-Goran Peterson joined the Company in 1992 as a Business Unit Manager
and became its Chief Financial Officer in January 1994. Mr. Peterson is
currently Senior Vice President-Finance and Chief Financial Officer of the
Company. From 1982 to 1992, Mr. Peterson was Chief Financial Officer of AB
Calvert & Co., a wholesale distributor of tube and steel. From 1972 to 1982,
Mr. Peterson served as Chief Financial Officer of Nordiska Industri AB, a
manufacturer and wholesale distributor of textiles.
David Simbari joined the Company in 1993 as Sales Director, United States
and became Senior Vice President-Worldwide Sales and Marketing of the Company
in June 1997. Before joining the Company, Mr. Simbari worked at Ross Systems,
Inc., a software company, from 1986 to 1993, where he served most recently as
Vice President of North American Sales.
36
<PAGE>
Per-Olof Ekholtz joined the Company's marketing department in 1988, became
Vice President Sales/Marketing in 1992 and is currently Vice President-Product
Marketing. Before joining the Company, Mr. Ekholtz owned his own software
consulting company.
Jeffrey A. Harris has served as a director of the Company since 1991. Mr.
Harris has been a Managing Director of E.M. Warburg, Pincus & Co. LLC ("EMWP &
Co.") 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., ECsoft Group plc and several privately held companies.
William H. Janeway has served as a director of the Company since 1991. Mr.
Janeway has been a Managing Director of EMWP & Co. since 1988 and is Head of
the High Technology Group. Mr. Janeway is a director of BEA Systems, Inc.,
Indus International, Inc., Vanstar Corporation, VERITAS Software Corporation,
Zilog, Inc. and several privately-held companies.
Martin Leimdorfer founded IMAB in 1967. Dr. Leimdorfer was President and
Chief Executive Officer of the Company from 1967 to 1995. He has been a
director of the Company since its formation. 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.
Geoffrey W. Squire has served as a director of the Company since 1994. Mr.
Squire is Co-Chairman of the Board and the Executive Vice President for
Worldwide Sales and Services Operations of VERITAS Software Corporation, a
storage management software company. Mr. Squire served at various positions at
Oracle Corporation from 1984, eventually being appointed in 1992 to Oracle's
five-person Executive Committee with responsibility as Chief Executive,
International Operations. Mr. Squire joined OpenVision Technologies Inc. in
1994 and was its Chief Executive Officer from July 1995 through April 1997,
when it merged with VERITAS Software Corporation.
37
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The table below sets forth certain information regarding the beneficial
ownership of the 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) the Selling Stockholders, (ii) each director and executive
officer of the Company and (iii) all directors and executive officers as a
group. 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 BENEFICIALLY
OWNED PRIOR TO NUMBER OWNED AFTER
OFFERING (1)(2) OF 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)................. 18,310,251 64.8% 3,500,000 14,810,251 46.6%
Jeffrey A. Harris(1)(4)(5)..... 18,310,251 64.8% 3,500,000 14,810,251 46.6%
William H. Janeway(1)(4)(5).... 18,310,251 64.8% 3,500,000 14,810,251 46.6%
Martin Leimdorfer.............. 3,067,017 10.9% -- 3,067,017 9.7%
Stig G. Durlow................. 640,000 2.3% 35,000 605,000 1.9%
Lars-Goran Peterson............ 267,000 * 15,000 252,000 *
David Simbari(6)............... 255,500 * 15,000 240,500 *
Mats Lillienberg............... 210,000 * 10,000 200,000 *
Carl Joelsson.................. 86,000 * -- 86,000 *
Per-Olof Ekholtz............... 64,996 * -- 64,996 *
Geoffrey Squire(7)............. 10,000 * -- 10,000 *
All executive officers and
directors as a group
(10 persons).................. 22,910,764 80.3% 3,575,000 19,335,764 60.4%
</TABLE>
- --------
* Less than 1%
(1) Based on 16,171,314 shares of Common Stock and 12,088,200 shares of Class
B Common Stock outstanding prior to this offering. All of the 12,088,200
shares of Class B Common Stock owned by Warburg will be converted into
Common Stock upon the closing of 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. EMWP & Co., a New York limited liability
company, manages Warburg. The members of EMWP & Co. are substantially the
same as the partners of WP. Lionel I. Pincus is the managing partner of WP
and the managing member of EMWP & Co. and may be deemed to control both WP
and EMWP & Co. WP has a 20% interest in the profits of Warburg. Mr.
Janeway and Mr. Harris, directors of the Company, are Managing Directors
of EMWP & Co. and General Partners of WP. 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 Exchange Act) in an indeterminate portion
of the shares beneficially owned by Warburg 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's and Harris' 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
14,279,626 shares, or 44.2% of the Company's outstanding Common Stock
after this offering.
(6) Includes 255,000 shares subject to options currently exercisable or
exercisable within 60 days of the date of this Prospectus.
(7) Includes 10,000 shares subject to options currently exercisable or
exercisable within 60 days of the date of this Prospectus.
38
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 75,000,000 shares of
Common Stock, $.01 par value, 12,500,000 shares of which are designated Class
B Common Stock, $.01 par value, and 15,000,000 shares of which are designated
Preferred Stock, $.01 par value.
COMMON STOCK
As of September 30, 1997, there were 16,171,314 shares of Common Stock
outstanding held of record by 27 stockholders. There will be 31,759,514 shares
of Common Stock outstanding after the sale of Common Stock offered hereby and
the conversion of all of the outstanding Class B Common Stock upon the closing
of this offering.
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
As of September 30, 1997, there were 12,088,200 shares of Class B Common
Stock outstanding and owned by Warburg. Following the completion of this
offering, no shares of Class B Common Stock will be outstanding.
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.
Warburg has elected to convert all of its shares of Class B Common Stock into
Common Stock, without any adjustments, upon the closing of this offering.
PREFERRED STOCK
As of September 30, 1997, there were no shares of Preferred Stock issued or
outstanding.
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 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.
39
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement BT Alex.
Brown Incorporated, Deutsche Morgan Grenfell Inc., SoundView Financial Group,
Inc. and UBS Securities LLC, (the "Underwriters"), have severally agreed to
purchase from the Company and the Selling Stockholders the following
respective numbers of shares of Common Stock at the 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>
BT Alex. Brown Incorporated.......................................
Deutsche Morgan Grenfell Inc. ...................................
SoundView Financial Group, Inc. ..................................
UBS Securities LLC ...............................................
---------
Total........................................................... 7,075,000
=========
</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
Underwriters that the Underwriters propose to offer the shares of Common Stock
to the public at the 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 public offering, the public offering price and other selling terms
may be changed by the Underwriters.
The Company and one of the Selling Stockholders, Warburg, have granted to
the Underwriters an option, exercisable not later than 30 days after the date
of this Prospectus, to purchase up to 1,061,250 additional shares of Common
Stock at the public offering price less the underwriting discounts and
commissions as set forth on the cover page of this Prospectus. The Company and
Warburg have each agreed to sell 530,625 shares. 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 the total number of shares offered hereby, and the Company 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 7,075,000 shares are
being offered hereby.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Stockholders regarding
certain liabilities, including liabilities under the Securities Act.
The Company, each of its directors and executive officers and Warburg have
each agreed, subject to certain limitations, not to offer, sell or otherwise
dispose of any shares of Common Stock for a period of 90 days after the date
of this Prospectus, without the prior written consent of BT Alex. Brown
Incorporated, except that the Company may grant options to purchase shares of
Common Stock under its current Stock Option Plan, sell shares pursuant to its
Restricted Stock Program and Employee Stock Purchase Plan and issue shares of
stock upon the exercise of stock options. See "Risk Factors--Shares Eligible
For Future Sale."
40
<PAGE>
In connection with this offering, certain Underwriters may engage in passive
market making transactions in the Common Stock on Nasdaq immediately prior to
the commencement of sales in this offering in accordance with Rule 103 of
Regulation M under the Exchange Act. Passive market making consists of
displaying bids on Nasdaq limited by the bid prices of independent market
makers and making purchases limited by such prices and effected in response to
order flow. Net purchases by a passive market maker on each day are limited to
a specified percentage of the passive market maker's average daily trading
volume in the Common Stock during a specified period and must be discontinued
when such limit is reached. Passive market making may stabilize the market
price of the Common Stock at a level above that which might otherwise prevail
and, if commenced, may be discontinued at any time.
Subject to applicable limitations, the Underwriters, in connection with this
offering, may place bids for or make purchases of the Common Stock in the open
market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the Common
Stock, which may be higher than the price that might otherwise prevail in the
open market. There can be no assurance that the price of the Common Stock will
be stabilized, or that stabilizing, if commenced, will not be discontinued at
any time. Subject to applicable limitations, the Underwriters may also place
bids or make purchases on behalf of the underwriting syndicate to reduce a
short position created in connection with this offering. The Underwriters are
not required to engage in these activities and may end these activities at any
time.
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, Stockholm, Sweden. 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, 1997 and 1996, 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, 1997
incorporated by reference in this Prospectus, are incorporated by reference
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 Commission a Registration Statement on Form
S-3 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 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.
41
<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>
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
The Company............................................................... 14
Use of Proceeds........................................................... 15
Price Range of Common Stock............................................... 15
Dividend Policy........................................................... 15
Capitalization............................................................ 16
Selected Consolidated Financial Data...................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 18
Business.................................................................. 24
Management................................................................ 36
Principal and Selling Stockholders........................................ 38
Description of Capital Stock.............................................. 39
Underwriting.............................................................. 40
Legal Matters............................................................. 41
Experts................................................................... 41
Additional Information.................................................... 41
</TABLE>
===============================================================================
===============================================================================
7,075,000 SHARES
LOGO
COMMON STOCK
------------
PROSPECTUS
------------
BT ALEX. BROWN
DEUTSCHE MORGAN GRENFELL
SOUNDVIEW FINANCIAL GROUP, INC.
UBS SECURITIES
, 1997
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. 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.................................................. $ 60,406
Nasdaq Listing Fee.................................................... 17,500
NASD Filing Fee....................................................... 20,434
Blue Sky Fees and Expenses............................................ 7,500
Accounting Fees and Expenses.......................................... 35,000
Legal Fees and Expenses............................................... 150,000
Printing and Engraving Expenses....................................... 100,000
Transfer Agent and Registrar Fees and Expenses........................ 3,000
Miscellaneous......................................................... 31,160
--------
Total............................................................. $425,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Section 145 of the Delaware General Corporation Law, as amended, (the
"DGCL") 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 DGCL 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 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
5.1 Opinion of Brobeck Hale and Dorr International
23.1 Consent of Ohrlings Coopers and Lybrand
23.2 Consent of Brobeck Hale and Dorr International (included in
Exhibit 5.1)
24.1 Power of Attorney (See page II-3)
</TABLE>
(b) Financial Statement Schedules
Inapplicable
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby further undertakes that:
(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
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 the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS 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 6TH DAY OF
OCTOBER, 1997.
Industri-Matematik International
Corp.
/s/ Stig G. Durlow
By: _________________________________
STIG G. DURLOW
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS STIG G.
DURLOW, LARS-GORAN PETERSON AND JEFFREY A. HARRIS HIS TRUE AND LAWFUL
ATTORNEY-IN-FACT AND AGENT, EACH ACTING ALONE, WITH FULL POWER OF SUBSTITUTION
AND RE-SUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD IN ANY AND ALL
CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THE REGISTRATION STATEMENT ON FORM S-3, AND TO ANY RELATED
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
RULE 462(B), AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND ALL
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE
COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT, FULL POWER AND
AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND
NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND
PURPOSES AS HE OR SHE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT, OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRA-
TION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACI-
TIES 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)
/s/ Lars-Goran Peterson Senior Vice
- ------------------------------------- President-Finance,
LARS-GORAN PETERSON Chief Financial
Officer and
Secretary
(Principal
Financial and
Accounting Officer)
October 6, 1997
/s/ Martin Leimdorfer Director
- -------------------------------------
MARTIN LEIMDORFER
/s/ Geoffrey W. Squire Director
- -------------------------------------
GEOFFREY W. SQUIRE
/s/ William H. Janeway Director
- -------------------------------------
WILLIAM H. JANEWAY
/s/ Jeffrey A. Harris Director
- -------------------------------------
JEFFREY A. HARRIS
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIONAL
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
5.1 Opinion of Brobeck Hale and Dorr International
23.1 Consent of Ohrlings Coopers and Lybrand
23.2 Consent of Brobeck Hale and Dorr International
(included in Exhibit 5.1)
24.1 Power of Attorney (See page II-3)
</TABLE>
<PAGE>
EXHIBIT 1.1
7,075,000 Shares
Industri-Matematik International Corp.
Common Stock
($.01 Par Value)
FORM OF UNDERWRITING AGREEMENT
------------------------------
, 1997
BT Alex. Brown & Sons Incorporated
Deutsche Morgan Grenfell Inc.
SoundView Financial Group, Inc.
UBS Securities LLC
c/o BT Alex. Brown & Sons Incorporated
1 South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Industri-Matematik International Corp., a Delaware corporation (the
"Company"), and certain stockholders of the Company (the "Selling Stockholders")
propose to sell to you, as the several underwriters (the "Underwriters"), an
aggregate of 7,075,000 shares of the Company's Common Stock, $.01 par value (the
"Firm Shares"), of which 3,500,000 shares will be sold by the Company and
3,575,000 shares will be sold by the Selling Stockholders. 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, and the respective amounts
to be sold by the Selling Stockholders are set forth opposite their names in
Schedule II hereto. In addition, the Company and Warburg, Pincus Investors, L.P.
(the "Principal Stockholder") propose to sell at the Underwriters' option an
aggregate of up to 1,061,250 additional shares of the Company's Common Stock
(the "Option Shares"). The respective amounts of the Option Shares to be sold by
the Company and the Principal Stockholder are set forth opposite their names in
Schedule III hereto. The Company and the Selling Stockholders are sometimes
referred to herein collectively as the "Sellers."
<PAGE>
As the Underwriters, you have advised the Company and the Selling
Stockholders (a) that you are authorized to enter into this Agreement, and (b)
that you are willing, acting severally and not jointly, to purchase the numbers
of Firm Shares set forth opposite your respective names in Schedule I, plus your
pro rata portion of the Option Shares if you elect to exercise the over-
allotment option in whole or in part. 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 hereby represents and warrants to each of the Underwriters
as follows:
(i) A registration statement on Form S-3 (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. The Company has complied with the conditions for the
use of Form S-3. 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 documents incorporated by
reference therein, and, in the case of any reference herein to any Prospectus,
also shall be deemed to include any documents incorporated by reference therein,
and 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.
-2-
<PAGE>
(ii) 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 Statement. Each of the subsidiaries
of the Company 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 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, except for director
qualifying shares, 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 documents incorporated by reference in
the Prospectus, at the time filed with the Commission, conformed in all respects
to the requirements of the Securities Exchange Act of 1934 or the Act, as
applicable, and the rules and regulations of the Commission thereunder. 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
-3-
<PAGE>
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, specifically for use in the
preparation thereof.
(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 or
incorporated by reference 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) Ohrlings Coopers & Lybrand AB, who have certified certain of
the financial statements filed with the Commission as part of, or incorporated
by reference in, 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.
-4-
<PAGE>
(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, 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,
-5-
<PAGE>
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.
(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.
-6-
<PAGE>
(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, 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, 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 to
each of the Underwriters 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
and has duly authorized, executed and delivered 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
-7-
<PAGE>
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, 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.
(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.
(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 in all material respects.
(v) Such 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
generally familiar with the Registration Statement and has no knowledge of any
material fact, condition or information not disclosed in the Registration
Statement which has materially and adversely affected or may materially and
adversely affect the business of the Company or any of the Subsidiaries. The
sale of the Shares by such Selling Stockholder pursuant thereto is not prompted
by any material 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" included or incorporated by reference
in the Prospectus is complete and accurate in all material respects.
2. Purchase, Sale and Delivery of the Firm Shares.
----------------------------------------------
-8-
<PAGE>
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
and the 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 Seller
shall be as nearly as practicable in the same proportion to the total number of
Firm Shares being sold by each 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 each of the Selling
Stockholders 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 First National Bank of Boston 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 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 be made in
immediately available funds by certified or bank cashier's checks drawn to the
order of, or by wire transfer to the account of, the Company for the shares to
be sold by it, and by certified or bank cashier's checks drawn to the order of,
or by wire transfer to the account of, "First National Bank of Boston, as
Custodian" for the shares to be sold by the Selling Stockholders, in each case
against delivery of certificates therefor to the Underwriters. Such payment and
delivery are to be made at the offices of BT Alex. Brown Incorporated, 1 South
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 Underwriters request in writing
not later than the
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second full business day prior to the Closing Date, and will be made available
for inspection by the Underwriters 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
Company and the Principal Stockholder hereby grant an option to the several
Underwriters to purchase the Option Shares at the price per share set forth in
the first paragraph of this Section 2. The maximum number of Option Shares to be
sold by the Company and the Principal Stockholder is set forth opposite their
respective names on Schedule III hereto. 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 the Underwriters, to the Company, the Attorney-if-
Fact, 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. If the option granted hereby is exercised
in part, the respective number of Option Shares to be sold by the Company and
the Principal Stockholder shall be determined on a pro rata basis in accordance
with the percentages set forth opposite their names on Schedule III hereto,
adjusted by you in such manner as to avoid fractional shares. The time and date
at which certificates for Option Shares are to be delivered shall be determined
by the Underwriters 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 Underwriters, may cancel such option at any
time prior to its expiration by giving written notice of such cancellation to
the Company and the Attorney-in-Fact. To the extent, if any, that the option is
exercised, payment for the Option Shares shall be made on the Option Closing
Date in immediately available funds by certified or bank cashier's check drawn
to the order of, or by wire transfer to the account of, the Company for the
Option Shares to be sold by it and to the order of "First National Bank of
Boston, as Custodian" for the Option Shares to be sold by the Principal
Stockholder against delivery of certificates therefor at the offices of BT Alex.
Brown Incorporated, 1 South 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 Underwriters.
3. Offering by the Underwriters. It is understood that you, as the
----------------------------
several Underwriters, are to make
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a public offering of the Firm Shares as soon as you 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 Underwriters 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.
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 Underwriters containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rule 430A of
the Rules and Regulations, (B) not file any amendment to the Registration
Statement or supplement to the Prospectus or document incorporated by reference
therein of which the Underwriters shall not previously have been advised and
furnished with a copy or to which the Underwriters shall have reasonably
objected in writing or which is not in compliance with the Rules and Regulations
and (C) file on a timely basis all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
subsequent to the date of the Prospectus and prior to the termination of the
offering of the Shares by the Underwriters.
(ii) The Company will advise the Underwriters 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 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 Underwriters in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Underwriters 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
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<PAGE>
required to continue such qualifications in effect for distribution of the
Shares for so long a period as the Underwriters may reasonably request.
(iv) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary Prospectus
as the Underwriters may reasonably request. The Company will deliver to, or
upon the order of, the Underwriters 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 Underwriters may
reasonably request. The Company will deliver to the Underwriters 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 Underwriters such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), including documents incorporated by
reference therein, and of all amendments thereto, as the Underwriters 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.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Underwriters 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 Underwriters 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
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period of 90 days after the date of this Agreement, directly or indirectly, by
the Company otherwise than hereunder or with the prior written consent of
BT Alex. Brown 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 the
stockholders of the Company listed in Exhibit B to this Agreement 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 90 days after the date of
this Agreement, directly or indirectly, except with the prior written consent of
BT Alex. Brown Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus.
(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.
(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 90 days after the date of this Agreement, directly or indirectly, by
such Selling Stockholder otherwise than hereunder or with the prior written
consent of BT Alex. Brown Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting
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<PAGE>
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 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 Underwriters 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
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<PAGE>
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 the Closing Date and the Option Shares, if any, on the Option Closing
Date 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 Underwriters 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 Underwriters 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 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
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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.
(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 and document incorporated by
reference therein comply as to form in all material respects with the
requirements of the Act or the Securities Exchange Act of 1934, as applicable,
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 or incorporated by reference
therein). The conditions for the use of Form S-3, set forth in the General
Instructions thereto, have been satisfied.
(vi) The statements under the captions "Description of Capital Stock"
and
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<PAGE>
"Risk Factors--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.
(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.
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<PAGE>
(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) Each of the Power of Attorney and the Custody Agreement
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 Underwriters
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 Underwriters shall have received from Advokatfirman Vinge
KB, Swedish counsel for the Company, 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:
(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 each of the Swedish Subsidiaries
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.
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<PAGE>
(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 are owned free and clear of all liens, encumbrances and
equities and claims, and, to the best of such counsel's knowledge, 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) 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 any Nordic language
document or agreement provided by the Company to such counsel to which the
Company or any of the Swedish Subsidiaries is a party (which documents and
agreements (the "Nordic Language Documents") are specifically summarized in the
Review Reports I and II dated _______, 1997 and _______, 1997, respectively,
prepared by such counsel (collectively, the "Review Reports") (it being
understood that the term "Nordic Language Documents" shall not refer to any
document or agreement which according to the Review Reports has not been
reviewed by such counsel), which Review Reports are attached as an appendix to
such counsel's opinion) or, to the best of such counsel's knowledge, any other
agreement or 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.
(iv) 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.
(v) 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.
(vi) Each of the Swedish Selling Stockholders 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.
(vii) Each of the Swedish Selling Stockholders has the power to
submit and
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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 or may claim exclusive
jurisdiction in respect of all property of each Swedish Selling Stockholder at
the bankruptcy of such Swedish Selling Stockholder) with respect to legal
proceedings in the United States; and there is no provision of Swedish law that
would render service of process effected in the manner set forth in Section 14
hereof invalid with respect to legal proceedings in the United States relating
to or arising under this Agreement and the transactions contemplated hereby.
(viii) 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 each Swedish 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;
(ix) The choice of the law of the State of Maryland as the law
expressed to govern this Agreement is valid and binding on each Swedish 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 Sweden in respect of, or an execution
against, each Swedish Selling Stockholder;
(x) Under the laws of the Kingdom of Sweden, each Swedish 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.
(xi) The Agreement of each Swedish Selling Stockholder under Section 8
of this Agreement does not contravene Swedish public policy;
(xii) The following statements with respect to Swedish law set forth
or incorporated by reference 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 Agreements;" and (iii) the statements regarding Swedish
law under "Management,Employee Benefit Plans;" and (iv) the statements regarding
Swedish law under "Business-Employees."
(xiii) Such counsel has reviewed the Nordic Language Documents and
has prepared and delivered to you the Review Reports, which set forth a brief
summary of each such Nordic Language Document; such summaries completely and
accurately state the subject matter of such Nordic Language Documents and do not
misstate or omit to state any material facts; such counsel has prepared and
delivered to you English language translations of certain material agreements
and documents (which agreements and documents are set forth in the Review
Reports) and such translations are fair and accurate in all material respects;
and
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(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 Underwriters 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 Underwriters 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 to the Underwriters 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 Underwriters may reasonably have designated to the Company.
(f) The Underwriters shall have received, on each of the dates
hereof, the Closing
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Date and (i) on the date of this Agreement, a letter, dated the date hereof,
from Ohrlings Coopers & Lybrand AB addressed to the Underwriters 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 Underwriters
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 Underwriters 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 Underwriters.
(g) The Underwriters 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 Registration 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 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;
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<PAGE>
(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 Underwriters such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein and
related matters as the Underwriters 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 Underwriters 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
Underwriters 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.
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
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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
Underwriters specifically for use in the preparation thereof; provided, further,
that each Selling Stockholder shall be liable under this Section 8(a) only 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 such
Selling Stockholder 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 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 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 Underwriters
specifically for use in the preparation thereof. This
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<PAGE>
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.
(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
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<PAGE>
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 pursuant to this Section 8(d)
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 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
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<PAGE>
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 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
Underwriters, 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
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
Underwriters, 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.
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,
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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, Hasilwood House, 60 Bishopsgate, London,
EC2N 4AJ, England, Attention: Christopher A. Grew, Esq.; and 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 or the NASD 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 Closing Date of any of the events
described in subparagraph (b) above or as provided in Sections 6 and 9 of this
Agreement.
-28-
<PAGE>
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 third, seventh and
eighth paragraph under the caption "Underwriting."
14. Submission to Jurisdiction. The Swedish 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. Each of the Swedish Selling
Stockholders 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 s erved 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. Each of the Swedish
Share Selling Stockholders agree 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.
Each of the Swedish Selling Stockholders represents and warrants that said
Tannenbaum Dubin & Robinson, LLP has agreed to act as said agent for service of
process. Each of the Swedish Selling Stockholders 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.
Each of the Swedish Selling Stockholders 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.
-29-
<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.
-30-
<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.
Very truly yours,
INDUSTRI-MATEMATIK INTERNATIONAL CORP.
By:
--------------------------------------------
Lars-Goran Peterson, Vice President,
Finance and Chief Financial Officer
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co., Inc.
its General Partner
By:
--------------------------------------------
Managing Director
SELLING STOCKHOLDERS LISTED ON
SCHEDULE II
By:
--------------------------------------------
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. BROWN INCORPORATED
DEUTSCHE MORGAN GRENFELL INC.
SOUNDVIEW FINANCIAL GROUP, INC.
UBS SECURITIES LLC
By: BT Alex. Brown Incorporated
By:
--------------------------------
Authorized Officer
-31-
<PAGE>
SCHEDULE I
Schedule of Underwriters
- ------------------------------------------------------------------
UNDERWRITER NUMBER OF FIRM SHARES
TO BE PURCHASED
BT Alex. Brown Incorporated............
Deutsche Morgan Grenfell Inc...........
Soundview Financial Group, Inc.........
UBS Securities LLC.....................
- ------------------------------------------------------------------
TOTAL 7,075,000
==============
====
<PAGE>
SCHEDULE II
Schedule of Selling Stockholders
Number of Firm Shares
Selling Stockholder to be Sold
- ------------------- ---------------------
Warburg, Pincus Investors, L.P........... 3,500,000
Stig G. Durlow........................... 35,000
Lars-Goran Peterson...................... 15,000
Mats Lillienberg......................... 10,000
David Simbari............................ 15,000
---------
Total 3,575,000
<PAGE>
SCHEDULE III
Schedule of Option Shares
Maximum Number Percentage of
of Option Shares Total Number of
Name of Seller to be Sold Option Shares
-------------- ---------------- ---------------
Industri-Matematik International 530,625 50%
Corp.
Warburg, Pincus Investors, L.P. 530,625 50%
--------- ---
Total 1,061,250 100%
<PAGE>
EXHIBIT A
List of Subsidiaries
<PAGE>
EXHIBIT B
Lockup Agreements
<PAGE>
EXHIBIT 5.1
[Brobeck Hale and Dorr Letterhead]
October 6, 1997
Industri-Matematik International Corp.
Kungsgatan 12-14
Box 7733
103 95 Stockholm
SWEDEN
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration Statement
on Form S-3 (File No. 333-____) (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), for the registration of an aggregate
of 8,136,250 shares of Common Stock, $.01 par value per share (the "Shares"), of
Industri-Matematik International Corp., a Delaware corporation (the "Company"),
of which (i) up to 4,030,625 Shares (including 530,625 Shares issuable upon
exercise of an over-allotment option granted by the Company) will be issued and
sold by the Company and (ii) the remaining 4,105,625 Shares (including 530,625
Shares issuable upon exercise of an over-allotment option granted by the
Company) will be sold by certain stockholders of the Company (the "Selling
Stockholders").
The Shares are to be sold by the Company and the Selling Stockholders pursuant
to an underwriting agreement (the "Underwriting Agreement") to be entered into
by and among the Company, the Selling Stockholders and B.T. Alex Brown
Incorporated, Deutsche Morgan Grenfell Inc., SoundView Financial Group, Inc. and
UBS Securities LLC, as representatives of the several underwriters named in the
Underwriting Agreement, the form of which has been filed as Exhibit 1 to the
Registration Statement.
We are acting as counsel for the Company in connection with the sale by the
Company and the Selling Stockholders of the Shares. We have examined signed
copies of the Registration Statement as filed with the Commission. We have also
examined and relied upon the Underwriting Agreement, minutes of meetings of the
Board of Directors of the Company as provided to us by the Company, stock record
books of the Company as provided to us by the Company, the Certificate of
Incorporation and By-Laws of the Company, each as restated and/or amended to
date, and such other documents as we have deemed necessary for purposes of
rendering the opinions hereinafter set forth.
<PAGE>
Industri-Matematik International Corp.
October 6, 1997
Page 2
In our examination of the foregoing documents, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
We assume that the appropriate action will be taken, prior to the offer and
sale of the Shares in accordance with the Underwriting Agreement, to register
and qualify the Shares for sale under all applicable state securities or "blue
sky" laws.
We express no opinion herein as to the laws of any state or jurisdiction other
than the state laws of New York, the Delaware General Corporation Law statute
and the federal laws of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that (i) the
Shares to be issued and sold by the Company have been duly authorized for
issuance and, when such Shares are issued and paid for in accordance with the
terms and conditions of the Underwriting Agreement, such Shares will be validly
issued, fully paid and nonassessable and (ii) the Shares to be sold by the
Selling Stockholders have been duly authorized and are validly issued, fully
paid and nonassessable.
It is understood that this opinion is to be used only in connection with the
offer and sale of the Shares while the Registration Statement is in effect.
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters."
In giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.
Very truly yours,
/s/ Brobeck Hale and Dorr International
---------------------------------------
BROBECK HALE AND DORR INTERNATIONAL
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-3 of our report dated July 28, 1997, on our audits of the consolidated
financial statements of Industri-Matematik International Corp. as of April 30,
1996 and 1997, and for the three years in the period ended April 30, 1997,
appearing in the Annual Report on Form 10-K (SEC File No. 000-21359) of
Industri-Matematik International Corp. filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1934.
Ohrlings Coopers & Lybrand
/s/ Ohrlings Cooper & Lybrand
Stockholm, Sweden
October 6, 1997
