<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1997.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
TSW INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
GEORGIA 7372 58-1545995
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
(770) 952-8444
</TABLE>
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN F. BARTELS
CHIEF FINANCIAL OFFICER
TSW INTERNATIONAL, INC.
3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
(770) 952-8444
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
WITH COPIES TO:
<TABLE>
<S> <C>
Daniel T. Falstad, Esq. Jeffrey M. Stein, Esq.
Troutman Sanders LLP King & Spalding
NationsBank Plaza--Suite 5200 191 Peachtree Street, N.E.
600 Peachtree Street, N.E. Atlanta, Georgia 30303-1763
Atlanta, Georgia 30308-2216 Phone (404) 572-4600
Phone (404) 885-3000 Facsimile (404) 572-5100
Facsimile (404) 885-3900
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
----------------
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, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration number of the
earlier effective registration statement for the same offering. / /
- ----------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, 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>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED (1)(2) SHARE (1) PRICE (2)(3) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.................. -- -- $51,750,000 $15,681.82
</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, the number
of shares being registered and the proposed maximum aggregate offering price
are not included in this table.
(2) Includes shares subject to the Underwriters' over-allotment option.
(3) Estimated solely for purposes of computing the registration fee.
----------------
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.
<PAGE>
SUBJECT TO COMPLETION
, 1997
SHARES
[LOGO]
COMMON STOCK
-----------
Of the shares of Common Stock offered hereby, shares are being
sold by TSW International, Inc. ("TSW" or the "Company") and shares are
being sold by certain shareholders of the Company (the "Selling Shareholders").
See "Principal and Selling Shareholders." The Company will not receive any
proceeds from the sale of shares by the Selling Shareholders. Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price of the Common
Stock will be between $ and $ per share. See "Underwriting" for the
factors to be considered in determining the initial public offering price. The
Company has applied for quotation of the Common Stock on the Nasdaq National
Market under the trading symbol "TSWI." Upon the completion of this offering,
the Company's principal shareholder will beneficially own approximately % of
the outstanding Common Stock.
--------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-------------
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>
UNDERWRITING
PRICE DISCOUNTS PROCEEDS PROCEEDS TO
TO AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
Total(3)............................... $ $ $ $
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $ .
(3) The Company's principal shareholder has granted the Underwriters a 30-day
option to purchase up to 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 Company and Proceeds to
Selling Shareholders will be $ , $ , $ and
$ , respectively. See "Underwriting" and "Principal and Selling
Shareholders."
--------------
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 Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
ALEX. BROWN & SONS
INCORPORATED
SOUNDVIEW FINANCIAL GROUP, INC.
WESSELS, ARNOLD & HENDERSON
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
[INSIDE FRONT COVER GRAPHIC TO BE ADDED.]
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and quarterly reports containing
unaudited financial statements for the first three quarters of each fiscal year.
CERTAIN PERSONS PARTICIPATING IN THE COMMON STOCK OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THE COMMON STOCK OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON
STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, THE INFORMATION IN
THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION
AND DOES NOT REFLECT THE EXERCISE OF ANY STOCK OPTIONS OR WARRANTS AFTER MARCH
31, 1997.
THE COMPANY
TSW International, Inc. ("TSW" or the "Company") is a leading provider of
Asset Care-TM- solutions, which are used by large organizations to maintain
their valuable physical assets on an enterprise-wide basis. The Company
develops, markets and supports advanced Asset Care application software and
provides related services that enable customers to plan, execute, monitor and
improve asset maintenance processes. With the Company's products, customers are
better able to increase equipment and production capacity, reduce operating
costs and safeguard the workforce and the environment. The Company's sales and
professional services functions are organized into vertical industry sectors to
best match the Company's solution to its customers' business requirements.
Typical licensees of the Company's software include discrete and process
manufacturers, utilities, hospitals, mining companies, transportation
authorities, educational systems, telecommunications providers and governmental
institutions.
The Company's client/server Asset Care solution, Enterprise MPAC ("EMPAC"),
is a scalable software solution that enables organizations to implement "best
practices" maintenance automation on an enterprise-wide basis. EMPAC allows
TSW's customers to raise the level of computerized maintenance management from a
simple record keeping system for preventive maintenance to a proactive knowledge
control system that manages the complete asset life cycle. EMPAC manages
physical assets in real time by interoperating with other business information
systems from vendors such as Baan, Oracle, PeopleSoft and SAP, and by acquiring
performance and maintenance-related data from plant floor systems. The Company's
professional services organization, which is organized along vertical markets,
applies the Company's software technology and industry expertise to specific
customer needs. With vertical market input to product development and an
industry focus in its implementation approach, the Company believes it can
leverage its Asset Care products across several vertical markets.
The Company's objective is to be the leading worldwide provider of advanced
enterprise-wide Asset Care software, services and support. To that end, TSW
employees with practical maintenance and operations experience work with
customers to develop the functional content of TSW's Asset Care solution, while
software engineers apply leading-edge technology in a common sense fashion. The
Company also is leveraging its substantial installed customer base by providing
a clearly defined migration path from its previous host-based systems to its
EMPAC client/server software solution. Finally, the Company intends to build
upon key customer relationships with opinion leaders in its various vertical
markets to extend its presence domestically and abroad.
As of March 31, 1997, TSW's solutions were licensed for use by 321 customers
at 941 sites in 48 countries. The Company's customer base consists of large,
asset-intensive organizations including The Tennessee Valley Authority
(utilities), Phelps Dodge Corporation (mining), Aluminum Company of America
(metals), James River Corporation (forest products), The Coca-Cola Company
(consumer packaged goods) and Unocal Thailand (oil and gas).
The Company was founded in 1976 and shipped its first major software
product, MPAC, in 1980. Its principal executive offices are located at 3301
Windy Ridge Parkway, Atlanta, Georgia 30339, and its telephone number is (770)
952-8444. As used herein, unless the context otherwise requires, the terms "TSW"
and the "Company" include the consolidated subsidiaries of the Company.
3
<PAGE>
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company............. shares
Common Stock offered by the Selling
Shareholders.................................. shares
Common Stock to be outstanding after the
offering...................................... shares (1)
Use of proceeds................................. To repay outstanding debt and for general
corporate purposes.
Proposed Nasdaq National Market symbol.......... TSWI
</TABLE>
- --------------
(1) Based upon the number of shares outstanding as of March 31, 1997. Excludes
shares of Common Stock issuable upon the exercise of stock options
outstanding as of March 31, 1997, with a weighted average exercise price of
$ per share, of which options to purchase shares were then
exercisable.
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
License fees..................................... $ 6,697 $ 8,447 $ 7,833 $ 22,140 $ 26,852
Services and support............................. 11,554 13,773 18,857 24,709 37,784
Other revenue.................................... 2,479 2,729 824 1,184 2,463
--------- --------- ---------- ---------- ---------
Total revenue.................................. 20,730 24,949 27,514 48,033 67,099
Operating expenses:
Costs of license fees............................ 1,048 1,163 1,557 4,799 2,917
Costs of services and support.................... 8,732 9,206 12,098 19,203 26,967
Costs of other revenue........................... 2,338 2,694 1,211 1,292 2,064
Write-off of goodwill (1)........................ -- -- -- -- 688
Other operating expenses......................... 7,120 11,596 26,581 32,158 34,433
--------- --------- ---------- ---------- ---------
Total operating expenses....................... 19,238 24,659 41,447 57,452 67,069
--------- --------- ---------- ---------- ---------
Income (loss) from operations...................... 1,492 290 (13,933) (9,419) 30
Interest income (expense):
Interest income.................................. 66 45 29 46 35
Interest expense................................. (33) (48) (711) (2,254) (3,173)
--------- --------- ---------- ---------- ---------
Total interest income (expense), net........... 33 (3) (682) (2,208) (3,138)
--------- --------- ---------- ---------- ---------
Income (loss) before taxes......................... 1,525 287 (14,615) (11,627) (3,108)
Income tax expense (benefit)..................... 601 132 (1,264) 98 295
--------- --------- ---------- ---------- ---------
Net income (loss).................................. $ 924 $ 155 $ (13,351) $ (11,725) $ (3,403)
--------- --------- ---------- ---------- ---------
--------- --------- ---------- ---------- ---------
Pro forma net loss per share (2)................... $ (0.99)
---------
---------
Pro forma weighted average shares outstanding
(2).............................................. 3,422
---------
---------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------------------
PRO PRO FORMA
ACTUAL FORMA (3) AS ADJUSTED (4)
---------- ---------- ---------------
<S> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital (deficit)............................................ $ (3,629) $ $
Total assets......................................................... 42,341
Short-term debt...................................................... 16,951
Long-term capital leases and term loans.............................. 2,126
Subordinated long-term notes......................................... 18,065
Redeemable Preferred Stock........................................... 18,100
Total shareholders' equity (deficit)................................. (34,706)
</TABLE>
- --------------
(1) See Note 1 of the Notes to the Consolidated Financial Statements for an
explanation of the write-off of goodwill.
(2) Reflects the conversion of all outstanding shares of Redeemable Preferred
Stock (as defined below) into Common Stock. See Note 1 of the Notes to the
Consolidated Financial Statements for an explanation of the determination of
shares used in calculating pro forma net loss per share.
(3) Reflects the Concurrent Transactions (as defined below).
(4) Adjusted to give effect to the sale of shares of Common Stock offered
by the Company hereby (at an assumed initial public offering price of $
per share) and the application of the estimated net proceeds therefrom.
EXCEPT FOR THE CONSOLIDATED FINANCIAL STATEMENTS AND AS OTHERWISE NOTED, ALL
INFORMATION IN THIS PROSPECTUS HAS BEEN ADJUSTED TO GIVE EFFECT TO A
-FOR-ONE STOCK SPLIT EFFECTED ON , 1997 AND TO THE FOLLOWING
TRANSACTIONS TO BE EFFECTED SIMULTANEOUSLY WITH THE CONSUMMATION OF THIS
OFFERING: (I) THE CONVERSION OF ALL OF THE COMPANY'S SERIES A PREFERRED STOCK,
SERIES B PREFERRED STOCK, SERIES C CUMULATIVE PREFERRED STOCK AND SERIES D
CUMULATIVE PREFERRED STOCK (COLLECTIVELY, THE "REDEEMABLE PREFERRED STOCK") INTO
AN AGGREGATE OF SHARES OF COMMON STOCK, (II) THE EXERCISE BY WARBURG,
PINCUS INVESTORS, L.P. ("WARBURG") OF WARRANTS TO PURCHASE SHARES OF THE
COMPANY'S COMMON STOCK, AND (III) THE ISSUANCE OF SHARES OF COMMON STOCK
IN PAYMENT OF PRINCIPAL AND ACCRUED INTEREST ON CERTAIN SUBORDINATED NOTES OF
THE COMPANY HELD BY WARBURG (COLLECTIVELY, THE "CONCURRENT TRANSACTIONS"). THE
REFERENCES TO FISCAL YEARS BY DATE REFER TO THE COMPANY'S FISCAL YEAR ENDING IN
MARCH OF THAT PARTICULAR CALENDAR YEAR; FOR EXAMPLE, "FISCAL 1997" REFERS TO THE
COMPANY'S FISCAL YEAR ENDED MARCH 31, 1997.
CURATOR-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF THE COMPANY. TSW
INTERNATIONAL-TM-, ENTERPRISE MPAC-TM-, TSWNET-TM-, CARENET-TM-, MPAC-UX-TM-, EN
GARDE-TM- AND ASSET CARE-TM- ARE TRADEMARKS OF THE COMPANY.
ORACLE-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF ORACLE CORPORATION.
ALL OTHER TRADEMARKS OR TRADE NAMES REFERRED TO IN THIS PROSPECTUS ARE THE
PROPERTY OF THEIR RESPECTIVE OWNERS.
5
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH A DIFFERENCE INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW.
HISTORY OF LOSSES. Although the Company's total revenue has increased in
each of the last five fiscal years, the Company has experienced operating and
net losses for fiscal 1995 and 1996 and a net loss for fiscal 1997. Such losses
resulted primarily from costs incurred in connection with the development and
introduction of the Company's client/server Asset Care system, Enterprise MPAC
("EMPAC"), purchasing delays by customers in anticipation of the introduction of
EMPAC, and, to a lesser extent, costs associated with the expansion of the
Company's international operations. There can be no assurance that the Company
will be able to achieve or sustain profitability in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DEPENDENCE ON PRINCIPAL PRODUCT LINE. License fee revenue from the
Company's EMPAC product was first recognized in the third quarter of fiscal 1996
and represented approximately 70% and 94% of total license fee revenue in fiscal
1996 and fiscal 1997, respectively. The Company expects that sales of EMPAC
licenses will continue to account for substantially all of the Company's license
fee revenue for the foreseeable future, and that revenue from EMPAC customers
will account for increasing portions of the Company's services and support
revenue in future periods. As a result, the Company's financial performance will
depend on continued market acceptance of EMPAC and, to a lesser extent, the
introduction and market acceptance of other new products developed by the
Company, if any. Any factor adversely affecting the sale of the Company's EMPAC
product or other new products, including delays in development, software flaws,
incompatibility with industry-leading hardware platforms, operating systems or
database systems or negative evaluations of the products, would have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business--Products."
LENGTHY SALES AND IMPLEMENTATION CYCLE; LARGE ORDER SIZE. The purchase and
implementation of Asset Care software by a customer generally involves a
significant commitment of capital over a long period of time, with the risk of
delays frequently associated with large capital expenditures and implementation
procedures within an organization, such as budgetary constraints and internal
approval review. During the sales process, 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 significant delays over which the Company has no control. In
addition, following license sales, the implementation of the Company's products
involves a lengthy process, including customer training and integration of the
Company's products with the customer's existing information systems. A
successful implementation requires a close working relationship between the
Company, the customer and, if applicable, third-party consultants and systems
integrators who assist in the process. These factors may increase the costs
associated with completion of any given sale, and the risks of cancellation or
delay of such sales.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. The Company's quarterly
operating results have varied in the past and may vary significantly in the
future depending on many factors including, among others: the size, timing and
recognition of revenue from significant orders; the timing of new product
releases and market acceptance of such releases; increases in operating expenses
required for product development and new product marketing; market acceptance of
new products and product enhancements; customer order deferrals in anticipation
of new products and product enhancements; the Company's success in expanding its
sales and marketing programs; and general economic conditions. Further, the
Company's operating results have been, and are expected to continue to be,
highly sensitive to the receipt, timing and payment of large orders. In fiscal
1996, the Company had one customer which
6
<PAGE>
accounted for more than ten percent of the Company's total revenue. The Company
had no customer which accounted for more than ten percent of the Company's total
revenue in fiscal 1995 or 1997. Approximately 41%, 37% and 35% of the Company's
total revenue was attributable to its ten largest customers in fiscal 1995, 1996
and 1997, respectively. The Company expects that revenue derived from a limited
number of large contracts will continue to represent a significant portion of
its revenue. Moreover, the Company historically has recognized greater license
fee revenue in the fourth quarter of each fiscal year than in each of the
preceding quarters, and first quarter revenue has typically declined from
revenue in the fourth quarter of the preceding fiscal year. The Company believes
that this concentration of licensing activity is caused primarily by the
Company's sales commission policies, which compensate sales personnel for
meeting or exceeding annual performance quotas. Any change in the Company's
sales commission policies could result in a change in this pattern of licensing
activity and reported revenue. Based upon all of the foregoing factors, the
Company believes that its quarterly revenue, expenses and operating results are
likely to vary significantly in the future, that period-to-period comparisons of
its results of operations may not be meaningful and that, in any event, such
comparisons should not be relied upon as indications of future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Information."
The Company's future revenue is difficult to predict, and the Company has,
in certain instances in the past, not achieved its revenue expectations. Because
the Company generally ships its software products within a few days after
receipt of an order, it typically does not have a material backlog of unfilled
software license orders, and license fee revenue in any quarter is substantially
dependent on orders booked and shipped in that quarter. In addition, the Company
typically enters into a significant portion of its new license contracts in the
last two weeks of a quarter. The Company's expense levels are based, in part, on
its expectations as to future revenue and to a large extent are fixed in the
short term. The Company generally is unable to adjust expenses in the short term
to compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall of revenue in relation to the Company's expectations or any material
delay in customer orders would have an immediate material adverse effect on its
business, operating results and financial condition and on the Company's ability
to achieve or maintain profitability. Due to all of the foregoing factors and
the other factors discussed in this section, it is possible that in future
quarters the Company's operating results may be below the expectations of public
market analysts and investors. In such event, the price of the Company's Common
Stock may be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly
Information."
DEPENDENCE ON CONTINUED ADOPTION OF ASSET CARE STRATEGIES. EMPAC is
designed to assist companies employing newly developed, complex Asset Care
strategies. These new strategies represent a shift from a reactive, preventive
approach to a proactive, predictive approach to Asset Care and include the
development of productivity-enhancing maintenance strategies. The Company
believes the success of these new strategies is dependent on an organization's
ability to integrate Asset Care information on an enterprise-wide basis. Any
decline or slowdown in the adoption of these advanced Asset Care strategies or
the inability of the Company's products to address its customers' increasingly
sophisticated Asset Care needs could have a material adverse effect on the
Company's business, operating results and financial condition.
RAPID TECHNOLOGICAL CHANGE AND REQUIREMENT FOR FREQUENT PRODUCT
TRANSITIONS. The application software market is subject to intense competition,
rapid technological change, frequent new product introductions and evolving
technology and industry standards that may render existing products obsolete.
Although the Company's products incorporate current industry standards, these
standards could change rapidly. While the Company is not aware of any emerging
products or industry standards that are likely to render its existing products
obsolete, there can be no assurance that the Company's products will not suffer
such obsolescence in the future. In addition, the Company's products must
address increasingly complex computing environments. Such factors may require,
from time to time, substantial
7
<PAGE>
expenditures by the Company on product development and testing. The Company is
conducting ongoing research and development relating to new and improved
software products. The Company believes that it will need to devote significant
time and resources to these efforts, and no assurance can be given that such
efforts will be successful. The Company has experienced delays in product
development in the past, and there can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of new products. In addition, there can be no
assurance that new products and product enhancements will meet the requirements
of the marketplace and achieve market acceptance, or that the Company's current
or future products will conform to industry requirements. From time to time the
Company or its competitors may introduce new products, capabilities or
technologies that have the potential to replace or shorten the life-cycles of
the Company's existing products. There can be no assurance that announcements of
currently planned or other new products will not cause customers to defer
purchasing the Company's products. Any such delay or other failure could have a
material adverse effect on the Company's business, operating results and
financial condition.
MANAGEMENT OF GROWTH. The Company has recently experienced a period of
rapid growth that has placed, and may continue to place, a significant strain on
the Company's financial, management, technical and other resources. In the third
quarter of fiscal 1996, the Company first recognized license fee revenue
associated with EMPAC after a substantial product development effort.
Additionally, the Company recently acquired operations in Europe and Australia
and opened offices in Asia, and the Company has recently implemented new
financial, time management and project reporting systems. The Company's ability
to manage its growth effectively will require it to continue to improve its
systems and procedures and to attract, train, motivate, manage and retain key
employees. Any inability of the Company to manage growth effectively could have
a material adverse effect on the Company's business, operating results and
financial condition.
RISKS ASSOCIATED WITH ACQUISITIONS. As part of its business strategy, the
Company from time to time may pursue the acquisition of complementary
technologies, products and services. Such transactions commonly involve a number
of risks including, among others: the difficulty of assimilating acquired
operations and personnel; the potential disruption of TSW's ongoing business;
the possible inability of management to maximize the financial and strategic
position of the Company by the successful incorporation of acquired technology,
products and services into the Company's offerings and the maintenance of
uniform standards, controls, procedures and policies; the risks of entering
markets in which TSW has little or no direct prior experience; and the potential
impairment of relationships with employees and customers. There can be no
assurance that the Company will consummate future acquisitions on satisfactory
terms, if at all, or that it will be successful in overcoming the risks or other
problems encountered with any acquisitions. Further, any such acquisitions could
have a material adverse effect on the Company's operating results or financial
condition due to the incurrence of additional debt, dilutive issuances of equity
securities and the amortization of expenses related to intangible assets. See
"Business--Company Strategy--Pursue Strategic Acquisitions."
DEPENDENCE ON KEY PERSONNEL; NEED TO ATTRACT AND RETAIN SKILLED
PERSONNEL. The Company is highly dependent on certain key executive officers
and technical employees, the loss of one or more of whom could have an adverse
impact on the Company. In addition, the Company may need to hire additional
skilled personnel to support the continued growth of its business. Competition
in the recruiting of highly-qualified software industry personnel is intense,
and from time to time the Company has experienced difficulty in recruiting
talented and qualified employees, particularly professional services and
technical personnel. The Company has employment agreements with certain of its
executive officers and is a party to confidentiality and non-disclosure
agreements with certain officers and other key employees. The laws governing
such agreements continually change, however, and the enforceability of such
agreements in each jurisdiction in which enforcement might be sought is
uncertain. There can be
8
<PAGE>
no assurance that the Company will be able to retain its existing personnel or
attract, motivate and retain additional qualified employees. See "Management."
COMPETITION. The market for application software is intensely competitive
and characterized by rapid changes in technology and evolving industry
standards. Competitors vary in size and in the scope and breadth of the products
and services offered. The Company encounters competition from a number of
sources, including: (i) software companies that provide computerized maintenance
management systems, (ii) software companies that integrate Asset Care
applications into their overall enterprise information management systems, (iii)
third-party professional services organizations that develop software, and (iv)
information technology departments of potential customers that develop in-house
software. New competitors may emerge with products that are superior to the
Company's products in performance, functionality or ease-of-use, or that achieve
a greater market acceptance. Many of the Company's current and potential
competitors have significantly greater financial, technical, marketing and other
resources than the Company. As a result, they may be able to respond more
quickly to new industry standards, emerging technologies and changes in customer
requirements, and to devote greater resources to the development and
distribution of their products. In addition, the Company expects additional
competition from other established or emerging companies if the Asset Care
software market continues to expand. Increased competition could result in price
reductions, reduced gross margins and loss of market share, any of which could
have a material adverse effect on the Company's business, operating results and
financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL SALES. Prior to fiscal 1995, the
Company derived no significant revenue from international operations. With the
Company's acquisition of the United Kingdom software firm, SQL Systems
International plc ("SQL Systems"), in October 1994 and its purchase of an 80%
equity interest in the French software firm, Socotec Maintenance Services
("Socotec"), in July 1995, international sales have become, and are expected to
continue to become, a more significant component of its business. In fiscal
1995, 1996 and 1997, approximately 12%, 22% and 23% of the Company's total
revenue originated outside the United States. International sales in certain
foreign markets are subject to a variety of risks, including difficulties in
establishing and managing international distribution channels, localizing
products for sales in foreign markets and enforcing intellectual property
rights, as well as fluctuations in the value of foreign currencies, changes in
duties and quotas, introduction of tariff or non-tariff barriers and economic,
political and regulatory changes. The Company's international sales are
generated primarily through its foreign subsidiaries and are currently
denominated in local currency, creating a risk of foreign currency translation
gains and losses. In addition, to the extent profit is generated or losses are
incurred in foreign countries, the Company's effective income tax rate may be
materially and adversely affected. The Company currently does not engage in
hedging transactions, but may do so in the future. There can be no assurance
that any of the factors described above will not 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."
DEPENDENCE ON PROPRIETARY TECHNOLOGY. The Company's success depends upon
its ability to protect the proprietary elements of its software products. The
Company typically distributes its software products under software license
agreements which contain, among other things, provisions limiting the use,
copying and transfer of the licensed program. In addition, the Company relies on
a combination of copyright, trademark and trade secret laws, as well as
non-disclosure agreements, to protect its proprietary rights in its products and
technology. The Company presently has no patents or patent applications pending.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or development by others of substantially equivalent or superior
technology. See "Business--Proprietary Rights and Licenses."
RISK OF INFRINGEMENT CLAIMS. The Company is not aware that any of its
products infringe on the proprietary rights of third parties. There can be no
assurance, however, that third parties will not claim
9
<PAGE>
infringement by TSW with respect to current or future products or that such
claims will be unsuccessful. Any such claims, with or without merit, could be
time consuming, result in costly litigation, prevent the Company from licensing
its products in the United States or abroad, cause product shipment delays,
cause TSW to discontinue the use of the challenged tradename, service mark or
technology or require the Company to enter into royalty or license agreements,
any of which could materially adversely affect the Company. In addition, there
can be no assurance that such royalty or license agreements, if needed, could be
obtained or extended on commercially reasonable terms, if at all. The failure to
obtain the necessary licenses or other rights could materially adversely affect
the Company's business, operating results and financial condition.
DEPENDENCE ON LICENSED TECHNOLOGY. Elements of the Company's products,
particularly in its EMPAC workflow engine, are licensed from third parties under
license agreements. The loss of the Company's right to use and license such
technology could limit the Company's ability to successfully market certain
modules of EMPAC. While the Company believes that it would be able to either
license or develop alternatives to such component technologies, there can be no
assurance that the Company would be able to do so, or that such alternatives
would achieve market acceptance or be available on a timely basis. Failure to
obtain the necessary licenses or to develop needed technologies could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business--Products--EMPAC Product Architecture and
Development Strategy--Partitioned Application Architecture" and "--Proprietary
Rights and Licenses."
DEPENDENCE ON THIRD PARTIES. Implementation and development of the
Company's EMPAC software depends on proprietary technology licensed from third
parties. Implementation of EMPAC requires the use of the Windows environment
licensed from Microsoft Corporation. The introduction and increased market
acceptance of operating systems that are incompatible with the Company's
products, or the failure of Microsoft's operating systems to achieve continued
market acceptance, could adversely affect the market for the Company's products.
EMPAC also relies on certain proprietary features of the database management
system developed by Oracle Corporation ("Oracle"). The introduction and
increased market acceptance of database management systems that are incompatible
with the Company's products, or the failure of Oracle products to achieve
continued market acceptance, could adversely affect the market for the Company's
products. In addition, certain elements of EMPAC have been developed in
PowerBuilder, a client/server development product that has been traditionally
database independent. Powersoft Corporation, which licenses PowerBuilder, was
acquired by Sybase, Inc. in 1994. If PowerBuilder does not continue to be
database independent, future development of the Company's Windows-based
components which operate in conjunction with the Oracle database management
system may be adversely affected. Although the Company's strategy has been to
develop software products that are minimally dependent on any particular element
of the underlying platform, there can be no assurance that the Company will be
able to avoid the obsolescence of its products due to rapid technological change
and evolving industry standards. See "Business--Products--EMPAC Product
Architecture and Development Strategy."
RISK OF SOFTWARE ERRORS OR FAILURES. Software products as complex as those
offered by TSW may contain undetected errors or failures when first introduced
or when new versions are released. The Company previously has discovered
software errors in certain of its new products and enhancements after their
introduction and has experienced delays and lost revenue during the periods
required to correct these errors. There can be no assurance that errors will not
be found in new products or releases after commencement of commercial shipments,
resulting in loss of or delay in market acceptance, which could have a material
adverse effect on the Company's business, operating results and financial
condition.
PRODUCT LIABILITY. TSW's license agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential product
liability claims, including disclaimers of
10
<PAGE>
warranties and limitations on liability for special, consequential and
incidental damages. Further, the
Company's licensing agreements generally limit the amounts recoverable for
damages to the amounts paid by the licensee to the Company for the product or
service giving rise to the damages claimed. While TSW has not experienced any
product liability claims to date, the sale and support of products by the
Company entails the risk of such claims, including claims arising out of asset
failures which might be alleged to have resulted from defects in the Company's
products. Moreover, although the Company believes that current and recent
releases of its software do not contain a year 2000 problem (a data structure
problem that will prevent software from properly recognizing dates after the
year 1999), there can be no assurance that certain older versions of the
Company's products will not present users with a year 2000 problem, or that any
such problem will not result in a product liability claim. Although the Company
maintains errors and omissions product liability insurance, a product liability
claim brought against the Company, whether or not successful, could have a
material adverse effect on the Company's business, operating results and
financial condition.
CONTROL BY MANAGEMENT AND CURRENT SHAREHOLDERS. Upon the completion of this
offering, Warburg, Pincus Investors, L.P. ("Warburg") and the Company's
executive officers and directors, in the aggregate, will beneficially own %
of the Company's Common Stock having % of the voting power of the Company.
Warburg will beneficially own % of the outstanding Common Stock of the
Company which, due to restrictions set forth in the Company's Amended and
Restated Articles of Incorporation (the "Articles of Incorporation"), will have
voting power limited to the number of votes represented by all of the
outstanding shares of all classes of the Company's capital stock that are not
owned directly or indirectly, beneficially or of record, by Warburg. As a
result, Warburg will be able to exercise significant influence over all matters
requiring shareholder approval, including the election of directors and the
approval of significant corporate transactions. In addition, under the Company's
Articles of Incorporation, the Board of Directors has the authority to issue
undesignated Preferred Stock and, subject to certain limitations, to determine
the rights, preferences, privileges and restrictions, including voting rights,
of such shares without any further vote or action by the stockholders. The
voting power of Warburg and the Company's officers and directors or the issuance
of Preferred Stock under certain circumstances could have the effect of delaying
or preventing a change in control of the Company. See "Principal and Selling
Shareholders" and "Description of Capital Stock."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to this
offering, there has been no public market for the Common Stock. Application has
been made to have the Common Stock approved for quotation on the Nasdaq National
Market. However, there can be no assurance that, following this offering, an
active trading market for the Common Stock will develop or be sustained or that
the market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price will be determined solely by
negotiations between the Company, the Selling Shareholders and the Underwriters
and will not necessarily reflect the market price of the Common Stock after this
offering. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The market price of the Common
Stock could be subject to significant fluctuations in response to, and may be
adversely affected by, variations in quarterly operating results, changes in
earnings estimates by analysts, developments in the software industry and
general stock market conditions, as well as other factors. Any future shortfall
in revenue or earnings from levels expected by securities analysts could have an
immediate and significant adverse effect on the trading price of the Company's
Common Stock in any given period. Additionally, the Company may not learn of, or
be able to confirm, such shortfalls until late in the fiscal quarter, or
following the end of the quarter, which could result in an even more immediate
and adverse effect on the trading price of the Company's Common Stock. The
Company's financial performance may in the future experience substantial
fluctuations as a consequence of industry patterns, general economic conditions
affecting the timing of orders and other factors affecting capital spending.
There can be no assurance that such factors will not have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, the stock market has experienced extreme price and volume fluctuations
from time to time which have, in
11
<PAGE>
certain circumstances, had no meaningful relationship to performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Information."
IMMEDIATE AND SUBSTANTIAL DILUTION. The assumed initial public offering
price is substantially higher than the pro forma net tangible book value per
share of the Common Stock. Based upon the pro forma net tangible book value of
the Company at March 31, 1997, and an assumed initial public offering price of
$ per share, investors in this offering will suffer an immediate and
substantial dilution of $ in net tangible book value per share of the
Common Stock. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial numbers of shares of
the Company's Common Stock in the public market following this offering could
adversely affect the market price of the Common Stock and could impair the
Company's ability to raise capital. Immediately after completion of this
offering, the Company will have shares of Common Stock outstanding, of which
the shares offered hereby will be eligible for sale without regard to volume
or other limitations pursuant to Rule 144 ("Rule 144") under the Securities Act
of 1933 (the "Securities Act"), unless owned by "affiliates" of the Company, as
that term is defined under Rule 144. The Company, its executive officers and
directors and certain shareholders, including its principal shareholder,
Warburg, have agreed pursuant to lock-up agreements that without the prior
written consent of the Company and Alex. Brown & Sons Incorporated, on behalf of
the Representatives, they will not sell or otherwise dispose of any shares of
Common Stock beneficially owned by them for a period of 180 days from the date
of this Prospectus, except for issuances pursuant to options outstanding under
the Company's stock option plans. The Representatives of the Underwriters and
the Company may, in their discretion and at any time without notice, release all
or a portion of the shares subject to these lock-up agreements. The Company
intends to register on one or more registration statements on Form S-8
approximately shares of Common Stock issuable under its stock option plans.
In addition, the holders of a total of shares of Common Stock have rights to
require registration of their shares under the Securities Act. See "Shares
Eligible for Future Sale," "Underwriting" and "Description of Capital
Stock--Registration Rights."
CERTAIN ANTI-TAKEOVER PROVISIONS. The Company will have no shares of
Preferred Stock outstanding as of the consummation of this offering, and has no
current plans to issue Preferred Stock. However, the Company's Articles of
Incorporation authorize the Company to issue shares of Preferred Stock in the
future without shareholder approval and upon such terms and conditions, and
having such rights, privileges and preferences, including voting rights, as the
Board of Directors of the Company may determine. The issuance of Preferred Stock
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from acquiring, a majority of the outstanding
voting stock of the Company. In addition, the Company's Articles of
Incorporation include a provision which limits the maximum number of votes which
may be cast by any shareholder of the Company on any matter to the number of
votes which is represented by all outstanding shares of the Company's capital
stock that are not directly or indirectly owned, beneficially or of record, by
such shareholder. See "Description of Capital Stock--Preferred Stock" and
"--Anti-Takeover Effects of Provisions of Articles of Incorporation and Bylaws."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common
Stock offered by the Company (at an assumed initial public offering price of
$ per share) are estimated to be approximately $ million after deducting
estimated underwriting discounts and offering expenses payable by the Company.
The Company will not receive any proceeds from the sale of shares of Common
Stock offered by the Selling Shareholders.
The Company anticipates that it will use approximately $ of the
proceeds of this offering to repay all outstanding borrowings under its secured
revolving credit facility with Greyrock Business Credit (the "Credit Facility"),
which expires on March 31, 1998, and a related amortizing term note to Greyrock
Business Credit due on the earlier of August 31, 2000 or the termination of the
Credit Facility. The Credit Facility and the related term note each bear
interest at the greater of 8% per annum or the one month LIBOR rate plus 5.25%
(10.94% as of March 31, 1997).
The balance of the net proceeds of this offering will be added to the
Company's working capital and will be available for general corporate purposes.
A portion of such proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. The Company is not currently a party to any agreement, arrangement
or understanding with respect to any such transaction and is not currently
engaged in discussions with any party concerning any such possible transaction.
Pending such uses, the Company intends to invest the net proceeds of this
offering in short-term, interest-bearing investment grade securities,
certificates of deposit or obligations issued or guaranteed by the United States
government.
DIVIDEND POLICY
The Company currently anticipates that all of its earnings will be retained
for development of the Company's business and does not anticipate paying any
cash dividends in the foreseeable future. Future cash dividends, if any, will be
at the discretion of the Company's Board of Directors and will depend upon,
among other things, the Company's future earnings, operations, capital
requirements and surplus, general financial condition, contractual restrictions
and such other factors as the Board of Directors may deem relevant.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
March 31, 1997, (ii) on a pro forma basis giving effect to the Concurrent
Transactions, and (iii) as adjusted to give effect to the sale of the
shares of Common Stock offered by the Company hereby (at an assumed initial
public offering price of $ per share) and the application of the
estimated net proceeds therefrom as described under "Use of Proceeds." This
table should be read in conjunction with the Consolidated Financial Statements
and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- ------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
Short-term debt (1)....................................................... $ 16,951 $ $
---------- ----------- ------------
Long-term debt:
Capital leases and term loans........................................... $ 2,126 $ $
Subordinated notes...................................................... 18,065
Redeemable Preferred Stock, $0.01 par value:
3,390,993 shares authorized, 2,943,218 shares issued and outstanding;
none issued and outstanding pro forma and as adjusted................. 18,100
Shareholders' equity (deficit):
Common Stock, $0.01 par value: shares authorized, shares
issued and outstanding; shares authorized pro forma,
shares issued and outstanding pro forma; shares issued and
outstanding pro forma as adjusted..................................... 3
Additional paid-in capital.............................................. 2,220
Accumulated deficit..................................................... (36,630)
Equity adjustment from foreign currency translation..................... (299)
---------- ----------- ------------
Total shareholders' equity (deficit).................................. (34,706)
---------- ----------- ------------
Total capitalization................................................ $ 3,585 $
---------- ----------- ------------
---------- ----------- ------------
</TABLE>
- --------------
(1) Includes revolving line of credit and current portion of capital leases and
term loans.
14
<PAGE>
DILUTION
The pro forma deficit in net tangible book value of the Company at March 31,
1997, was $ or $ per share (giving effect to the Concurrent
Transactions). Pro forma deficit in net tangible book value per share represents
the amount of the Company's shareholders' deficit, less intangible assets,
divided by the total number of shares of Common Stock outstanding, giving effect
to the Concurrent Transactions.
Net tangible book value dilution per share represents the difference between
the amount per share paid by purchasers of shares of Common Stock in this
offering and the pro forma net tangible book value per share of Common Stock
immediately after completion of this offering. After giving effect to the sale
by the Company of shares of Common Stock (at an assumed initial public
offering price of $ per share) and the application of the estimated net
proceeds therefrom, and the Concurrent Transactions, the pro forma net tangible
book value of the Company as of March 31, 1997, would have been $ or
$ per share. This represents an immediate increase in net tangible book
value of $ per share to existing shareholders and an immediate dilution
in the net tangible book value of $ per share to purchasers of Common
Stock in this offering, as illustrated by the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $
Pro forma deficit in net tangible book value per share at March 31,
1997...............................................................
Increase per share attributable to new investors.....................
---------
Pro forma net tangible book value per share after this offering........
---------
Net tangible book value dilution per share to new investors............ $
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1997,
giving effect to the Concurrent Transactions, the number of shares of Common
Stock previously purchased from the Company, the total consideration paid and
the average price per share paid to the Company by existing shareholders and by
new investors, at an assumed initial public offering price of $ per
share:
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED
------------------------ ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.................................... % $ % $
New investors............................................ $
----- ----- ----- -----
Total.............................................. 100.0% $ 100.0%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
The sale of shares by the Selling Shareholders in this offering will cause
the pro forma number of shares held by all existing shareholders as of March 31,
1997 to be reduced to shares, or % of total shares of Common Stock to
be outstanding after this offering, and the pro forma number of shares held by
new investors as of March 31, 1997 to be shares, or % of the total
shares of Common Stock to be outstanding after this offering. See "Principal and
Selling Shareholders."
The foregoing discussion and tables assume no exercise of stock options
outstanding on March 31, 1997. As of March 31, 1997, there were options
outstanding to purchase a total of shares of Common Stock at a weighted
average exercise price of $ per share, and additional shares
reserved for the grant of future options under the Company's stock option plans.
See "Management--Stock Option Plans."
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below as of and for each
of the years ended March 31, 1993 through 1997 are derived from the consolidated
financial statements of the Company which have been audited by Ernst & Young
LLP, independent auditors. The following data should be read in conjunction with
the Consolidated Financial Statements and Notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other financial information included herein.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
License fees.......................................... $ 6,697 $ 8,447 $ 7,833 $ 22,140 $ 26,852
Services and support.................................. 11,554 13,773 18,857 24,709 37,784
Other revenue......................................... 2,479 2,729 824 1,184 2,463
--------- --------- --------- --------- ---------
Total revenue..................................... 20,730 24,949 27,514 48,033 67,099
Operating expenses:
Costs of license fees................................. 1,048 1,163 1,557 4,799 2,917
Costs of services and support......................... 8,732 9,206 12,098 19,203 26,967
Costs of other revenue................................ 2,338 2,694 1,211 1,292 2,064
Sales and marketing................................... 3,410 4,879 8,940 14,235 17,217
General and administrative............................ 1,201 2,364 5,698 8,078 8,599
Product development................................... 2,509 4,353 11,943 9,845 8,617
Write-off of goodwill (1)............................. -- -- -- -- 688
--------- --------- --------- --------- ---------
Total operating expenses.......................... 19,238 24,659 41,447 57,452 67,069
--------- --------- --------- --------- ---------
Income (loss) from operations........................... 1,492 290 (13,933) (9,419) 30
Interest income (expense):
Interest income....................................... 66 45 29 46 35
Interest expense...................................... (33) (48) (711) (2,254) (3,173)
--------- --------- --------- --------- ---------
Total interest income (expense), net.............. 33 (3) (682) (2,208) (3,138)
--------- --------- --------- --------- ---------
Income (loss) before taxes.............................. 1,525 287 (14,615) (11,627) (3,108)
Income tax expense (benefit).......................... 601 132 (1,264) 98 295
--------- --------- --------- --------- ---------
Net income (loss)....................................... $ 924 $ 155 $ (13,351) $ (11,725) $ (3,403)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net loss per share (2)........................ $ (0.99)
---------
---------
Pro forma weighted average shares outstanding (2)....... 3,422
---------
---------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).............................. $ 5,041 $ 5,056 $ (4,472) $ (7,931) $ (3,629)
Total assets........................................... 12,255 12,904 21,794 26,659 42,341
Short-term debt........................................ 157 498 2,491 7,581 16,951
Long-term capital leases and term loans................ 205 249 665 1,222 2,126
Subordinated long-term notes........................... -- -- 9,650 16,251 18,065
Redeemable Preferred Stock............................. 8,100 8,100 11,100 13,100 18,100
Total shareholders' deficit............................ (1,308) (1,151) (20,089) (31,321) (34,706)
</TABLE>
- --------------
(1) See Note 1 of the Notes to the Consolidated Financial Statement for an
explanation of the write-off of goodwill.
(2) Reflects the conversion of all outstanding shares of Redeemable Preferred
Stock into Common Stock. See Note 1 of the Notes to the Consolidated
Financial Statements for an explanation of the determination of shares used
calculating pro forma net loss per share.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPANY BACKGROUND AND HISTORY
TSW develops, markets and supports advanced Asset Care application software
used by large organizations to maintain their valuable physical assets on an
enterprise-wide basis. The Company was founded in 1976 as a sole proprietorship.
The Company was incorporated in Georgia in 1983 and operated under the name The
System Works, Inc. until it changed its name to TSW International, Inc. in 1995.
The Company shipped its first major software product, MPAC, in 1980. MPAC
operated on a PICK system on Prime hardware and offered a flexible and
user-friendly way to manage maintenance procedures, inventories, purchasing and
related activities.
In early 1989, the Company recognized that it could better meet the needs of
its customers by redesigning MPAC (including MPAC-UX and MPAC-SQL) to run in a
distributed enterprise-wide environment. To do so, TSW commissioned Communix
Corporation ("Communix") to design an advanced applications architecture. In
1990, TSW and Communix released TSW's first generation client/server product,
MPAC-2000. In August 1994, the Company acquired Communix, securing the rights to
the intellectual property used in the design, development, deployment and
support of MPAC-2000. In October 1994, the Company acquired certain assets and
assumed certain liabilities of SQL Systems International plc ("SQL Systems"), a
British company that developed and licensed the En Garde/IPS maintenance and
materials management software product. This acquisition expanded the Company's
software products portfolio and its distribution network, forming the basis of
the Company's European, Far Eastern and Middle Eastern operations. Effective
July 1995, the Company acquired an 80% interest in Socotec Maintenance Services
("Socotec"), a French developer and marketer of the CIMIX maintenance and
materials management software. The Socotec acquisition further strengthened the
Company's international market presence. The Company's "heritage" products
described above are supported by the Company, but no longer represent
significant license fee revenue.
The Company commenced the development of its current client/server Asset
Care product, Enterprise MPAC ("EMPAC"), early in fiscal 1995. EMPAC first
became operational at a customer site in December 1995, and the Company began
recognizing license fee revenue from EMPAC at that time. The expenses associated
with the development of EMPAC were the primary cause of the Company's operating
loss in fiscal 1995 and contributed to the operating loss in fiscal 1996. During
the third quarter of fiscal 1996, the Company experienced a substantial increase
in license fee revenue associated with the introduction of EMPAC. During fiscal
1997, approximately 94% of the Company's license fee revenue was derived from
new customer purchases of, and existing customer migration to, EMPAC.
OVERVIEW
The Company generates revenue from two principal sources: (i) license fees
for its software products and (ii) professional services and support revenue
derived from consulting, implementation, training and maintenance services and
other technical support related to its software products.
Software license fees, which accounted for approximately 40% of the
Company's revenue in fiscal 1997, consist primarily of license fees for EMPAC.
Typically, customers pay an upfront, one-time license fee for the Company's
software which is based on the number of licensed sites, users and modules.
Initial software license fees ranged from approximately $100,000 to $2.8 million
in fiscal 1997.
License fee revenue is generally recognized upon delivery of the product if
the Company is not subject to any significant remaining obligations and
collection of the resulting receivable is deemed probable. If the Company is
subject to significant remaining obligations at delivery or if the product is
subject to return and refund, revenue is deferred until no significant
obligations remain or the refund period has expired.
17
<PAGE>
Services and support revenue, which accounted for approximately 56% of the
Company's revenue in fiscal 1997, consists principally of revenue derived from
professional services associated with the implementation and deployment of the
Company's software products and, to a lesser extent, fees for ongoing customer
support, consisting primarily of customer technical support services and product
enhancements. Professional services are typically delivered on a time and
materials basis, or occasionally on a fixed price or not-to-exceed basis.
Out-of-pocket expenses incurred by Company personnel performing professional
services are reimbursed by the customer.
The Company recognizes revenue from professional services as such services
are performed. Support revenue, which is invoiced annually in advance, is
recognized ratably over the term of the support agreement, which is usually 12
months. Most such agreements are renewable at the discretion of the customer and
are subject to change annually. The Company has experienced a support agreement
renewal rate that has averaged 95% for the past three fiscal years. Pursuant to
these agreements, the Company provides product enhancements and technical
support services to customers for an annual fee which typically amounts to 15%
to 18% of the license fee. While a 90-day warranty is included in the initial
software license, support agreements typically are entered into as of the date
of the initial software license, warranty claims are typically negligible, and
customers are charged for support during the warranty period.
Delivery lead times for the Company's products are very short and,
consequently, substantially all of the Company's license fee revenue in each
quarter results from the orders received in that quarter. Accordingly, the
Company only maintains a significant backlog for its professional services and
support activities, and the Company believes that its backlog at any point in
time is not a reliable indicator of future revenue and earnings. The absence of
material backlog may contribute to unpredictability in the Company's results of
operations. See "Risk Factors--Fluctuations in Quarterly Operating Results."
The Company's other revenue consists primarily of occasional sales of
hardware and third-party application software. These sales are provided as an
accommodation to the Company's customers and accounted for 3.7% of total revenue
in fiscal 1997. Margins to the Company on these accommodation sales are
typically minimal.
In accordance with Statement of Financial Accounting Standards No. 86,
software development costs are expensed as incurred until technological
feasibility of the software is established, after which any additional costs are
capitalized. To date, the Company has expensed all software development costs
because development costs incurred subsequent to the establishment of
technological feasibility have been minimal.
18
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship of certain statement of operations items to total revenue:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
Revenue:
License fees...................................................................... 28.5% 46.1% 40.0%
Services and support.............................................................. 68.5 51.4 56.3
Other revenue..................................................................... 3.0 2.5 3.7
--------- --------- ---------
Total revenue................................................................... 100.0 100.0 100.0
Operating expenses:
Costs of license fees............................................................. 5.7 10.0 4.3
Costs of services and support..................................................... 44.0 40.0 40.2
Costs of other revenue............................................................ 4.4 2.7 3.1
Sales and marketing............................................................... 32.5 29.6 25.7
General and administrative........................................................ 20.7 16.8 12.8
Product development............................................................... 43.3 20.5 12.9
Write-off of goodwill............................................................. -- -- 1.0
--------- --------- ---------
Total operating expenses........................................................ 150.6 119.6 100.0
--------- --------- ---------
Income (loss) from operations....................................................... (50.6) (19.6) 0.0
Interest income (expense):
Interest income................................................................... 0.1 0.1 0.0
Interest expense.................................................................. (2.6) (4.7) (4.7)
--------- --------- ---------
Total interest income (expense), net............................................ (2.5) (4.6) (4.7)
--------- --------- ---------
Income (loss) before taxes.......................................................... (53.1) (24.2) (4.7)
Income tax expense (benefit)...................................................... (4.6) 0.2 0.4
--------- --------- ---------
Net income (loss)................................................................... (48.5)% (24.4)% (5.1)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED MARCH 31, 1997 COMPARED TO YEAR ENDED MARCH 31, 1996
LICENSE FEES. License fees increased 21.3% to $26.9 million in fiscal 1997,
compared to $22.1 million in fiscal 1996. The increase reflects the first full
year of revenue from EMPAC, which represented approximately 94% of license fee
revenue in fiscal 1997, compared to approximately 70% in fiscal 1996. The
Company does not expect future license fee revenue from its heritage products to
be significant.
Certain of the modules in the Company's EMPAC product (particularly modules
in its electronic document management system) contain software developed and
owned by third parties. The Company pays sublicense fees to such third parties
upon the sale of the Company's product containing the third-party software. The
costs of these fees are included in "costs of license fees." The revenue from
license fees available to the Company after paying such third-party sublicense
fees may vary depending upon the percentage of license fee revenue attributable
to the electronic document management system. Accordingly, the Company believes
that it is important to consider sublicense costs when evaluating license fee
revenue. Revenue from license fees, net of sublicense costs, increased 38.0% to
$23.9 million in fiscal 1997, compared to $17.3 million in fiscal 1996.
SERVICES AND SUPPORT. Services and support revenue increased 52.9% to $37.8
million in fiscal 1997, compared to $24.7 million in fiscal 1996. The increase
was primarily due to an increase in services
19
<PAGE>
and support revenue related to increased EMPAC licensing activity. The services
portion of this revenue associated with heritage products in fiscal 1996 has
largely been replaced in fiscal 1997 with services revenue associated with
EMPAC. However, approximately 79% of the Company's support revenue in fiscal
1997 was comprised of support revenue from its heritage products. In future
years, the Company intends to continue to seek to migrate its heritage customers
to EMPAC as their needs warrant, thereby maintaining support revenue from these
customers.
OTHER REVENUE. Other revenue increased 108.0% to $2.5 million in fiscal
1997, compared to $1.2 million in fiscal 1996. The increase was primarily due to
increased sales by the Company of hardware and third-party application software
to its customers. The Company does not actively pursue the sale of such items,
but includes them in certain transactions as an accommodation to its customers.
As a result, other revenue, costs of other revenue and the related margins may
vary significantly from quarter to quarter and year to year. The costs of
equipment sales and miscellaneous revenue are included in "costs of other
revenue." Other revenue, net of these costs, increased to $399,000 in fiscal
1997, compared to $(108,000) in fiscal 1996.
TOTAL REVENUE. Total revenue increased 39.7% to $67.1 million in fiscal
1997, compared to $48.0 million in fiscal 1996. The Company began recognizing
license fee revenue from EMPAC in December 1995 when it first became operational
at a customer site. The sales of EMPAC for the full year in fiscal 1997
accounted for the increase in total revenue in fiscal 1997 by creating an
increase in both license fee and services and support revenue.
The Company analyzes its revenue, revenue growth and operating margins after
considering the costs of third-party sublicense fees and the costs of other
revenue. Such costs from other vendors are effectively passed on to the
Company's customers at varying margins. Revenue from such products can vary
significantly from quarter to quarter and year to year. These fluctuations can
significantly affect comparisons of total revenue and operating ratios between
periods. Net of these costs, the revenue available to the Company increased
48.2% to $62.1 million in fiscal 1997, compared to $41.9 million in fiscal 1996.
COSTS OF LICENSE FEES. Costs of license fees decreased 39.2% to $2.9
million in fiscal 1997, compared to $4.8 million in fiscal 1996. The decrease
was primarily due to a decrease in sales of certain modules of the Company's
EMPAC product. These modules (particularly certain modules in its electronic
document management system) contain software developed and owned by third
parties. The Company pays sublicense fees, which are included in costs of
license fees, to the third parties upon the sale of the Company's product
containing such third-party software. Accordingly, the costs of license fees may
vary depending upon the percentage of license fee revenue attributable to its
electronic document management system. As a percentage of license fee revenue,
these costs declined to 10.9% in fiscal 1997, compared to 21.7% in fiscal 1996,
primarily due to a decline in the percentage of license fee revenue represented
by its electronic document management system.
COSTS OF SERVICES AND SUPPORT. Costs of services and support consist
primarily of personnel costs associated with the implementation, training,
support and best practices consulting associated with the Company's products.
Costs of services and support increased 40.4% to $27.0 million in fiscal 1997,
compared to $19.2 million in fiscal 1996, as a direct result of the additional
services and support activity associated with the increase in license fees of
EMPAC. However, as a percentage of services and support revenue, these costs
declined to 71.4% in fiscal 1997, compared to 77.7% in fiscal 1996, as the
Company became more efficient in implementing its new EMPAC product, which
resulted in improvements in the utilization of its personnel and increased
realization of services and support revenue.
COSTS OF OTHER REVENUE. Costs of other revenue increased 59.8% to $2.1
million in fiscal 1997, compared to $1.3 million in fiscal 1996. The increase
was due to increased sales of hardware and third-party application software.
Because the Company does not actively pursue the sale of such items and
20
<PAGE>
includes them only as accommodations to its customers, costs of other revenue
may vary significantly from quarter to quarter and year to year both in dollars
and as a percentage of revenue. As a percentage of other revenue, these costs
declined to 83.8% in fiscal 1997, compared to 109.1% in fiscal 1996.
SALES AND MARKETING. Sales and marketing expenses include personnel costs,
including sales commissions, involved in the sale and marketing of the Company's
products and services and the costs of advertising, public relations and
participation in industry conferences and trade shows. Sales and marketing
expenses increased 20.9% to $17.2 million in fiscal 1997, compared to $14.2
million in fiscal 1996, primarily as a result of increases in sales force
personnel and commissions associated with the increase in license fee revenue.
However, as a percentage of total revenue, sales and marketing expenses declined
to 25.7% in fiscal 1997, compared to 29.6% in fiscal 1996, due to improved
revenue realization from its sales and marketing efforts.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include the
costs of the Company's finance, human resources, information services, and
administrative operations. General and administrative expenses increased 6.4% to
$8.6 million in fiscal 1997, compared to $8.1 million in fiscal 1996, due to the
increased size of the Company's operations necessary to support its growth. As a
percentage of total revenue, general and administrative expenses declined to
12.8% in fiscal 1997, compared to 16.8% in fiscal 1996.
PRODUCT DEVELOPMENT. Product development expenses include costs associated
with the development of new products and enhancements of existing products. Such
expenses consist primarily of employee salaries and benefits, consulting
expenses (including amounts paid to subcontractors for development work) and the
costs of development tools. Product development expenses decreased 12.5% to $8.6
million in fiscal 1997, compared to $9.8 million in fiscal 1996. The decrease
reflects the high level of cost incurred in fiscal 1996 related to the
accelerated development associated with the first release of EMPAC. As a
percentage of total revenue, product development expenses declined to 12.9% in
fiscal 1997, compared to 20.5% in fiscal 1996, due to the decrease in expenses
and the increase in total revenue. As a percentage of license fee revenue,
product development expenses declined to 32.1% in fiscal 1997, compared to 44.5%
in fiscal 1996, as a result of reduced expenses combined with higher license fee
revenue.
WRITE-OFF OF GOODWILL. During the second quarter of fiscal 1997, the
Company restructured its European operations making its United Kingdom
subsidiary the headquarters of its European, Middle Eastern and African
operations. As a result of this restructuring and losses at Socotec, the
Company's French subsidiary, the Company wrote off goodwill of $688,000
associated with the Socotec acquisition. See "Goodwill" in Note 1 of the Notes
to the Consolidated Financial Statements.
INCOME (LOSS) FROM OPERATIONS. As the result of the above factors, the
Company's results of operations before interest and taxes improved by $9.4
million resulting in $30,000 of income from operations in fiscal 1997 as
compared to a loss from operations of $9.4 million in fiscal 1996.
INTEREST INCOME (EXPENSE), NET. Net interest expense increased 42.1% to
$3.1 million in fiscal 1997, compared to $2.2 million in fiscal 1996. The
increase was primarily due to an increase in borrowings under the Credit
Facility and related term note as well as additional subordinated debt
borrowings from the Company's principal shareholder. See "Liquidity and Capital
Resources" and Notes 4, 5 and 6 of the Notes to the Consolidated Financial
Statements.
INCOME TAXES. Income tax expense represents foreign withholding taxes
payable by customers. Income tax expense increased 201.0% to $295,000 in fiscal
1997, compared to $98,000 in fiscal 1996. There was no United States or foreign
income tax expense in fiscal 1997 or fiscal 1996. See Note 12 of the Notes to
the Consolidated Financial Statements.
21
<PAGE>
NET LOSS. As a result of the above factors, the Company's net loss in
fiscal 1997 declined by $8.3 million from $11.7 million in fiscal 1996 to $3.4
million in fiscal 1997.
YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
LICENSE FEES. License fees increased 182.7% to $22.1 million in fiscal
1996, compared to $7.8 million in fiscal 1995, as the Company began recognizing
license fee revenue from EMPAC in December 1995 when it first became operational
at a customer site. EMPAC resulted in an increase in the average license fee
charged when compared to prior periods and caused some customers to delay
purchases which otherwise might have been made in fiscal 1995. In addition, the
SQL Systems and Socotec acquisitions contributed an additional $2.5 million in
license fees during fiscal 1996 as compared to fiscal 1995. License fee revenue,
net of sublicense costs included in "costs of license fees," increased 174.6% to
$17.3 million in fiscal 1996, compared to $6.3 million in fiscal 1995.
SERVICES AND SUPPORT. Services and support revenue increased 31.0% to $24.7
million in fiscal 1996, compared to $18.9 million in fiscal 1995, primarily as a
result of the increase in new licensed customers. In addition, the SQL Systems
and Socotec acquisitions contributed an additional $4.5 million in services and
support revenue in fiscal 1996 as compared to fiscal 1995.
OTHER REVENUE. Other revenue increased 43.7% to $1.2 million in fiscal
1996, compared to $824,000 in fiscal 1995. The increase was primarily due to
increased sales by the Company of hardware and third-party application software
to its customers. The costs of equipment sales and miscellaneous revenue are
included in "costs of other revenue." Other revenue, net of these costs, was a
slight loss of $108,000 in fiscal 1996, compared to a loss of $387,000 in fiscal
1995.
TOTAL REVENUE. Total revenue increased 74.6% to $48.0 million in fiscal
1996, compared to $27.5 million in fiscal 1995. The increase reflects the
recognition of license fee revenue from EMPAC beginning in December 1995. In
addition, total revenue in fiscal 1996 includes approximately $5.5 million of
additional revenue as a result of the inclusion of a full year of revenue
resulting from the SQL Systems acquisition in October 1994 and approximately
$1.5 million as a result of the Socotec acquisition in July 1995.
The Company analyzes its revenue, revenue growth and operating margins after
considering the costs of third-party sublicense fees and the costs of other
revenue. Such costs from other vendors are effectively passed on to the
Company's customers at varying margins. Revenue from such products can vary
significantly from quarter to quarter and year to year. These fluctuations can
significantly affect comparisons of total revenue and operating ratios between
periods. Net of these costs, the revenue available to the Company increased
69.5% to $41.9 million in fiscal 1996, compared to $24.7 million in fiscal 1995.
COSTS OF LICENSE FEES. Costs of license fees increased 208.2% to $4.8
million in fiscal 1996, compared to $1.6 million in fiscal 1995. The increase
was due to an increase in the sale of certain modules (particularly modules in
its electronic document management system) which have third-party software
sublicense fees associated with them. Accordingly, the costs of license fees may
vary depending upon the percentage of license fee revenue attributable to its
electronic document management system. As a percentage of license fee revenue,
these costs increased to 21.7% in fiscal 1996, compared to 19.9% in fiscal 1995,
primarily due to a slight increase in the percentage of license fee revenue
represented by these modules.
COSTS OF SERVICES AND SUPPORT. Costs of services and support increased
58.7% to $19.2 million in fiscal 1996, compared to $12.1 million in fiscal 1995,
as a direct result of the additional services and support activity associated
with the increase in license fees. In addition, the SQL Systems and Socotec
acquisitions added $2.7 million of services and support costs in fiscal 1996 as
compared to fiscal 1995. As
22
<PAGE>
a percentage of services and support revenue, these costs increased to 77.7% in
fiscal 1996, compared to 64.2% in fiscal 1995, because the Company was less
efficient in implementing the new EMPAC product as compared to its heritage
products in fiscal 1996, which resulted in decreased realization of services and
support revenue.
COSTS OF OTHER REVENUE. Costs of other revenue increased 6.7% to $1.3
million in fiscal 1996, compared to $1.2 million in fiscal 1995. The increase
was due to increased sales of hardware and third-party application software.
Because the Company does not actively pursue the sale of such items and includes
them as accommodations to its customers, costs of other revenue may vary
significantly from quarter-to-quarter and year-to-year both in dollars and as a
percentage of revenue. As a percentage of other revenue, these costs declined to
109.1% in fiscal 1996, compared to 147.0% in fiscal 1995.
SALES AND MARKETING. Sales and marketing expenses increased by 59.2% to
$14.2 million in fiscal 1996, compared to $8.9 million in fiscal 1995. The
increase primarily resulted from increases in sales force personnel and
commissions associated with the increase in license fees, and increased
promotional costs associated with the introduction of EMPAC. Also, the SQL
Systems and Socotec acquisitions contributed an additional $2.9 million of sales
and marketing costs in fiscal 1996 as compared to fiscal 1995. However, as a
percentage of total revenue, sales and marketing expenses declined to 29.6% in
fiscal 1996, compared to 32.5% in fiscal 1995, due to improved revenue
realization from its sales and marketing efforts.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
41.8% to $8.1 million in fiscal 1996, compared to $5.7 million in fiscal 1995,
due to the increased size of the Company's operations necessary to support its
growth. In addition, the SQL Systems and Socotec acquisitions added $2.0 million
of costs in fiscal 1996 as compared to fiscal 1995. As the percentage growth of
these costs was less than the growth of revenue, general and administrative
expenses, as a percentage of total revenue, declined to 16.8% in fiscal 1996,
compared to 20.7% in fiscal 1995.
PRODUCT DEVELOPMENT. Product development expenses decreased 17.6% to $9.8
million in fiscal 1996, compared to $11.9 million in fiscal 1995. The decrease
in development costs was principally due to the higher costs of the accelerated
development effort associated with EMPAC included in fiscal 1995 as compared to
fiscal 1996. As a percentage of total revenue, product development expenses
declined to 20.5% in fiscal 1996, compared to 43.3% in fiscal 1995, due to the
reduced expense level and the increase in fiscal 1996 revenue. As a percentage
of license fee revenue, product development expenses declined to 44.5% in fiscal
1996, compared to 152.5% in fiscal 1995, due to reduced expenses and an increase
in fiscal 1996 license fee revenue.
INCOME (LOSS) FROM OPERATIONS. As the result of the above factors, the
Company's loss from operations before interest and taxes declined from $13.9
million in fiscal 1995 to $9.4 million in fiscal 1996.
INTEREST INCOME (EXPENSE), NET. Net interest expense increased 223.8% to
$2.2 million in fiscal 1996, compared to $682,000 in fiscal 1995. The increase
was primarily due to an increase in borrowings under the Company's credit
facilities as well as additional subordinated debt borrowings from the Company's
principal shareholder. See "Liquidity and Capital Resources" below and Notes 4,
5 and 6 of the Notes to the Consolidated Financial Statements.
INCOME TAXES. Income tax expense of $98,000 in fiscal 1996 represented
foreign withholding taxes payable by customers. There was no United States
foreign income tax expense in fiscal 1996. The tax benefit in fiscal 1995
reflected the utilization of tax losses generated that year to obtain refunds of
taxes paid in prior years. See Note 12 of the Notes to Consolidated Financial
Statements.
NET LOSS. As a result of the above factors, the Company's net loss in
fiscal 1996 declined by $1.7 million from $13.4 million in fiscal 1995 to $11.7
million in fiscal 1996.
23
<PAGE>
QUARTERLY INFORMATION
The following tables set forth certain unaudited consolidated statements of
operations data for each of the Company's last eight quarters in the period
ending March 31, 1997, as well as the percentage of the Company's total revenue
represented by each item. The information has been derived from the Company's
unaudited consolidated financial statements. The unaudited consolidated
financial statements have been prepared on substantially the same basis as the
audited consolidated financial statements contained herein and include all
adjustments, consisting only of normal recurring accruals, that the Company
considers necessary to present fairly this information when read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. The Company's operating results for any one
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1996 1996 1996 1996
----------- ----------- --------- --------- ----------- ----------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
License fees (1)....................... $ 2,852 $ 2,718 $ 9,097 $ 7,473 $ 4,372 $ 6,565 $ 6,831
Services and support................... 6,088 6,883 5,909 5,829 6,585 9,728 10,169
Other revenue.......................... 138 -- 795 251 131 921 311
----------- ----------- --------- --------- ----------- ----------- ---------
Total revenue........................ 9,078 9,601 15,801 13,553 11,088 17,214 17,311
Operating expenses:
Costs of license fees.................. 388 636 2,264 1,511 472 858 637
Costs of services and support.......... 4,644 4,708 5,179 4,672 5,050 6,654 7,183
Costs of other revenue................. 29 47 1,012 204 161 787 348
Sales and marketing.................... 2,945 2,936 4,187 4,167 3,527 3,823 4,440
General and administrative............. 1,273 1,845 2,266 2,694 2,031 2,220 1,935
Product development.................... 2,738 2,568 2,180 2,359 1,933 1,874 2,282
Write-off of goodwill (2).............. -- -- -- -- -- 688 --
----------- ----------- --------- --------- ----------- ----------- ---------
Total operating expenses............. 12,017 12,740 17,088 15,607 13,174 16,904 16,825
----------- ----------- --------- --------- ----------- ----------- ---------
Income (loss) from operations............ (2,939) (3,139) (1,287) (2,054) (2,086) 310 486
Interest income (expense):
Interest income........................ 13 6 5 22 4 9 8
Interest expense....................... (426) (476) (669) (683) (608) (804) (804)
----------- ----------- --------- --------- ----------- ----------- ---------
Total interest income (expense), net... (413) (470) (664) (661) (604) (795) (796)
----------- ----------- --------- --------- ----------- ----------- ---------
Income (loss) before taxes............... (3,352) (3,609) (1,951) (2,715) (2,690) (485) (310)
Income tax expense (benefit)........... -- -- -- 98 60 91 43
----------- ----------- --------- --------- ----------- ----------- ---------
Net income (loss)........................ $ (3,352) $ (3,609) $ (1,951) $ (2,813) $ (2,750) $ (576) $ (353)
----------- ----------- --------- --------- ----------- ----------- ---------
----------- ----------- --------- --------- ----------- ----------- ---------
Pro forma net income (loss)
per share (3).......................... $ (0.81) $ (0.17) $ (0.10)
----------- ----------- ---------
----------- ----------- ---------
<CAPTION>
<S> <C>
MAR. 31,
1997
---------
<S> <C>
Revenue:
License fees (1)....................... $ 9,084
Services and support................... 11,302
Other revenue.......................... 1,100
---------
Total revenue........................ 21,486
Operating expenses:
Costs of license fees.................. 950
Costs of services and support.......... 8,080
Costs of other revenue................. 768
Sales and marketing.................... 5,427
General and administrative............. 2,413
Product development.................... 2,528
Write-off of goodwill (2).............. --
---------
Total operating expenses............. 20,166
---------
Income (loss) from operations............ 1,320
Interest income (expense):
Interest income........................ 14
Interest expense....................... (957)
---------
Total interest income (expense), net... (943)
---------
Income (loss) before taxes............... 377
Income tax expense (benefit)........... 101
---------
Net income (loss)........................ $ 276
---------
---------
Pro forma net income (loss)
per share (3).......................... $ 0.08
---------
---------
</TABLE>
- --------------
(1) The Company began recognizing license fee revenue from EMPAC in the quarter
ended December 31, 1995, when EMPAC first became operational at a customer
site.
(2) See Note 1 of the Notes to the Consolidated Financial Statements for an
explanation of the write-off of goodwill.
(3) Reflects conversion of all outstanding shares of Redeemable Preferred Stock
into Common Stock. See Note 1 of the Notes to the Consolidated Financial
Statements for an explanation of the determination of shares used in
calculating pro forma net income (loss) per share.
24
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996 1996 1996 1996 1997
-------- --------- -------- -------- -------- --------- -------- --------
Revenue:
License fees..................... 31.4% 28.3% 57.6% 55.1% 39.4% 38.1% 39.5% 42.3%
Services and support............. 67.1 71.7 37.4 43.0 59.4 56.5 58.7 52.6
Other revenue.................... 1.5 -- 5.0 1.9 1.2 5.4 1.8 5.1
-------- --------- -------- -------- -------- --------- -------- --------
Total revenue.................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Operating expenses:
Costs of license fees............ 4.3 6.6 14.3 11.2 4.3 5.0 3.7 4.4
Costs of services and support.... 51.2 49.0 32.8 34.5 45.5 38.6 41.5 37.6
Costs of other revenue........... 0.3 0.5 6.4 1.5 1.5 4.6 2.0 3.6
Sales and marketing.............. 32.5 30.6 26.5 30.7 31.8 22.2 25.6 25.3
General and administrative....... 14.0 19.3 14.3 19.9 18.3 12.9 11.2 11.2
Product development.............. 30.1 26.7 13.8 17.4 17.4 10.9 13.2 11.8
Write-off of goodwill............ -- -- -- -- -- 4.0 -- --
-------- --------- -------- -------- -------- --------- -------- --------
Total operating expenses....... 132.4 132.7 108.1 115.2 118.8 98.2 97.2 93.9
-------- --------- -------- -------- -------- --------- -------- --------
Income (loss) from operations...... (32.4) (32.7) (8.1) (15.2) (18.8) 1.8 2.8 6.1
Interest income (expense):
Interest income.................. 0.2 0.1 0.0 0.2 0.0 0.1 0.0 0.1
Interest expense................. (4.7) (5.0) (4.2) (5.0) (5.5) (4.7) (4.6) (4.4)
-------- --------- -------- -------- -------- --------- -------- --------
Total interest income
(expense), net............... (4.5) (4.9) (4.2) (4.8) (5.5) (4.6) (4.6) (4.3)
-------- --------- -------- -------- -------- --------- -------- --------
Income (loss) before taxes......... (36.9) (37.6) (12.3) (20.0) (24.3) (2.8) (1.8) 1.8
Income tax expense (benefit)..... -- -- -- 0.7 0.5 0.5 0.2 0.5
-------- --------- -------- -------- -------- --------- -------- --------
Net income (loss).................. (36.9)% (37.6)% (12.3)% (20.7)% (24.8)% (3.3)% (2.0)% 1.3%
-------- --------- -------- -------- -------- --------- -------- --------
-------- --------- -------- -------- -------- --------- -------- --------
</TABLE>
The Company's quarterly operating results have varied in the past and may
vary significantly in the future depending on many factors including, among
others: the size, timing and recognition of revenue from significant orders; the
timing of new product releases and market acceptance of such releases; increases
in operating expenses required for product development and marketing; market
acceptance of new products and product enhancements; customer order deferrals in
anticipation of new products and product enhancements; the Company's success in
expanding its sales and marketing programs; and general economic conditions.
Further, the Company's operating results have been, and are expected to continue
to be, highly sensitive to the receipt, timing and payment of large orders.
Moreover, the Company historically has recognized greater license fee revenue in
the fourth quarter of each fiscal year than in each of the preceding quarters,
and first quarter revenue has typically declined from revenue in the fourth
quarter of the preceding fiscal year. The Company believes that this
concentration of licensing activity is caused primarily by the Company's sales
commission policies, which compensate sales personnel for meeting or exceeding
annual performance quotas. Any change in the Company's sales commission policies
could result in a change in this pattern of licensing activity and reported
revenue. Based upon all of the foregoing factors, the Company believes that its
quarterly revenue, expenses and operating results are likely to vary
significantly in the future, that period-to-period comparisons of its results of
operations may not be meaningful and that, in any event, such comparisons should
not be relied upon as indications of future performance. See "Risk
Factors--Fluctuations in Quarterly Operating Results."
The Company's future revenue is difficult to predict, and the Company has in
certain instances in the past not achieved its revenue expectations. Because the
Company generally ships its software products within a few days after receipt of
an order, it typically does not have a material backlog of unfilled software
license orders, and license fee revenue in any quarter is substantially
dependent on orders
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booked and shipped in that quarter. In addition, the Company typically enters
into a significant portion of its new license contracts in the last two weeks of
a quarter. The Company's expense levels are based, in part, on its expectations
as to future revenue and to a large extent are fixed in the short term. The
Company generally is unable to adjust expenses in the short term to compensate
for any unexpected revenue shortfall. Accordingly, any significant shortfall of
revenue in relation to the Company's expectations or any material delay in
customer orders would have an immediate material adverse effect on its business,
operating results and financial condition and on the Company's ability to
achieve or maintain profitability. See "Risk Factors--Fluctuations in Quarterly
Operating Results."
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years, the Company has financed its operations
and growth primarily through funds generated through operations, sales of
Redeemable Preferred Stock to its principal shareholder, and funds borrowed from
lending institutions and its principal shareholder. At March 31, 1997, the
Company's primary sources of liquidity consisted of cash, cash equivalents, and
short-term investments totaling $549,000 and its $15.0 million Credit Facility
and related term note, which is secured by substantially all of the assets of
the Company. The Credit Facility expires on March 31, 1998, and the amortizing
term note expires on the earlier of August 31, 2000 or the termination of the
Credit Facility. The Credit Facility and the related amortizing term note each
bear interest at the greater of 8.0% per annum or the one month LIBOR rate plus
5.25% (10.94% as of March 31, 1997). Effective April 3, 1997, the Company
increased the maximum size of this facility to $20.0 million. The Company
anticipates that it will repay all outstanding borrowings under the Credit
Facility and the related term note with proceeds of this offering. The Company
intends to enter into a new credit facility following the completion of the
offering which would replace this facility. See Notes 4, 5, 6, 7 and 9 of the
Notes to the Consolidated Financial Statements.
The Company's operating activities have used cash in each of the last three
fiscal years. Operating activities in fiscal 1997 used $11.9 million of cash,
primarily as a result of the Company's net loss of $3.4 million coupled with an
increase in working capital, principally billed and unbilled accounts
receivable, resulting from the Company's revenue growth of approximately 40%.
During fiscal 1996 and 1995, cash used for operating activities of $10.9 million
and $6.0 million, respectively, resulted primarily from net losses of $11.7
million and $13.4 million, respectively, as well as an increase in unbilled
accounts receivable in fiscal 1996, resulting from revenue growth of
approximately 75%.
Cash used for investing activities was approximately $2.4 million, $2.8
million and $2.1 million in fiscal 1997, 1996 and 1995, respectively. The cash
used for investing activities was due primarily to additions in property and
equipment. The Company's capital expenditures relate primarily to purchases of
personal computers for internal use to support the Company's growth, as well as
furniture, fixtures and leasehold improvements. The Company expects that the
rate of its purchases of property and equipment will increase if the Company's
employee base grows.
Cash provided by financing activities amounted to $14.7 million in fiscal
1997. Of this amount, $9.8 million was provided from net borrowings under the
Company's Credit Facility and related term note. In addition, $5.0 million of
cash was provided by the sale of Redeemable Preferred Stock to the Company's
principal shareholder. During fiscal 1996 and 1995, financing activities
provided $13.3 million and $7.9 million, respectively. In addition to borrowings
under the Company's Credit Facility and the sale of Redeemable Preferred Stock
to the Company's principal shareholder during fiscal 1996 and 1995, the Company
also issued subordinated notes with warrants to its principal shareholder. See
Notes 4, 5, 6 and 9 of the Notes to the Consolidated Financial Statements.
As of March 31, 1997, the Company had negative working capital of $3.6
million as compared to negative working capital of $7.9 million and $4.5 million
at the end of fiscal 1996 and 1995, respectively. The $4.3 million change in
working capital during fiscal 1997 resulted from an increase in current assets
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<PAGE>
of $15.7 million due to increases in both billed and unbilled accounts
receivable and an increase in current liabilities of $11.3 million due to
increases in both the Credit Facility and accrued liabilities.
The Company is sometimes required to offer extended payment terms for a
portion of its license fees. With the introduction of EMPAC, the Company has
begun to experience higher license fees. The growth of the Company's license fee
revenue has caused both the accounts receivable and unbilled accounts receivable
to increase at the end of each quarter. These factors have caused the Company to
require more working capital to support these higher levels of receivables.
Should software license fee revenue continue to grow, successively higher levels
of working capital will be required. A portion of the proceeds of this offering
will be used to provide the Company with working capital to support any future
growth. The Company believes that the proceeds of this offering not used to
repay indebtedness, together with its current cash balances, cash available
under its Credit Facility and cash flow from operations, will be sufficient to
meet its working capital and capital expenditure requirements for at least the
next twelve months.
The Company may, in the future, acquire businesses or products complementary
to the Company's business, or otherwise obtain the right to use complementary
technologies, although there can be no assurance that any such acquisitions will
be made. Although operating activities may provide cash in certain periods, the
Company anticipates that to the extent it experiences growth or incurs
significant development expenses in connection with development or enhancement
of its products, its operating and investment activities may use cash.
Consequently, any such future growth or development activities may cause the
Company to experience added needs for working capital. The need for cash to
finance additional working capital or to make acquisitions may cause the Company
to seek additional equity or debt financing. There can be no assurance that such
financing will be available, or that the Company's need for higher levels of
working capital will not have a material adverse effect on the Company.
FORWARD-LOOKING INFORMATION
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth under
"Risk Factors," which could cause actual results to differ materially from those
indicated by such forward-looking statements.
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BUSINESS
TSW International, Inc. ("TSW" or the "Company") is a leading provider of
Asset Care solutions, which are used by large organizations to maintain their
valuable physical assets on an enterprise-wide basis. The Company develops,
markets and supports advanced Asset Care application software and provider
related services that enable customers to plan, execute, monitor and improve
asset maintenance processes. With the Company's products, customers are better
able to increase equipment and production capacity, reduce operating costs and
safeguard the workforce and the environment. The Company's sales and
professional services functions are organized into vertical industry sectors to
best match the Company's solution to its customers' business requirements.
Typical licensees of the Company's software include discrete and process
manufacturers, utilities, hospitals, mining companies, transportation
authorities, educational systems, telecommunications providers and governmental
institutions. TSW shipped its first commercial maintenance management software
package in 1980. As of March 31, 1997, the Company's products were licensed for
use by 321 customers at 941 sites in 48 countries.
INDUSTRY BACKGROUND
Organizations with large capital asset bases spend considerable resources on
maintenance operations. For example, U.S. manufacturing companies typically
spend more than $600 billion annually on maintenance operations, including
activities such as performing equipment maintenance, purchasing spare parts,
managing equipment warranties and ensuring regulatory compliance. Despite the
impact of maintenance operations on the bottom line, maintenance remained, until
recently, a secondary consideration in corporate planning.
Throughout the 1980s and early 1990s, while functional areas such as
manufacturing, financial and human resources were automated through the
implementation of enterprise resource planning ("ERP") systems, minimal
resources were dedicated to maintenance automation. For many organizations,
maintenance automation amounted to either a homegrown system or a departmental
software package, typically isolated from the core ERP applications. Such early
automation efforts, which became known as computerized maintenance management
systems ("CMMS"), focused on record keeping and employee tracking. Despite
improvements achieved through CMMS systems, industry studies regularly report
that maintenance labor productivity, as measured by employees' time spent
performing maintenance activities, remains below 40%.
In recent years, the market for automated maintenance solutions has
benefited from maturation and standardization in the ERP market. Many ERP
systems are only now being extended from the corporate level to plant and
operational areas. As this occurs, companies realize that ERP systems do not
provide the detailed information and advanced methodologies needed to
proactively manage functions such as maintenance, demand planning and logistics.
Standardization of popular off-the-shelf ERP suites such as Baan, Oracle and SAP
has made it easier for organizations to integrate off-the-shelf solutions for
plant floor systems. Advanced planning and scheduling ("APS") systems have
emerged to extend the traditional manufacturing resource planning ("MRP") master
production scheduling model to reflect demand information and logistics
constraints. However, ERP and APS systems lack real-time asset availability
information. An enterprise-oriented CMMS, known today as an Asset Care system,
brings asset and capacity information to these corporate-level systems, enabling
companies to manage their operations in real time.
The addressable market for strategic Asset Care solutions is not limited to
manufacturing organizations. Competitive market conditions are compelling
organizations in many industries to adopt advanced Asset Care systems that are
integrated with their enterprise-wide business systems. Electric power utilities
rely on Asset Care systems to provide reliable and cost-effective service to
customers. Hospitals integrate patient scheduling with asset availability to
treat larger patient populations with improved
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service at lower delivery costs. Waste water treatment plants incorporate
regulatory and hazardous material information into their Asset Care systems to
protect the workforce and the environment.
Organizations in these and other industries are now analyzing total cost of
ownership and return on invested capital--rather than simply net profit--as
important measures of operational efficiency. These measures highlight the true
costs of poor maintenance management for companies with bloated spare parts
inventories, capacity inefficiencies or unproductive maintenance personnel. With
maintenance costs of certain capital-intensive organizations representing as
much as 30% to 40% of revenues, these organizations are realizing that
sophisticated asset management solutions are critical to their competitive
position.
Today's Asset Care solutions enable companies to shift from reactive and
preventive maintenance to more proactive and predictive strategies which
leverage sophisticated software systems with "best practices" methodologies,
such as Reliability Centered Maintenance ("RCM") and Total Productive
Maintenance ("TPM"). These Asset Care strategies focus on the needs of the asset
throughout its life cycle rather than simply responding to failures. However,
despite these improvements, the Company believes many capital-intensive
enterprises have yet to apply the full potential of best practices Asset Care.
Many maintenance automation solutions lack real-time integration with other
business information systems. Others emphasize software features without
studying underlying business drivers or process improvement opportunities. An
Asset Care solution that approaches maintenance from an enterprise perspective,
enabling organizations to implement proactive and predictive maintenance
strategies, allows organizations to increase equipment and production capacity,
reduce operating costs and safeguard the workforce and the environment.
THE TSW SOLUTION
The TSW solution includes software and services which incorporate
sophisticated Asset Care methodologies, extensive subject matter expertise and
advanced technology designed to interoperate seamlessly with other enterprise
business information systems. The Company's primary software product, Enterprise
MPAC ("EMPAC"), supports work management, inventory management, procurement and
electronic document management. To manage assets in real time, EMPAC
interoperates with other business systems from vendors such as Baan, Oracle,
PeopleSoft and SAP as well as process control systems from vendors such as
Allen-Bradley and Johnson Controls. By integrating with these and other
information systems, EMPAC optimizes capacity utilization through just-in-time
maintenance. The Company's products are designed to reflect Asset Care best
practices, including RCM, TPM and Web-based procurement, to allow customers to
apply the Company's Asset Care solution as a strategic advantage. TSW's Asset
Care solution functions as a knowledge control system for managing all
information related to asset performance.
The Company's Asset Care solution also includes consulting services that
help customers implement advanced maintenance strategies. Its solution leverages
the knowledge gained from hundreds of customer implementations and the extensive
plant experience of the Company's employees. TSW's professional services and
sales organizations are established along vertical lines to apply the Company's
software technology to its customers' industry-specific requirements. In
addition, the Company offers a global customer support organization with 7 x 24
multi-lingual support. The Company believes this combination of enterprise
software, vertically-oriented consulting services and worldwide customer support
allows customers to increase equipment and production capacity, reduce operating
costs and safeguard the workforce and the environment.
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COMPANY STRATEGY
The Company's objective is to be the leading worldwide provider of advanced,
enterprise-wide Asset Care software, services and support. Key aspects of its
business strategy include:
COMBINE END-USER FOCUS WITH LEADING-EDGE TECHNOLOGY. Since its founding in
1976, TSW has built a business focused on the plant floor employee. TSW
employees with practical maintenance and operations experience work with
customers to develop the functional content of TSW's Asset Care solution. TSW
employees collectively represent 1,750 years of plant experience. The Company's
user-oriented development and implementation methods allow plant managers,
tradespeople, buyers, warehouse clerks and others to embrace the software as a
tool that is essential to their jobs. With EMPAC, the Company successfully
integrated this end-user orientation with the software engineering discipline
required of a client/server enterprise-wide information management system. The
Company is committed to applying leading-edge technology, such as Internet-based
newsgroups, video on demand, performance benchmarking and
supplier-to-manufacturer integration, in a common sense fashion that is
appropriate for the plant worker.
LEVERAGE BEST-OF-BREED SOLUTIONS. The Company believes its core competence
is the design, development and successful delivery of Asset Care solutions. To
maintain this focus, the Company seeks strategic alliances with industry leaders
in order to meet the needs of its customers. For example, the Company has joined
Oracle's Industry Solutions Initiative ("ISI") with other best-of-breed software
vendors to create industry-specific solutions. In the consumer packaged goods
industry, Manugistics, Industri-Matematik, Oracle and TSW are providing
best-of-breed components of a complete suite solution that is being delivered,
implemented and supported by Oracle. The Company has also entered into alliances
with leading suppliers of applied technologies such as process control,
electronic document management systems and hand-held devices.
EXPLOIT GLOBAL VERTICAL MARKETS. The Company implemented a
vertically-oriented sales and marketing strategy in 1986 under which it has
established customer relationships with opinion leaders in key target markets
such as The Tennessee Valley Authority in utilities, Phelps Dodge Corporation in
mining, Aluminum Company of America in metals, James River Corporation in forest
products, The Coca-Cola Company in consumer packaged goods, and Unocal Thailand
in oil and gas. The Company seeks to use such opinion leading customers as
references to expand its presence within its vertical markets. In addition, TSW
has extended its vertical focus to its professional services group and believes
the industry-specific expertise of its Asset Care professionals, including
expertise gained through working with existing clients, ensures that its
solutions continue to meet the particular needs of each of the vertical markets.
Since these vertical markets are increasingly global, the Company is applying
its professionals' Asset Care expertise internationally. With installed sites in
48 countries, the Company intends to continue to expand internationally by
offering localized versions of its products.
EXPAND PROFESSIONAL SERVICES OFFERING. Although the Company has a track
record of successful relationships with systems integrators and other
implementation partners, it expects to expand its own professional services
staff by continuing to hire individuals with practical end-user experience. The
Company's professional services organization provides practical and strategic
value to its clients and retains accountability for overall project success. The
Company's services expertise is critical given the unique requirements of Asset
Care optimization programs and the rapid changes in maintenance methodologies,
which require close interaction between software developers and end-user
practitioners.
LEVERAGE EXISTING CUSTOMER BASE. At March 31, 1997, TSW had a total of 321
customers licensed to use its solutions at 941 sites. Of these sites, 699 sites
were using the Company's heritage products and the remaining 242 sites were
licensed to use EMPAC. The Company provides a clearly defined migration path
from its heritage products to EMPAC and has seen an increase in revenue from the
migration of existing customers to its enterprise solution. The Company is still
in the early stages of this customer migration
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process and intends to continue pursuing this opportunity. In addition, the
Company will continue to offer users of its heritage products new functionality
to extend the revenue stream from this large installed base.
PURSUE STRATEGIC ACQUISITIONS. The Company has successfully acquired and
integrated into its operations three companies over the past four years and
expects to continue that strategy in order to achieve its corporate objectives.
The Company will continue to consider acquisitions that strategically augment
its intellectual property, enhance market coverage or extend professional
services and support capabilities.
PRODUCTS
The Company's software products enable customers to plan, execute, monitor
and improve asset maintenance processes in order to increase capacity, reduce
operating costs and safeguard the workforce and environment. The Company's
latest Asset Care system, EMPAC, is a scalable client/server software solution
that enables organizations to implement maintenance automation on an
enterprise-wide basis. EMPAC, which first became operational at a customer site
in December 1995, was designed to incorporate the Company's best practices
expertise delivered in its earlier heritage products into a flexible and open
technology architecture. Those heritage products, including MPAC-UX, MPAC-SQL,
MPAC 2000, En Garde/IPS and CIMIX, have been widely adopted since the initial
release of MPAC-UX in 1980. EMPAC has become the Company's primary source of
license fee revenue, accounting for approximately 94% of the Company's license
fee revenue in fiscal 1997. For that period, the average EMPAC license fee was
$627,000. As of March 31, 1997, EMPAC was licensed for use by 74 customers at
242 sites.
ENTERPRISE MPAC
EMPAC consists of nineteen modules grouped into four primary information
engines designed to operate as an integrated system while allowing customers to
deploy their server and hardware infrastructure in an efficient and
cost-effective manner. Each module can be licensed and implemented separately to
allow customers to match the Company's solution with their operational
requirements. All modules interoperate to present a single integrated
information resource with an easy-to-use graphical or browser-based user
interface.
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[Omitted Graphic and Image Material]
[The following is a narrative description of graphic and image material
contained in the printed version of this Prospectus which has been omitted from
the version of this Prospectus filed electronically. The omitted graphic and
image material contains a figure describing the four information engines
comprising EMPAC. At the top of the figure is a picture of a laptop computer
with the Enterprise MPAC logo on the screen representing the EMPAC workbench.
Beneath the EMPAC workbench, arrows point from the workbench down to four
separate cylinders. The four cylinders have been labeled the "Transaction
Engine," the "Real-time Engine," the "Content Engine" and the "Workflow Engine."
Underneath each cylinder is a list of modules that comprise the information
engine as set forth in the tables which follow.]
TRANSACTION ENGINE. EMPAC's transaction engine addresses the core business
processes required to implement advanced Asset Care strategies. It also
incorporates the product's application programming interface ("API"), which
enables EMPAC to be integrated with third-party business information systems,
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such as manufacturing, financials and project management systems. The following
table describes the functions and benefits of the transaction engine modules:
<TABLE>
<S> <C> <C>
MODULE FUNCTIONS BENEFITS
Asset and Work Tracks capital asset information, Increases asset capacity and life;
maintenance job plans and improves labor productivity
workforce management information. through better job planning.
Component Tracking Provides component-level Optimizes repair and cost control
management for complex multi-level at lowest possible level.
equipment and capital spares.
Project Tracking Manages large-scale capital Reduces shutdown time and
projects for new construction and contractor expense.
major shutdowns.
Capacity Tracking Integrates manufacturing, Reduces asset downtime through
operations and production data integration with enterprise-wide
with maintenance information. activities.
Warranty Tracking Supports asset warranty Reduces out-of-warranty work and
management. total cost of asset ownership.
Stores Manages spare part inventories Increases inventory turnover;
across multiple locations. reduces inventory carrying costs.
Procurement Supports requisitions, quotation Reduces emergency and routine
processing, purchase orders, acquisition costs; improves
contract management and vendor supplier performance and asset
analysis. availability through timely
goods/services acquisition.
Invoice Matching Integrates purchase order, invoice Reduces payment and accounting
and payment process with delivery, errors; improves accuracy of
inspection and acceptance. inventory accruals and asset life
cycle costing.
Advanced Security Manages complex multi-plant and Ensures appropriate cost
multi-organization data security. accounting and streamlines user
interaction.
Integration Toolkit Supports integration with general Improves labor productivity and
ledger, purchasing, accounts Asset Care through shared
payable and project management information; reduces data errors
systems. by eliminating data redundancy.
</TABLE>
WORKFLOW ENGINE. EMPAC's workflow engine is an advanced document management
system that supports the life cycle management of critical plant documents and
integrates them with business information stored in the transaction engine. The
workflow engine enables customers to model business process flows graphically
without altering EMPAC source code. This helps customers introduce EMPAC into
their current operational structures as well as model and implement business
process reengineering. Furthermore, customers can manage centrally all document
files and work with native applications such as Microsoft Word and Autodesk
AutoCAD when creating a work package that may include EMPAC transaction data,
engineering drawings and access control procedures. The workflow engine also
supports document and version control that enables companies to comply with FDA,
OSHA, and ISO 9000
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documentation and control requirements. The following table describes the
functions and benefits of the workflow engine modules:
<TABLE>
<S> <C> <C>
MODULE FUNCTIONS BENEFITS
EDM-Imaging Manages engineering drawings and Reduces asset repair times by
other application documents; improving access to design and
supports editing, version control engineering data.
and inter-document navigation.
EDM-Workflow Manages site and user-specific Improves labor productivity by
business process flows; supports streamlining procedure changes and
Asset Care process modeling. optimizing approval and review
cycles; reduces liability exposure
through regulatory compliance.
Advanced Search Provides single-entry query Reduces document retrieval time and
capability over multiple databases, improves Asset Care by providing all
text files and information relevant information on a timely
resources. basis.
Electronic Mail Integrates corporate electronic mail Improves inter-department
systems with Asset Care processes communication and labor
and data. productivity; reduces equipment
downtime.
</TABLE>
REAL-TIME ENGINE. EMPAC integrates Asset Care information with real-time
data collection systems such as process control, energy management, and
hand-held data collection devices. Asset-intensive organizations make large
capital investments in sophisticated controls systems from suppliers such as
Johnson Controls, Honeywell, Allen-Bradley and Elsag Bailey. The real-time
engine gives maintenance personnel immediate access to the hundreds of data
points being collected every second. The information collected by these systems
is vital to the "just-in-time" maintenance strategy that aims to optimize asset
capacity through a comprehensive and real-time assessment of equipment health.
Through industry-standard technology such as OLE for Process Control (OPC) and
Cellular Digital Packet Data (CDPD), information collected by such systems is
processed on-line through EMPAC's failure diagnostics system. This diagnostics
system allows maintenance personnel to process real-time data in conjunction
with EMPAC's failure history, workforce availability and materials information.
The following table describes the functions and benefits of the real-time engine
modules:
<TABLE>
<S> <C> <C>
MODULE FUNCTIONS BENEFITS
Process Control Integrates EMPAC with production Improves equipment health
and control systems such as assessment and facilitates
programmable logic controllers "just-in- time" Asset Care.
(PLC) and distributed control
systems (DCS).
Condition Monitoring Integrates machine-level Improves asset diagnostics by
monitoring tools such as providing machine-level
ultrasound, temperature, and information.
vibration monitoring.
Asset Optimization Supports automatic problem Predicts asset failure and reduces
diagnosis through pre-defined asset failure diagnosis time.
logic trees.
</TABLE>
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CONTENT ENGINE. EMPAC's content engine provides users with access to global
information resources through the Internet, Intranets or Extranets. For example,
a maintenance planner working on a critical production failure can utilize
Internet-based part locator services to quickly and cost-effectively purchase an
emergency spare part. The content engine also enables customers and their
trading partners to process Asset Care transactions securely. For example,
buyers can post requests for quotation on the Internet, and consignment vendors
can perform Internet-based queries on stock levels to replenish inventory on a
"just-in-time" basis. EMPAC supports enterprise-wide sharing of critical
documents stored on an Intranet or the Internet through microwave and/or
satellite technology. The following table describes the functions and benefits
of the content engine modules:
<TABLE>
<S> <C> <C>
MODULE FUNCTIONS BENEFITS
Electronic Commerce Supports quote processing and Improves asset repair efficiency
stock inquiries through Java through access to broader
applets; provides integrated information resources; improves
access to Internet resources efficiency by reducing
through EMPAC links. communication time.
Performance Tracks key maintenance Reduces maintenance response time
Indicators performance indicators. to changes in business drivers.
</TABLE>
EMPAC PRODUCT ARCHITECTURE AND DEVELOPMENT STRATEGY
COMMERCIAL OFF-THE-SHELF TECHNOLOGY. TSW utilizes industry-standard tools
and technologies to develop its products, allowing the Company's solution to
evolve with emerging industry standards. EMPAC is largely platform independent,
running on industry-standard UNIX and Windows NT servers including the IBM
RS/6000, HP 9000, Sun SPARCstation and Intel-based systems. EMPAC utilizes the
native functionality of the Oracle database with a graphical user interface
developed in PowerBuilder.
PARTITIONED APPLICATION ARCHITECTURE. The layers of the EMPAC application
architecture--the user interface, business logic, data storage, workflow and
browser interface--are interoperable but not interdependent. For example,
changes to the database layer are not dependent on the user interface. The
partitioning built into EMPAC minimizes the Company's dependence on third-party
vendors and efficiently utilizes desktop computers, "thin clients," servers and
networks. The Company believes this architecture reduces its exposure to the
risks of technology or market shifts that require changes in one or more of the
layers.
OBJECT-ORIENTED DESIGN AND THIRD-PARTY INTEROPERABILITY. TSW develops its
products through an object-oriented design and development methodology by which
software "objects" (i.e., collections of properties and methods) are used as
building blocks to model real-world business processes. Further, EMPAC is
designed to be an open system with an API that enables easy interoperability and
extension at the application level. The API is available to third-party
developers to facilitate the integration of TSW software with other
client/server applications such as SAP's R/3, Oracle Applications, Baan IV or
PeopleSoft's Enterprise Solution. This interoperability with popular third-party
packages extends the value of the Company's solution by providing customers with
an enterprise-wide, integrated business information system. The Company also
believes object-oriented development has several benefits including software
reusability, which results in decreased development expense and improved
software quality, and component management, which allows customers to implement
and upgrade subsets of the application.
FLEXIBLE NETWORK TECHNOLOGY. EMPAC can be installed in a network
configuration to allow customers to take full advantage of client/server
technology with low cost and low maintenance "thin clients." Network-centric
implementation is attractive to clients concerned about the acquisition and
systems management expense associated with personal computers. EMPAC's efficient
network architecture is
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particularly important to clients with low-bandwidth networks, prevalent in
developing markets, which require the minimization of network traffic to support
advanced client/server applications.
PROFESSIONAL SERVICES
Fundamental to the success of an Asset Care solution are the professional
services required to help the customer introduce and apply advanced maintenance
strategies and leading technology to the Asset Care function. The Company's
professional services are focused on identifying appropriate and timely process
improvements that produce a measurable return on investment for the customer.
TSW's professional services are organized along vertical markets, which parallel
its sales force's vertical organization, to enhance the delivery of its subject
matter expertise to its customers. The Company offers the following consulting
and training and education services in conjunction with its partners and on a
stand-alone basis.
CONSULTING
TSW consultants conduct site examinations and assist customers in developing
and implementing advanced Asset Care strategies. With significant experience in
diverse industries such as discrete and process manufacturing, utilities,
healthcare, mining, transportation, education, telecommunications and
government, TSW consultants provide practical and proven direction in developing
strategies which apply best practice Asset Care methodologies that meet the
customer's requirements. Depending on the customer's needs, TSW offers:
- Requirements analysis and Asset Care software evaluation services;
- Advanced Asset Care methodology consulting, such as TPM and RCM;
- Benchmarking and other advanced strategy workshops involving customers and
industry experts;
- Asset database design and data collection;
- Installation services and technical consulting in areas such as data
conversion, system interfaces, software installation, system
administration, and database/network tuning; and
- Management consulting intended to lead the customer through the
implementation activities required to successfully achieve the customer's
business objectives.
Consulting services are delivered directly by TSW but are also delivered in
conjunction with value-added third-party service providers such as systems
integrators and specialist consulting firms. TSW consulting services are
typically delivered on a time and materials basis, or occasionally on a fixed
price and not-to-exceed basis.
TRAINING AND EDUCATION
The Company offers a variety of standard and customized training and
education services, both at customers' sites and in the Company's training
centers. The training curriculum is delivered by education specialists who
utilize proven education techniques and advanced technology including video
conferencing and computer-based training. The Company also offers a "train the
trainer" program in which TSW trains customer employees designated as trainers
within their organization. These trainers are educated in both training
techniques and the optimal use of the Company's products. The Company believes
its train-the-trainer methodology is a crucial element in the success of its
implementations, which often span multiple departments, plants and countries.
Training is delivered through standard courses with package prices or can be
contracted for on a time and materials basis.
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WORLDWIDE CUSTOMER SUPPORT
The Company's customer support function is responsible for servicing TSW
customers after the initial implementation project is complete. TSW has customer
support operations in the United States, United Kingdom, France and Australia.
These operations enable the Company to respond more quickly and effectively to
the needs of its multinational and international customers. One of customer
support's key performance criteria is its support agreement renewal rate, which
has averaged 95% for the past three fiscal years.
TSW customer support personnel have technical, functional and product
expertise which enables them to analyze and resolve customer problems. The
Company offers a global support organization with 7 x 24 multi-lingual support.
The Company's CareNet service allows TSW support customers to access, via the
Internet, an electronic repository of frequently asked questions, problem
diagnostics and software upgrades. Event schedules, product enhancement requests
and electronic mail are also supported. Support contracts are typically annual
agreements priced based on a percentage of the software license fee. Depending
on the services delivered, support agreements typically are priced from 15% to
18% of the license fee.
In addition to EMPAC, the Company supports a number of heritage products.
MPAC-UX, the Company's first commercial maintenance management software system,
is in its nineteenth major release and was licensed for use by 142 customers at
403 sites as of March 31, 1997. MPAC-SQL, a maintenance management software
system designed to run under Oracle, Rdb and Ingres, was licensed for use by 13
customers at 38 sites as of March 31, 1997. In 1990, the Company sold its first
generation client/server system, MPAC-2000, which was licensed for use by 6
customers at 12 sites as of March 31, 1997. In 1994, the Company acquired the
developer of the En Garde/IPS maintenance management software, which was
licensed for use by 49 customers at 180 sites as of March 31, 1997, and a
majority interest in the developer of the CIMIX maintenance management software,
which was licensed for use by 37 customers at 66 sites as of March 31, 1997.
RESEARCH AND DEVELOPMENT
The Company's research and development function includes subject matter
experts responsible for determining the functional content of all TSW products
as well as software engineers who develop the Company's software. TSW follows a
structured development methodology to ensure the timely and cost-effective
production of high-quality software. The Company has a formal partnership
program through which customers can participate directly in the research and
development process. Typically, at least two major customers have such
relationships with the Company for each major product release. Occasionally,
customers will fund the development of modules from which the customer may
receive royalties or other accommodations. TSW retains the ownership of all
intellectual property associated with such modules. The Company believes this
direct participation by industry leaders helps it deliver a solution which is
focused on its customers' most important business needs.
As of March 31, 1997, the Company's product development staff consisted of
85 employees. From time to time, the Company has also engaged outside
consultants in its product development efforts. The Company's total expenses for
product development in fiscal 1995, 1996 and 1997 were $11.9 million, $9.8
million and $8.6 million, respectively. The Company did not capitalize any
software development costs in fiscal 1995, 1996 or 1997. The Company anticipates
that it will continue to commit substantial resources to product development in
the future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
SALES AND MARKETING
The Company sells its products exclusively through direct or direct-assisted
channels, organized along vertical markets. This structure allows the Company to
exploit the industry knowledge and Asset
37
<PAGE>
Care expertise of its sales and marketing professionals to appropriately match
customer requirements with the Company's solution. The Company believes this
expertise provides it with a competitive advantage and allows it to market its
products more effectively to senior management decision makers in its target
markets.
The Company supports its direct sales and marketing force with a group of
systems engineering professionals, many of whom also possess vertical market and
practical Asset Care expertise. As of March 31, 1997, the Company employed 76
sales and marketing personnel (51 domestically and 25 internationally),
consisting of 32 sales representatives, 18 supporting systems engineers and 26
marketing and other support personnel. While the Company's sales personnel
generally make the initial sales contact, its professional services group works
closely with the sales team and the customer to develop professional services
contracts. Furthermore, the professional services group takes a primary role in
the marketing and sales of its services to customers after the initial
implementation engagement. In addition to offices in Atlanta, the Company has
offices in other cities in the United States, Europe, Australia and Asia.
The Company has also implemented a direct-assisted sales model through
select reseller relationships with strategic partners that can add value to the
marketing or implementation effort. The Company believes its direct-assisted
model allows it to take advantage of the name recognition and value added by
larger partners such as Oracle and IBM without losing accountability for the
customer's success. For example, the Company believes its ISI agreement with
Oracle will allow TSW to further penetrate the consumer packaged goods industry.
The Company has also negotiated a resale relationship with Oracle which the
Company believes will enable it to penetrate international markets in a
cost-effective way. The TSW sales force and professional services organization
continue to be involved with these partners so customer requirements can be
appropriately matched to solution capabilities, thus ensuring that the Company
remains accountable for the project's success.
TSW has organized an international users' group whose Advisory Committee
plays an important role in helping the Company to develop and refine product and
services strategies. Each year, TSW arranges an international user group
conference which includes presentations by the Company and customers concerning
the features and capabilities of the Company's products. The Company also
sponsors an annual United Kingdom and Asia-Pacific user conference to promote
global participation in the Company's strategy and direction. All of these
conferences include workshops, roundtable discussions and special sessions
devoted to products, technologies and Asset Care methodologies. More than 700
attendees participated in the Company's 1996 international conference held in
Atlanta.
38
<PAGE>
CUSTOMERS
As of March 31, 1997, the Company's products were licensed for use by more
than 321 customers at over 941 sites in over 48 countries worldwide. Below is a
representative sampling in key vertical markets:
[Omitted Graphic and Image Material]
[The following is a narrative description of graphic and image material
contained in the printed version of this Prospectus which has been omitted from
the version of this Prospectus filed electronically. The omitted graphic and
image material contains a chart consisting of seven lists of customers grouped
by vertical markets. The lists are arranged in three rows with two lists on the
top and bottom rows. In the upper left corner of each list is an icon
representing the vertical market. In the upper right corner of each list is the
title of the vertical market. Underneath each title are the number of sites and
the names of the customers as follows.]
<TABLE>
<S> <C>
PROCESS MANUFACTURING
FOREST PRODUCTS/ DISCRETE
MINING/METALS MANUFACTURING
97 sites 49 sites
- ------------------------- -------------------------
- - James River Corporation - Sikorsky Aircraft Corporation
- - Aluminum Company of America - Pratt & Whitney
- - Phelps Dodge Corporation - Babcock & Wilcox
UTILITIES CONSUMER
TELECOM/GAS/WATER PACKAGED GOODS
100 sites 131 Sites
- ------------------------- -------------------------
- - PrimeCo Personal Communications, L.P. - Genentech, Inc.
- - Southern Nevada Water Authority - The Coca Cola Company
- - Media General Cable, Inc. - United Distillers
PUBLIC
PETROCHEMICAL SECTOR
OIL AND GAS 101 Sites
140 Sites -------------------------
- ------------------------- - Stanford University Hospital
- - Unocal Thailand - Vanderbilt University
- - Mapco, Inc. - Metropolitan Atlanta Rapid
- - Augusta Services Company, Inc. Transit Authority
UTILITIES
POWER GENERATION
243 Sites
- -------------------------
- - Wolf Creek Nuclear
Operating Corporation
- - The Detroit Edison Company
- - The Tennessee Valley Authority
</TABLE>
The Company has a successful track record of integrating its end-user focus
with the software engineering discipline required of an enterprise-wide
information management system. The following customer case studies, reported on
the basis of information provided by the customer, illustrate how the Company's
solution has enabled organizations to implement best practices Asset Care
solutions on an enterprise-wide basis:
39
<PAGE>
THE TENNESSEE VALLEY AUTHORITY. The Tennessee Valley Authority ("TVA") is
the nation's largest power producer, producing more than 145 billion
kilowatt-hours of electricity in its fiscal year 1996. TVA is a wholly-owned
corporate agency and instrumentality of The United States, operating 29
hydroelectric plants, 11 fossil plants, three nuclear plants, four combustion
turbine plants, and one pumped storage plant, maintaining 28,123 megawatts of
generation capacity and 17,000 miles of transmission line. TVA uses EMPAC at its
Browns Ferry Nuclear Plant to create electronic Technical Information Centers
where thousands of documents and diagrams were previously stored in hard copy
format. In addition, TVA is using EMPAC to consolidate over 700 databases that,
in many cases, were not compatible. In eighteen months, TVA reported that the
procedural improvements gained from the use of EMPAC saved the Browns Ferry
plant an estimated $12 million.
AUGUSTA SERVICES COMPANY, INC. Augusta Services Company, Inc. ("ASC"), a
maintenance and support company for a major petrochemical/fertilizer producer,
implemented the TSW solution in 1990. In eighteen months, ASC reported a one
million dollar return on its investment through increased asset availability,
reduced maintenance contractor overtime expense and better pricing from its
suppliers. ASC also reported that the TSW solution, together with its
application of best practices maintenance strategies such as RCM, have enabled
it to keep annual maintenance budget increases below the inflation rate for the
past seven years, saving an additional $11 million. During this period, ASC
decreased its maintenance staff by more than 100 people while increasing plant
capacity.
SOUTHERN NEVADA WATER AUTHORITY. In July 1996, Southern Nevada Water
Authority ("SNWA"), located in Las Vegas, needed an advanced Asset Care system
to control costs in the resource-intensive effort of providing safe, inexpensive
drinking water to the population of one of the nation's fastest growing regions.
To help with the maintenance process, SNWA selected EMPAC to meet those
challenges. Placing client/server based EMPAC on line at its Lake Mead facility
enabled SNWA to establish and monitor system-wide maintenance of all components
of the system, track warehouse inventories and establish a cost-effective
schedule of preventive maintenance.
COMPETITION
The market for application software is intensely competitive and
characterized by rapid changes in technology and evolving industry standards. To
maintain or enhance its position in the industry, the Company will need to
continually enhance its current product offerings, introduce new product
features, and expand its professional services capabilities. The Company
currently competes on the basis of the breadth of its product features and
functions, including the product's scalability and interoperability with other
enterprise-wide information systems, and product quality, price, ease-of-use,
reliability and performance. In addition, the Company competes on the basis of
its reputation and vertical market expertise. TSW also competes for
international business on the basis of its international distribution and
services and support network. The Company believes it competes favorably in all
of these areas. The Company encounters competition from a number of sources
including: (i) software companies that provide computerized maintenance
management systems, including The Indus Group, Inc. and Project Software &
Development, Inc.; (ii) software companies that integrate CMMS applications into
their overall enterprise information management systems, including SAP and
Marcam Corporation; (iii) third-party professional services organizations that
develop software; and (iv) information technology departments of potential
customers that develop in-house software. See "Risk Factors--Competition."
PROPRIETARY RIGHTS AND LICENSES
The Company relies on a combination of copyright, trademark and trade secret
laws, license agreements, non-disclosure and other contractual provisions and
technical measures to protect its proprietary rights in its products and
technology. The Company typically distributes its software products under
software license agreements which contain, among other things, provisions
limiting the use, copying and transfer of the licensed program. In certain
events, usually linked to the inability of the
40
<PAGE>
Company to continue to perform its obligations under the license agreement, the
licensees of certain agreements may obtain the source code and documentation for
the proper maintenance of the product in connection with the licensee's use of
the product. Because the Company's products allow customization of applications
without altering source code, the source code for the Company's products is
typically neither licensed nor provided to the customers. The Company protects
the source code of its software as a trade secret and through copyright
registrations.
The Company currently has operations in the United States, Europe, Australia
and Asia, and its products are licensed for use by customers in over 48
countries. The Company has registered Curator, its electronic document
management system, as a trademark in the United States. In addition, En Garde
has been registered as a trademark in the United Kingdom. The Company believes
that international protection and enforcement of intellectual property rights
for software products in particular may be more limited than in the United
States. Specifically, intellectual property laws in certain countries may not
protect software companies from the loss of intellectual property rights through
reverse engineering.
The Company has entered into several agreements to integrate intellectual
property of third parties into its products, including Enterprise FYI developed
by Identitech, Inc., the IMAGEnation imaging system developed by SPICER
Corporation, the full text search engine developed by Excalibur Technologies
Corp. and integrated reporting software licensed from Scribe Technologies, Inc.
See "Risk Factors-- Dependence on Licensed Technology."
The Company requires key employees to sign agreements under which the
employee agrees not to disclose trade secrets or confidential information and
agrees to disclose and assign to the Company all of the intellectual property
rights associated with any ideas, concepts, techniques, inventions, processes,
or works of authorship developed or created during the course of performing work
for the Company or its customers. In addition, the Company generally requires
its consultants to enter into an independent contractor consulting agreement
which prohibits disclosure of the Company's trade secrets and other proprietary
information.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or development by others of similar technology. The Company does not
believe that any of its products infringe the proprietary rights of third
parties. Because the software development industry is characterized by rapid
technological change, however, the Company believes that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements, industry reputation and customer support are more
important to establishing and maintaining a leadership position than the various
legal protections available for its technology.
LEGAL PROCEEDINGS
From time to time, the Company is involved in legal proceedings incidental
to the conduct of its business. The Company believes that the litigation,
individually or in the aggregate, to which it is currently a party is not likely
to have a material adverse effect on the Company's results of operations or
financial condition.
EMPLOYEES
As of March 31, 1997, the Company had a total of 412 full-time employees: 85
in product development, 76 in sales and marketing, 166 in professional services,
40 in customer support and 45 in management, administration and finance. As of
March 31, 1997, 274 of its employees were based in the United States and 80 were
based in the United Kingdom. The remaining 58 employees of the Company were
based at its locations in France, Australia and certain countries in Asia. None
of the Company's U.S.-based employees is subject to a collective bargaining
agreement, and the Company has not experienced any work stoppages. The Company
believes that its employee relations are good.
41
<PAGE>
The Company's future success depends, in large part, on the continued
service of its key management, sales, product development and operational
personnel and on its ability to attract and retain highly qualified employees,
including management personnel. There can be no assurance that the Company will
be successful in attracting, retaining and motivating key personnel. See "Risk
Factors-- Dependence on Key Personnel; Need to Attract and Retain Skilled
Personnel."
FACILITIES
The Company's principal executive offices are located at 3301 Windy Ridge
Parkway, Atlanta, Georgia, 30339. The Company is the sole tenant in an office
building containing 106,000 rentable square feet that is located on
approximately ten acres under a lease that expires in 2004. The lease was
initially for 60% of the building with options permitting TSW to expand its
occupancy to the remainder of the building over a period of several years. TSW
has exercised two of such options and now leases approximately 80% of the
building.
42
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company and their
ages as of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Christopher R. Lane............................... 41 President, Chief Executive Officer and Director
John F. Bartels................................... 52 Senior Vice President and Chief Financial Officer
John W. Blend, III................................ 50 Executive Vice President, Worldwide Distribution, and
Director
Kenneth C. Colby, Jr.............................. 43 Senior Vice President of Professional Services
David J. Loesch................................... 35 Vice President of Strategy
Michael T. Nugent................................. 36 Vice President of Worldwide Customer Support
Christopher A. Smith.............................. 33 Vice President of Development
Allen D. Vaughn................................... 35 Vice President of Human Resources
John R. Oltman.................................... 52 Chairman of the Board
George D. Busbee.................................. 69 Director
William H. Janeway................................ 53 Director
Joseph P. Landy................................... 35 Director
</TABLE>
All directors hold office until the next annual meeting of shareholders or
until their successors have been elected and qualified. Officers of the Company
serve at the discretion of the Board of Directors, subject to the terms of any
employment agreements with the Company. See "Management--Employment Contracts."
There are no family relationships among any of the Company's executive officers
and directors.
Mr. Lane has served as President of the Company since May 1994, Chief
Executive Officer of the Company since June 1994, and as a director since 1993.
From June 1994 to July 1996, he served as the Company's Chairman of the Board.
Prior to joining the Company in May 1994, he served as a Vice President at E.M.
Warburg, Pincus & Co., Inc., a diversified financial services firm ("EMW Inc."),
from 1993 to 1994. From 1987 to 1993, he held various positions at Oracle
Corporation, a provider of software for information management ("Oracle"), in
both the United States and Europe during the firm's major growth period. Mr.
Lane developed Oracle's strategic market divisions in the United Kingdom, was
Vice President of its U.S. consulting business and was responsible for European
product development. Prior to his tenure at Oracle, he worked for nine years in
a commercial capacity for the National Computing Centre, a self-financing
government agency in the United Kingdom specializing in information technology
methodology and standards.
Mr. Bartels has served as the Company's Senior Vice President, Chief
Financial Officer, Secretary and Treasurer since October 1995. From 1993 until
he joined the Company, Mr. Bartels served as Chief Financial Officer of Boral
Industries, Inc., the North American operations of an Australian manufacturing
company. From 1992 until 1993, Mr. Bartels was a principal in AFS, Inc., a
company formed to explore potential acquisitions in the funeral service
industry. From 1974 to 1991, he was employed by Fuqua Industries, Inc., a
provider of quality, brand-name consumer products, where he served in many
capacities, including Senior Vice President and Chief Financial Officer from
1990 to 1991.
Mr. Blend has served as the Company's Executive Vice President, Worldwide
Distribution, since 1986. He also has served as a director of the Company since
1987. Prior to joining the Company, he served as Area Vice President for the
eastern field operations of HBO & Company, a provider of enterprise-wide patient
care, clinical, financial and strategic management software solutions. Prior to
his tenure at HBO & Company, he was employed in various positions by IBM
Corporation, a provider of customer solutions through the use of advanced
information technologies. Pursuant to that certain Amended and Restated
Stockholders Agreement by and among the Company, Mr. Blend, Warburg and
43
<PAGE>
David Welden, the former chairman and chief executive officer of the Company
(the "Shareholder Agreement"), Warburg agreed that while Mr. Blend remains an
employee of the Company, Warburg will cause Mr. Blend to be nominated to the
Board of Directors of the Company. Further, Warburg and Mr. Blend agreed to cast
their votes in favor of Mr. Blend for director. The Shareholder Agreement
continues in effect as to each party for as long as any such party owns stock of
the Company.
Mr. Colby has served as the Company's Senior Vice President of Professional
Services since March 1996. He previously served as the Company's Senior Vice
President of Development and Business Operations from September 1995 to March
1996, Vice President of Procurement Business Unit from April 1995 to September
1995, Vice President of Application Development from June 1994 to March 1995,
Vice President of Software Engineering from January 1994 to June 1994, Director
of Engineering--MPAC-SQL Development from February 1993 to January 1994, and in
various other capacities since 1993. Prior to joining the Company, Mr. Colby
served from 1988 to 1992 as the Eastern Region Group Director for the Oracle
Consulting Group. Prior to his tenure at Oracle, he was a national account
manager with Control Data Corporation's Business Information Services Division.
Mr. Loesch has served as the Company's Vice President of Strategy since
March 1997. He previously served as the Company's Vice President of Marketing
from March 1996 to March 1997, Director of Product Management from October 1995
to March 1996 and Director of Procurement Business Unit from March 1995 to
October 1995. From 1990 to 1994, Mr. Loesch was the principal of YieldPro, a
management consulting firm specializing in the Asset Care market. From 1986 to
1990, Mr. Loesch was an employee of the Company and held positions in product
management, marketing and sales.
Mr. Nugent has served as Vice President of Worldwide Customer Support since
March 1996. He previously served as the Company's Director of Worldwide Service
from May 1995 to March 1996. Prior to joining TSW, he served ten years as a
director of customer service for Dun & Bradstreet Software, a business
applications software company ("D&B"). Prior to his tenure at D&B, Mr. Nugent
served as a system analyst for the Federal Bureau of Investigation.
Mr. Smith has served as Vice President of Development since December 1995.
From May 1995 to December 1995, he served as Director of Product Development for
the Procurement Business Unit. He joined TSW in May 1995 after serving six years
as a director of product development for human resources and payroll products
for Oracle. From 1986 to 1989, he was a software manager for Novus, Inc., where
he developed client/server systems that used a PC to interact with an airline
reservation mainframe.
Mr. Vaughn has served as Vice President of Human Resources since September
1994. He served in senior human resources positions at D&B from January 1990
until May 1993 and was Director of Human Resources from June 1993 until August
1994. Mr. Vaughn served on active duty in the United States Army from 1986 until
1989 and is currently a Major in the United States Army Reserve.
Mr. Oltman has served as a director of the Company since January 1996 and
Chairman of the Board of Directors since July 1996. Since November 1995, Mr.
Oltman has been the principal of JRO Consulting, Inc. ("JRO Consulting"). JRO
Consulting is a party to a Consulting Agreement with Warburg pursuant to which
JRO Consulting has agreed to provide consulting services to Warburg relating to
its investment in the Company and has agreed that Mr. Oltman will serve as
Chairman of the Board of Directors, subject to the right of the Company's
shareholders to remove directors in accordance with the provisions of the
Company's Articles of Incorporation and Bylaws. From July 1991 to November 1995,
Mr. Oltman served as the Chairman and Chief Executive Officer of SHL
Systemhouse, Inc., a former affiliate of the Company and a provider of
client/server consulting, systems integration and technology outsourcing ("SHL
Systemhouse"). Before joining SHL Systemhouse in 1991, Mr. Oltman was Worldwide
Managing Partner for Integration Services for Andersen Consulting, a division of
Arthur Andersen, LLP, an international professional services firm ("Andersen"),
and a member of Andersen's Worldwide Organization Board of Directors. Mr. Oltman
joined the Arthur Andersen Worldwide Organization in 1970 and held a number of
positions within that firm, including Managing Partner for Andersen's Chicago
Consulting Group. Mr. Oltman also serves as a director of IA Corporation, an
affiliate of the Company and an application
44
<PAGE>
software company, and Vanstar Corporation, an affiliate of the Company and a
reseller of personal computer products ("Vanstar").
Mr. Busbee has served as a director of the Company since January 1995. He
has been of counsel to the law firm of King & Spalding since 1993, was a partner
in that firm from 1983 to 1993, and was Governor of the State of Georgia from
1975 until 1983. Prior to his election as Governor, he served for eighteen years
as a member of the Georgia House of Representatives, while also engaging in the
practice of law. Mr. Busbee also serves as a director of Delta Air Lines, Inc.,
a major air carrier, Union Camp Corporation, a manufacturer of paper, packaging,
chemicals and wood products, and Weeks Corporation, a developer and manager of
industrial and suburban office buildings in the southeastern United States.
Mr. Janeway has served as a director of the Company since 1994. Since 1988,
he has been a managing director and the head of the Venture Capital High
Technology Team of E.M. Warburg, Pincus & Co., LLC ("EMW LLC") and its
predecessor, EMW Inc. Mr. Janeway serves on the Board of Directors as a nominee
of Warburg. Mr. Janeway also serves as a director of BEA Systems, Inc., an
on-line transaction processing software and services company, Ecsoft Group plc,
a European software distributor, Industri-Matematik International Corp., a
client/server application software company, Maxis, Inc., an entertainment and
education software company, OpenVision Technologies, Inc., a Unix system
software company, Zilog, Inc., a manufacturer of microcontroller-based
integrated circuits, Vanstar and several privately-held companies.
Mr. Landy has served as a director of the Company since 1992. Since 1994,
Mr. Landy has been a managing director of EMW LLC and its predecessor, EMW Inc.
Mr. Landy has been employed in various capacities by EMW LLC and EMW Inc. since
1985. Mr. Landy serves on the Board of Directors as a nominee of Warburg. Mr.
Landy also serves as a director of CN Biosciences, Inc., a developer, marketer
and distributor of products used in disease-related life sciences research,
Level One Communications, Inc., a designer, developer and marketer of
application specific standard integrated circuit products, Nova Corporation, an
integrated provider of transaction processing services, and several
privately-held companies.
Messrs. and presently serve on the Compensation
Committee of the Board of Directors (the "Compensation Committee"). The
Compensation Committee establishes remuneration levels for officers of the
Company, reviews management organization and development, reviews significant
employee benefit programs and establishes and administers executive compensation
programs.
Messrs. , and presently serve on the Audit
Committee of the Board of Directors (the "Audit Committee"). The Audit Committee
recommends to the Board of Directors the independent public accountants to be
selected to audit the Company's annual financial statements and approves any
special assignments given to such accountants. The Audit Committee also reviews
the planned scope of the annual audit, any changes in accounting principles and
the effectiveness and efficiency of the Company's internal accounting staff.
The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company.
DIRECTOR COMPENSATION
As compensation for serving on the Board of Directors, directors who are not
also employees of the Company receive an annual fee of $10,000 and $750 for each
meeting of the Board of Directors or any committee thereof in which they
participate. In addition, the Company has adopted a 1995 Stock Option Plan for
Outside Directors, which grants stock options to directors who are not employees
of the Company or any of its affiliates. See "Management--Stock Option Plans."
45
<PAGE>
In lieu of the payment of annual director's fees to Mr. Oltman and in lieu
of Mr. Oltman's participation in the 1995 Stock Option Plan for Outside
Directors, the Company and JRO Consulting, whose principal is Mr. Oltman,
entered into two nonqualified stock option agreements dated August 8, 1996 and
December 11, 1996 (collectively, the "JRO Options"), under which JRO Consulting
was granted options to purchase and shares of Common Stock,
respectively. Each JRO Option has an exercise price of $ per share and
expires on August 8, 2006. The shares covered by each of the JRO Options vest in
three equal installments on February 8, 1997, August 8, 1997 and December 31,
1997, provided that JRO Consulting continues to make available a person to
provide services to the Company in the capacity of Chairman of the Board of
Directors to the Company through such dates. Vesting will accelerate and the
options will become fully exercisable upon the occurrence of a "Liquidity Event"
(as defined in the JRO Options). The offering to which this Prospectus relates
will be a Liquidity Event. Under the terms of the JRO Options, JRO Consulting
has preemptive rights to participate in any offerings of stock by the Company
that occur prior to the earlier of (i) December 31, 1997 and (ii) an initial
public offering of Common Stock, other than issuances of stock in connection
with normal employee and director stock option plans. Such rights, which must be
exercised within thirty days notice of any such offerings, entitle JRO
Consulting to purchase a number of shares required to maintain its relative
percentage ownership of Common Stock.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information with
respect to the compensation paid to or accrued by the Company for services
rendered during the fiscal year ended March 31, 1997, by the Company's Chief
Executive Officer and the three other executive officers of the Company whose
salary and bonus for fiscal 1997 exceeded $100,000 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION SECURITIES
-------------------------------------- UNDERLYING
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION (# OF SHARES) COMPENSATION (1)
- ----------------------------------- ----------- --------- -------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Christopher R. Lane ............... $ 250,000 -- $ 91,997(2) $ 662
President and Chief Executive
Officer
John F. Bartels ................... 220,000 $ 40,000 -- 1,613
Senior Vice President, Chief
Financial Officer, Secretary and
Treasurer
John W. Blend, III ................ 200,000 -- -- 16,407
Executive Vice President,
Worldwide Distribution
Kenneth C. Colby, Jr. ............. 150,000 -- -- 346
Senior Vice President of
Professional Services
</TABLE>
- --------------
(1) Represents Company contributions for group life insurance benefits and, in
the case of Mr. Blend, split dollar life insurance premium payments.
(2) Includes approximately $48,000 of housing costs paid on behalf of Mr. Lane.
46
<PAGE>
OPTION GRANTS
The following table sets forth certain information for fiscal 1997, with
respect to grants of stock options to each of the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR OPTION TERM (2)
OPTIONS EMPLOYEES BASE EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR PRICE (1) DATE 5% 10%
- ------------------------------------ ------------- --------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Christopher R. Lane................. 4.9% $ 11/04/06
16.9 12/11/06
John F. Bartels..................... 3.4 11/04/06
2.9 02/21/07
John W. Blend, III.................. 3.1 11/04/06
5.8 02/21/07
Kenneth C. Colby, Jr................ 2.3 11/04/06
</TABLE>
- --------------
(1) Prior to this offering, there was no public market for the Common Stock and,
therefore, the exercise price of the options was based upon the estimated
fair market value, excluding goodwill, of the Company as determined by the
Board of Directors as of the date of grant.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the market price of the Common Stock.
OPTION HOLDINGS AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding stock options held by
the Named Executive Officers at March 31, 1997.
FISCAL 1997 YEAR-END OPTION HOLDINGS AND VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT MARCH 31, 1997 AT MARCH 31, 1997 (1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------ ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Christopher R. Lane...................................
John F. Bartels.......................................
John W. Blend, III....................................
Kenneth C. Colby, Jr..................................
</TABLE>
- --------------
(1) There was no public trading market for the Common Stock as of March 31,
1997. Accordingly, these values are based on the fair market value of the
Common Stock as of March 31, 1997 of $ per share, as determined by
the Board of Directors.
47
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 1997 were Messrs.
Lane, Oltman, Landy and Janeway; however, Mr. Lane ceased to be a member of the
Compensation Committee on November 4, 1996. During fiscal 1997, no executive
officer of the Company served as a member of the board of directors or
compensation committee of any entity that had one or more executive officers
serving as a member of the Board of Directors or the Compensation Committee.
During fiscal 1995 and 1996, the Company purchased $3.2 million and
$557,000, respectively, of research and development services from SHL
Systemhouse, in which Warburg then had an ownership interest and of which Mr.
Oltman was Chairman and Chief Executive Officer and Mr. Janeway was a director.
In December 1996, the Company loaned L100,000 ($166,000 as of March 31,
1997) to Mr. Lane, President and Chief Executive Officer of the Company. The
loan is due on or before April 30, 1999 and bears interest at a rate of 6.00%
per annum. The loan is secured by restrictive provisions related to options to
purchase shares of the Company's Common Stock at $ per share and
$ per share, as set forth in the agreements evidencing such options. The
loan will also become due upon (i) the sale or disposition of any of the options
securing the loan or (ii) 90 days after Mr. Lane ceases to be employed by the
Company. Such loan and accrued interest may only be repaid out of the proceeds
to Mr. Lane from the sale of the shares of Common Stock to be sold by him in
this offering.
STOCK OPTION PLANS
1984 STOCK OPTION PLAN
The 1984 Stock Option Plan (the "1984 Plan") was adopted to provide a means
to attract and retain highly qualified and competent employees and motivate such
employees to exert their best efforts on behalf of the Company through the
granting of incentive stock options ("ISOs") and nonqualified stock options
("NQSOs"), within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code"), to purchase Common Stock. Following the adoption of the 1994 Stock
Option Plan, no further options were granted under the Company's 1984 Plan and
the number of shares available for issuance under the 1984 Plan was reduced to
the number of options then outstanding. As of March 31, 1997, options to
purchase shares of Common Stock remained outstanding under the 1984 Plan
at a weighted average exercise price of $ per share.
1994 STOCK OPTION PLAN
The Company's Amended and Restated 1994 Stock Option Plan (the "1994 Plan")
is the successor to the 1984 Plan. The 1994 Plan was adopted to provide
continuing long-term incentives to all directors and key employees, provide a
means of rewarding outstanding performance by individuals and enable the Company
to attract and retain the personnel necessary for the continued long-term growth
of the Company through the granting of ISOs and NQSOs. To date, no outside or
non-employee director of the Company has been granted an option under the 1994
Plan. shares of Common Stock have been reserved for issuance under the
1994 Plan, subject to adjustment in accordance with the terms of the 1994 Plan.
As of March 31, 1997, options to purchase shares of Common Stock were
outstanding under the 1994 Plan at a weighted average exercise price of
$ per share.
The 1994 Plan is administered by the Compensation Committee. The
Compensation Committee may interpret the 1994 Plan and, subject to its
provisions, may prescribe, amend and rescind rules and make all other
determinations necessary or desirable for the administration of the 1994 Plan.
Subject to certain limits set forth in the 1994 Plan, the Compensation Committee
has complete discretion to select the participants, establish the manner in
which options are granted and exercised, cancel or modify options in certain
situations, impose restrictions on transferability or repurchase rights on
shares of
48
<PAGE>
Common Stock issued thereunder and otherwise prescribe all terms and provisions
of options granted under the 1994 Plan. Options granted under the 1994 Plan may
be in the form of ISOs or NQSOs. In no event may any ISO granted under the 1994
Plan have an exercise price lower than the fair market value of a share of
Common Stock on the date of grant of such option. NQSOs under the Plan may have
an exercise price less than the fair market value of a share of Common Stock on
the date of grant. To date, however, no NQSO has been granted under the 1994
Plan with an exercise price below such fair market value.
Any option granted under the Company's 1994 Plan which is outstanding as of
the date any "Change in Control" (as defined in the 1994 Plan) is determined to
have occurred may become fully vested and exercisable on that date and be
purchased by the Company at its value on the basis of recent market prices or
the highest price paid in any such Change in Control transaction. The 1994 Plan
generally defines a Change in Control to include a variety of transactions or
events involving or affecting the Company, including (i) the acquisition of
securities of the Company representing 50% or more of the combined voting power
of the outstanding securities of the Company, (ii) certain changes in the
composition of the Board of Directors or (iii) a dissolution or liquidation of
more than 50% in value of the Company or sale of 50% or more in value of the
assets of the Company. The acceleration and subsequent cash-out of the options
outstanding under the 1994 Plan occurs to the extent determined by the Board of
Directors.
THE 1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The Company's 1995 Stock Option Plan for Outside Directors (the "Directors
Plan"), which provides for grants of options to directors who are not employees
of the Company or any of its affiliates, was adopted as a means to obtain,
motivate and retain experienced outside directors. Automatic option grants are
made at periodic intervals, as described below, to eligible directors.
shares of Common Stock have been reserved for issuance under the Directors Plan.
As of March 31, 1997, options to purchase shares of Common Stock were
outstanding under the Directors Plan at a weighted average exercise price of
$ per share.
The Directors Plan is administered by the Chief Financial Officer of the
Company. On the date the Board of Directors approved the Directors Plan, each
non-employee director was automatically granted options to purchase shares
of Common Stock vesting in equal amounts over four years. However, Messrs.
Oltman, Janeway and Landy elected not to receive options under the Directors
Plan. Upon the occurrence of an event constituting a "change of control" as
described in the Directors Plan, the Company will afford each participant in the
Directors Plan either (i) a reasonable time thereafter within which to exercise
each option prior to the effectiveness of the change of control or (ii) the
right to exercise such option as to shares of stock of the corporation
succeeding the Company or acquiring its business by reason of such change of
control event. In addition, on the date of each Annual Shareholders Meeting,
beginning with the 1996 Annual Meeting, each non-employee director will
automatically be granted an option to purchase shares vesting in equal
increments over a four-year period.
THE 1995 CONSULTANTS OPTION PLAN
The 1995 Consultants Option Plan (the "Consultants Plan") was adopted to
provide a means to attract and retain highly qualified and competent consultants
and motivate such consultants to exert their best efforts on behalf of the
Company through the grant of NQSOs to purchase Common Stock. The Consultants
Plan is administered by the Compensation Committee. shares of Common Stock
have been reserved for issuance under the Consultants Plan. As of March 31,
1997, options to purchase shares of Common Stock were outstanding under
the Consultants Plan at an exercise price of $ per share.
49
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
Certain of the federal income tax consequences to optionees and the Company
of options granted under the stock option plans described above should be
generally as set forth in the following summary.
An employee to whom an ISO which qualifies under Section 422 of the Code is
granted will not recognize income at the time of grant or exercise of such
option. No federal income tax deduction will be allowable to the Company upon
the grant or exercise of such ISO. Upon the exercise of an ISO, however, any
excess in the fair market price of the Common Stock over the option price
constitutes a tax preference item which may have alternative minimum tax
consequences for the employee. When the employee sells such shares more than one
year after the date of transfer of such shares and more than two years after the
date of grant of such ISO, the employee will normally recognize a long-term
capital gain or loss equal to the difference, if any, between the sale prices of
such shares and the option price. If the employee does not hold such shares for
the required period, when the employee sells such shares, the employee will
recognize ordinary compensation income and possibly capital gain or loss in such
amounts as are prescribed by the Code and the regulations thereunder, and the
Company will generally be entitled to a federal income tax deduction in the
amount of such ordinary compensation income.
An optionee to whom a NQSO is granted will not recognize income at the time
of grant of such option. When such optionee exercises such NQSO, the optionee
will recognize ordinary compensation income equal to the difference, if any,
between the option price paid and the fair market value, as of the date of
option exercise, of the shares the optionee receives. The tax basis of such
shares to such optionee will be equal to the option price paid plus the amount
includible in the optionee's gross income, and the optionee's holding period for
such shares will commence on the date on which the optionee recognized taxable
income in respect of such shares. Subject to the applicable provisions of the
Code and regulations thereunder, the Company will generally be entitled to a
federal income tax deduction in respect of a NQSO in an amount equal to the
ordinary compensation income recognized by the optionee.
401(K) PLAN
On January 1, 1993, the Company's Section 401(k) Retirement Savings Plan
(the "401(k) Plan") became effective. The 401(k) Plan is a tax-qualified plan
covering Company employees who, as of the enrollment eligibility dates under the
401(k) Plan, are at least 18 years of age and elect to participate in the 401(k)
Plan. All Company contributions to the 401(k) Plan are fully vested after five
years of service. Benefits will normally be distributed to an employee upon (i)
the employee reaching age 59 1/2, (ii) the employee's retirement, (iii) the
employee's death or disability, (iv) the termination of the employee's
employment with the Company, (v) the termination of the 401(k) Plan or (vi) a
requested withdrawal due to financial hardship.
EMPLOYMENT CONTRACTS
The Company has entered into employment agreements with Messrs. Lane,
Bartels and Blend which, among other things, define their responsibilities as
employees, set forth base salary levels and restrict the ability of the employee
to compete with the Company during his employment.
The terms of Mr. Lane's employment with the Company as President and Chief
Executive Officer are detailed in his employment agreement with the Company
dated July 19, 1994, as amended (the "Lane Employment Agreement"). The Lane
Employment Agreement expires on December 31, 1997, unless earlier terminated (i)
upon the death or disability of Mr. Lane, (ii) by mutual agreement of Mr. Lane
and the Company or (iii) by the Company for "good cause" (as defined in the Lane
Employment Agreement). Under the Lane Employment Agreement, Mr. Lane is entitled
to receive a salary at the rate of $250,000 per year, subject to increase at any
time by the Board of Directors in its sole discretion, as well as to participate
in the Company's bonus and benefit plans. Mr. Lane is also entitled to certain
other benefits
50
<PAGE>
and perquisites, including, among others, Company-paid medical insurance for
himself and his immediate family, a residential housing allowance, an automobile
leasing allowance and a tax advisor allowance. Further, pursuant to the Lane
Employment Agreement, Mr. Lane was granted options to purchase shares of
the Company's Common Stock at an exercise price of $ per share. The Lane
Employment Agreement also contains provisions that restrict Mr. Lane's rights to
solicit the Company's customers or recruit its employees and obligate him to
protect the confidentiality of certain Company information for a period of time
following termination of his employment.
Mr. Lane is also party to a supplemental severance agreement (the "Lane
Severance Agreement") with the Company. The Lane Severance Agreement details the
Company's obligations to Mr. Lane in the event his employment is terminated
under various circumstances described therein. Under the Lane Severance
Agreement, if Mr. Lane's employment is terminated by the Company other than for
"cause" or "disability" or by Mr. Lane for "good reason" (as such terms are
defined in the Lane Severance Agreement), Mr. Lane would be entitled to receive
salary continuation payments for a period of twelve months following the date of
termination. Such salary continuation payments would be offset by any amounts
earned by Mr. Lane during the severance period as either an employee or
consultant. The Lane Severance Agreement provides that payments thereunder are
in addition to any other benefits to which Mr. Lane may be entitled under any
other plan or arrangement of the Company.
The Company and Mr. Bartels entered into an employment agreement (the
"Bartels Employment Agreement") under which Mr. Bartels agreed to serve as the
Chief Financial Officer of the Company. Mr. Bartels' employment under the
Bartels Employment Agreement terminates upon the occurrence of any of the
following events: (i) Mr. Bartels' death; (ii) mutual written agreement of the
Company and Mr. Bartels to terminate the Bartels Employment Agreement; (iii) Mr.
Bartels' resignation upon thirty days written notice to the Company; (iv) the
termination of Mr. Bartels' employment by the Company for "good cause" (as
defined therein); or (v) the termination of Mr. Bartels' employment by the
Company without good cause. In the event that Mr. Bartels' employment is
terminated by the Company without good cause or upon Mr. Bartels' resignation as
a result of his principal place of employment being relocated to a location
other than metropolitan Atlanta, Georgia, Mr. Bartels would be entitled to
continue to receive his base salary for a period of twelve months from the date
of such termination or resignation. Under the Bartels Employment Agreement, Mr.
Bartels is entitled to receive a salary of $220,000 per year, subject to
increase at any time by the Board of Directors, in its sole discretion, and to
participate in the Company's bonus and benefit plans. The Bartels Employment
Agreement also contains restrictive covenants which restrict Mr. Bartels with
respect to Company work product, solicitation of Company employees and clients
and his ability to compete with the Company.
Pursuant to the Bartels Employment Agreement , effective August 8, 1996, the
Company granted to Mr. Bartels NQSOs and ISOs (the "Bartels Options") to
purchase an aggregate of shares of Common Stock at an exercise price of
$ per share. In accordance with the terms of the two option agreements
(the "Bartels Option Agreements") entered into by the Company and Mr. Bartels,
options vested and became exercisable on October 30, 1996 (the "Initial
Vesting Date") and an additional shares will become vested and exercisable
on each of the first three anniversaries of the Initial Vesting Date. The
Bartels Options will terminate October 30, 2005, unless earlier terminated
pursuant to the terms of the Bartels Option Agreements. If Mr. Bartels ceases to
be employed by the Company, except by reason of his death, vesting will cease,
but if such cessation of employment occurs by reason of Mr. Bartels' resignation
due to a "relocation" (as defined in the Bartels Employment Agreement) all
unexercised portions of the Bartels Options will vest fully and become
immediately exercisable. All vested portions of the Bartels Options may be
exercised during the period beginning on the date of cessation of Mr. Bartels'
employment with the Company (other than by death) and ending three months after
such date (provided such period does not extend beyond the term of the Bartels
Options). In the event of Mr. Bartels' death, the vested portions of the Bartels
Options may be exercised by his legal representative during the period beginning
on the date of his death and ending one year after such date
51
<PAGE>
(provided such period does not extend beyond the term of the Bartels Options).
All unexercised portions of the Bartels Options will become immediately
exercisable upon a "change of control" as defined in the Bartels Option
Agreements.
The Shareholder Agreement contains the terms of Mr. Blend's employment with
the Company as an executive vice president (the "Blend Employment Agreement").
The Blend Employment Agreement terminates automatically when Mr. Blend ceases to
own stock in the Company, and Mr. Blend's employment may be earlier terminated
by majority vote of the Board of Directors, (i) upon Mr. Blend's death or
incapacity, (ii) for "cause" (as defined in the Shareholder Agreement) or (iii)
for any reason upon 30 days prior notice. In the event Mr. Blend's employment is
terminated, he must immediately resign from the Board of Directors. Mr. Blend is
entitled to receive a salary at the rate set by the Compensation Committee,
currently $200,000 per year, as well as to participate in the Company's bonus
and benefit plans. Should Mr. Blend be terminated due to incapacity or injury,
he would be entitled to receive disability pay from the date of his termination
until he attains age 65 at the rate of 50% of his base salary or such higher
percentage as may be provided by any applicable insurance policies at the time
held by the Company. If Mr. Blend is terminated by reason of his death or by the
Company for cause, he would not be entitled to any salary continuation or
severance pay. If, however, Mr. Blend is terminated without cause, he would be
entitled to receive salary continuation payments equal to his base salary for a
period of twelve months from the date of termination. Should Mr. Blend die
before the term of the Shareholder Agreement expires, the Company would be
obligated to purchase from Mr. Blend's estate, and Mr. Blend's estate would
become obligated to sell to the Company, a portion of Mr. Blend's stock holdings
of the Company in accordance with the Shareholder Agreement. The Blend
Employment Agreement also restricts Mr. Blend from disclosing confidential
information, competing with or interfering with the Company.
CERTAIN TRANSACTIONS
The Company and its principal shareholder, Warburg, entered into a
Securities Purchase Agreement (the "Purchase Agreement") dated June 20, 1994.
All 834,016 shares of Class A Common Stock outstanding at the date of the
Purchase Agreement (representing all of the common stock then outstanding) were
reclassified to newly authorized shares of Common Stock, and the 1,897,028
outstanding shares of Series C and Series D Cumulative Preferred Stock then held
by Warburg were reclassified to shares of Series A Preferred Stock. Under the
Purchase Agreement, the Company sold all 393,965 authorized shares of Series B
Preferred Stock to Warburg at a price of $7.615 per share, for aggregate
proceeds of $3.0 million. The Company used the proceeds from the sale of Series
B Preferred Stock plus $4.0 million in proceeds from the issuance of a
subordinated note payable to Warburg (as further described below) to repurchase
and retire all of the shares of Common Stock held by David P. Welden, then the
Company's Chairman and Chief Executive Officer, at a purchase price of $8.9172
per share, or an aggregate price of $7.0 million.
On November 29, 1995 and April 15, 1996, Warburg purchased 174,216 and
261,324 shares of Series C Cumulative Preferred Stock for $2.0 million and $3.0
million, respectively. On August 14, 1996, Warburg purchased 216,685 shares of
Series D Cumulative Preferred Stock for $2.0 million. All of the outstanding
shares of Redeemable Preferred Stock of the Company will be converted into
shares of Common Stock simultaneously with the consummation of this
offering.
52
<PAGE>
Since June 20, 1994, the Company has issued to Warburg the following
subordinated notes payable and warrants to purchase Common Stock:
<TABLE>
<CAPTION>
EXERCISE
PRINCIPAL NUMBER OF PRICE
AMOUNT OF NOTE WARRANTS PER SHARE
---------------- ----------- -------------
<S> <C> <C> <C>
Subordinated note dated June 20, 1994, with principal and interest
due on July 31, 1999............................................. $ 4,000,000 $
Subordinated note dated November 10, 1994, with principal and
interest due on November 10, 1999................................ 2,500,000
Subordinated note dated January 4, 1995, with principal and
interest due on January 4, 2000.................................. 3,500,000
Subordinated note dated February 14, 1995, with principal and
interest due on February 14, 2000................................ 1,100,000
Subordinated note dated May 5, 1995, with principal and interest
due on May 5, 2000............................................... 1,500,000
Subordinated note dated June 27, 1995, with principal and interest
due on June 27, 2000............................................. 400,000
Subordinated note dated October 13, 1995, with principal and
interest due on October 13, 2000................................. 2,500,000
---------------- ----------- -------------
Total.............................................................. $ 15,500,000
---------------- ----------- -------------
---------------- ----------- -------------
</TABLE>
Such notes are mandatorily due when the Securities and Exchange Commission
(the "Commission") declares effective the registration statement of which this
Prospectus is a part (subject to the prior payment in full of all amounts then
owing under the Credit Facility) and bear interest at prime plus 1.5%.
Simultaneously with the execution of each such note, the Company issued to
Warburg warrants to purchase shares of Common Stock which are fully exercisable
and expire five years from their respective dates of issuance. The Company and
Warburg have agreed that all of the accrued interest and $3,437,233 of the
principal amount of such notes will be repaid by the issuance to Warburg of
shares of Common Stock which will be valued for such purpose at the initial
public offering price, and that the remaining principal amount of such notes
will be used by Warburg to pay the exercise price of the outstanding warrants.
During fiscal 1995 and 1996, the Company purchased $3.2 million and
$557,000, respectively, of research and development services from SHL
Systemhouse, Inc., in which Warburg then had an ownership interest and of which
Mr. Oltman was Chairman and Chief Executive Officer and Messrs. Busbee and
Janeway were directors.
In September 1992, the Company loaned $230,000 to Mr. Blend, an officer,
director and shareholder of the Company. The loan is due on or before December
31, 1998 and bears interest at a rate of 5.98% per annum, of which $ is
accrued and unpaid as of March 31, 1997. The loan is collateralized by
shares of the Company's Common Stock and by restrictive provisions
related to NQSOs to purchase shares of Common Stock at $ per
share as set forth in the agreements evidencing such options. The loan will also
become due (i) upon the sale or disposition of the shares or any of the stock
options securing the loan or (ii) 90 days after Mr. Blend ceases to be employed
by the Company. Accrued interest aggregating approximately $8,000 was forgiven
in fiscal 1995. Such loan may only be repaid out of the proceeds to Mr. Blend
from the sale of the shares of Common Stock to be sold by him in this offering.
In May 1996, in connection with a $250,000 loan from Warburg to Mr. Blend,
Warburg entered into an intercreditor agreement (the "Intercreditor Agreement")
with the Company, that sets forth each of the parties' relative rights regarding
the repayment of their respective loans to Mr. Blend. Pursuant to the terms of
the Intercreditor Agreement, Warburg subordinated any security interests it may
have in the
53
<PAGE>
Collateral (as defined in the Intercreditor Agreement) to the security interests
the Company has in the Collateral. In addition, the Intercreditor Agreement
provides that (i) Warburg agrees to remit to the Company any payments it may
receive with respect to the Collateral, which Collateral is subject to the
Company's prior security interest and (ii) the Company agrees to remit to
Warburg any payments it may receive with respect to any of the Collateral which
are in excess of Mr. Blend's indebtedness to the Company and which Collateral is
also subject to Warburg's second priority security interest and to deliver to
Warburg any Collateral then in the Company's possession upon the satisfaction of
all indebtedness to the Company pursuant to its loan to Mr. Blend (provided that
at such time there exists any outstanding debt to Warburg).
In December 1996, the Company loaned L100,000 ($166,000 as of March 31,
1997) to Mr. Lane, President and Chief Executive Officer of the Company. The
loan is due on or before April 30, 1999 and bears interest at a rate of 6.00%
per annum. The loan is secured by restrictive provisions related to options to
purchase shares of the Company's Common Stock at $ per share and
options to purchase shares of the Company's Common Stock at $ per
share as set forth in the agreements evidencing such options. The loan will also
become due (i) upon the sale or disposition of any of the options securing the
loan or (ii) 90 days after Mr. Lane ceases to be employed by the Company. Such
loan and accrued interest may only be repaid out of the proceeds to Mr. Lane
from the sale of the shares of Common Stock to be sold by him in this offering.
Mr. Busbee, a director of the Company, is of counsel to King & Spalding, a
law firm based in Atlanta, Georgia, which provided certain legal services to the
Company in fiscal year 1997 and is presently being retained to provide certain
services to the Company.
Any future transactions between the Company and its officers, directors or
principal shareholders will be approved by a majority of the disinterested
members of the Board of Directors.
54
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1997 (adjusted to give
effect to a -for-one stock split effected on , 1997) and as adjusted
to reflect the sale of the shares offered hereby, the conversion of all of the
outstanding shares of Redeemable Preferred Stock of the Company into shares of
Common Stock, and the exercise of certain warrants to be exercised upon the
consummation of this offering, by (i) each person who is known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each director and each Named Executive Officer of the Company, (iii) all
directors and executive officers of the Company as a group, and (iv) each other
Selling Shareholder. Unless otherwise indicated below, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING SHARES BENEFICIALLY
(1) OWNED AFTER OFFERING (2)
------------------------ ------------------------
NUMBER SHARES NUMBER
NAME AND ADDRESS OF SHARES PERCENT OFFERED OF SHARES PERCENT
- ------------------------------------------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Warburg, Pincus Investors, L.P. (3)(4)...................... 93.6
William H. Janeway (3)(5)................................... 93.6
Joseph P. Landy (3)(5)...................................... 93.6
Christopher R. Lane (6)..................................... 5.1 --
John F. Bartels (6)......................................... 1.2 --
John W. Blend, III (7)...................................... 8.5
Kenneth C. Colby, Jr. (6)................................... 1.2 --
John R. Oltman (8).......................................... 3.1 --
George D. Busbee (6)........................................ * --
All executive officers and directors as a group (9)......... 95.4
Alan T. Johnston (10)....................................... 2.3
</TABLE>
- --------------
* Less than 1.0% of outstanding shares.
(1) Pursuant to the rules of the Commission, certain shares of the Company's
Common Stock that a beneficial owner has the right to acquire within 60 days
pursuant to the exercise of stock options or warrants are deemed to be
outstanding for the purpose of computing the percentage ownership of such
owner but are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Shares beneficially owned prior to
the offering do not give effect to the Concurrent Transactions, except for
the conversion of all outstanding shares of Redeemable Preferred Stock.
(2) Gives effect to the Concurrent Transactions.
(3) Includes shares of Common Stock issuable upon conversion of Redeemable
Preferred Stock. All of the shares of Redeemable Preferred Stock will be
automatically converted into an aggregate of shares of Common Stock
simultaneously with the consummation of this offering. Also includes
shares of Common Stock issuable upon the exercise of currently exercisable
warrants. The address of Warburg and Messrs. Janeway and Landy is 466
Lexington Avenue, New York, New York, 10017.
(4) The sole general partner of Warburg is Warburg, Pincus & Co., a New York
general partnership ("WP"). EMW LLC, a New York limited liability company,
manages Warburg. The members of EMW LLC are substantially the same as the
partners of WP. Lionel I. Pincus is the managing partner of WP and the
managing member of EMW LLC and may be deemed to control both WP and EMW LLC.
WP
55
<PAGE>
has a 20% interest in the profits of Warburg as the general partner. Messrs.
Janeway and Landy, directors of the Company, are Managing Directors and
members of EMW LLC and general partners of WP. As such, Messrs. Janeway and
Landy may be deemed to have an indirect pecuniary interest (within the
meaning of Rule 16a-1 under the Securities Exchange Act of 1934) in an
indeterminate portion of the shares beneficially owned by Warburg and WP.
See Note 5 below.
(5) All of the shares indicated as owned by Messrs. Janeway and Landy are owned
directly by Warburg and are included because of Messrs. Janeway and Landy's
affiliation with Warburg. Messrs. Janeway and Landy disclaim "beneficial
ownership" of these shares within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934. See Note 4 above.
(6) Represents shares issuable upon exercise of stock options.
(7) Includes shares issuable upon exercise of stock options. Mr. Blend's
address is c/o TSW International, Inc., 3301 Windy Ridge Parkway, Atlanta,
Georgia, 30339.
(8) Represents shares issuable upon exercise of stock options granted by
the Company and shares obtainable upon exercise of stock options
granted by Warburg.
(9) Includes shares issuable upon exercise of stock options, the shares
issuable upon conversion of all of the Company's outstanding Redeemable
Preferred Stock into an aggregate of shares of Common Stock and the
shares issuable upon exercise of currently exercisable warrants to purchase
shares of Common Stock.
(10) Mr. Johnston was Chairman, President and Chief Executive Officer of
Communix Corporation from December 1985 to August 1994 and Vice President of
the Company from August 1994 to August 1996.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, $0.01 par value per share, and 22,390,993 shares of Preferred
Stock, $0.01 par value per share.
The following summary description of the Company's capital stock is not
intended to be complete and is qualified in its entirety by reference to the
provisions of applicable law and to the Company's Articles of Incorporation and
Bylaws filed as exhibits to the registration statement of which this Prospectus
is a part.
COMMON STOCK
As of March 31, 1997, there were shares of Common Stock outstanding
(after giving effect to a -for-one stock split effected on , 1997)
held by 48 shareholders. Based upon the number of shares outstanding as of that
date and giving effect to the issuance of the shares of Common Stock
offered hereby, the conversion of all of the outstanding shares of the Company's
Preferred Stock into Common Stock and the exercise by Warburg of warrants to
purchase shares of Common Stock, there will be shares of Common
Stock outstanding upon the consummation of this offering. In addition, as of
March 31, 1997, there were outstanding stock options to purchase an aggregate of
shares of Common Stock (adjusted to give effect to the above-described
stock split).
Except as described below under "Description of Capital Stock--Anti-Takeover
Effects of Provisions of Articles of Incorporation and Bylaws," holders of
Common Stock are entitled to one vote for each share held on all matters
submitted to a vote of shareholders, and do not have cumulative voting rights.
Directors are elected by a plurality of the votes of the shares present in
person or by proxy at the shareholders meeting and entitled to vote in such
election. 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 therefor, subject to any preferential dividend rights of any
outstanding Preferred Stock. Upon
56
<PAGE>
the liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities of the Company, subject to
the prior rights of any outstanding Preferred Stock. Holders of the Common Stock
have no preemptive, subscription, redemption or conversion rights, nor are they
entitled to the benefit of any sinking fund. The outstanding shares of Common
Stock are, and the shares offered by the Company in this offering will be, when
issued and paid for, validly issued, fully paid and nonassessable. The rights,
powers, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future. Upon the consummation of this offering, there will be no shares of
Preferred Stock outstanding.
PREFERRED STOCK
As of the date of this Prospectus, there are an aggregate of 2,943,218
shares of Preferred Stock outstanding, consisting of 1,897,028 shares of Series
A Preferred Stock, 353,965 shares of Series B Preferred Stock, 435,540 shares of
Series C Cumulative Preferred Stock and 216,685 shares of Series D Cumulative
Preferred Stock (the "Preferred Shares"). The Preferred Shares will be converted
into an aggregate of shares of Common Stock in the Concurrent Transactions
and, upon the consummation of this offering, there will be no shares of
Preferred Stock outstanding. For a summary of the material terms of the
outstanding Preferred Stock, see Note 9 of the Notes to the Consolidated
Financial Statements.
Following the consummation of this offering, the Board of Directors will be
authorized, subject to any limitations prescribed by law, without further
shareholder approval, to issue from time to time up to an aggregate of
20,000,000 shares of Preferred Stock, in one or more series. Each such series of
Preferred Stock shall have such number of shares, designations, preferences,
voting powers, qualifications and special or relative rights or privileges as
shall be determined by the Board of Directors, which may include, among others,
dividend rights, voting rights, redemption and sinking fund provisions,
liquidation preferences, conversion rights and preemptive rights.
The shareholders of the Company have granted the Board of Directors
authority to issue the Preferred Stock and to determine its rights and
preferences in order to eliminate delays associated with a shareholder vote on
specific issuances. The rights of the holders of Common Stock will be subject to
the rights of holders of any Preferred Stock issued in the future. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could adversely affect the
voting power or other rights of the holders of Common Stock, and could make it
more difficult for a third party to acquire, or discourage a third party from
attempting to acquire, a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue any shares of Preferred
Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation of the Company authorize "blank check"
preferred stock. Although the Company has no current plans to issue any shares
of Preferred Stock, the Board of Directors can set the voting, redemption,
conversion and other rights relating to such preferred stock. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of holders of any Preferred Stock that may be issued in the future.
The issuance of Preferred Stock could adversely affect the voting power of
holders of Common Stock and the likelihood that such holders will receive
dividend payments and payments upon liquidation and could have the effect of
delaying, deferring or preventing a change in control of the Company. See
"Description of Capital Stock--Preferred Stock."
In addition, the Company's Articles of Incorporation include a provision
which limits the maximum number of votes which may be cast by any shareholder of
the Company on any matter to the number of
57
<PAGE>
votes which is represented by all outstanding shares of the Company's capital
stock that are not directly or indirectly owned, beneficially or of record, by
such holder.
GEORGIA ANTI-TAKEOVER STATUTES
The Georgia Business Corporation Code restricts certain business
combinations with "interested shareholders" and contains fair price requirements
applicable to certain mergers with "interested shareholders" that are summarized
below. The restrictions imposed by these statutes will not apply to a
corporation unless it elects to be governed by these statutes. The Company has
not elected to be covered by such restrictions but may do so in the future.
The Georgia business combination statute regulates business combinations
such as mergers, consolidations, share exchanges and asset purchases where the
acquired business has at least 100 shareholders residing in Georgia and has its
principal office in Georgia, and where the acquiror became an "interested
shareholder" of the corporation, unless either (i) the transaction resulting in
such acquiror becoming an "interested shareholder" or the business combination
received the approval of the corporation's board of directors prior to the date
on which the acquiror became an "interested shareholder," or (ii) the acquiror
became the owner of at least 90% of the outstanding voting stock of the
corporation (excluding shares held by directors, officers and affiliates of the
corporation and shares held by certain other persons) in the same transaction in
which the acquiror became an "interested shareholder." For purposes of this
statute, an "interested shareholder" generally is any person who directly or
indirectly, alone or in concert with others, beneficially owns or controls ten
percent or more of the voting power of the outstanding voting shares of the
corporation. The statute prohibits business combinations with an unapproved
"interested shareholder" for a period of five years after the date on which such
person became an "interested shareholder." The statute restricting business
combinations is broad in its scope and is designed to inhibit unfriendly
acquisitions.
The Georgia fair price statute prohibits certain business combinations
between a Georgia business corporation and an "interested shareholder" unless
(i) certain "fair price" criteria are satisfied, (ii) the business combination
is unanimously approved by the continuing directors, (iii) the business
combination is recommended by at least two-thirds of the continuing directors
and approved by a majority of the votes entitled to be cast by holders of voting
shares, other than voting shares beneficially owned by the "interested
shareholder," or (iv) the "interested shareholder" has been such for at least
three years and has not increased this ownership position in such three-year
period by more than one percent in any twelve-month period. The fair price
statute is designed to inhibit unfriendly acquistions that do not satisfy the
specified "fair price" requirements.
REGISTRATION RIGHTS
The Company's principal shareholder, Warburg, and John W. Blend, III, an
executive officer of the Company, have certain registration rights with respect
to any shares of Common Stock currently owned or subsequently acquired by them.
Mr. Blend beneficially owns shares of Common Stock and options to purchase
an additional shares of Common Stock from the Company. Upon completion of
the offering, Warburg will beneficially own shares of Common Stock. Under
the terms of the Company's agreement with Mr. Blend and Warburg, a holder of
more than 50% of the Registrable Securities (as defined in such agreement) may
require the Company to prepare and file on not more than two occasions a
registration statement under the Securities Act covering such shares. In
addition, if the Company proposes to register any of its securities under the
Securities Act (other than any registration on Form S-8 or Form S-4 or any
successor thereto), Mr. Blend and Warburg have the right to require that any
shares of Common Stock held by them be included in such registration, subject to
certain limitations set forth in the agreement. Under the foregoing agreement,
the Company is required to bear the fees, costs and expenses of each
registration of the selling shareholders' shares, provided that payment of the
legal fees and expenses of counsel to such selling shareholders is limited to
$30,000 for each such registration.
58
<PAGE>
In addition, under the terms of each of the warrants issued to Warburg, Warburg
holds a right to request registration of the shares of Common Stock issuable
upon the exercise of the warrants. Under the terms of the warrants, the holder
is required to bear pro rata the fees, costs and expenses of registration,
including but not limited to legal, accounting and printing expenses.
Under another agreement, a former officer of the Company who holds
shares of Common Stock as of March 31, 1997 has registration rights with respect
to such shares and any additional shares of Common Stock that he may acquire. If
the Company proposes to register any of its securities under the Securities Act
(other than any registration on Form S-8 or Form S-4 or any successor thereto),
such former officer will have the right to require that any shares of Common
Stock held by him be included in such registration, subject to certain
limitations set forth in the agreement. Under the foregoing agreement the
Company is required to bear the fees, costs and expenses of each registration of
the selling shareholder's shares, provided that payment of the legal fees and
expenses of counsel to such selling shareholder is limited to $30,000 for each
such registration.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registar for the Common Stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
shares of Common Stock. Of these shares, all of the shares of Common Stock
sold in this offering will be freely transferable without restriction or
limitation under the Securities Act, unless purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act. The
remaining shares of Common Stock held by existing shareholders are
"restricted" shares within the meaning of Rule 144 under the Securities Act
("Restricted Shares"). The Restricted Shares were issued and sold by the Company
in private transactions in reliance upon exemptions from registration under the
Securities Act and may not be sold except in compliance with the registration
requirements of the Securities Act or pursuant to an exemption from
registration, such as the exemption provided by Rule 144 under the Securities
Act.
Beginning 90 days after the date of this Prospectus, approximately
Restricted Shares will be eligible for sale in the public market pursuant to
Rule 144. In general, under Rule 144 as currently in effect, beginning 90 days
after the date of this Prospectus, any person (or persons whose shares are
aggregated), including an affiliate of the Company, who has held shares for at
least a one-year period (as computed under Rule 144) is entitled to sell within
any three-month period a number of shares that does not exceed the greater of:
(i) one percent of the number of shares of Common Stock then outstanding
(approximately shares after giving effect to this offering); and (ii) the
average weekly trading volume in the Company's Common Stock during the four
calendar weeks immediately preceding the date on which the notice of sale is
filed with the Commission. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. A person (or persons whose shares
are aggregated) who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has held shares for at
least a two-year period (as computed under Rule 144), would be entitled to sell
such shares under Rule 144(k) without regard to the volume limitation and other
conditions described above. Upon completion of this offering, there will be
shares which may be sold pursuant to Rule 144(k).
Upon completion of this offering, the holders of shares of Common Stock
will be entitled to certain registration rights with respect to such shares. See
"Description of Capital Stock--Registration Rights."
59
<PAGE>
Promptly following the consummation of this offering, the Company intends to
file one or more registration statements on Form S-8 under the Securities Act to
register all shares of Common Stock subject to outstanding options or future
grants under the Company's stock option plans. These registration statements are
expected to become effective upon filing, and shares covered by these
registration statements will, subject to Rule 144 volume limitations applicable
to affiliates, be eligible for public sale after the lock-up agreements with the
Underwriters have expired and any vesting requirements have been met.
Prior to this offering, there has been no public market for the Common Stock
and no prediction can be made of the effect that the sale or availability for
sale of shares of Common Stock will have on the market price of the Common
Stock. Nevertheless, sales of substantial amounts of such shares in the public
market, or the perception that such sales could occur, could adversely affect
the market price of the Common Stock and could impair the Company's future
ability to raise capital through an offering of its equity securities.
All executive officers and directors of the Company and certain other
holders of the Common Stock (who will hold an aggregate of shares of Common
Stock upon completion of this offering), have agreed not to sell, offer for
sale, or otherwise dispose of any of their shares of Common Stock (other than
the shares offered by the Selling Shareholders in this offering) for a period of
180 days from the date of this Prospectus without the prior written consent of
Alex. Brown & Sons Incorporated, on behalf of the Representatives, and the
Company.
60
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their representatives,
Alex. Brown & Sons Incorporated, SoundView Financial Group, Inc. and Wessels,
Arnold & Henderson, L.L.C. (the "Representatives"), have severally agreed to
purchase from the Company and the Selling Shareholders the following respective
numbers of shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- -----------
<S> <C>
Alex. Brown & Sons Incorporated......................................................................
SoundView Financial Group, Inc.......................................................................
Wessels, Arnold & Henderson, L.L.C...................................................................
-----------
Total............................................................................................
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of the Common Stock offered hereby if any of such
shares are purchased.
The Company and the Selling Shareholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the initial public offering price set forth on the cover
page of this Prospectus and to certain dealers at such price less a concession
not in excess of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After commencement of this offering, the offering price
and other selling terms may be changed by the Representatives.
Warburg has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. 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 and Warburg will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The Underwriter
may exercise such option only to cover over-allotments made in connection with
the sale of Common Stock offered hereby. If purchased, the Underwriters will
offer such additional shares on the same terms as those on which the shares
are being offered.
To facilitate this offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the Common Stock. Specifically, the Underwriters may over-allot shares of the
Common Stock in connection with this offering, thereby creating a short position
in the Underwriters' syndicate account. Additionally, to cover such
over-allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of the Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the syndicate of Underwriters, also may reclaim
selling concessions allowed to an Underwriter or dealer, if the syndicate
repurchases shares distributed by that Underwriter or dealer.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Shareholders regarding
certain liabilities, including liabilities under the Securities Act.
61
<PAGE>
All executive officers and directors of the Company and certain other
holders of the Common Stock have agreed not to offer, sell or otherwise dispose
of any of such shares of Common Stock for a period of 180 days after the date of
this Prospectus, without the prior written consent of Alex. Brown & Sons
Incorporated, on behalf of the Representatives, and the Company. See "Shares
Eligible for Future Sale."
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock has been determined by negotiations between the Company, the Selling
Shareholders and the Representatives. Among the factors considered in such
negotiations were prevailing market conditions, the results of operations of the
Company in recent periods, the market capitalizations and stages of development
of other companies which the Company, the Selling Shareholders and the
Representatives believed to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Shareholders by Troutman Sanders LLP,
Atlanta, Georgia and certain legal matters will be passed upon for the
Underwriters by King & Spalding, Atlanta, Georgia. Robert W. Grout, the sole
shareholder and President of a professional corporation which is a partner of
Troutman Sanders LLP, beneficially owns shares of the Company's Common
Stock. Mr. Busbee, a director of the Company, is of counsel to King & Spalding
and beneficially owns shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements and schedule of TSW International,
Inc. at March 31, 1996 and 1997 and for each of the three years in the period
ended March 31, 1997, appearing in this Prospectus and registration statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein and in the registration
statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus, which is part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain items of which are
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 hereby made to the Registration Statement and such exhibits and schedules
filed as a part thereof, which may be inspected, without charge, at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the Registration Statement may be obtained from the Public Reference
Section of the Commission, upon payment of prescribed fees. Such material also
may be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are necessarily summaries of such
documents. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
62
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets as of March 31, 1996 and 1997 and Pro Forma Shareholders' Equity (Deficit) as
of March 31, 1997........................................................................................ F-3
Consolidated Statements of Operations for the years ended March 31, 1995, 1996, and 1997................... F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended March 31, 1995, 1996, and
1997..................................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1995, 1996, and 1997................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
TSW International, Inc.
We have audited the accompanying consolidated balance sheets of TSW
International, Inc. as of March 31, 1996 and 1997, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended March 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TSW
International, Inc. at March 31, 1996 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1997 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Atlanta, Georgia
April 18, 1997
F-2
<PAGE>
TSW INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
EQUITY
(DEFICIT) (NOTE
1996 1997 1) 1997
--------- --------- ---------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 252 $ 549
Trade accounts receivable, less allowance for doubtful accounts of $586
and $798 at March 31, 1996 and 1997, respectively.................... 12,326 18,972
Unbilled accounts receivable........................................... 5,991 13,764
Refundable income taxes................................................ 233 --
Prepaid expenses and other current assets.............................. 674 1,842
--------- ---------
Total current assets............................................... 19,476 35,127
PROPERTY AND EQUIPMENT:
Leasehold improvements................................................. 1,041 1,054
Furniture and fixtures................................................. 831 1,011
Equipment.............................................................. 8,390 10,950
--------- ---------
10,262 13,015
Less accumulated depreciation and amortization......................... 5,163 7,082
--------- ---------
Net property and equipment......................................... 5,099 5,933
PURCHASED SOFTWARE, net of accumulated amortization of $512 and $971 at
March 31, 1996 and 1997, respectively.................................... 753 294
NOTES RECEIVABLE from officers/shareholders................................ 230 396
OTHER ASSETS, net.......................................................... 1,101 591
--------- ---------
$ 26,659 $ 42,341
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit............................................... $ 7,171 $ 15,991
Current portion of obligations under capital leases and term loans..... 410 960
Accounts payable....................................................... 5,966 4,841
Accrued liabilities.................................................... 3,390 6,191
Deferred revenue....................................................... 10,470 10,773
--------- ---------
Total current liabilities.......................................... 27,407 38,756
OBLIGATIONS UNDER CAPITAL LEASES AND TERM LOANS, excluding current
portion.................................................................. 1,222 2,126
SUBORDINATED LONG-TERM NOTES and accrued interest payable to related
party.................................................................... 16,251 18,065
COMMITMENTS
REDEEMABLE PREFERRED STOCK, in series; $.01 par value; 3,390,993 shares
authorized and 2,465,209 issued and outstanding at March 31, 1996;
2,943,218 shares issued and outstanding at March 31, 1997; $14,257
liquidation preference at March 31, 1997; none issued and outstanding pro
forma.................................................................... 13,100 18,100 $ --
SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock, $.01 par value; 6,000,000 shares authorized; 264,795,
296,282, and 3,239,500 shares issued and outstanding at March 31,
1996, 1997, and 1997 pro forma, respectively......................... 3 3 32
Additional paid-in capital............................................. 2,113 2,220 20,291
Accumulated deficit.................................................... (33,227) (36,630) (36,630)
Equity adjustment from foreign currency translation.................... (210) (299) (299)
--------- --------- ---------------
Total shareholders' equity (deficit)............................... (31,321) (34,706) $ (16,606)
--------- --------- ---------------
$ 26,659 $ 42,341
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TSW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------
1995 1996 1997
--------- --------- ----------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
REVENUE:
License fees......................................................... $ 7,833 $ 22,140 $ 26,852
Services and support................................................. 18,857 24,709 37,784
Other revenue........................................................ 824 1,184 2,463
--------- --------- ----------
Total revenue...................................................... 27,514 48,033 67,099
OPERATING EXPENSES:
Costs of license fees................................................ 1,557 4,799 2,917
Costs of services and support........................................ 12,098 19,203 26,967
Costs of other revenue............................................... 1,211 1,292 2,064
Sales and marketing.................................................. 8,940 14,235 17,217
General and administrative........................................... 5,698 8,078 8,599
Product development.................................................. 8,728 9,288 8,617
Product development--related party................................... 3,215 557 --
Write-off of goodwill................................................ -- -- 688
--------- --------- ----------
Total operating expenses........................................... 41,447 57,452 67,069
--------- --------- ----------
INCOME (LOSS) FROM OPERATIONS.......................................... (13,933) (9,419) 30
INTEREST INCOME (EXPENSE):
Interest income...................................................... 29 46 35
Interest expense..................................................... (711) (2,254) (3,173)
--------- --------- ----------
Total interest income (expense), net............................... (682) (2,208) (3,138)
--------- --------- ----------
(LOSS) BEFORE TAXES.................................................... (14,615) (11,627) (3,108)
INCOME TAX EXPENSE (BENEFIT)........................................... (1,264) 98 295
--------- --------- ----------
NET (LOSS)............................................................. $ (13,351) $ (11,725) $ (3,403)
--------- --------- ----------
--------- --------- ----------
PRO FORMA NET (LOSS) PER SHARE
(NOTE 1)............................................................. $ (0.99)
----------
----------
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING (NOTE 1).......................................... 3,422,307
----------
----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TSW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
ADJUSTMENTS TOTAL
COMMON STOCK ADDITIONAL FROM FOREIGN SHAREHOLDERS'
------------------------ PAID-IN ACCUMULATED CURRENCY EQUITY
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION (DEFICIT)
--------- ------------- ----------- ------------- --------------- ---------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
BALANCE at April 1, 1994................ 834,016 $ 8 $ 2 $ (1,161) $ -- $ (1,151)
Repurchase and retirement of Class A
Common Stock at $8.9172 per share... (785,000) (8) (2) (6,990) -- (7,000)
Issuance of Common Stock for purchase
of Communix at $4.50 per share...... 75,000 1 337 -- -- 338
Issuance of warrants to purchase
837,584 shares of Common Stock...... -- -- 889 -- -- 889
Exercise of stock options............. 65,839 1 173 -- -- 174
Equity adjustment from foreign
currency translation................ -- -- -- -- 13 13
Net loss.............................. -- -- -- (13,351) -- (13,351)
--
--------- ----------- ------------- ------ ---------------
BALANCE at March 31, 1995............... 189,855 2 1,399 (21,502) 13 (20,088)
Repurchase and retirement of Common
Stock at $11.48 per share........... (10,669) -- (122) -- -- (122)
Issuance of warrants to purchase
516,417 shares of Common Stock...... -- -- 570 -- -- 570
Exercise of stock options............. 85,609 1 266 -- -- 267
Equity adjustment from foreign
currency translation................ -- -- -- -- (223) (223)
Net loss.............................. -- -- -- (11,725) -- (11,725)
--
--------- ----------- ------------- ------ ---------------
BALANCE at March 31, 1996............... 264,795 3 2,113 (33,227) (210) (31,321)
Exercise of stock options............. 31,487 -- 107 -- -- 107
Equity adjustment from foreign
currency translation................ -- -- -- -- (89) (89)
Net loss.............................. -- -- -- (3,403) -- (3,403)
--
--------- ----------- ------------- ------ ---------------
BALANCE at March 31, 1997............... 296,282 $ 3 $ 2,220 $ (36,630) $ (299) $ (34,706)
--
--
--------- ----------- ------------- ------ ---------------
--------- ----------- ------------- ------ ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TSW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
----------------------------------
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................. $ (13,351) $ (11,725) $ (3,403)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization........................................... 947 1,503 2,080
Loss on disposal of property and equipment, net......................... -- 89 --
Amortization of purchased software costs................................ 222 385 459
Provision for doubtful accounts......................................... 354 422 573
Write-off of goodwill................................................... -- -- 688
Other................................................................... 719 252 275
Changes in operating assets and liabilities:............................
Accounts receivable................................................... (5,544) (545) (7,511)
Unbilled accounts receivable.......................................... 3,114 (5,407) (7,366)
Prepaids and other assets............................................. (169) (22) (1,403)
Accounts payable...................................................... 94 659 (1,162)
Accounts payable--related party....................................... 1,020 (527) --
Income taxes payable/refundable....................................... (2,451) 1,981 --
Accrued liabilities................................................... 1,571 1,806 4,594
Deferred revenue...................................................... 7,485 261 270
---------- ---------- ----------
Net cash used in operating activities............................... (5,989) (10,868) (11,906)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................................... (2,089) (2,190) (2,305)
Investment in subsidiary, net of cash acquired............................ -- (642) --
Other................................................................... -- -- (109)
---------- ---------- ----------
Net cash used in investing activities............................... (2,089) (2,832) (2,414)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit.................................... 3,975 25,576 56,954
Payments on revolving line of credit...................................... (2,325) (20,000) (48,135)
Proceeds from notes payable............................................... 450 550 2,000
Payments on notes payable................................................. (100) (299) (1,007)
Payments on capital lease obligations..................................... (237) (177) (268)
Proceeds from exercise of stock options................................... 174 267 107
Proceeds from subordinated debt........................................... 10,000 5,500 --
Proceeds from issuance of redeemable preferred stock...................... 3,000 2,000 5,000
Payments to repurchase Preferred Stock.................................... (7,000) -- --
Payments to repurchase Common Stock....................................... -- (122) --
---------- ---------- ----------
Net cash provided by financing activities........................... 7,937 13,295 14,651
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ (141) (405) 331
Effect of exchange rate changes on cash..................................... 18 5 (34)
CASH AND CASH EQUIVALENTS, beginning of period.............................. 775 652 252
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period.................................... $ 652 $ 252 $ 549
---------- ---------- ----------
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid............................................................. $ 173 $ 526 $ 1,359
---------- ---------- ----------
---------- ---------- ----------
Income taxes paid......................................................... $ 786 $ 287 $ 295
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
TSW International, Inc. (the "Company"), formerly The System Works, Inc.,
changed its name during the year ended March 31, 1995. The Company develops,
markets and supports advanced Asset Care application software and provides
related services that enable customers to plan, execute, monitor and improve
asset maintenance processes. The Company is majority owned by Warburg, Pincus
Investors, L.P. (the "Investor"). However, the Company's articles of
incorporation restrict voting of any single shareholder to no more than 50%. The
Investor has committed to providing additional funding, if necessary, to sustain
the Company's operations through at least April 1, 1998.
The years ended March 31, 1995, 1996 and 1997 represent "fiscal 1995",
"fiscal 1996" and "fiscal 1997."
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly and 50% or greater owned subsidiaries. All significant
intercompany investments, accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue is derived from sales of software licenses and related services.
Revenue recognition practices are in accordance with Statement of Position 91-1
"Software Revenue Recognition." The Company generally recognizes software
license revenue upon delivery of the software and related documentation when
there are no significant remaining obligations. The Company accrues the costs of
any insignificant obligations remaining when software license revenue is
recognized. Service fees received from the sale of software support contracts
provide customers access to technical support and minor upgrades to licensed
releases and are recognized over the life of such contracts. Revenue from
consulting and training services is recognized as work is performed or over the
term of the related agreement. Revenue from the sale of computer hardware is
recognized when the equipment is shipped to the customer.
Deferred revenue primarily represents advance payments from customers for
service agreements and license fees.
UNAUDITED PRO FORMA INFORMATION
The March 31, 1997 unaudited pro forma balance sheet reflects the automatic
conversion of all outstanding shares of Redeemable Preferred Stock into Common
Stock upon the assumed effective date of an initial public offering of the
Company's Common Stock.
F-7
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER SHARE
Net loss per share is computed using the weighted average number of common
shares outstanding. Common equivalent shares from stock options and warrants are
excluded from the computation as their effect is antidilutive, except that,
pursuant to Securities and Exchange Commission ("SEC") Staff Accounting Bulletin
No. 83, common and common equivalent shares (stock options and preferred stock)
issued during the twelve-month period prior to the proposed initial public
offering at prices below the assumed public offering price have been included in
the calculation of common shares, using the treasury stock method, as if they
were outstanding for all periods prior to the effective date of the initial
public offering. Net loss for purposes of computing historical net loss per
share information has been increased by cumulative dividends on Redeemable
Preferred Stock of $61,000 and $438,000 in fiscal 1996 and fiscal 1997,
respectively.
Historical net loss per share information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Net loss per share......................................... $ (18.95) $ (18.27) $ (5.44)
--------- --------- ---------
--------- --------- ---------
Weighted average common and common equivalent shares
outstanding during the period............................ 704,607 645,194 706,542
--------- --------- ---------
--------- --------- ---------
</TABLE>
Pro forma net loss per share has been computed as described above and also
gives effect, pursuant to SEC staff policy, to common equivalent shares from
convertible preferred shares issued more than twelve months prior to the
proposed initial public offering that will be converted upon completion of the
Company's initial public offering (using the if-converted method).
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of accounts receivable. Accounts receivable
represent billed and unbilled receivables, primarily for license fees and
related services. These receivables are unsecured. The unbilled accounts
receivable represent earned revenues which are billable in the future in
accordance with contract terms. The Company performs periodic credit evaluations
of its customers' financial conditions and generally does not require
collateral. The Company provides an allowance for doubtful accounts equal to the
estimated losses expected to be incurred in the collection of accounts
receivable.
The Company's revenue to date is principally generated from sales in the
United States. Revenue from Europe and Asia/Pacific represented approximately
14.2% and 8.4%, respectively, of fiscal 1997 revenue. In fiscal 1995 and fiscal
1997, no customer accounted for more than 10% of revenue. In fiscal 1996, one
customer accounted for 11% of revenue.
F-8
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets, which
generally range from two to five years. Leasehold improvements are amortized
using the straight-line method over the shorter of the lease term or the
estimated useful life of the asset, which is approximately 10 years.
INTANGIBLES
GOODWILL
Goodwill represents the excess of the purchase price of acquired businesses
over the fair value of net assets acquired, is amortized using the straight-line
method over 10 years, and is included in other assets, net on the consolidated
balance sheets. Accumulated amortization of goodwill totaled $83,000 and
$113,000 at March 31, 1996 and 1997, respectively.
Periodically, the Company assesses the appropriateness of the carrying
amount of goodwill and amortization periods based on the undiscounted value of
the current and anticipated future cash flows and projected profitability of the
acquired businesses. If there are indicated impairments, a write-down is
recorded to the extent the carrying amount exceeds fair value. Under Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
goodwill associated with assets acquired in a purchase business combination is
included in impairment evaluations when events or circumstances exist that
indicate the carrying amount of those assets may not be recoverable.
During the second quarter of fiscal 1997, the Company determined that the
goodwill related to the acquisition of Socotec Maintenance Services ("Socotec")
was impaired due to continuing losses at this subsidiary. The Company
restructured the operations of Socotec during the second quarter, reducing the
size of the operation and placing it under the control of the Company's
remaining European subsidiary. As goodwill represented substantially all of the
net assets acquired in the acquisition of Socotec (See Note 15), the Company
wrote off the remaining goodwill of approximately $688,000 related to this
business in connection with the restructuring and reduction of operations.
INTERNALLY DEVELOPED AND PURCHASED SOFTWARE
Costs related to internally developed software are accounted for in
accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed". No amounts related to internally
developed software are capitalized at March 31, 1996 and 1997. Purchased
software costs recorded at March 31, 1996 and 1997 resulted principally from the
acquisition of SQL Systems International plc (see Note 15). These costs are
amortized over three years, the estimated life of the related product.
Amortization expense was approximately $222,000, $356,000 and $459,000 in fiscal
1995, 1996 and 1997, respectively.
ADVERTISING COSTS
Advertising costs are charged to expense in the period the costs are
incurred. Advertising expense was approximately $381,000, $325,000 and $368,000
in fiscal 1995, 1996 and 1997, respectively.
F-9
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TRANSLATION OF FOREIGN CURRENCIES
The functional currency of the Company's subsidiaries is the respective
local currency. Assets and liabilities denominated in foreign currencies are
translated to U.S. dollars at the exchange rate on the balance sheet date. Sales
and expenses denominated in foreign currencies are translated at rates that
approximate those in effect during the period. Gains and losses arising from the
foreign currency translation are included in shareholders' equity (deficit).
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes." SFAS 109 requires the establishment of a deferred tax asset or
liability for the recognition of future deductions or taxable amounts, and
operating loss and tax credit carryforwards. Deferred tax expense or benefit is
recognized as a result of the change in the asset or liability during the year
(See Note 12).
IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
the first quarter of fiscal 1997, and the impact of adoption was not material.
STOCK-BASED COMPENSATION
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which provides an alternative to APB Opinion No. 25, "Accounting
for Stock Issued to Employees", in accounting for stock-based compensation
issued to employees. As permitted by SFAS No. 123, the Company continues to
account for stock option grants in accordance with APB Opinion No. 25 and has
elected the pro forma disclosure alternative of the effect of SFAS No. 123.
Accordingly, adoption of the standard in fiscal 1997 did not affect the
Company's results of operations or financial position.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the FASB issued a new accounting pronouncement, SFAS No.
128, "Earnings per Share," which will change the current method of computing
earnings per share. The new standard requires presentation of "basic earnings
per share" and "diluted earnings per share" amounts, as defined. SFAS No. 128
will be effective for the Company's year ending March 31, 1998, and, upon
adoption, all prior-period earnings per share data presented will be restated to
conform with the provisions of the new pronouncement. Application earlier than
the Company's year ending March 31, 1998 is not permitted.
RECLASSIFICATIONS
Certain prior-period amounts have been reclassified to conform with the
current period presentation.
F-10
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheet for cash and cash
equivalents, receivables, notes receivable and accounts payable approximate
their fair values. The fair values of the Company's revolving credit facility,
obligations under capital leases, term loans, and subordinated long-term notes
payable are estimated using discounted cash flow analyses based on the Company's
incremental borrowing rates for similar types of borrowing arrangements. Their
carrying amounts at March 31, 1997 approximate their fair values.
3. NOTES RECEIVABLE FROM OFFICER/SHAREHOLDER
In September 1992, the Company loaned $230,000 to an officer/shareholder of
the Company. The loan is due on or before December 31, 1998 and bears interest
at a rate of 5.98% per annum, of which approximately $50,000 of interest is
accrued and unpaid as of March 31, 1997. The loan is collateralized by 33,333
shares of Common Stock and is also secured by restrictive provisions related to
options to purchase 112,430 shares of Common Stock at $2.7211 per share. The
loan will also become due (1) upon the sale or disposition of the shares or
exercise of any of the options securing the loan or (2) 90 days after the
officer/shareholder ceases to be employed by the Company.
In December 1996, the Company loaned $166,000 to an officer/shareholder of
the Company. The loan is due on or before April 30, 1999, and bears interest at
a rate of 6.00% per annum, which is payable annually on April 30. The loan is
secured by restrictive provisions related to options to purchase 88,888 and
158,509 shares, respectively, of the Company's Common Stock at $4.50 and $9.23
per share, respectively. The loan will also become due (1) upon the sale or
disposition of the options securing the loan or (2) 90 days after the
officer/shareholder ceases to be employed by the Company.
4. REVOLVING CREDIT FACILITY AND TERM LOAN
The Company has a loan agreement, as amended, with a financing company
whereby the Company has available a $15,000,000 credit facility, secured by
substantially all the assets of the Company, which matures on November 30, 1997.
Under the agreement, the Company may borrow up to $2,000,000 under a term loan
and the remaining balance under a revolving credit facility. The revolving
credit facility bears interest at the greater of 8.0% per annum or the one month
LIBOR rate plus 5.25% (10.75% and 10.94% at March 31, 1996 and 1997,
respectively). Advances under the revolving credit facility are limited by
eligible accounts receivable. During fiscal 1997, the Company borrowed
$2,000,000 under the term loan. Approximately $900,000 of the amount borrowed
was used to repay existing term loans outstanding at March 31, 1996 (see note
5). The term loan is payable in equal monthly installments over a three year
period beginning in August 1997 and bears interest at the LIBOR rate plus 5.25%
(10.75% and 10.94% at March 31, 1996 and 1997, respectively). At March 31, 1997,
the Company had $17,990,078 outstanding under the revolving credit and term loan
facility. Subsequent to fiscal year end, the revolving credit facility was
amended to increase the maximum borrowings permitted under the facility to
$20,000,000 and to extend the maturity date to March 31, 1998.
5. BANK LOANS
At March 31, 1996, the Company had three loans with a bank totaling
$1,007,284, bearing interest at the bank's prime rate plus 0.50% to 0.75% (8.75%
to 9.00% at March 31, 1996). On August 1, 1996, the Company repaid the balances
outstanding under these loans with the proceeds received under the credit
facility described in Note 4.
F-11
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
6. SUBORDINATED LONG-TERM NOTES PAYABLE TO RELATED PARTY
The components of subordinated long-term notes payable at March 31, 1996 and
1997 consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Subordinated note dated June 20, 1994; principal and interest due on July 31, 1999; bearing
interest at prime plus 1.5%, (10% (effective rate of 10.43%) at March 31, 1997), $4,000
note less unamortized discount of $140 and $123 in 1996 and 1997, respectively........... $ 3,860 $ 3,877
Subordinated note dated November 10, 1994; principal and interest due on November 10, 1999;
bearing interest at prime plus 1.5%, (10% (effective rate of 12.31%) at March 31, 1997),
$2,500 note less unamortized discount of $207 and $149 in 1996 and 1997, respectively.... 2,293 2,351
Subordinated note dated January 4, 1995; principal and interest due on January 4, 2000;
bearing interest at prime plus 1.5% (10% (effective rate of 12.45%) at March 31, 1997),
$3,500 note less unamortized discount of $322 and $236 in 1996 and 1997, respectively.... 3,178 3,264
Subordinated note dated February 14, 1995 (issued in June 1995); principal and interest due
on February 14, 2000; bearing interest at prime plus 1.5% (10% (effective rate of 12.36%)
at March 31, 1997), $1,100 note less unamortized discount of $100 and $74 in 1996 and
1997, respectively....................................................................... 1,000 1,026
Subordinated note dated May 5, 1995; principal and interest due on May 5, 2000; bearing
interest at prime plus 1.5% (10% (effective rate of 12.10%) at March 31, 1997), $1,500
note less unamortized discount of $129 and $97 in 1996 and 1997, respectively............ 1,371 1,403
Subordinated note dated June 27, 1995; principal and interest due on June 27, 2000; bearing
interest at prime plus 1.5% (10% (effective rate of 11.96%) at March 31, 1997), $400 note
less unamortized discount of $33 and $25 in 1996 and 1997, respectively.................. 367 375
Subordinated note dated October 13, 1995; principal and interest due on October 13, 2000;
bearing interest at prime plus 1.5% (10% (effective rate of 11.95%) at March 31, 1997),
$2,500 note less unamortized discount of $218 and $170 in 1996 and 1997, respectively.... 2,282 2,330
Accrued interest........................................................................... 1,900 3,439
--------- ---------
$ 16,251 $ 18,065
--------- ---------
--------- ---------
</TABLE>
F-12
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
6. SUBORDINATED LONG-TERM NOTES PAYABLE TO RELATED PARTY (CONTINUED)
The subordinated long-term notes are payable to the Investor. The notes are
mandatorily due, subordinated in right of payment to Senior Indebtedness, as
defined, upon the effectiveness of a registration statement relating to the
Company's capital stock under the Securities Act of 1933.
Simultaneously with the execution of the notes, the Company issued warrants
to purchase 837,584 shares and 516,417 shares of the Company's Common Stock in
fiscal 1995 and 1996, at exercise prices ranging from $7.615 to $11.48 per
share. The warrants are fully exercisable and expire in either five or ten years
from the date of the respective warrant. The Company allocated $889,195 and
$570,144 of the debt proceeds to the value of the warrants issued in fiscal 1995
and 1996, respectively. The discount on the debt is being amortized over the
term of the notes. Amortization expense was approximately $60,000, $251,000 and
$275,000 in fiscal 1995, 1996, and 1997, respectively.
7. AGGREGATE MATURITIES UNDER THE REVOLVING CREDIT FACILITY, TERM LOAN AND
SUBORDINATED LONG-TERM NOTES PAYABLE
Future payments due under the revolving credit facility, term loan and
subordinated long-term notes and accrued interest payable to related party, are
as follows (in thousands):
<TABLE>
<S> <C>
Year ending March 31,
1998.............................................................. $ 16,435
1999.............................................................. 667
2000.............................................................. 9,344
2001.............................................................. 5,359
2002.............................................................. --
Thereafter........................................................ 5,125
---------
36,930
Less: unamortized discount...................................... 874
---------
$ 36,056
---------
---------
</TABLE>
8. LEASES
The Company leases office space and equipment under noncancellable operating
leases expiring at various periods through December 2004. Rental expense for
these operating leases was approximately $1,749,000, $2,130,000, and $2,795,000
in Fiscal 1995, 1996 and 1997, respectively. The Company's lease for its main
office space contains provisions for annual rent escalations based on changes in
the consumer price index.
F-13
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
8. LEASES (CONTINUED)
The Company is obligated under certain capital leases for computer and
office equipment that expire at various dates through 1999. Property and
equipment includes the following amounts related to assets under capital leases:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cost..................................................................... $ 1,254 $ 2,078
Less accumulated amortization............................................ 604 876
--------- ---------
Net property and equipment under capital lease obligations............... $ 650 $ 1,202
--------- ---------
--------- ---------
</TABLE>
Amortization of leased assets is included in depreciation and amortization
expense.
Future minimum payments under capital leases and noncancellable operating
leases with terms of one year or more consisted of the following at March 31,
1997:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Year ending March 31,
1998................................................................... $ 605 $ 2,318
1999................................................................... 495 2,498
2000................................................................... 171 2,562
2001................................................................... 32 2,613
2002................................................................... 5 2,707
Thereafter............................................................. -- 4,337
--------- -----------
Total minimum lease payments........................................... 1,308 $ 17,035
-----------
-----------
Less: amount representing interest..................................... 222
---------
Present value of minimum lease payments................................ 1,086
Less current portion................................................... 516
---------
Obligations under capital leases, excluding current portion............ $ 570
---------
---------
</TABLE>
9. REDEEMABLE PREFERRED STOCK
In June 1994, the Company entered into a Securities Purchase Agreement (the
"1994 Agreement") with the Investor. In accordance with the 1994 Agreement, the
Company amended its Articles of Incorporation to authorize 6,000,000 shares of
$.01 par value Common Stock, 1,897,028 shares of $.01 par value Series A
Preferred Stock, and 393,965 shares of $.01 par value Series B Preferred Stock.
All 834,016 shares of Class A Common Stock outstanding at the date of the 1994
Agreement were reclassified to newly authorized shares of Common Stock, and the
1,897,028 outstanding shares of Series C and Series D Preferred Stock were
reclassified to shares of Series A Preferred Stock. Under the 1994 Agreement,
the Company sold all 393,965 authorized shares of Series B Preferred Stock to
the Investor at a price of $7.615 per share, for aggregate proceeds of
$3,000,000.
F-14
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
9. REDEEMABLE PREFERRED STOCK (CONTINUED)
The Company used the proceeds from the sale of Series B Preferred Stock plus
$4,000,000 in proceeds from issuing a subordinated note payable to the Investor
to repurchase and retire 785,000 shares of Common Stock held by the chairman and
chief executive officer of the Company at a
purchase price of $8.9172 per share. In conjunction with the buyout of his
shares, the chief executive officer resigned from his employment with the
Company.
In November 1995, the Company entered into another Securities Purchase
Agreement (the "Series C Agreement") with the Investor. In accordance with the
Series C Agreement, the Company amended its Articles of Incorporation to
authorize 500,000 shares of $.01 par value Series C Cumulative Preferred Stock.
Under the Series C Agreement, the Company sold 174,216 shares of Series C
Cumulative Preferred Stock to the Investor at a price of $11.48 per share, for
aggregate proceeds of $2,000,000.
In April 1996, the Company entered into a second Securities Purchase
Agreement relating to Series C Cumulative Preferred Stock under which the
Company sold 261,324 shares of Series C Cumulative Preferred Stock to the
Investor at a price of $11.48 per share, for aggregate proceeds of $3,000,000.
In August 1996, the Company entered into an additional Securities Purchase
Agreement (the "Series D Agreement"). In accordance with the Series D Agreement,
the Company amended its Articles of Incorporation to authorize 600,000 shares of
$.01 par value Series D Cumulative Preferred Stock. Under the Series D
Agreement, the Company sold 216,685 shares of Series D Cumulative Preferred
Stock to the Investor at a price of $9.23 per share, for aggregate proceeds of
$2,000,000.
The holders of Series A and Series B Preferred Stock are entitled to receive
noncumulative dividends at the rate of $.315 per share and $.533 per share,
respectively, per annum when and if declared by the Board of Directors. The
holders of Series C Cumulative and Series D Cumulative Preferred Stock are
entitled to receive cumulative dividends at the rate of $1.03 and $.83 per
share, respectively. No such dividends had been declared as of March 31, 1997
and accumulated undeclared dividends were approximately $626,000 at March 31,
1997. The holders of Series A and Series B Preferred Stock are entitled to a
liquidation preference of $1.90 and $7.615 per share, respectively, plus any
declared but unpaid dividends. The holders of Series C Cumulative and Series D
Cumulative Preferred Stock are entitled to a liquidation preference of $11.48
and $9.23 per share, respectively plus any accumulated and unpaid dividends.
Each share of Series A, Series B, Series C and Series D Preferred Stock ("the
Redeemable Preferred Stock") is convertible at any time into one share of Common
Stock, subject to adjustment for dilution, and automatically converts into
Common Stock upon a public offering of the Company's Common Stock meeting
certain criteria. Each share of the Redeemable Preferred Stock is entitled to
the number of votes equal to the number of shares of Common Stock into which
each share is convertible, subject to other limitations on voting included in
the Articles of Incorporation which, among other things, limit any holder of
shares of any class of stock to a maximum 50% vote of all shares outstanding.
The Company is required to redeem one-third of the Redeemable Preferred Stock on
each of January 31, 2000 through 2002. The Company is required to redeem the
Series A and Series B Preferred Stock at $1.90 and $7.615 per share plus any
dividends declared but unpaid, respectively, and the Series C Cumulative and
Series D Cumulative Preferred Stock at $11.48 and $9.23 per share plus any
accumulated and unpaid dividends.
F-15
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
10. COMMON STOCK
At March 31, 1997, the Company had 296,282 shares of Common Stock
outstanding and 6,081,350 shares of Common Stock reserved for future issuance
upon conversion of Redeemable Preferred Stock and exercise of warrants and
options to purchase Common Stock.
11. STOCK OPTION PLANS
The Company has elected to follow APB Opinion No. 25 and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
No. 123 requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB Opinion No. 25, because the
exercise price of the Company's employee stock options equals the estimated fair
value of the underlying stock on the date of grant, no compensation expense is
recognized.
The Company's stock option plans authorize the Board of Directors to grant
employees, non-employee directors, and consultants qualified and nonqualified
stock options to purchase up to 2,175,000 shares of the Company's Common Stock.
Outstanding options generally vest over four to five years and must be exercised
within ten years of the effective date of grant.
Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123, which also requires that the information be determined as if
the Company has accounted for its employee stock options granted subsequent to
March 31, 1995, under the fair value method prescribed by that Statement. The
fair value for options granted was estimated at the date of grant using the
Minimum Value option pricing model. The following weighted-average assumptions
were used in the appropriate models for fiscal 1996 and fiscal 1997,
respectively: risk-free interest rates of 5.86% and 6.15%; no dividend yield;
and an expected life of the option of five years.
In addition, the option valuation models require the input of highly
subjective assumptions. Because the Company's employee stock options have
characteristics different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31, 1997
---------------------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C>
Pro forma net loss..................................................... $ 3,707
Pro forma net loss per share........................................... $ (1.08)
</TABLE>
Because SFAS No. 123 is applicable only to options granted subsequent to
March 31, 1995, its pro forma effect will not be fully reflected until March 31,
2000.
F-16
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
11. STOCK OPTION PLANS (CONTINUED)
A summary of the Company's stock option activity and related information for
the three years ended March 31, 1997 follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------------------------------
1995 1996 1997
---------------------- ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding--beginning of year........ 551,994 $ 3.20 803,256 $ 3.75 1,015,048 $ 5.93
Granted............................... 393,695 $ 4.58 471,534 $ 9.23 547,736 $ 9.38
Exercised............................. (65,839) $ 2.64 (85,609) $ 3.12 (31,961) $ 3.52
Forfeited............................. (76,594) $ 3.61 (174,133) $ 5.96 (91,658) $ 7.64
--------- ----------- -----------
Outstanding--end of year.............. 803,256 $ 3.75 1,015,048 $ 5.93 1,439,165 $ 7.18
--------- ----------- -----------
--------- ----------- -----------
Exercisable at end of year............ 435,319 $ 2.64 497,106 $ 4.29 594,867 $ 4.83
Weighted-average fair value of options
granted during the year............. $ 2.35 $ 2.50
</TABLE>
Exercise prices for options outstanding as of March 31, 1997 ranged from
$2.72 to $10.75. The weighted-average remaining contractual life of those
options is 7.4 years. At March 31, 1997, the Company had 344,965 shares
available for future grants.
12. INCOME TAXES
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal......................................................... $ (1,491) $ -- $ --
State........................................................... (181) -- --
Foreign......................................................... 74 98 295
--------- --------- ---------
(1,598) 98 295
Deferred:
Federal......................................................... 299 -- --
State........................................................... 35 -- --
--------- --------- ---------
334 -- --
--------- --------- ---------
$ (1,264) $ 98 $ 295
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-17
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
12. INCOME TAXES (CONTINUED)
The actual income tax expense (benefit) differs from the "expected" amount
(computed by applying the U.S. Federal corporate income tax rate of 34% to
income or loss before income taxes) as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax expense (benefit) computed at statutory rates........... $ (5,115) $ (4,069) $ (1,088)
Foreign withholding taxes................................... 74 98 295
State income taxes, net of Federal effect................... (570) (453) (121)
Other, net.................................................. 124 (43) (67)
Change in valuation allowance............................... 4,223 4,565 1,276
--------- --------- ---------
Income tax expense (benefit)................................ $ (1,264) $ 98 $ 295
--------- --------- ---------
--------- --------- ---------
</TABLE>
SFAS No. 109 requires the recognition of deferred tax assets and liabilities
for both the expected future tax impact of differences between the financial
statement and tax basis of assets and liabilities, and for the expected future
tax benefit to be derived from tax loss and tax credit carryforwards. SFAS No.
109 additionally requires the establishment of a valuation allowance to reflect
the likelihood of realization of deferred tax assets. The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and liabilities at March 31, 1996 and 1997 are presented below:
<TABLE>
<CAPTION>
MARCH 31,
--------------------
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss and tax credit carryforwards....................... $ 5,055 $ 6,445
Accounts receivable, principally due to allowance for doubtful
accounts............................................................ 321 247
Deferred revenue for financial reporting purposes..................... 3,332 3,207
Accruals not deducted for tax purposes................................ 407 505
--------- ---------
Total gross deferred tax assets......................................... 9,115 10,404
Deferred tax liability:
Property and equipment, principally due to depreciation............... 327 340
--------- ---------
Less valuation allowance................................................ 8,788 10,064
--------- ---------
Net deferred tax asset (liability)...................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
At March 31, 1997, the Company had domestic net operating loss carryforwards
of approximately $10,301,000 which expire in years 2010 through 2012; domestic
research and experimental tax credits of approximately $776,000 which expire in
years 2010 to 2012; domestic and foreign tax credits of approximately $506,000
which can be carried forward indefinitely; and foreign net operating loss
carryforwards of approximately $2,938,000 which can be carried forward
indefinitely.
F-18
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
12. INCOME TAXES (CONTINUED)
Due to uncertainties related to the Company's ability to generate sufficient
taxable income in the future to realize the benefit of net deferred income tax
assets related principally to these carryforward items, the Company has recorded
a valuation allowance against deferred tax assets based on management's belief
that it is more likely than not that the deferred tax assets for which the
valuation allowance has been recorded will not be realized. The annual
utilization of net operating loss carryforwards to offset future taxable income
may be limited due to changes in the ownership of the Company.
13. RELATED PARTY TRANSACTIONS
During fiscal 1995 and 1996, the Company purchased specified research and
development services from a company in which the Company's principal shareholder
had an ownership interest. In fiscal 1995 and the portion of fiscal 1996 during
which the Company's principal shareholder had an interest, the Company incurred
approximately $3,200,000 and $557,000, respectively, of research and development
expenses with this related party.
14. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan that covers substantially all employees over
18 years of age. The Company may make contributions at the discretion of the
Board of Directors. The Company did not make contributions to this plan during
fiscal 1995, 1996 and 1997.
15. ACQUISITIONS
Effective August 30, 1994, the Company acquired substantially all the assets
and assumed certain liabilities of Communix Corporation, a developer of software
and provider of related services in exchange for 75,000 shares of the Company's
Common Stock valued at $4.50 per share. Purchased in-process research and
development of $310,050 was expensed in connection with the allocation of the
purchase price.
Effective October 31, 1994, the Company acquired substantially all the
assets and assumed certain liabilities of SQL Systems International plc, a
developer of software with offices in the United Kingdom and Australia. The
purchase price totalled approximately $580,000, representing settlement of
existing liabilities. Goodwill of approximately $47,000 that resulted from the
allocation of the purchase price is being amortized using the straight-line
method over an estimated useful life of ten years. In addition, the Company is
required to pay the seller additional consideration for 48 months following the
acquisition. This additional consideration is based on a percentage of license
fees collected from products sold which include the software acquired and will
be allocated to goodwill. Such additional consideration is limited to
$1,621,000, $2,431,500, $2,431,500, and $810,500, in each successive 12-month
period following the acquisition date. Additional consideration of approximately
$169,000 and $69,000 was recorded in fiscal 1996 and 1997, respectively.
F-19
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
15. ACQUISITIONS (CONTINUED)
Effective June 30, 1995, the Company acquired an 80% interest in Socotec, a
software company in Paris, France for approximately $960,000. Goodwill of
approximately $778,000 that resulted from the allocation of the purchase price
was being amortized using the straight-line method over an estimated useful life
of ten years. During fiscal 1997, the Company wrote off the remaining goodwill
related to this acquisition (See Note 1). The purchase agreement provides for a
call/put option for the Company to purchase an additional 19% of Socotec for
approximately $280,000 for a period up to five years from the acquisition date.
The purchase method of accounting was used to record each of the above
acquisitions. Accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed based on estimated fair values at purchase
dates. Operating results for the acquired companies have been included in the
Company's consolidated results of operations from the respective purchase dates.
The following represents the unaudited pro forma consolidated results of
operations for fiscal 1995 and 1996 assuming the above acquisitions had occurred
at the beginning of the year of acquisition and the beginning of the year for
the immediately preceding period:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
MARCH 31,
----------------------
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Revenues............................................................. $ 33,331 $ 48,547
Net loss............................................................. (15,945) (11,837)
</TABLE>
These unaudited pro forma consolidated results do not purport to be
indicative of the results or trends that actually would have been obtained if
the operations were combined during the periods presented, and is not intended
to be a projection of future results or trends. The historical net loss per
share (see Note 1) for the unaudited pro forma consolidated results of
operations for fiscal 1995 and 1996 would have been $(22.63) and $(18.35),
respectively.
F-20
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1997
16. GEOGRAPHIC INFORMATION
Revenue, operating income (loss) and identifiable assets, classified by the
major geographic areas in which the Company operates, are as follows:
<TABLE>
<CAPTION>
UNITED ASIA/
STATES EUROPE PACIFIC TOTAL
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
REVENUE
Fiscal 1995............................................. $ 24,354 $ 2,054 $ 1,106 $ 27,514
Fiscal 1996............................................. 37,497 7,242 3,294 48,033
Fiscal 1997............................................. 51,884 9,554 5,661 67,099
OPERATING INCOME (LOSS)
Fiscal 1995............................................. (13,181) (833) 81 (13,933)
Fiscal 1996............................................. (5,948) (2,585) (886) (9,419)
Fiscal 1997............................................. 1,019 127 (1,116) 30
IDENTIFIABLE ASSETS
March 31, 1995.......................................... 17,937 3,042 815 21,794
March 31, 1996.......................................... 20,124 4,963 1,572 26,659
March 31, 1997.......................................... 33,351 5,592 3,398 42,341
</TABLE>
Intercompany sales between geographic areas are at amounts above cost and in
accordance with the rules and regulations of the respective governing tax
authorities. Operating income (loss) is total revenue less cost of sales and
operating expenses.
17. EXPORT SALES
Export sales represent sales by domestic operations to customers located
primarily in Central and South America and Canada and totaled approximately
10.7%, 12.7%, and 4.2% of the Company's sales in fiscal 1995, 1996, and 1997,
respectively. The primary international markets served by the Company are Europe
and the Asia/Pacific.
F-21
<PAGE>
- --------------------------------------------
--------------------------------------------
- --------------------------------------------
--------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION 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 SHAREHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN 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
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 DATE SUBSEQUENT TO THE DATE
HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................... 3
Risk Factors..................................... 6
Use of Proceeds.................................. 13
Dividend Policy.................................. 13
Capitalization................................... 14
Dilution......................................... 15
Selected Consolidated Financial Data............. 16
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 17
Business......................................... 28
Management....................................... 43
Certain Transactions............................. 52
Principal and Selling Shareholders............... 55
Description of Capital Stock..................... 56
Shares Eligible for Future Sale.................. 59
Underwriting..................................... 61
Legal Matters.................................... 62
Experts.......................................... 62
Additional Information........................... 62
Index to Consolidated Financial Statements....... F-1
</TABLE>
--------------
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
SHARES
[LOGO]
COMMON STOCK
------------
PROSPECTUS
------------
ALEX. BROWN & SONS
INCORPORATED
SOUNDVIEW FINANCIAL GROUP, INC.
WESSELS, ARNOLD & HENDERSON
, 1997
- --------------------------------------------
--------------------------------------------
- --------------------------------------------
--------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the Securities and Exchange Commission registration fee, the NASD filing fee and
the Nasdaq listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
Securities and Exchange Commission registration fee.............................. $ 15,682
NASD filing fee.................................................................. 5,675
Nasdaq National Market listing fee............................................... $ +
Printing and engraving expenses.................................................. +
Legal fees and expenses.......................................................... +
Accounting fees and expenses..................................................... +
Blue sky fees and expenses....................................................... +
Transfer agent and registrar fees................................................ +
Miscellaneous expenses........................................................... +
-----------
Total........................................................................ +
-----------
-----------
</TABLE>
- --------------
+ To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Georgia Business Corporation Code permits a corporation to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, provided that no provisions shall eliminate or limit the liability of
a director: (i) for any appropriation, in violation of his duties, of any
business opportunity of the corporation; (ii) for acts or omissions which
involve intentional misconduct or a knowing violation of law; (iii) for unlawful
corporate distributions; or (iv) for any transaction from which the director
received an improper personal benefit. This provision pertains only to breaches
of duty by directors in their capacity as directors (and not in any other
corporate capacity, such as officers) and limits liability only for breaches of
fiduciary duties under Georgia corporate law (and not for violation of other
laws, such as the Federal securities laws). The Amended and Restated Articles of
Incorporation exonerate the Company's directors from monetary liability to the
extent permitted by this statutory provision.
The Company's Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws also provide that the Company shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the Company), by
reason of the fact that such person is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including reasonable attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding, if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Company (and with respect to any criminal
action or proceeding, if such person had no reasonable cause to believe such
person's conduct was unlawful), to the maximum extent permitted by, and in the
manner provided by, the Georgia Business Corporation
II-1
<PAGE>
Code. In addition, the Amended and Restated Bylaws provide that the Company will
advance to its directors or officers reasonable expenses of any such proceeding.
Notwithstanding any provision of the Company's Amended and Restated Articles
of Incorporation and Amended and Restated Bylaws to the contrary, the Georgia
Business Corporation Code provides that the Company shall not indemnify a
director or officer for any liability incurred in a proceeding in which the
director is adjudged liable to the Company or is subjected to injunctive relief
in favor of the Company: (i) for any appropriation, in violation of his duties,
of any business opportunity of the Company; (ii) for acts or omissions which
involve intentional misconduct or a knowing violation of law; (iii) for unlawful
corporate distributions; and (iv) for any transaction from which the director or
officer received an improper personal benefit.
Section of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
underwriters named therein.
The Company has purchased insurance with respect to, among other things,
liabilities that may accrue under the statutory provisions referred to above.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The information in this Item gives retroactive effect to a -for-one stock
split of the Company's Common Stock which was effected on , 1997.
The following is a summary of transactions by the Company since March 31,
1994 involving sales of the Company's securities (without payment of any selling
commission to any person) that were not registered under the Securities Act of
1933 (the "Securities Act"):
1. On various dates since March 31, 1994, the registrant has sold
shares (net of repurchases) of its Common Stock to 26 employees and
consultants, outside directors, etc. pursuant to direct issuances and
exercises of stock options under its 1984 Stock Option Plan and 1994 Stock
Option Plan. The exercise prices per share ranged from $ to
$ , for an aggregate consideration of $ .
2. On June 20, 1994, the registrant sold 393,965 shares of Series B
Preferred Stock at a per share price of $7.615 for an aggregate purchase
price of $3,000,000 to Warburg, Pincus Investors, L.P.
3. On August 30, 1994, the registrant sold shares of its Common
Stock to Alan T. Johnston, in exchange for all of the outstanding stock of
Communix Corporation, pursuant to an Agreement and Plan of Merger by and
among the registrant, TSW Network Services, Inc., Communix Corporation and
Alan T. Johnston.
4. On November 29, 1995, the registrant sold 174,216 shares of Series C
Cumulative Preferred Stock at a per share price of $11.48 for an aggregate
purchase price of $2,000,000 to Warburg, Pincus Investors, L.P.
5. On April 15, 1996, the registrant sold 261,324 shares of Series C
Cumulative Preferred Stock at a per share price of $11.48 for an aggregate
purchase price of $3,000,000 to Warburg, Pincus Investors, L.P.
6. On August 14, 1996, the registrant sold 216,685 shares of Series D
Cumulative Preferred Stock at a per share price of $9.23 for an aggregate
purchase price of $2,000,000 to Warburg, Pincus Investors, L.P.
II-2
<PAGE>
7. Since June 20, 1994, the Company has issued to Warburg, Pincus
Investors, L.P. the following subordinated notes payable and, in
consideration for the Company's issuance to Warburg, Pincus Investors, L.P.,
of such subordinated notes, warrants to purchase Common Stock:
<TABLE>
<CAPTION>
PRINCIPAL NUMBER OF EXERCISE PRICE
AMOUNT OF NOTE WARRANTS PER SHARE
-------------- ----------- --------------
<S> <C> <C> <C>
Subordinated note dated June 20, 1994, with principal and interest
due on July 31, 1999.............................................. $ 4,000,000 $
Subordinated note dated November 10, 1994, with principal and
interest due on November 10, 1999................................. 2,500,000
Subordinated note dated January 4, 1995, with principal and interest
due on January 4, 2000............................................ 3,500,000
Subordinated note dated February 14, 1995, with principal and
interest due on February 14, 2000................................. 1,100,000
Subordinated note dated May 5, 1995, with principal and interest due
on May 5, 2000.................................................... 1,500,000
Subordinated note dated June 27, 1995, with principal and interest
due on June 27, 2000.............................................. 400,000
Subordinated note dated October 13, 1995, with principal and
interest due on October 13, 2000.................................. 2,500,000
-------------- -----------
Total............................................................... $ 15,500,000
-------------- -----------
-------------- -----------
</TABLE>
The issuances of the securities described in Item 15(1) were deemed to be
exempt from registration under the Securities Act in reliance of Section 4(2)
under the Securities Act or Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions by an issuer not involving a public offering or
transactions pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The issuance of the securities
described in Item 15(2) through 15(7) were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving a public offering. In addition, the
recipients in each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates issued in such transactions. All recipients had adequate access,
through their relationships with the registrant, to information about the
registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
1.1+ Form of Underwriting Agreement among TSW International, Inc. ("TSW") and the Underwriters named therein
3.1 Form of Amended and Restated Articles of Incorporation to be filed prior to effectiveness of this
offering
3.2 Form of Amended and Restated Bylaws to be approved prior to effectiveness of this offering
4.1+ Form of Common Stock Certificate
5.1+ Opinion of Troutman Sanders LLP
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.1.1 Loan and Security Agreement dated November 17, 1995 between TSW and Greyrock Business Credit, a
division of Greyrock Capital Group Inc. ("Greyrock")
10.1.2 Patent and Trademark Security Agreement dated November 17, 1995 between TSW and Greyrock
10.1.3 Security Agreement in Copyrighted Works dated February 28, 1996 between TSW and Greyrock
10.1.4 Amendment to Loan Documents, dated August 1, 1996, between TSW and Greyrock
10.1.5 Secured Promissory Note dated August 1, 1996 between TSW and Greyrock
10.1.6 Guarantee dated November 6, 1996 between TSW International Limited and Greyrock
10.1.7 Deed of Guarantee and Indemnity dated November 14, 1996 between TSW International Pty Ltd and Greyrock
10.1.8 Second Amendment to Loan Documents, dated April 3, 1997, between TSW and Greyrock
10.2.1 Securities Purchase Agreement dated as of June 20, 1994, between TSW and Warburg, Pincus Investors,
L.P. ("Warburg")
10.2.2 Amended and Restated Stockholders Agreement dated June 20, 1994 between TSW, Warburg, John W. Blend,
III ("Blend") and David P. Welden
10.2.3 Amended and Restated Registration Rights Agreement dated June 20, 1994 between TSW, Warburg, Blend and
David P. Welden
10.3 Stockholder's Rights Agreement, dated as of August 30, 1994, between TSW, Warburg and Alan Johnston
10.4.1 Form of Note and Warrant Purchase Agreement between TSW and Warburg and schedule of substantially
similar agreements
10.4.2 Form of Subordinated Floating Rate Note payable by TSW to Warburg and schedule of substantially similar
agreements
10.4.3 Form of Stock Purchase Warrant between TSW and Warburg and schedule of substantially similar agreements
10.4.4 Form of Preferred Stock Purchase Agreement between TSW and Warburg and schedule of substantially
similar agreements
10.5.1 Employment Agreement dated July 19, 1994 between TSW and Christopher R. Lane ("Lane"), as amended
10.5.2 Supplemental Severance Agreement dated December 15, 1994 between TSW and Lane
10.6.1 Loan Agreement dated December 22, 1996 between TSW and Lane
10.6.2 Promissory Note dated December 22, 1996 between TSW and Lane
10.6.3 Collateral Assignment Agreement dated December 22, 1996 between TSW and Lane
10.7 Employment Agreement dated October 30, 1995 between TSW and John F. Bartels ("Bartels")
10.8+ Nonqualified Stock Option Agreement between TSW and Bartels dated August 8, 1996
10.9.1 Nonrecourse Loan Agreement dated September 16, 1992 between TSW and Blend
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.9.2 Stock Pledge Agreement dated September 16, 1992 between TSW and Blend
10.9.3 Collateral Assignment and Agreement dated September 16, 1992 between TSW and Blend
10.9.4 Nonrecourse Promissory Note dated September 16, 1992 between TSW and Blend
10.10 Form of Nondisclosure and Non-compete Agreement and schedule of substantially similar agreements
10.11 Form of Stock Option Agreement between TSW and JRO Consulting, Inc. and schedule of substantially
similar agreements
10.12.1 1984 Stock Option Plan
10.12.2 Stock Option Agreement dated January 7, 1986 between TSW and Blend
10.12.3 1984 Stock Option Plan, as amended
10.12.4 Form of Nonqualified Stock Option Agreement pursuant to the 1984 Plan, as amended, and schedule of
substantially similar agreements
10.13.1 1994 Stock Option Plan
10.13.2 Form of Incentive Stock Option Agreement pursuant to the 1994 Stock Option Plan and schedule of
substantially similar agreements
10.13.3 Amended and Restated 1994 Stock Option Plan
10.14.1 1995 Stock Option Plan for Outside Directors
10.14.2 Form of Outside Directors Stock Option Agreement pursuant to the 1995 Stock Option Plan for Outside
Directors and schedule of substantially similar agreements
10.15 Involuntary Severance Benefits Plan
10.16 Section 401(k) Retirement Savings Plan
10.17 1995 Consultants Stock Option Plan
10.18 Lease Agreement dated June 8, 1993 between TSW and Cousins Properties Incorporated, as amended
10.19 Agreement for the Sale and Purchase of the Business of SQL Systems International plc, dated as of
October 31, 1994, between SQL Systems International plc, SQL Systems International BV, TSW (UK)
Limited and TSW
10.20 Share Purchase Agreement dated March 3, 1995 between TSW, Socotec SA, Socotec Industrie SA, Jacky Talet
and Jean-Jacques Maze
11.1 Statement of Computation of Per Share Earnings
21.1 Schedule of Subsidiaries
23.1+ Consent of Troutman Sanders LLP (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24 Power of Attorney (Reference is made to Page II-7 hereof)
27 Financial Data Schedule (for Commission filing purposes only)
</TABLE>
- --------------
+ To be filed by amendment.
II-5
<PAGE>
(b) Financial Statement Schedules
The following financial statement schedule of the Company is included in
Part II of the Registration Statement:
Report of Ernst & Young LLP, Independent Auditors
Schedule II--Valuation and Qualifying Accounts
Except for the financial statement schedule listed above, the financial
statement schedules for which provision is made in the applicable accounting
regulations of the Commission are either not required under the related
instructions or are inapplicable and have therefore been omitted.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions, 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 Securities 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 defense 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 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.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus as filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
TSW International, Inc., has duly caused this Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Atlanta, State of Georgia on this fifth day of May, 1997.
TSW INTERNATIONAL, INC.
By: /s/ CHRISTOPHER R. LANE
-----------------------------------------
Christopher R. Lane
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Christopher R. Lane and John F. Bartels, and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any 462(b) Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their 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
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ CHRISTOPHER R. LANE Officer and Director
- ------------------------------ (Principal Executive May 5, 1997
Christopher R. Lane Officer)
Senior Vice President,
/s/ JOHN F. BARTELS Chief Financial Officer,
- ------------------------------ Secretary and Treasurer May 5, 1997
John F. Bartels (Principal Financial
Officer)
/s/ VINCENT C. KLINGES
- ------------------------------ Controller (Principal May 5, 1997
Vincent C. Klinges Accounting Officer)
/s/ JOHN W. BLEND, III Executive Vice President,
- ------------------------------ Worldwide Distribution May 5, 1997
John W. Blend, III and Director
II-7
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ JOHN R. OLTMAN
- ------------------------------ Chairman of the Board May 5, 1997
John R. Oltman
/s/ GEORGE D. BUSBEE
- ------------------------------ Director May 5, 1997
George D. Busbee
/s/ WILLIAM H. JANEWAY
- ------------------------------ Director May 5, 1997
William H. Janeway
/s/ JOSEPH P. LANDY
- ------------------------------ Director May 5, 1997
Joseph P. Landy
II-8
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated financial statements of TSW International,
Inc. as of March 31, 1996 and 1997 and for each of the three years in the period
ended March 31, 1997, and have issued our opinion thereon dated April 18, 1997
(included elsewhere in this Registration Statement). Our audits also included
the financial statement schedule listed in Item 16(b) of this Registration
Statement. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Atlanta, Georgia
April 18, 1997
<PAGE>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS (1) PERIOD
- -------------------------------------------- --------------- --------------- ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
YEAR ENDED
MARCH 31, 1995:
Allowance for doubtful accounts........... $ 310 $ 354 $ (232) $ 432
YEAR ENDED
MARCH 31, 1996:
Allowance for doubtful accounts........... $ 432 $ 422 $ (268) $ 586
YEAR ENDED
MARCH 31, 1997:
Allowance for doubtful accounts........... $ 586 $ 573 $ (361) $ 798
</TABLE>
- --------------
(1) Uncollectible accounts written off, net of recoveries.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------
<S> <C> <C>
1.1+ Form of Underwriting Agreement among TSW International, Inc. ("TSW") and the Underwriters named
therein
3.1 Form of Amended and Restated Articles of Incorporation to be filed prior to effectiveness of
this offering
3.2 Form of Amended and Restated Bylaws to be approved prior to effectiveness of this offering
4.1+ Form of Common Stock Certificate
5.1+ Opinion of Troutman Sanders LLP
10.1.1 Loan and Security Agreement dated November 17, 1995 between TSW and Greyrock Business Credit, a
division of Greyrock Capital Group Inc. ("Greyrock")
10.1.2 Patent and Trademark Security Agreement dated November 17, 1995 between TSW and Greyrock
10.1.3 Security Agreement in Copyrighted Works dated February 28, 1996 between TSW and Greyrock
10.1.4 Amendment to Loan Documents, dated August 1, 1996, between TSW and Greyrock
10.1.5 Secured Promissory Note dated August 1, 1996 between TSW and Greyrock
10.1.6 Guarantee dated November 6, 1996 between TSW International Limited and Greyrock
10.1.7 Deed of Guarantee and Indemnity dated November 14, 1996 between TSW International Pty Ltd and
Greyrock
10.1.8 Second Amendment to Loan Documents, dated April 3, 1997, between TSW and Greyrock
10.2.1 Securities Purchase Agreement dated as of June 20, 1994, between TSW and Warburg, Pincus
Investors, L.P. ("Warburg")
10.2.2 Amended and Restated Stockholders Agreement dated June 20, 1994 between TSW, Warburg, John W.
Blend, III ("Blend") and David P. Welden
10.2.3 Amended and Restated Registration Rights Agreement dated June 20, 1994 between TSW, Warburg,
Blend and David P. Welden
10.3 Stockholder's Rights Agreement, dated as of August 30, 1994, between TSW, Warburg and Alan
Johnston
10.4.1 Form of Note and Warrant Purchase Agreement between TSW and Warburg and schedule of
substantially similar agreements
10.4.2 Form of Subordinated Floating Rate Note payable by TSW to Warburg and schedule of substantially
similar agreements
10.4.3 Form of Stock Purchase Warrant between TSW and Warburg and schedule of substantially similar
agreements
10.4.4 Form of Preferred Stock Purchase Agreement between TSW and Warburg and schedule of
substantially similar agreements
10.5.1 Employment Agreement dated July 19, 1994 between TSW and Christopher R. Lane ("Lane"), as
amended
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------
<S> <C> <C>
10.5.2 Supplemental Severance Agreement dated December 15, 1994 between TSW and Lane
10.6.1 Loan Agreement dated December 22, 1996 between TSW and Lane
10.6.2 Promissory Note dated December 22, 1996 between TSW and Lane
10.6.3 Collateral Assignment Agreement dated December 22, 1996 between TSW and Lane
10.7 Employment Agreement dated October 30, 1995 between TSW and John F. Bartels ("Bartels")
10.8+ Nonqualified Stock Option Agreement between TSW and Bartels dated August 8, 1996
10.9.1 Nonrecourse Loan Agreement dated September 16, 1992 between TSW and Blend
10.9.2 Stock Pledge Agreement dated September 16, 1992 between TSW and Blend
10.9.3 Collateral Assignment and Agreement dated September 16, 1992 between TSW and Blend
10.9.4 Nonrecourse Promissory Note dated September 16, 1992 between TSW and Blend
10.10 Form of Nondisclosure and Non-compete Agreement and schedule of substantially similar
agreements
10.11 Form of Stock Option Agreement between TSW and JRO Consulting, Inc. and schedule of
substantially similar agreements
10.12.1 1984 Stock Option Plan
10.12.2 Stock Option Agreement dated January 7, 1986 between TSW and Blend
10.12.3 1984 Stock Option Plan, as amended
10.12.4 Form of Nonqualified Stock Option Agreement pursuant to the 1984 Plan, as amended, and schedule
of substantially similar agreements
10.13.1 1994 Stock Option Plan
10.13.2 Form of Incentive Stock Option Agreement pursuant to the 1994 Stock Option Plan and schedule of
substantially similar agreements
10.13.3 Amended and Restated 1994 Stock Option Plan
10.14.1 1995 Stock Option Plan for Outside Directors
10.14.2 Form of Outside Directors Stock Option Agreement pursuant to the 1995 Stock Option Plan for
Outside Directors and schedule of substantially similar agreements
10.15 Involuntary Severance Benefits Plan
10.16 Section 401(k) Retirement Savings Plan
10.17 1995 Consultants Stock Option Plan
10.18 Lease Agreement dated June 8, 1993 between TSW and Cousins Properties Incorporated, as amended
10.19 Agreement for the Sale and Purchase of the Business of SQL Systems International plc, dated as
of October 31, 1994, between SQL Systems International plc, SQL Systems International BV, TSW
(UK) Limited and TSW
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------
<S> <C> <C>
10.20 Share Purchase Agreement dated March 3, 1995 between TSW, Socotec SA, Socotec Industrie SA,
Jacky Talet and Jean-Jacques Maze
11.1 Statement of Computation of Per Share Earnings
21.1 Schedule of Subsidiaries
23.1+ Consent of Troutman Sanders LLP (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
24 Power of Attorney (Reference is made to Page II-7 hereof)
27 Financial Data Schedule (for Commission filing purposes only)
</TABLE>
- --------------
+ To be filed by amendment.
<PAGE>
EXHIBIT 3.1
TSW INTERNATIONAL, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
TO THE SECRETARY OF STATE
OF THE STATE OF GEORGIA:
WHEREAS, pursuant to O.C.G.A. Sections 14-2-1003 and 14-2-1007, the
Board of Directors and Shareholders of the Corporation have provided that the
Articles of Incorporation of TSW International, Inc., as heretofore amended,
be amended and restated as set forth herein;
NOW, THEREFORE, the Articles of Incorporation of the Corporation are
hereby amended and restated in their entirety to read as follows:
ARTICLE I
The name of the corporation is TSW INTERNATIONAL, INC.
ARTICLE II
The Corporation is organized pursuant to the provisions of the Georgia
Business Corporation Code.
ARTICLE III
The purpose of the Corporation is to engage in any form or type of
business for any lawful purpose or purposes not specifically prohibited to
corporations for profit under the laws of the State of Georgia and to have
all the rights, powers privileges and immunities which are now or hereafter
may be allowed to corporations under the laws of the State of Georgia.
ARTICLE IV
A. AUTHORIZED CAPITAL STOCK.
The Corporation shall be authorized to issue 50,000,000 shares of $0.01
par value common stock (the "Common Stock").
The Corporation shall also be authorized to issue 22,390,993 shares of
preferred stock (the "Preferred Stock"), of which 1,897,028 shares shall be
denominated "Series A Preferred Stock," 393,965 shares shall be
denominated "Series B Preferred Stock," 500,000 shares shall be denominated
"Series C Cumulative Preferred Stock," 600,000 shares shall be denominated
"Series D Cumulative Preferred Stock" and 20,000,000 shares may be issued
from time to time in one or more series (the "Undesignated Preferred Stock").
The Board of Directors
<PAGE>
is authorized to fix by resolution the designations, powers, preferences and
relative, participating, optional or other special rights (including voting
rights, if any, and conversion rights, if any), and qualifications,
limitations or restrictions thereof, of any such series of Undesignated
Preferred Stock, and the number of shares constituting any such series, or
all or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of such shares then outstanding. Each share of Preferred Stock shall
have a par value of $0.01.
B. COMMON STOCK.
The rights of the Common Stock shall be as follows:
1. DIVIDENDS. Subject to the preferences and other rights of the
Preferred Stock, the holders of Common Stock shall be entitled to receive
dividends as and when declared by the Board of Directors out of funds legally
available therefor. Holders of Common Stock shall be entitled to share
equally, share for share, in dividends declared on the Common Stock.
2. LIQUIDATION. In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, voluntary or involuntary, after
payment or provision for payment to the holders of the Preferred Stock of the
amounts to which they may be entitled, the remaining assets of the
Corporation available to shareholders shall be distributed equally per share
to the holders of Common Stock.
3. VOTING RIGHTS. Except as otherwise provided herein or by law, each
holder of Common Stock shall be entitled to one vote in respect of each share
of Common Stock held of record on all matters submitted to a vote of
shareholders.
4. RECLASSIFICATIONS. In the event of any stock split, combination or
other reclassification of shares of Common Stock, each share of Common Stock
shall be treated equally.
C. PREFERRED STOCK.
The relative rights, preferences, privileges and restrictions granted to
and imposed upon Series A Preferred Stock, Series B Preferred Stock, Series C
Cumulative Preferred Stock and Series D Cumulative Preferred Stock shall be
as follows:
1. SERIES A AND SERIES B PREFERRED STOCK DIVIDENDS.
(a) The holders of Series A Preferred Stock shall be entitled to
receive noncumulative dividends at the rate of $0.315 per share per annum as
and when declared by the Board of Directors out of funds legally available
therefor and the holders of Series B Preferred Stock shall be entitled to
receive noncumulative dividends at the rate of $0.533 per share per annum as
and when declared by the Board of Directors out of funds legally available
therefor.
2
<PAGE>
All such dividends on the Series A Preferred Stock and Series B Preferred Stock
will be payable quarterly and before any dividends shall be set apart for or
paid in any year upon the Common Stock or any Junior Stock (as hereinafter
defined). If any such distribution shall be insufficient to pay the holders of
Series A Preferred Stock or Series B Preferred Stock the full amount to which
they shall be entitled, the holders of the Series A Preferred Stock and Series B
Preferred Stock shall share ratably in any distribution in proportion to the
respective amounts which would otherwise be payable in respect to the shares
held by them upon such distribution if all amounts payable on or with respect to
said shares were paid in full.
(b) Dividends on the Series A and Series B Preferred Stock shall
be noncumulative, whether or not in any fiscal year net profits or surplus
are available for the payment of dividends in such fiscal year, so that if in
any fiscal year or years, dividends in whole or in part are not paid upon the
Series A Preferred Stock or Series B Preferred Stock, unpaid dividends shall
not accumulate as against the holders of the Series C Cumulative Preferred
Stock, the Series D Cumulative Preferred Stock or the Junior Stock and no
sums in any later years shall be paid to the holders of the Series A
Preferred Stock or the Series B Preferred Stock with respect to any prior
year or years when dividends were not paid.
2. SERIES C AND SERIES D CUMULATIVE PREFERRED STOCK DIVIDENDS.
(a) The holders of Series C Cumulative Preferred Stock shall be
entitled to receive cumulative dividends at the rate of $1.03 per share per
annum as and when declared by the Board of Directors out of funds legally
available therefor. The holders of Series D Cumulative Preferred Stock shall
be entitled to receive cumulative dividends at the rate of $0.83 per share
per annum as and when declared by the Board of Directors out of funds legally
available therefore. All such dividends on the Series C Cumulative
Preferred Stock and the Series D Cumulative Preferred Stock will be payable
quarterly and before any dividends shall be set apart for or paid in any year
upon (i) the Common Stock or any other stock ranking on liquidation junior to
the Preferred Stock (such stock being referred to hereinafter collectively as
"Junior Stock"), (ii) the Series A Preferred Stock or (iii) the Series B
Preferred Stock. If any such distribution shall be insufficient to pay the
holders of Series C Cumulative Preferred Stock or the Series D Cumulative
Preferred Stock the full amount to which they shall be entitled, the holders
of the Series C Cumulative Preferred Stock and the Series D Cumulative
Preferred Stock shall share ratably in any distribution in proportion to the
respective amounts which would otherwise be payable in respect to the shares
held by them upon such distribution if all amounts payable on or with respect
to said shares were paid in full.
(b) If any dividends payable on the Series C Cumulative Preferred
Stock and the Series D Cumulative Preferred Stock with respect to any fiscal
year of the Corporation are not paid for any reason, the right of the holders
of the Series C Cumulative Preferred Stock and the Series D Cumulative
Preferred Stock to receive payment of such dividend shall not lapse or
terminate, but said unpaid dividend or dividends shall accumulate and shall
be paid without interest to the holders of the Series C Cumulative Preferred
Stock and the Series D Cumulative Preferred Stock, when and as authorized by
the Board of Directors of the Corporation, before any
3
<PAGE>
sum or sums shall be set aside for or applied to the purchase, redemption or
other acquisition for value of shares of any other class (including, without
limitation, Junior Stock, Series A Preferred Stock and Series B Preferred Stock)
and before any dividend shall be paid or declared, or any other distribution
shall be ordered or made, upon shares of any other class (including, without
limitation, Junior Stock, Series A Preferred Stock and Series B Preferred
Stock).
3. RESTRICTION ON JUNIOR STOCK DIVIDENDS. As long as any Preferred
Stock remains outstanding, the Corporation shall not pay any dividend on the
Junior Stock, whether in cash or other property (other than shares of Junior
Stock), or purchase, redeem or otherwise acquire any such Junior Stock
unless, in addition to the payment of the dividend to the holders of
Preferred Stock as described above, the Corporation has redeemed all shares
of Preferred Stock which it would theretofore have been required to redeem
under Section 9 hereof.
4. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its shareholders, after and subject
to the payment in full of all amounts required to be distributed to the
holders of any other preferred stock of the Corporation ranking on
liquidation prior and in preference to the Preferred Stock (such preferred
stock being referred to hereinafter as "Senior Preferred Stock") upon such
liquidation, dissolution or winding up, but before any payment shall be made
to the holders of Junior Stock, an amount equal to $1.90 per share with
respect to the Series A Preferred Stock, $7.615 per share with respect to the
Series B Preferred Stock, $11.48 per share with respect to the Series C
Cumulative Preferred Stock and $9.23 per share with respect to the Series D
Cumulative Preferred Stock, PLUS any dividends declared but unpaid thereon,
and PLUS with respect to the Series C Cumulative Preferred Stock and Series D
Cumulative Preferred Stock, any accumulated and unpaid dividends, if not yet
declared (subject, in each case, to adjustment in the event of any stock
dividend, stock split, stock distribution or combination with respect to such
shares). If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for the
distribution of its shareholders after payment in full of amounts required to
be paid or distributed to holders of Senior Preferred Stock shall be
insufficient to pay the holders of Preferred Stock the full amount to which
they shall be entitled, the holders of the Preferred Stock, and any class of
stock ranking on liquidation on a parity with the Preferred Stock, shall
share ratably in any distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which would otherwise be
payable in respect to the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full.
(b) After the payment of all preferential amounts required to be
paid to the holders of Senior Preferred Stock and Preferred Stock and any
other series of preferred stock upon the liquidation, dissolution or winding
up of the Corporation, the holders of shares of Common Stock then outstanding
shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its shareholders.
4
<PAGE>
(c) The merger or consolidation of the Corporation into or with
another corporation in which the holders of the Corporation's outstanding
shares before the consolidation or merger do not retain a majority of the
voting power of the surviving corporation, or the sale, conveyance, mortgage,
pledge or lease of all or substantially all the assets of the Corporation
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 4.
5. VOTING RIGHTS OF PREFERRED STOCK.
(a) Each issued and outstanding share of Series A Preferred Stock,
Series B Preferred Stock, Series C Cumulative Preferred Stock and Series D
Cumulative Preferred Stock shall be entitled to the number of votes equal to
the number of shares of Common Stock into which each such share of Series A
Preferred Stock, Series B Preferred Stock, Series C Cumulative Preferred
Stock and Series D Cumulative Preferred Stock is convertible (as adjusted
from time to time pursuant to Section 7 hereof), at each meeting of
shareholders of the Corporation with respect to any and all matters presented
to the shareholders of the Corporation for their action or consideration,
including the election of directors. Except as provided by law, by the
provisions of Sections 5(b) and (c) below or by the provisions establishing
any other series of preferred stock, holders of Preferred Stock and of any
other outstanding preferred stock shall vote together with the holders of
Common Stock as a single class.
(b) In addition to any other rights provided by law, the
Corporation shall not without first obtaining the affirmative vote or written
consent of the holders of a majority of the outstanding shares of each of the
Series A Preferred Stock, Series B Preferred Stock, Series C Cumulative
Preferred Stock and Series D Cumulative Preferred Stock:
(i) amend or repeal any provision of the Corporation's
Articles of Incorporation or Bylaws, including without limitation a change in
the number of members of the Board of Directors of the Corporation;
(ii) authorize or effect the payment of dividends or the
redemption or repurchase of any capital stock of the Corporation or rights to
acquire capital stock of the Corporation except as otherwise required by the
Articles of Incorporation;
(iii) authorize or effect the issuance by the Corporation
of any shares of capital stock or rights to acquire capital stock other than
(A) pursuant to options, warrants, conversion or subscription rights in
existence on the initial date of issuance of the Series A Preferred Stock and
the Series B Preferred Stock or (B) pursuant to stock option, stock bonus or
other employee stock plans for the benefit of the employees of the
Corporation or its subsidiaries;
(iv) authorize or effect (A) any sale, lease, transfer or
other disposition of all or substantially all the assets of the Corporation
out of the ordinary course of the
5
<PAGE>
Corporation's business; (B) any merger or consolidation or other reorganization
of the Corporation with or into another corporation, (C) the acquisition by the
Corporation of another corporation by means of a purchase of all or
substantially all the assets of such corporation, merger, consolidation or other
reorganization, (D) any joint ventures by the Corporation outside of its
ordinary course of business or (E) a liquidation, winding up, dissolution or
adoption of any plan for the same;
(v) enter into any transaction, other than employment
agreements approved by the Board of Directors or shareholders agreements to
which the holders of the Series A Preferred Stock, Series B Preferred Stock,
Series C Cumulative Preferred Stock and Series D Cumulative Preferred Stock
shall be parties, with any officer, director or beneficial owner of five
percent (5%) or more of the Common Stock of the Corporation or any affiliate
of any of the foregoing; or
(vi) authorize the incurrence of indebtedness for borrowed
money in an amount in excess of $1,000,000.
(c) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock,
Series B Preferred Stock, the Series C Cumulative Preferred Stock and/or the
Series D Cumulative Preferred Stock so as to affect adversely the Series A
Preferred Stock, Series B Preferred Stock, Series C Cumulative Preferred
Stock and/or the Series D Cumulative Preferred Stock, without the written
consent or affirmative vote of the holders of at least 50% of the then
outstanding aggregate number of shares of such adversely affected Preferred
Stock given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class. For this purpose, the authorization or
issuance of any series of Preferred Stock with preference or priority over,
or being on a parity with the Series A Preferred Stock, Series B Preferred
Stock, the Series C Cumulative Preferred Stock and/or the Series D Cumulative
Preferred Stock as to the voting rights or the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding
up of the Corporation shall be deemed so to affect adversely the Series A
Preferred Stock, Series B Preferred Stock, the Series C Cumulative Preferred
Stock and/or the Series D Cumulative Preferred Stock, as applicable.
6. OPTIONAL CONVERSION.
(a) Each share of Series A Preferred Stock, Series B Preferred
Stock, Series C Cumulative Preferred Stock and/or the Series D Cumulative
Preferred Stock may be converted at any time, at the option of the holder
thereof, in the manner hereinafter provided, into one fully paid and
nonassessable share of Common Stock, subject, in each case, to adjustments
described below; PROVIDED, HOWEVER that on any redemption of any Preferred
Stock or any liquidation of the Corporation, the right of conversion shall
terminate at the close of business on the full business day next preceding
the date fixed for such redemption or for the payment of any amounts
distributable on liquidation. (The number of shares of Common Stock into
which each share of Preferred Stock may be converted is herein called the
"Conversion Rate").
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(b) Whenever the Conversion Rate shall be adjusted as provided in
Section 7 hereof, the Corporation shall forthwith file at each office
designated for the conversion, a statement, signed by the Chairman of the
Board, the President, any Vice President or Treasurer of the Corporation,
showing in reasonable detail the facts requiring such adjustment and the
Conversion Rate that will be effective after such adjustment. The
Corporation shall also cause a notice setting forth any such adjustments to
be sent by mail, first class, postage prepaid, to each record holder of
Preferred Stock at his or its address appearing on the stock register.
(c) In order to exercise the conversion privilege, the holder of
any Preferred Stock to be converted shall surrender his or its certificate or
certificates therefor to the principal office of the transfer agent (or if
there is no transfer agent appointed at that time, then the Corporation at
its principal office), and shall give written notice to the Corporation at
such office that the holder elects to convert the Preferred Stock represented
by such certificates, or any number thereof. Such notice shall also state
the name or names (with address) in which the certificate or certificates for
shares of Common Stock issuable on such conversion shall be issued, subject
to any restrictions on transfer relating to shares of the Preferred Stock or
shares of Common Stock upon the conversion thereof. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly authorized in writing. The date of
receipt by the transfer agent (or by the Corporation if the Corporation
serves as its own transfer agent) of the certificates and notice shall be the
conversion date. As soon as practicable after receipt of such notice and
surrender of the certificate or certificates for Preferred Stock as
aforesaid, the Corporation shall cause to be issued and delivered at such
office to such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Common Stock issuable on such
conversion in accordance with the provisions hereof.
(d) The Corporation shall at all times when the Preferred Stock
shall be outstanding reserve and keep available out of its authorized but
unissued stock, for the purposes of effecting the conversion of the Preferred
Stock such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding
Preferred Stock.
(e) Upon any such conversion, no adjustment to the Conversion Rate
shall be made for declared and unpaid dividends on the Preferred Stock
surrendered for conversion, any accumulated and unpaid dividends on the
Series C Cumulative Preferred Stock and the Series D Cumulative Preferred
Stock, if not yet declared, or on the Common Stock delivered.
(f) All Preferred Stock which shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
all rights with respect to such shares, including the rights, if any, to
receive notices and to vote, shall forthwith cease and terminate except only
the right of the holder thereof to receive shares of Common Stock in exchange
therefor and payment of any declared and unpaid (and, with respect to the
Series C Cumulative Preferred Stock or the Series D Cumulative Preferred
Stock, any accumulated and
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unpaid, if not yet declared) dividends thereon. Any of the Preferred Stock so
converted shall be retired and canceled and shall not be reissued, and the
Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Series A Preferred Stock, Series B Preferred
Stock, Series C Cumulative Preferred Stock and the Series D Cumulative Preferred
Stock accordingly.
7. ANTI-DILUTION PROVISIONS. The Conversion Rate shall be subject to
adjustment as follows:
(a) In case the Corporation shall (i) pay a dividend in shares of
its capital stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares, or (iv) issue by reclassification of its shares of Common Stock any
shares of the Corporation, the Conversion Rate in effect immediately prior
thereto shall be adjusted so that the holder of any Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number
of shares of the Corporation which he or it would have owned or have been
entitled to receive after the happenings of any of the events described
above, had such Preferred Stock been converted immediately prior to the
happening of such event. An adjustment made pursuant to this Section 7(a)
shall become effective immediately after the record date in the case of a
dividend and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
(b) If any event occurs as to which, in the opinion of the Board
of Directors of the Corporation, the provisions of this Section 7 are not
strictly applicable or if strictly applicable would not protect the holders
of the Preferred Stock in accordance with the essential intent and principles
of such provisions, then the Board of Directors shall make an adjustment in
the application of such provisions, in accordance with such essential intent
and principles, so as to protect such rights as aforesaid.
8. CONVERSION.
(a) Each share of Series A Preferred Stock, Series B Preferred
Stock, Series C Cumulative Preferred Stock and Series D Cumulative Preferred
Stock shall automatically be converted into the corresponding number of
shares of Common Stock at the then effective Conversion Rate at any time upon
the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public generally at a price to the public which places upon the Corporation a
value (prior to the receipt of proceeds of such offering) of at least $40
million and in which the net proceeds to the Corporation are not less than
$10 million (herein referred to as a "Qualified Public Offering"). In
addition, each share of Series A Preferred Stock, Series B Preferred Stock,
Series C Cumulative Preferred Stock and Series D Cumulative Preferred Stock
shall automatically be converted into shares of Common Stock at the then
effective Conversion Rate for such shares upon the vote to so convert of the
holders of a least a majority of the shares of Series A Preferred Stock,
Series B Preferred Stock,
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Series C Cumulative Preferred Stock and Series D Cumulative Preferred Stock,
respectively, then outstanding.
(b) All holders of record of Preferred Stock will be given at
least 10 days' prior written notice of the date fixed and the place
designated for mandatory conversion of shares pursuant to this Section 8.
Such notice will be sent by mail, first class, postage prepaid, to each
record holder of Preferred Stock at such holder's address appearing on the
stock register. On or before the date fixed for conversion each holder of
Preferred Stock shall surrender his or its certificate or certificates for
all such shares to the Corporation at the place designated in such notice,
and shall thereafter receive certificates for the number of shares of Common
Stock to which such holder is entitled pursuant to this Section 8. On the
date fixed for conversion, all rights with respect to the Preferred Stock so
converted will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive
certificates for the number of shares of Common Stock into which such
Preferred Stock have been converted and payment of any declared and unpaid
(and, with respect to the Series C Cumulative Preferred Stock and the Series
D Cumulative Preferred Stock, any accumulated and unpaid, if not yet
declared) dividends thereon. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his attorneys duly
authorized in writing. All certificates evidencing Preferred Stock which are
required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the date such certificates are so required to be
surrendered, be deemed to have been retired and canceled and the Preferred
Stock represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender
such certificates on or prior to such date. As soon as practicable after the
date of such mandatory conversion and the surrender of the certificate or
certificates for the Preferred Stock as aforesaid, the Corporation shall
cause to be issued and delivered to such holder, or on his or its written
order, a certificate or certificates for the number of full shares of Common
Stock issuable on such conversion in accordance with the provisions hereof.
9. REDEMPTION.
(a) The Corporation shall redeem (to the extent that such
redemption shall not violate any applicable provision of the laws of the
State of Georgia) the Series A Preferred Stock at a price of $1.90 per share,
the Series B Preferred Stock at a price of $7.615 per share, the Series C
Cumulative Preferred Stock at a price of $11.48 per share and the Series D
Cumulative Preferred Stock at a price of $9.23 per share (subject to
adjustment in the event of any stock dividend, stock split, stock
distribution or combination with respect to such shares), PLUS an amount
equal to any dividends declared but unpaid thereon and PLUS with respect to
the Series C Cumulative Preferred Stock and the Series D Cumulative Preferred
Stock, any accumulated and unpaid dividends, if not yet declared (such amount
is hereinafter inferred to as the "Redemption Price"), on the 1st day of
January (the "Redemption Date") of each of the years 2000 through 2002
thirty-three and one-third percent (33 1/3%) of the Preferred Stock
outstanding on the first Redemption Date. In respect of each such
redemption, shares of Series A Preferred Stock, Series
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B Preferred Stock, Series C Cumulative Preferred Stock and Series D Cumulative
Preferred Stock shall be redeemed in proportion to the respective numbers of
shares of each such series outstanding on the first Redemption Date. If the
Corporation is unable at any Redemption Date to redeem any Preferred Stock then
to be redeemed because such redemption would violate the applicable laws of the
State of Georgia, then the Corporation shall redeem such Preferred Stock as soon
thereafter as redemption would not violate such laws.
(b) In the event of any redemption of only a part of the then
outstanding Preferred Stock, the Corporation shall effect such redemption pro
rata within each Series among the holders thereof (based on the number of
shares of Preferred Stock held on the date of notice of redemption).
(c) At least thirty (30) days prior to each Redemption Date,
written notice shall be mailed, postage prepaid, to each holder of record of
Preferred Stock to be redeemed at his or its address last shown on the
records of the Corporation, notifying such holder of the number of shares so
to be redeemed, specifying the Redemption Date and the date on which such
holder's conversion rights (pursuant to Section 6 hereof) as to such shares
terminate and calling upon such holder to surrender to the Corporation, in
the manner and at the place designated, his or its certificate or
certificates representing the shares to be redeemed (such notice is
hereinafter referred to as the "Redemption Notice"). On or prior to each
Redemption Date, each holder of Preferred Stock to be redeemed shall
surrender his or its certificate or certificates representing such shares to
the Corporation, in the manner and at the place designated in the Redemption
Notice, and thereupon the Redemption Price of such shares shall be payable to
the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
remaining shares. From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of Preferred Stock of the Corporation (except the right to receive
the Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed to
be outstanding for any purpose whatsoever.
(d) Except as provided in Section 9(a) above, the Corporation
shall have no right to redeem the Preferred Stock. Any Preferred Stock so
redeemed shall be permanently retired, shall no longer be deemed outstanding
and shall not under any circumstances be reissued, and the Corporation may
from time to time take such appropriate corporate action as may be necessary
to reduce the authorized Series A Preferred Stock, Series B Preferred Stock,
Series C Cumulative Preferred Stock and Series D Cumulative Preferred Stock
accordingly. Nothing herein contained shall prevent or restrict the purchase
by the Corporation, from time to time either at public or private sale, of
the whole or any part of the Series A Preferred Stock, Series B Preferred
Stock, Series C Cumulative Preferred Stock or Series D Cumulative Preferred
Stock subject to the provisions of applicable law.
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D. LIMITATION ON VOTING RIGHTS.
1. Notwithstanding anything in these Articles of Incorporation to the
contrary, if any person (a "Holder") owns, in the aggregate, directly and
indirectly, beneficially and of record, a number of shares of all classes of
stock of the Corporation that would otherwise entitle such Holder to cast a
number of votes in excess of the Maximum Number of Votes, then all shares
held by such Holder which represent a number of votes in excess of the
Maximum Number of Votes shall be deemed to be nonvoting shares, and such
nonvoting shares shall have no right to vote upon the election of Directors
or any other matter submitted to shareholder vote. This paragraph shall not
apply to any shares transferred by a Holder, to the extent such transfer
would not cause the transferee of such shares to become the owner, directly
or indirectly, beneficially or of record, of any shares representing a number
of votes in excess of the Maximum Number of Votes.
2. For purposes hereof, the term:
(a) "Maximum Number of Votes" shall be equal to the number of
votes represented by all outstanding shares of all classes of the
Corporation's capital stock that are not owned directly or indirectly,
beneficially or of record, by the Holder;
(b) "beneficial ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act
of 1934 (or any successor rule or statutory provision); provided, however,
that Rule 13d-3(d)(1) shall not apply; and
(c) "person" shall include any corporation, partnership, trust,
individual or other entity.
ARTICLE V
A. No director of the Corporation shall be liable to the Corporation or any
of its shareholders for monetary damages for any action taken, or failure to
take any action, as a director, provided that this provision does not
eliminate the liability of a director (i) for any appropriation, in violation
of the director's duties, of any business opportunity of the Corporation,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 14-2-832 of the
Business Corporation Code of Georgia or (iv) for any transaction from which
the director derived an improper personal benefit. For purposes of the prior
sentence, the term "damages" shall, to the extent permitted by law, include
without limitation, any judgment, fine, amount paid in settlement, penalty,
punitive damages, excise or other tax assessed with respect to an employee
benefit plan, or expense of any nature (including, without limitation,
counsel fees and disbursements).
B. Each person who serves as a director of the Corporation while this
Article V is in effect shall be deemed to be doing so in reliance on the
provisions of this Article V, and neither the
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amendment or repeal of this Article V, nor the adoption of any provision of
these Articles of Incorporation inconsistent with this Article V, shall apply to
or have any effect on the liability or alleged liability of any director of the
Corporation for, arising out of, based upon, or in connection with any acts or
omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision. The provisions of this Article V are
cumulative and shall be in addition to and independent of any and all other
limitations on or eliminations of the liabilities of directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, by-law, agreement, vote of
shareholders or disinterested directors, or otherwise. If the Business
Corporation Code of Georgia is hereafter amended to permit further elimination
or limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Business Corporation Code of Georgia as so amended. Any repeal
or modification of this Article V by the shareholders of the Corporation or
otherwise shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
C. For purposes of this Article V, all references to a director shall also
be deemed to refer to any person or persons, if any, who, pursuant to a
provision of these Articles of Incorporation, exercise or perform any of the
powers or duties otherwise conferred or imposed upon the board of directors
of the Corporation.
ARTICLE VI
These Amended and Restated Articles of Incorporation supersede and
replace in their entirety the Corporation's original Articles of
Incorporation, as heretofore amended and restated.
ARTICLE VII
These Amended and Restated Articles of Incorporation as hereinabove set
forth were duly adopted on ___________ __, 1997, by the shareholders of the
Corporation in accordance with the provisions of Sections 14-2-1003 and
14-2-1007 of the Georgia Business Corporation Code.
ARTICLE VIII
The address of the Corporation's registered office in the State of
Georgia is 600 Peachtree Street, N.E., Suite 5200, Atlanta, Georgia,
30308-2216, and the name of its registered agent at such address is Robert W.
Grout.
ARTICLE IX
The mailing address of the principal office of the Corporation is: 3301
Windy Ridge Parkway, Atlanta, Georgia, 30339.
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ARTICLE X
Preemptive rights are hereby denied. No holder of any shares of this
Corporation shall have the preemptive right to purchase, subscribe for, or
otherwise acquire any shares of stock of the Corporation of any class now or
hereafter authorized or any securities exchangeable for or convertible into
such shares, or any warrants or other instruments evidencing rights or
options to subscribe for purchase or otherwise acquire shares.
ARTICLE XI
The Corporation may, upon adoption of a resolution by its Board of
Directors, purchase its own shares to the extent of unreserved and
unrestricted capital surplus available therefor.
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IN WITNESS WHEREOF, TSW INTERNATIONAL, INC. has caused its duly
authorized corporate officer to execute these Amended and Restated Articles
of Incorporation under seal as of this _____ day of _____________ 1997.
TSW INTERNATIONAL, INC., a
Georgia corporation
By:____________________________
Title:_________________________
[CORPORATE SEAL]
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EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
TSW INTERNATIONAL, INC.
ARTICLE ONE
Offices
1.1 REGISTERED OFFICE AND AGENT. The Corporation shall maintain a
registered office and shall have a registered agent whose office is identical
with such registered office.
1.2 OTHER OFFICES. The Corporation may have offices at such place or
places, within or without the State of Georgia, as the Board of Directors may
from time to time appoint or the business of the Corporation may require or make
desirable.
ARTICLE TWO
Shareholders' Meetings
2.1 PLACE OF MEETINGS. Meetings of the shareholders may be held on the
call of the Board of Directors at any place within or without the State of
Georgia as set forth in the notice thereof or in the event of a meeting held
pursuant to wavier of notice, as may be set forth in the waiver, or if no place
is so specified, at the principal office of the Corporation.
2.2 ANNUAL MEETINGS. The annual meeting of shareholders shall be held on
such date within 120 days following the close of the Corporation's fiscal year
as shall be designated for the purpose of electing Directors and transacting any
and all business that may properly come before the meeting. At the annual
meeting of shareholders, the order of business shall be as determined by the
Chairman of the meeting.
2.3 SUBSTITUTE ANNUAL MEETING. In the event that such annual meeting is
not held on the day designated pursuant to Section 2.2, the Board of Directors
shall cause a meeting in lieu thereof to be held as soon as conveniently may be
thereafter, and any business transacted or elections held at such meeting shall
be as valid as if transacted or held at the annual meeting. Such subsequent
meeting shall be called in the same manner as provided for special shareholders'
meetings.
2.4 SPECIAL MEETINGS. Special meetings of the shareholders shall be held
at the principal office of the Corporation or at such other place as may be
designated in the notice of said meetings upon call of the Board of Directors or
of the Chairman of the Board of Directors or of the President, or of the
Secretary or at the request in writing of two or more directors or of
shareholders owning at least twenty-five percent (25%) of the issued and
outstanding capital stock of the Corporation entitled to vote thereat.
<PAGE>
2.5 NOTICE OF MEETINGS. Unless waived as contemplated in Section 5.2 or
by attendance at the meeting, either in person or by proxy, for any purpose
other than to state, at the beginning of the meeting, an objection or objections
to the transaction of business, a written or printed notice of each
shareholders' meeting stating the place, day and hour of the meeting shall be
delivered not less than ten (10) days nor more than sixty (60) days before the
date thereof except as may otherwise be required by law, either personally or by
mail, by or at the direction of the President or Secretary or other person
calling the meeting, to each shareholder of record entitled to vote at such
meeting. The Board of Directors may fix in advance a date, not exceeding seventy
(70) days preceding the date of any meeting of shareholders, as a record date
for the determination of the shareholders entitled to notice of and to vote at
any such meeting. In the case of an annual or substitute annual meeting, the
notice of the meeting need not state the purpose or purposes of the meeting
unless the purpose or purposes constitute a matter which the Georgia Business
Corporation Code (the "Code") requires to be stated in the notice of the
meeting. In the case of a special meeting, the notice of meeting shall state the
purpose or purposes for which the meeting is called. When a meeting is
adjourned to another time or place, unless after the adjournment the Board fixes
a new record date for the adjourned meeting as may be required pursuant to
Section 2.9 hereof, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken and if at the
adjourned meeting business which might have been transacted on the original date
of the meeting is transacted.
2.6 QUORUM FOR VOTING GROUPS. Unless otherwise provided by the Articles
of Incorporation, at all meetings of the shareholders, the presence, in person
or by proxy, of the holders of more than fifty percent (50%) of the shares
outstanding and entitled to vote as a separate voting group (within the meaning
of the Code Section 14-2-140) shall constitute a quorum. The shareholders at a
meeting at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, unless the meeting is adjourned under circumstances where a new
record date is or must be set pursuant to Section 2.9 hereof. A shareholder
who makes a special appearance for purposes of objecting to the lack of notice
or defective notice or objecting to holding the meeting or transacting business
at the meeting shall not be counted for purposes of determining a quorum. If a
quorum is not present to organize a meeting, the meeting may be adjourned
pursuant to Section 2.9 hereof.
2.7 VOTING OF SHARES. (a) Except as may otherwise be provided by the
Articles of Incorporation, each outstanding share having voting rights
shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders. Voting on all matters shall be by voice vote or
by show of hands unless any qualified voter, prior to the voting on any
matter, demands vote by ballot, in which case each ballot shall state the
name of the shareholder voting and the number of shares voted by him, and
if such ballot be cast by proxy, it shall also state the name of such
proxy. If a quorum is present, action on a matter (other than the election
of Directors) by a voting group is approved if the votes cast within the
group favoring the action, exceed the votes cast opposing the action unless
these Bylaws, the Articles of Incorporation or the Code requires a greater
number of affirmative votes.
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(b) If the Articles of Incorporation or the Code provides for voting
by a single voting group on a matter and a quorum is present with respect
to that voting group, action on that matter is taken when voted upon by
that voting group pursuant to Section 2.7(a) hereof. If the Articles of
Incorporation or the Code provides for voting by two (2) or more voting
groups on a matter and a quorum is present with respect to such voting
groups, action on that matter is taken only when voted upon by each of
those voting groups COUNTED SEPARATELY as provided in Section 2.7(a)
hereof. Action may be taken by one voting group on a matter even though
no action is taken by another voting group entitled to vote upon the
matter.
(c) Unless otherwise provided in the Articles of Incorporation,
Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
Shareholders do not have a right to cumulate their votes for Directors
unless the Articles of Incorporation so provide.
2.8 PROXIES. A shareholder entitled to vote pursuant to Section 2.7 may
vote in person or by proxy executed in writing by the shareholder or by his
attorney-in-fact. A proxy shall not be valid after eleven (11) months from the
date of its execution, unless a longer period is expressly stated therein. If
the validity of any proxy is questioned it must be submitted to the Secretary of
the shareholders' meeting for examination or to a proxy officer or committee
appointed by the person presiding at the meeting. The Secretary of the meeting
or, if appointed, the proxy officer or committee, shall determine the validity
or invalidity of any proxy submitted, and reference by the Secretary in the
minutes of the meeting to the regularity of a proxy shall be received as prima
facie evidence of the facts stated for the purpose of establishing the presence
of a quorum at such meeting and for all other purposes.
2.9 ADJOURNMENTS. Any meeting of the shareholders, whether or not a
quorum is present, may be adjourned by the holders of a majority of the voting
shares represented at the meeting to reconvene at a specific time and place. It
shall not be necessary to give any notice of the reconvened meeting or of the
business to be transacted, if the time and place of the reconvened meeting are
announced at the meeting which was adjourned except that if the meeting is
adjourned to a date more than 120 days after the date of the original meeting,
the Board of Directors must fix a new record date and provide notice of the
adjourned meeting to persons who are shareholders of the Corporation on the new
record date. At any such reconvened meeting at which a quorum is represented or
present, any business may be transacted which could have been transacted at the
meeting which was adjourned.
2.10 INSPECTORS OF ELECTION. One or more inspectors of election shall be
appointed by the Board of Directors before or at each meeting of the
shareholders of the Corporation at which an election of Directors shall take
place; if no such appointment shall have been made or if the inspectors
appointed by the Board of Directors shall refuse to act or fail to attend, then
the Secretary of the Corporation (or, if he not be present, the secretary of the
meeting) shall act as the inspector of election for the meeting. The inspectors
shall receive and take in charge all proxies and ballots and shall decide all
questions touching upon the acceptance and rejection of votes. In case of a tie
vote by the inspectors on any question, the presiding officer shall decide.
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2.11 ACTION OF SHAREHOLDERS WITHOUT A MEETING. Subject to such further
conditions as may be required by law, any action which may be taken at a meeting
of the shareholders may be taken without a meeting if a written approval and
consent, setting forth the action authorized, shall be signed by each of the
shareholders entitled to vote on the date on which the last such shareholder
signs such approval and consent and upon the filing of such approval and consent
with the officer of the Corporation having custody of its books and records.
Such approval and consent so filed shall have the same effect as a unanimous
vote of the shareholders at a special meeting called for the purpose of
considering the action authorized.
2.12 LIST OF SHAREHOLDERS. A complete list of the shareholders entitled to
vote at an ensuing meeting of shareholders arranged in alphabetical order with
the address of, and the number and class and series, if any, of voting shares
held by each shall be prepared by the Secretary, or other officer of the
Corporation having charge of the stock ledger, and shall be produced and kept
open at the time and place of the meeting and during the whole time of said
meeting shall be open to the examination of any shareholder. If the requirements
of this section have not been substantially complied with, the meeting shall, on
the reasonable demand of any shareholder in person or by proxy be adjourned
until the requirements are complied with. If no such demand is made, failure to
comply with the requirements of this section shall not affect the validity of
any action taken at such meeting.
2.13 NOTICE OF BUSINESS. No business may be transacted at an annual
meeting of shareholders, other than business that is either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors (or any duly authorized committee thereof), (b) otherwise
properly brought before the annual meeting by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (c) otherwise
properly brought before the annual meeting by any shareholder of the Corporation
(i) who is a shareholder of record on the date of the giving of the notice
provided for in this Section 2.13 and on the record date for the determination
of shareholders entitled to vote at such annual meeting and (ii) who complies
with the notice procedures set forth in this Section 2.13. The nomination by a
shareholder of any person for election as a Director, other than the persons
nominated by the Board of Directors or any duly authorized committee thereof,
shall be considered business other than business specified in clauses (a) and
(b) above and shall be permitted only upon compliance with the requirements of
this Section 2.13.
In addition to any other applicable requirements for business to be
properly brought before an annual meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of shareholders;
PROVIDED, HOWEVER, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the shareholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was
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mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must be set forth as to each matter such shareholder proposes to bring before
the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of such
shareholder, (iii) the class or series and number of shares of capital stock
of the Corporation which are owned beneficially or of record by such
shareholder, (iv) a description of all arrangements or understandings between
such shareholder and any other person or persons (including their names) in
connection with the proposal of such business by such shareholder and any
material interest of such shareholder in such business, (v) a representation
that such shareholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting, and (vi) in the case of
the nomination of a person as a Director, a brief description of the
background and credentials of such person including (A) the name, age,
business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares
of the Corporation which are beneficially owned by such person, and (D) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or as otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written consent
to being named in the proxy statement as a nominee and to serving as a
Director if elected).
No business shall be conducted at the annual meeting of shareholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 2.13, PROVIDED, HOWEVER, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 2.13 shall be deemed to preclude discussion by any
shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE THREE
The Board of Directors
3.1 GENERAL POWERS. The business and affairs of the Corporation shall be
managed by the Board of Directors. In addition to the powers and authority
expressly conferred upon it by these Bylaws, the Board of Directors may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law, by any legal agreement among shareholders, by the
Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.
3.2 NUMBER, ELECTION AND TERM OF OFFICE. Unless Georgia law permits a
lesser number, the number of Directors of the Corporation shall be not less than
three (3) nor more than twenty (20), the precise number to be fixed by
resolution of the Board of Directors from time to
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time. Except as may otherwise be provided in the Articles of Incorporation or
Section 3.4 hereof, the Directors shall be elected at each annual meeting as set
forth in Section 2.7(c) hereof. Each Director, except in case of death,
resignation, retirement, disqualification, or removal, shall serve until the
next succeeding annual meeting and until his successor shall have been elected
and qualified.
3.3 REMOVAL. Any Director may be removed from office with or without
cause by the affirmative vote of the holders of a majority of the shares
entitled to vote at an election of Directors. Removal action may be taken at
any shareholders' meeting with respect to which notice of such purpose has been
given, and a removed Director's successor may be elected at the same meeting to
serve the unexpired term.
3.4 VACANCIES. Except as may be otherwise provided by the Articles of
Incorporation, a vacancy occurring in the Board of Directors for any reason,
except by reason of removal of a Director, may be filled for the unexpired term,
and until the shareholders shall have elected a successor, by affirmative vote
of a majority of the Directors remaining in office though less than a quorum of
the Board of Directors.
3.5 COMPENSATION. Directors may receive such compensation for their
services as Directors as may from time to time be fixed by vote of the Board of
Directors or the shareholders. A Director may also serve the Corporation in a
capacity other than that of Director and receive compensation, as determined by
the Board of Directors, for services rendered in that other capacity.
3.6 EXECUTIVE AND OTHER COMMITTEES. Subject to the following terms and
conditions, the Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board, designate an executive committee and one or more
other standing or temporary committees, each consisting of two or more
Directors, each of which committees may act by a majority of its members. Such
executive committee shall have and may exercise all the powers of the Board of
Directors specified in these Bylaws and otherwise existing in the management of
the business and affairs of the Corporation when the Board is not meeting; and
each other committee shall have such powers of the Board and otherwise as are
provided in the resolution establishing such committee. Any vacancies in such
committee may be filled by the Board. The Chairman of the Board of Directors
shall be a member of the executive committee and shall act as Chairman thereof.
The executive committee and all other committees established by the Board shall
have no power (1) to amend the Articles of Incorporation or the Bylaws; (2) to
adopt a plan of merger or consolidation; (3) to sell, lease, exchange or
otherwise dispose of all or substantially all of the assets and property of the
Corporation; or (4) to voluntarily dissolve or revoke a voluntary dissolution of
the Corporation. Unless otherwise specifically permitted by the Board of
Directors, the rules promulgated by these Bylaws with respect to meetings of
Directors, notice, quorums, voting and other procedures at such meeting shall be
applicable to meetings of the executive and any other committee established by
the Board of Directors. Such committee shall keep a record of its proceedings
and shall report these proceedings to the Board of Directors at the meeting
thereof held next after they have been taken, and all such proceedings shall be
subject to revision or alteration by the Board of Directors, except to the
extent that action
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shall have been taken pursuant to or in reliance upon such proceedings prior to
any such revision or alteration.
ARTICLE FOUR
Meetings of the Board of Directors
4.1 ANNUAL MEETING. The first meeting of each newly elected Board of
Directors shall be held immediately following the annual meeting of
shareholders, and no notice of such meeting shall be necessary to the newly
elected Directors in order legally to constitute the meeting, provided a
majority of the Directors shall be present. They may meet at such place and
time as shall be fixed by the consent in writing of all of the Directors.
4.2 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held at the principal office of the Company or at such other place or places,
within or without the State of Georgia, as the Board of Directors may from time
to time designate.
4.3 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board or the President, or in
the latter's absence by the Secretary of the Corporation, or by one-third of the
Directors in office at that time.
4.4 PLACE OF MEETINGS. Directors may hold their meetings at any place
within or without the State of Georgia as the Board of Directors may from time
to time establish for regular meetings or as is set forth in the notice of
special meetings or, in the event of a meeting held pursuant to waiver of
notice, as may be set forth in the waiver.
4.5 NOTICE OF MEETINGS. No notice shall be required for any regularly
scheduled meeting of the Directors of the Corporation. Unless waived as
contemplated in Section 5.2, the President or Secretary of the Corporation or
any Director thereof shall send notice to each Director of each special meeting
stating the time and place of the meeting. Such notice shall be given by mailing
a notice of the meeting at least four (4) days before the date of the meeting,
or by telephone, telegram, cablegram or personal delivery at least twenty-four
(24) hours before the date of the meeting. Notice shall be deemed to have been
given by telegram or cablegram at the time notice is filed with the transmitting
agency. Attendance by a Director at a meeting shall constitute waiver of notice
of such meeting, except where the Director states, at the beginning of the
meeting, his objection or objections to the transaction of business at the
meeting. No notice of any meeting of the Board of Directors need state the
purposes thereof.
4.6 QUORUM. At meetings of the Board of Directors, the presence of a
majority of the Directors then in office shall be necessary to constitute a
quorum for the transaction of business.
4.7 VOTE REQUIRED FOR ACTION. Except as otherwise provided in this
section or by law, the act of a majority of the Directors present at a meeting
at which a quorum is present at the time shall be the act of the Board of
Directors. Adoption, amendment and repeal of a bylaw is provided for in Article
11 of these Bylaws. Vacancies in the Board of Directors may be filled as
provided in Section 3.4 of these Bylaws.
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4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent thereto shall be signed by all the
Directors and such written consent is filed with the minutes of the proceedings
of the Board. Such consent shall have the same force and effect as a unanimous
vote of the Board of Directors.
4.9 ADJOURNMENTS. A meeting of the Board of Directors, whether or not a
quorum is present, may be adjourned by a majority of the Directors present to
reconvene at a specific time and place. It shall not be necessary to give notice
of the reconvened meeting or of the business to be transacted, other than by
announcement at the meeting which was adjourned. At any such reconvened meeting
at which a quorum is present, any business may be transacted which could have
been transacted at the meeting which was adjourned.
4.10 TELEPHONE CONFERENCE CALLS. Unless otherwise prohibited by the
Articles of Incorporation, members of the Board of Directors, or any committee
designated by such Board, may participate in a meeting of such Board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 4.10 shall constitute
presence in person at such meeting.
ARTICLE FIVE
Notice and Waiver
5.1 PROCEDURE. Whenever these Bylaws require notice to be given to any
shareholder or Director, the notice shall be given as prescribed in Sections 2.5
or 4.5 for any shareholder or Director, respectively. Whenever notice is given
to a shareholder or Director by mail, the notice shall be sent first-class mail
by depositing the same in a post office or letter box in a postage prepaid
sealed envelope addressed to the shareholder or Director at his address as it
appears on the books of the Corporation, and such notice shall be deemed to have
been given at the time the same is deposited in the United States mail.
5.2 WAIVER. Notice of a meeting need not be given to any shareholder or
Director who signs a waiver of such notice, in person or by proxy, either before
or after the meeting. Unless otherwise required by law or by these Bylaws,
neither the business transacted nor the purpose of the meeting need be specified
in the waiver. Attendance of a shareholder or Director at a meeting shall
constitute a waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when such shareholder or
Director attends such meeting solely for the purpose of stating, at the
beginning of the meeting, any such objection or objections to the transaction of
business.
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ARTICLE SIX
Officers
6.1 NUMBER. The officers of the Corporation shall consist of a Chairman
of the Board, a President, one or more Vice Presidents as determined or
designated by the Board of Directors, a Secretary and a Treasurer. The Board of
Directors shall from time to time create and establish the duties of such other
officers and elect or provide for the appointment of such other officers or
assistant officers as it deems necessary for the efficient management of the
Corporation, but the Corporation shall not be required to have at any time any
officers other than a President, Secretary and Treasurer. In the event that no
Chairman of the Board is elected, the President shall perform all of the duties
and assume all of the responsibilities assigned to the office of Chairman of the
Board. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
6.2 ELECTION AND TERM. All officers shall be elected by the Board of
Directors and shall serve at the will of the Board of Directors and until their
successors have been elected and have qualified or until their earlier death,
resignation, removal, retirement or disqualification.
6.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors or executive committee, and the fact
that any officer is a Director shall not preclude him from receiving
compensation or from voting upon resolution providing the same.
6.4 REMOVAL. Any officer or agent elected by the Board of Directors may
be removed, with or without cause, by the Board of Director's at any meeting
with respect to which notice of such purpose has been given to the members
thereof upon the majority vote of the Board of Directors. Such removal without
cause shall be without prejudice to such person's contract rights, if any, but
the election or appointment of any person as an officer, agent or employee of
the Corporation shall not of itself create contract rights.
6.5 POWERS AND DUTIES. The officers of the Corporation shall each have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as from time to time may be conferred by the Board of
Directors. The Vice President or Vice Presidents, the Assistant Secretary or
Assistant Secretaries and the Assistant Treasurer or Assistant Treasurers shall,
in the order of their respective seniorities, in the absence or disability of
the President, Secretary or Treasurer, respectively, perform the duties of such
offices and shall generally assist the President, Secretary or Treasurer,
respectively.
Without limitation upon any of the foregoing:
(a) The Chairman of the Board shall preside at all meetings of the
shareholders and Board of Directors, and shall be charged with general
supervision of the management and policy of the Corporation, together with
such other duties as the Board of Directors prescribe from time to time.
The President shall have the powers and duties of the Chairman at all times
in the absence of such Chairman.
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(b) The President shall be the chief executive officer and shall have
general supervision of the affairs of the Corporation and have full control
of and responsibility for said affairs as the Board of Directors or
executive committee shall specify from time to time. The President shall
preside at the meetings of shareholders, unless the Chairman has been
appointed and is present. The President or a vice president, unless some
other person is thereunto specifically authorized by the Board of Directors
or executive committee, shall sign all bonds, debentures, promissory notes,
deeds and contracts of the Corporation.
(c) The Vice Presidents, in the order determined by the Board of
Directors from time to time, may assume and perform the duties of the
President in the absence or disability of the President or whenever the
office of President is vacant, except that if one or more executive vice
presidents has been elected or appointed. The Vice Presidents shall also
perform such other duties and have such other powers as the Board of
Directors or the Chairman shall designated from time to time.
(d) The Secretary shall issue notices for and keep minutes of all
corporate meetings and shall have charge of the corporate seal and of all
corporate books, stock books and other like records of the Corporation.
The Secretary shall also make such reports and perform such other duties as
are incident to his office, or are properly required by him by the Board of
Directors or President from time to time.
(e) The Treasurer shall have custody and control of all funds,
securities and of all financial records of the Corporation. He shall
disburse the funds of the Corporation in payment of the just debts of the
Corporation, or as may be ordered by the President or the Board of
Directors, taking proper voucher for such disbursements, and shall render
to the President and the Board of Directors from time to time as may be
required of him, an account of all his transactions as Treasurer and of the
financial condition of the Corporation. He shall perform all duties
incident to his office or which are properly required of him by the Board
of Directors or by the President.
(f) Except as is otherwise required by the Code Section 14-2-1201,
the Board of Directors by resolution may authorize any officer or officers
of the Corporation to negotiate and execute contracts to buy, sell, lease
or exchange any and all of the real or personal property of the
Corporation, and to negotiate and enter into loans to be secured by notes,
pledges, deeds to secure debt, mortgages and/or other instruments
encumbering the property of the Corporation.
6.6 ADDITIONAL POWERS AND DUTIES. In addition to the foregoing especially
enumerated powers and duties, the several officers of the Corporation shall have
such other powers and duties as are provided for them in these Bylaws or as may,
from time to time, be prescribed by the Board of Directors or the executive
committee or the Chairman of the Board.
6.7 DELEGATION. In the case of absence or inability to act of any officer
of the Corporation and of any person herein authorized to act in his place, the
Board of Directors may
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from time to time delegate the powers or duties of such officer to any other
officer, or any Director or other person whom it may select.
6.8 BONDS. The Board of Directors may by resolution require any or all of
the officers, agents or employees of the Corporation to give bonds to the
Corporation, with sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with such other conditions as may from time to time be required by the
Board of Directors.
6.9 REIMBURSEMENT OF OFFICERS. Any payments made to an officer of the
Corporation such as salary, commission, bonus, interest or rent, or
entertainment expense incurred by him, which shall be disallowed in whole or in
part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer to the Corporation to the full extent of such
disallowance. It shall be the duty of the Board of Directors to enforce payment
of each such amount disallowed. In lieu of payment by the officer, subject to
the determination of the Board of Directors, proportionate amounts may be
withheld from his future compensation payments until the amount owed to the
Corporation has been recovered.
ARTICLE SEVEN
Dividends
7.1 SHARE DIVIDENDS. Unless otherwise provided in the Articles of
Incorporation, shares may be issued as a share dividend pro rata and without
consideration to the shareholders or to the shareholders of one or more classes
or series. Shares of one class or series may not be issued as a share dividend
in respect of another class or series unless authorized by the Articles of
Incorporation or unless a majority of the votes entitled to be cast by the class
or series to be issued approve the issue or unless there are no issued and
outstanding shares of the class or series to be issued.
7.2 DISTRIBUTION TO SHAREHOLDERS. The Board of Directors shall not
authorize any payment of any dividend or any distribution to the shareholders of
the Corporation if such dividend or distribution would prevent the Corporation
from paying and discharging its debts as they become due in the usual course of
business or if the Corporation's total assets would be less than the sum of the
total liabilities plus the amount that would be needed should the Corporation be
dissolved at the time of the distribution to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights would be superior to
those shareholders receiving the distribution.
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ARTICLE EIGHT
Shares
8.1 AUTHORIZATION AND ISSUANCE OF SHARES. The par value and the maximum
number of shares of any class of the Corporation which may be issued and
outstanding shall be as set forth from time to time in the Articles of
Incorporation of the Corporation. The Board of Directors may increase or
decrease the number of issued and outstanding shares of the Corporation within
the maximum authorized by the Articles of Incorporation and the minimum
requirements of the Articles or Georgia law.
8.2 SHARE CERTIFICATES: FORM AND CONTENT OF CERTIFICATES. The interest of
each shareholder shall be evidenced by a certificate or certificates
representing shares of the Corporation which shall be in such form as the Board
of Directors may from time to time adopt in accordance with Georgia law. Share
certificates shall be consecutively numbered, shall be in registered form, and
shall indicate the date of issue and all such information shall be entered on
the Corporation's books. Each certificate shall be signed, either manually or
in facsimile, by the President or a Vice President and the Secretary or an
Assistant Secretary and shall be sealed with the seal of the Corporation or a
facsimile thereof; provided, however, that if a share certificate is signed in
facsimile, then it must be countersigned, either manually or in facsimile, by a
transfer agent or registered by a registrar other than the Corporation itself or
an employee of the Corporation. If the person who signed a share certificate,
either manually or in facsimile, no longer holds office when the certificate is
issued, then the certificate is nevertheless valid.
8.3 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to due
presentation for transfer of registration of its shares, the Corporation may
treat the registered owner of the shares as the person exclusively entitled to
vote such shares, to receive any dividend or other distribution with respect to
such shares, and for all other purposes; and the Corporation shall not be bound
to recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by law.
8.4 TRANSFERS OF SHARES. Transfers of shares shall only be made upon the
transfer books of the Corporation, kept at the office of the transfer agent
designated to transfer the shares, only upon proper assignment and endorsement
of the person named in the certificate, or by an attorney lawfully constituted
in writing; and before a new certificate is issued, the old certificate shall be
surrendered for cancellation or, in the case of a certificate alleged to have
been lost, stolen, or destroyed, in accordance with the provisions of Section
8.6 of these Bylaws. If the Corporation has a transfer agent or agents or
transfer clerk and registrar of transfers acting on its behalf, the signature of
any officer or representative thereof may be in facsimile.
8.5 TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint a
transfer agent or agents and a registrar for the stock of the Corporation, and
may require by resolution that all stock certificates must bear the signature of
such transfer agent or agents and registrar or registrars.
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8.6 LOST. STOLEN OR DESTROYED CERTIFICATES. Any person claiming a share
certificate to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board of Directors may require and
shall, if the Board of Directors so requires, give the Corporation a bond of
indemnity in form and amount, and with one or more sureties satisfactory to the
Board of Directors, as the Board of Directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
8.7 FIXING OF RECORD DATE. For the purpose of determining shareholders
entitled to notice or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date, such date to be not more
than 70 days (and, in the case of a shareholders' meeting, not less then 10
days) prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.
8.8 RECORD DATE IF NONE FIXED. If no record date is fixed, as provided in
Section 8.7 of these Bylaws, then the record date for any determination of
shareholders which may be proper or required by law, shall be the date on which
notice is mailed, in the case of a shareholders' meeting; the date on which the
Board of Directors approves a resolution declaring a dividend, in the case of a
payment of a dividend; and the date on which any other action, the consummation
of which requires a determination of shareholders, is to be taken.
ARTICLE NINE
Indemnification and Interested Parties
9.1 INDEMNIFICATION. Any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of the Corporation), by reason of the fact that he
or she is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Corporation against expenses (including reasonable attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding, in
each case to the maximum extent permitted by, and in the manner provided by, the
Code, if (a) he or she conducted himself or herself in good faith and (b) he or
she reasonably believed that (i) in the case of conduct in his or her official
capacity, that such conduct was in the best interests of the Corporation,
(ii) in all other cases, that such conduct was at least not opposed to the best
interests of the Corporation, and (iii) in the case of any criminal proceeding,
that the individual had no reasonable cause to believe such conduct was
unlawful.
9.2 ADVANCE FOR EXPENSES. The Corporation shall pay for or reimburse the
reasonable expenses incurred by a Director or officer of the Corporation, or a
person who was serving at the request of the Corporation as a Director or
officer of another corporation, partnership, joint venture, trust or other
enterprise (the "Indemnified Party"), who is a party to a proceeding if:
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(a) The Indemnified Party furnishes the Corporation a written
affirmation of his or her good faith belief that he or she has met the
standard of conduct set forth in Code Section 14-2-851 or that the
proceeding involves conduct for which liability has been eliminated under a
provision of the Articles of Incorporation of the Corporation as authorized
by paragraph (4) of subsection (b) of Code Section 14-2-202; and
(b) The Indemnified Party furnishes the Corporation a written
undertaking to repay any advance if it is ultimately determined that the
Indemnified Party is not entitled to indemnification under this Section 9.2.
The written undertaking required by paragraph (b) above must be an
unlimited general obligation of the Indemnified Party but need not be secured
and may be accepted without reference to financial ability of the Indemnified
Party to make repayment.
9.3 INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the Corporation and one or
more of its Directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one
or more of its Directors or officers are directors or officers or have a
financial interest, shall be enjoined, set aside or give rise to an award
of damages or other sanctions, in an action by a shareholder or by or in
the right of the Corporation, on the grounds of an interest in the
transaction of the Director or any person with whom or which he has a
personal, economic, or other association, if:
(i) such transaction is approved by the Directors pursuant to
Code Section 14-2-862; or
(ii) such transaction is approved by the shareholders pursuant to
Code Section 14-2-863; or
(iii) such transaction, judged in the circumstances at the
time of the commitment, is established to have been fair to the
Corporation.
(b) Except when the Board consists of less than three (3) Directors,
a majority (but not less than two) of all the "qualified directors" (as
such term is defined in Section 14-2-862 of the Code) on the Board, or on
the committee thereof, shall constitute a quorum for purposes of action
that complies with Section 9.3 (a) (i) of these Bylaws. Director's action
that otherwise complies with the Code and these Bylaws is not affected by
the presence or vote of a director who is not a "qualified director."
ARTICLE TEN
Miscellaneous
10.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall have
power to determine which accounts, books and records of the Corporation shall be
open to the inspection
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of shareholders, except such as may by law be specifically open to inspection,
and shall have power to fix reasonable rules and regulations not in conflict
with the applicable law for the inspection of accounts, books and records which
by law or by determination of the Board of Directors shall be open to
inspection.
10.2 FISCAL YEAR. The Board of Directors is authorized to fix the fiscal
year of the Corporation and to change the same from time to time as it deems
appropriate, but unless otherwise so determined shall begin on the first of
January in each year and shall end on the last day of December in the same year.
10.3 SEAL. The seal of the Corporation shall consist of an impression
bearing the name of the Corporation around the perimeter and the word "Seal" and
such other information, including the year of incorporation, in the center
thereof as is desired. In lieu thereof, the Corporation may use an impression
or writing bearing the words "CORPORATE SEAL" enclosed in parentheses or scroll,
which shall also be deemed the seal of the Corporation.
10.4 ANNUAL STATEMENTS. Not later than four months after the close of each
fiscal year, and in any case prior to the next annual meeting of shareholders,
the Corporation shall prepare (a) a balance sheet showing in reasonable detail
the financial condition of the Corporation as of the close of its fiscal year,
and (b) a profit and loss statement showing the results of its operations during
its fiscal year. Upon receipt of written request, the Corporation promptly
shall mail to any shareholder of record a copy of the most recent such balance
sheet and profit and loss statement.
10.5 EXECUTION OF DOCUMENTS. No attestation by the Secretary or an
assistant secretary shall be necessary to make any contract, conveyance or other
document valid and legally binding which has been executed by and on behalf of
the Corporation by an officer or officers thereunto duly authorized in the
manner provided for in these Bylaws.
ARTICLE ELEVEN
Amendments
11.1 POWER TO AMEND BYLAWS. The Board of Directors shall have power to
alter, amend or repeal these Bylaws or adopt new bylaws, but any bylaws adopted
by the Board of Directors may be altered, amended or repealed, and new bylaws
adopted, by the shareholders. The shareholders may prescribe that any bylaw or
bylaws adopted by them shall not be altered, amended or repealed by the Board of
Directors.
11.2 CONDITIONS. Action taken by the shareholders with respect to bylaws
shall be taken by an affirmative vote of a majority of all shares entitled to
elect Directors, and action by the Board of Directors with respect to bylaws
shall be taken by an affirmative vote of a majority of all Directors then
holding office.
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I hereby certify that the foregoing Bylaws were duly adopted by the
Board of Directors of the Corporation on April ___,1997.
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Secretary
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Greyrock EXHIBIT 10.1.1
Business
Credit LOAN AND SECURITY AGREEMENT
A NationsBank Company
BORROWER: TSW INTERNATIONAL, INC.
ADDRESS: 3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
DATE: NOVEMBER 17, 1995
This Loan and Security Agreement is entered into on the above date between
GREYROCK BUSINESS CREDIT, a Division of Greyrock Capital Group Inc. ("GBC"),
whose address is 300 North Continental Blvd., Suite 200, El Segundo, California
90245 and the borrower named above ("Borrower"), whose chief executive office
is located at the above address ("Borrower's Address"). The Schedule to this
Agreement (the "Schedule") being signed concurrently is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are set forth
in Section 8 below.)
1. LOANS.
1.1 LOANS. GBC will make loans to Borrower (the "Loans") up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or
Event of Default has occurred and is continuing. If at any time or for any
reason the total of all outstanding Loans and all other Obligations exceeds
the Credit Limit, Borrower shall immediately pay the amount of the excess to
GBC, without notice or demand.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement or in another written agreement signed by GBC and
Borrower. Interest shall be payable monthly, on the last day of the month.
Interest may, in GBC's discretion, be charged to Borrower's loan account, and
the same shall thereafter bear interest at the same rate as the other Loans.
1.3 FEES. Borrower shall pay GBC the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to GBC and are not
refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of
the Obligations when due, Borrower hereby grants to GBC a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, and General Intangibles, including, without limitation,
all of Borrower's Deposit Accounts, all money, all collateral in which GBC is
granted a security interest pursuant to any other present or future agreement,
all property now or at any time in the future in GBC's possession, and all
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties), all products of the foregoing, and all books and
records related to any of the foregoing.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GBC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GBC as follows, and Borrower covenants
that the following representations will continue to be true, (except as
expressly provided below for changes pursuant to written notice by Borrower
to GBC) and that Borrower will at all times comply with all of the following
covenants:
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3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a material adverse effect on Borrower.
The execution, delivery and performance by Borrower of this Agreement, and all
other documents contemplated hereby (i) have been duly and validly authorized,
(ii) are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), (iii) do not violate Borrower's articles or certificate of
incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give GBC 30 days' prior written notice before changing
its name or doing business under any other name. Borrower has complied, and
will in the future comply, with all laws relating to the conduct of business
under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule except for sale offices at which not
more than $50,000 of Collateral is located. Borrower will give GBC at least
30 days' prior written notice before opening any additional place of
business, changing its chief executive office, or moving any of the
Collateral to any new location not previously reported to GBC to a location
other than Borrower's Address or one of the locations set forth on the
Schedule except for sale offices at which not more than $50,000 of Collateral
is located.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GBC now has,
and will continue to have, a first-priority perfected and enforceable
security interest in all of the Collateral, subject only to the Permitted
Liens, and Borrower will at all times defend GBC and the Collateral against
all claims of others with respect to the Collateral (except for those holding
Permitted Liens). Borrower is not and will not become a lessee under any
real property lease with respect to its chief executive office pursuant to
which the lessor may obtain any rights in any of the Collateral (unless
Borrower provides GBC with a Landlord Waiver with respect thereto in form and
substance satisfactory to GBC or unless the same is a sales office at which
not more than $50,000 of Collateral is located) and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises (unless Borrower
provides GBC with a Landlord Waiver with respect thereto in form and
substance satisfactory to GBC or unless the same is a sales office at which
not more than $50,000 of Collateral is located). Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by GBC, use its reasonable best efforts to
cause such third party to execute and deliver to GBC, in form acceptable to
GBC, such waivers and subordinations as GBC shall specify, so as to ensure
that GBC's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the material terms of, any lease of real
property where any of the Collateral now or in the future may be located
except for leases of sales offices at which not more than $50,000 of
Collateral is located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
good working condition, ordinary wear and tear excepted, and Borrower will
not use the Collateral for any unlawful purpose. Borrower
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will immediately advise GBC in writing of any material loss or damage to the
Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address books and records which are complete and accurate in all
material respects and which comprise an accounting system in accordance with
generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to GBC have been, and will be,
prepared in conformity with generally accepted accounting principles and now
and in the future will fairly reflect the financial condition of Borrower,
at the times and for the periods therein stated. Between the last date
covered by any such statement provided to GBC and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent. As used herein,
"solvent" means, as to any Person at any time, that (A) the fair value of the
property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Reform Act of 1978 and, in the alternative, for
purposes of the applicable fraudulent transfer or conveyance statute in
effect in the State of Georgia; (B) the present fair saleable value of the
property of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become
absolute and matured; (C) such Person is able to realize upon its property
and pay its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of business;
(D) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (E) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by applicable
law, and Borrower has timely paid, and will timely pay, all applicable taxes,
assessments, deposits and contributions now or in the future owed by Borrower
(except where failure to do so would not have a material adverse effect on
Borrower and would not result in a lien on any of the Collateral, but only so
long as the Borrower maintains adequate reserves with respect to such
liabilities in accordance with generally accepted accounting principles
consistently applied). Borrower may, however, defer payment of any contested
taxes, provided that Borrower (i) in good faith contests Borrower's
obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (ii) notifies GBC in writing of the
commencement of, and any material development in, the proceedings, and (iii)
posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. Borrower is unaware of any
claims or adjustments proposed for any of Borrower's prior tax years which
could result in additional taxes becoming due and payable by Borrower.
Borrower has paid, and shall continue to pay all amounts necessary to fund
all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not
withdraw from participation in, permit partial or complete termination of, or
permit the occurrence of any other event with respect to, any such plan which
could result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll
service providing for the automatic deposit of all payroll taxes payable by
Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied and will comply, in all
material respects, with all provisions of all applicable laws and regulations,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which is
reasonably likely to result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower,
or in any material impairment in the ability of Borrower to carry on its
business in
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substantially the same manner as it is now being conducted. Borrower will
promptly inform GBC in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Borrower
involving any single claim of $50,000 or more, or involving $250,000 or more
in the aggregate. Any claim, proceeding, litigation or investigation which
actually results in a material adverse change in the business or condition of
Borrower, or in a material impairment in the ability of Borrower to carry on
its business in substantially the same manner as it is now being conducted,
shall be an Event of Default hereunder, but any claim, proceeding, litigation
or investigation pending or threatened by, against or affecting Borrower
arising after the date hereof will not otherwise result in a breach of the
notice provisions of this Section provided that the Borrower complies with
the notice provision in the preceding sentence with respect thereto.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes.
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to GBC as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
(i) represent an undisputed bona fide, existing, unconditional obligation of the
Account Debtor created by the sale, delivery and acceptance of goods, the
licensing of software, or the rendition of services, in the ordinary course
of Borrower's business, and (ii) meet the Minimum Eligibility Requirements
set forth in Section 8 below.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to GBC as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be, and all
signatories and endorsers have the capacity to contract. All sales and other
transactions underlying or giving rise to each Receivable shall comply with all
applicable laws and governmental rules and regulations. All signatures and
indorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall
deliver to GBC transaction reports and loan requests, schedules and assignments
of all Receivables, and schedules of collections, all on GBC's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit GBC's security interest and other rights in all of
Borrower's Receivables, nor shall GBC's failure to advance or lend against a
specific Receivable affect or limit GBC's security interest and other rights
therein. Together with each such schedule and assignment, or later if requested
by GBC, Borrower shall furnish GBC with copies (or, at GBC's request, originals)
of all contracts, orders, invoices, and other similar documents, and all
original shipping instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of which gave rise
to such Receivables, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to GBC an aged accounts receivable trial
balance in such form and at such intervals as GBC shall reasonably request,
provided that if no Event of Default exists, GBC may not request the
foregoing more than twice in one month. In addition, Borrower shall deliver
to GBC the originals of all instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any
Receivables, immediately upon receipt thereof and in the same form as
received, with all necessary indorsements.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect
all Receivables, unless and until a Default or an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
GBC, and Borrower shall deliver all such payments and proceeds to GBC, within
one business day after receipt of the same, in their original form, duly
endorsed, to be applied to the Obligations in such order as GBC shall determine.
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4.5 DISPUTES. Borrower shall notify GBC promptly of all disputes in
excess of $50,000 or claims relating to Receivables on the regular reports to
GBC. Borrower shall not forgive, or settle any Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower
may do so, provided that: (i) Borrower does so in good faith, in a
commercially reasonably manner, in the ordinary course of business, and in
arm's length transactions, which are reported to GBC on the regular reports
provided to GBC; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) taking into account all such settlements and
forgiveness, the total outstanding Loans and other Obligations will not
exceed the Credit Limit.
4.6 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the
reason for such return and promptly issue a credit memorandum to the Account
Debtor in the appropriate amount (sending a copy to GBC). In the event any
attempted return occurs after the occurrence of any Event of Default,
Borrower shall (i) not accept any return without GBC's prior written consent,
(ii) hold the returned Inventory in trust for GBC, (iii) segregate all
returned Inventory from all of Borrower's other property, (iv) conspicuously
label the returned Inventory as GBC's property, and (v) immediately notify
GBC of the return of any Inventory, specifying the reason for such return,
the location and condition of the returned Inventory, and on GBC's request
deliver such returned Inventory to GBC.
4.7 VERIFICATION. GBC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower or GBC or such other name as GBC may choose, and GBC or its
designee may, at any time, notify Account Debtors that it has a security
interest in the Receivables. If no Event of Default exists, GBC will provide
Borrower with one week's prior written notice of any such verification.
4.8 NO LIABILITY. GBC shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable good faith for less than the full amount thereof, nor
shall GBC be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve GBC from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to GBC, in such form and amounts as GBC may
reasonably require, and Borrower shall provide evidence of such insurance to
GBC, so that GBC is satisfied that such insurance is, at all times, in full
force and effect. All such insurance policies shall name GBC as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to GBC. Upon receipt of the proceeds of any such
insurance, GBC shall apply such proceeds in reduction of the Obligations as
GBC shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, GBC shall release to
Borrower (i) insurance proceeds with respect to Equipment totaling less than
$500,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid and (ii)
insurance proceeds with respect to Inventory totaling less than $500,000,
which shall be utilized by Borrower for the replacement of the Inventory with
respect to which the insurance proceeds were paid. GBC may require
reasonable assurance that the insurance proceeds so released will be so used.
If Borrower fails to provide or pay for any insurance, GBC may, but is not
obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to GBC copies of all material reports made to insurance companies.
5.2 REPORTS. Borrower, at its expense, shall provide GBC with the
written reports set forth in the Schedule, and such other written reports
with respect to
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Borrower (including budgets, sales projections, operating plans and other
financial documentation), as GBC shall from time to time reasonably specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and
on one business day's notice, GBC, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Any such inspection shall be conducted by GBC, or its agents,
without material hindrance or interruption of Borrower's business. GBC shall
take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but GBC shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant
to any subpoena or other legal process. The foregoing inspections and audits
shall be at Borrower's expense and the charge therefor shall be $600 per
person per day (or such higher amount as shall represent GBC's then current
standard charge for the same), plus reasonable out-of-pockets expenses.
Borrower shall not be charged more than $3,000 per audit (plus reasonable
out-of-pockets expenses), nor shall audits be done more frequently than four
times per calendar year or more than once during any two month period in any
calendar year, provided that the foregoing limits shall not apply after the
occurrence of a Default or Event of Default, nor shall they restrict GBC's
right to conduct audits at its own expense (whether or not a Default or Event
of Default has occurred). Borrower will not enter into any agreement with
any accounting firm, service bureau or third party to store Borrowers books
or records at any location other than Borrower's Address, without first
obtaining GBC's written consent, which may be conditioned upon such
accounting firm, service bureau or other third party agreeing to give GBC the
same rights with respect to access to books and records and related rights as
GBC has under this Agreement.
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to GBC
(or, at GBC's request, into a lockbox account, or other blocked account,
established pursuant to an agreement acceptable to GBC, and with a bank
selected by Borrower which is acceptable to GBC) in the original form in
which received by Borrower not later than the following business day after
receipt by Borrower (except wire transfer remittances received by Borrower
shall be transmitted to GBC in total the day following posting to Borrower's
bank account), to be applied to the Obligations in such order as GBC shall
determine; provided that, if no Default or Event of Default has occurred and
is continuing, and if no term loan is outstanding hereunder, then Borrower
shall not be obligated to remit to GBC the proceeds of the sale of Equipment
which is sold in the ordinary course of business, in a good-faith arm's
length transaction nor shall Borrower be obligated to remit to GBC any such
proceeds unless the aggregate amount thereof received and held by the
Borrower equals or exceeds $20,000. Except for the proceeds of the sale of
Equipment as set forth above, Borrower shall not commingle proceeds of
Collateral with any of Borrower's other funds or property, and shall hold
such proceeds separate and apart from such other funds and property and in an
express trust for GBC. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without GBC's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity
(except in a transaction in which (A) the current majority shareholders of
the Borrower hold at least 51% of the common stock and all other capital
stock of the surviving corporation immediately after such merger or
consolidation, (B) the Borrower is the surviving corporation and (C) no
Default or Event of Default shall exist either immediately prior to or after
giving effect to the transaction); (ii) acquire any assets, except in the
ordinary course of business (except in a transaction or a series of
transactions not involving the payment of an aggregate amount in excess of
$250,000 provided that no Default or Event of Default shall exist either
immediately prior to or after giving effect to the transaction); (iii) enter
into any business substantially different from that presently engaged in;
(iv) sell or transfer any Collateral, except that, provided no Default or
Event of Default has occurred and is continuing, Borrower may (a) sell
finished Inventory in the ordinary course of Borrower's business, (b) sell
Equipment in the ordinary course of business, in good-faith arm's length
transactions and (c) license or sublicense intellectual property in the
ordinary course of Borrower's business; (v) store any Inventory or other
Collateral with any warehouseman or other third party, unless such
warehouseman or other third party enters into a Bailee Agreement with GBC on
terms satisfactory to GBC in its sole discretion; (vi) sell any Inventory on
a sale-or-return, guaranteed sale, consignment, or other contingent basis;
(vii) make any loans of any money or other assets, except (A) advances to
subsidiaries of the Company and customers or suppliers, in each case, if
created, acquired or made in the ordinary course of business, (B) travel
advances in the ordinary course of business, (C) employee relocation loans in
the ordinary course of business, (D) other employee loans and advances in the
ordinary course of business, (E) loans to employees, officers and directors
for the purpose of purchasing equity securities of the Borrower, (F) other
loans to officers and employees approved by the Board of Directors of the
Borrower and (G) other loans or extensions of credit not otherwise permitted
hereunder, PROVIDED that the aggregate amount of all of the foregoing items
set forth in (A), (B), (D), (E), (F) and (G) shall not exceed $500,000 at any
one time outstanding and incurred after the date hereof, except that any
loans made prior to the date hereof or agreements to make loans entered into
prior to the date hereof (whether or not such loans are made after the date
hereof) pursuant to items (E) and (F) shall not be included in said $500,000
limit, and PROVIDED, FURTHER, that no Default or Event of Default shall exist
either immediately prior to or after giving effect to the making of any of
the foregoing advances, loans or other extensions of credit in clauses (A)
through (G); (viii) incur any debts, outside the ordinary course of
business, which would have a material, adverse effect on Borrower or on the
prospect of repayment of the Obligations; provided that Borrower may in any
case incur debt in the form of equipment leases in an amount not to exceed
$700,000 in any fiscal year; (ix) guarantee or otherwise become liable with
respect to the obligations of another party or entity except that Borrower
may issue guarantees in the ordinary course of its business in an aggregate
amount at any one time outstanding not to exceed $500,000; (x) pay or declare
any dividends on Borrower's stock (except for dividends payable solely in
stock of Borrower) and except that Borrower may pay and declare dividends
upon the Borrower's preferred stock in accordance with the provisions of said
preferred stock; (xi) redeem, retire, purchase or otherwise acquire, directly
or indirectly, any of Borrower's stock (except that Borrower may repurchase
or redeem shares of its capital stock pursuant to employee option plans for
an aggregate purchase price not to exceed $500,000 per fiscal year, on a
non-cumulative basis); (xii) make any change in Borrower's capital structure
which would have a material adverse effect on Borrower or on the prospect of
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repayment of the Obligations; or (xiii) dissolve or elect to dissolve; or
(xiv) agree to do any of the foregoing.
5.6 LITIGATION CORPORATION. Should any third-party suit or proceeding be
instituted by or against GBC with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to GBC, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the extent that GBC may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.7 NOTIFICATION OF CHANGES. Borrower will promptly notify GBC in
writing of any change in its executive officers (including, without
limitation, its president, secretary and chief financial officer), or
directors, the opening of any new bank account or other deposit account, and
any material adverse change in the business or financial affairs of Borrower.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
GBC, to execute all documents and take all actions, as GBC may deem reasonably
necessary or useful in order to perfect and maintain GBC's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
5.9 INDEMNITY. Borrower hereby agrees to indemnify GBC and hold GBC
harmless from and against any and all claims, debts, liabilities, demands,
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obligations, actions, causes of action, penalties, costs and expenses (including
attorneys' fees), of every nature, character and description, which GBC may
sustain or incur based upon or arising out of any of the Obligations, any actual
or alleged failure to collect and pay over any withholding or other tax relating
to Borrower or its employees, any relationship or agreement between GBC and
Borrower, any actual or alleged failure of GBC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GBC relating to Borrower or the Obligations (except any
such amounts sustained or incurred as the result of the gross negligence or
willful misconduct of GBC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or representing GBC).
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided, that
the Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to GBC; or (ii) by GBC at any time after
the occurrence of an Event of Default, without notice, effective immediately.
If this Agreement is terminated by Borrower or by GBC under this Section 6.2,
Borrower shall pay to GBC a termination fee (the "Termination Fee") in the
amount shown on the Schedule. The termination fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or
on any earlier effective date of termination, there are any outstanding letters
of credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of GBC, then on such date Borrower shall provide to GBC
cash collateral in an amount equal to 110% of the face amount of all such
letters of credit plus all interest, fees and costs due or (in GBC's estimation)
likely to become due in connection therewith, to secure all of the Obligations
relating to said letters of credit, pursuant to GBC's then standard form cash
pledge agreement. Notwithstanding any termination of this Agreement, all of
GBC's security interests in all of the Collateral and all of the terms and
provisions of this Agreement shall continue in full force and effect until all
Obligations have been paid and performed in full; provided that, without
limiting the fact that Loans are subject to the discretion of GBC, GBC may in
its sole discretion, refuse to make any further Loans after termination. No
termination shall in any way affect or impair any right or remedy of GBC, nor
shall any such termination relieve Borrower of any Obligation to GBC, until all
of the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations and termination of this Agreement,
GBC shall promptly deliver to Borrower termination statements, requests for
re-conveyances and such other documents as may be reasonably required to
terminate GBC's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give GBC immediate written notice thereof; (a) Any warranty, representation,
statement, report or certificate made or delivered to GBC by Borrower or any of
Borrower's officers, employees or agents, now or in the future, shall be untrue
or misleading in a material respect; or (b) Borrower shall fail to pay when due
any Loan or any interest thereon or any other monetary Obligation; or (c) the
total Loans and other Obligations outstanding at any time shall exceed the
Credit Limit; or (d) Borrower shall fail to perform any non-monetary Obligation
which by its nature cannot be cured; or (e) Borrower shall fail to perform any
other non-monetary Obligation, which failure is not cured within 10 business
days after the date performance is due; or (f) Any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any
part of the Collateral which is not cured within 10 days after the
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occurrence of the same; or (g) any default or event of default occurs under
any obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted
Lien; or (h) Borrower breaches any material contract or obligation, which has
or may reasonably be expected to have a material adverse effect on Borrower's
business or financial condition; or (i) Dissolution, termination of
existence, insolvency or business failure of Borrower or any Guarantor, or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement
of any proceeding by Borrower or any Guarantor under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in
effect; or (j) the commencement of any proceeding against Borrower or any
Guarantor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 45 days after the date commenced; or (k) revocation
or termination of, or limitation or denial of liability upon, any guaranty of
the Obligations or any attempt to do any of the foregoing; or (l) revocation
or termination of, or limitation or denial of liability upon, any pledge of
any certificate of deposit, securities or other property or asset pledged by
any third party to secure any or all of the Obligations, or any attempt to do
any of the foregoing, or commencement of proceedings by or against any such
third party under any bankruptcy or insolvency law; or (m) Borrower makes any
payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits or terminates its
subordination agreement; or (n) there shall be a change in the record or
beneficial ownership (within the meaning of Rule 13d-3 under the Securities
and Exchange Act of 1934) of securities of the Borrower representing
effective control over the election of a majority of the board of directors
of the Borrower; or (o) Borrower shall generally not pay its debts as they
become due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a
material adverse change in Borrower's business or financial condition. GBC
may cease making any Loans hereunder during any of the above cure periods,
and thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence of any Event of Default, and at any
time thereafter while such Event of Default is continuing, GBC, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following
(except that, prior to or concurrently with the taking of the first of any of
the following actions, GBC shall give Borrower one general written notice
stating that GBC is "proceeding to exercise its rights and remedies" or words
to that effect); (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation;
(c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes GBC without judicial process
to enter onto any of Borrower's premises without interference to search for,
take possession of, keep, store, or remove any of the Collateral, and remain
on the premises or cause a custodian to remain on the premises in exclusive
control thereof, without charge for so long as GBC deems it reasonably
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; provided, however, that should GBC seek to
take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any
suit or action to recover possession thereof; and (iii) any requirement that
GBC retain possession of, and not dispose of, any such Collateral until after
trial or final judgment; (d) Require Borrower to assemble any or all of the
Collateral and make it available to GBC at places designated by GBC which are
reasonably convenient to GBC and Borrower, and to remove the Collateral to
such locations as GBC may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, GBC shall have the right to
use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge; (f) Sell, lease or otherwise dispose of any of
the Collateral, in its
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condition at the time GBC obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. GBC shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as GBC deems reasonable, or on GBC's premises, or elsewhere and the
Collateral need not be located at the place of disposition. GBC may directly or
through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes GBC to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in GBC's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables, General Intangibles and the like for
less than face value; and (h) Demand and receive possession of any of Borrower's
federal and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by GBC with respect to the
foregoing shall be added to and become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and GBC
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
ten days prior to the sale, and in the case of a public sale, notice of the
sale is published at least ten days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of
the sale describes the collateral in general, non-specific terms; (iii) The
sale is conducted at a place designated by GBC, with or without the
Collateral being present; (iv) The sale commences at any time between 8:00
a.m. and 6:00 p.m.; (v) Payment of the purchase price in cash or by cashier's
check or wire transfer is required; (vi) With respect to any sale of any of
the Collateral, GBC may (but is not obligated to) direct any prospective
purchaser to ascertain directly from Borrower any and all information
concerning the same. GBC shall be free to employ other methods of noticing
and selling the Collateral, in its discretion, if they are commercially
reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default,
without limiting GBC's other rights and remedies, Borrower grants to GBC an
irrevocable power of attorney coupled with an interest, authorizing and
permitting GBC (acting through any of its employees, attorneys or agents) at any
time during the continuance of such Event of Default, at its option, but
without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise,
but GBC agrees to exercise the following powers in a commercially reasonable
manner: (a) Execute on behalf of Borrower any documents that GBC may, in its
sole discretion, deem advisable in order to perfect and maintain GBC's
security interest in the Collateral, or in order to exercise a right of
Borrower or GBC, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future
agreements; (b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose
of or to lease (as lessor or lessee) any real or personal property which is
part of GBC's Collateral or in which GBC has an interest; (c) Execute on
behalf of Borrower, any invoices relating to any Receivable, any draft against
any Account Debtor and any notice to any Account Debtor, any proof of claim
in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other
lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment
or proceeds of Collateral; endorse the name of Borrower upon any instruments,
or documents, evidence of payment or Collateral that may come into GBC's
possession; (e) Endorse all checks and other forms of remittances received by
GBC; (f) Pay, contest or settle
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any lien, charge, encumbrance, security interest and adverse claim in or to any
of the Collateral, or any judgment based thereon, or otherwise take any action
to terminate or discharge the same; (g) Grant extensions of time to pay,
compromise claims and settle Receivables and General Intangibles for less than
face value and execute all releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to secure the
release of any liens therefor, or both; (i) Settle and adjust, and give releases
of, any insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give GBC the same rights of
access and other rights with respect thereto as GBC has under this Agreement;
and (k) Take any action or pay any sum required of Borrower pursuant to this
Agreement and any other present or future agreements. Any and all reasonable
sums paid and any and all reasonable costs, expenses, liabilities, obligations
and reasonable attorneys' fees incurred by GBC with respect to the foregoing
shall be added to and become part of the Obligations, shall be payable on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall GBC's rights under the
foregoing power of attorney or any of GBC's other rights under this Agreement be
deemed to indicate that GBC is in control of the business, management or
properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by GBC first to
the reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of
the Obligations, in such order as GBC shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled
thereto; Borrower shall remain liable to GBC for any deficiency. If, GBC, in
its sole discretion, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, GBC
shall have the option, exercisable at any time, in its sole discretion, of
either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by GBC of
the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth
in this Agreement, GBC shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between GBC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GBC of one or more of its rights or remedies shall not be deemed an election,
nor bar GBC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GBC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable.
"AFFILIATE" means, with respect to any Person, a relative, partner, five
percent shareholder, director, or officer of such person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"BUSINESS DAY" means a day on which GBC is open for business.
"CODE" means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.
"COLLATERAL" has the meaning set forth in Section 2.1 above.
"DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.
"ELIGIBLE INVENTORY" means Inventory which GBC, in its sole judgment, deems
eligible for borrowing, based on such considerations as GBC may from time to
time deem appropriate. Without limiting the fact that the
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determination of which Inventory is eligible for borrowing is a matter of GBC's
discretion, Inventory which does not meet the following requirements will not be
deemed to be Eligible Inventory: Inventory which (i) consists of finished
goods, in good, new and salable condition which is not perishable, not obsolete
or unmerchantable, and is not comprised of raw materials, work in process,
packaging materials or supplies; (iii) meets all applicable governmental
standards; (iv) has been manufactured in compliance with the Fair Labor
Standards Act; (v) conforms in all respects to the warranties and
representations set forth in this Agreement; (vi) is at all times subject to
GBC's duly perfected, first priority security interest; and (vii) is situated at
a one of the locations set forth on the Schedule.
"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary course
of Borrower's business from the sale of goods or rendition of services or the
licensing of software, which GBC, in its sole judgment, shall deem eligible
for borrowing, based on such considerations as GBC may from time to time deem
appropriate. Without limiting the fact that the determination of which
Receivables are eligible for borrowing is a matter of GBC's discretion, the
following (the "MINIMUM ELIGIBILITY REQUIREMENTS") are the minimum
requirements for a Receivable to be an Eligible Receivable: (i) the
Receivable must not be outstanding for more than 90 days from its invoice
date, (ii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be
conditional), (iii) the Receivable must not be owing from an Account Debtor
with whom the Borrower has any dispute (whether or not relating to the
particular Receivable), (iv) the Receivable must not be owing from an
Affiliate of Borrower, (v) the Receivable must not be owing from an Account
Debtor which is subject to any insolvency or bankruptcy proceeding, or whose
financial condition is not acceptable to GBC, or which, fails or goes out of
a material portion of its business, (vi) the Receivable must not be owing
from the United States or any department, agency or instrumentality thereof
(unless there has been compliance, to GBC's satisfaction, with the United
States Assignment of Claims Act), (vii) the Receivable must not be owing
from an Account Debtor located outside the United States or Canada (unless
pre-approved by GBC in its discretion in writing, or backed by a letter of
credit satisfactory to GBC, or FCIA insured satisfactory to GBC), (viii) the
Receivable must not be owing from an Account Debtor to whom Borrower is or
may be liable for goods purchased from such Account Debtor or otherwise, (ix)
the Receivable must not violate any representation or warranty set forth in
this Agreement, (x) the Receivable must not be one in which GBC does not
have a first-priority, valid, perfected security interest, and (xi) the
Receivable must not be one which GBC, in its sole judgment exercised in good
faith discretion, believes the collection of which is insecure or may not be
paid by reason of the Account Debtor's financial inability to pay, or deems
ineligible on such other credit and/or collateral considerations as GBC in
its good faith discretion deems appropriate. If more than 50% of the
Receivables owing from an Account Debtor are outstanding more than 90 days
from their invoice date (without regard to unapplied credits) or are otherwise
not Eligible Receivables, then all Receivables owing from that Account Debtor
will be deemed ineligible for borrowing. GBC may, from time to time, in its
discretion, revise the Minimum Eligibility Requirements, upon written notice
to the Borrower.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any interest
in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"EVENT OF DEFAULT" means any of the events set forth in Section 7.1 of this
Agreement.
"GENERAL INTANGIBLES" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all chooses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against GBC, rights to purchase or sell real
or personal property, rights as a Licensor or licensee of
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any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including life insurance, key man
insurance, credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"GUARANTOR" means any Person who has guaranteed any of the Obligations.
"INVENTORY" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including all raw materials,
work in process, finished goods and goods in transit), and all materials and
supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"LIBOR RATE" means (i) the one-month London Interbank Offered Rate for
deposits in U.S. dollars, as shown each day in The Wall Street Journal (Eastern
Edition) under the caption "Money Rates - London Interbank Offered Rates
(LIBOR)"; or (ii) if the Wall Street Journal does not publish such rate, the
offered one-month rate for deposits in U.S. dollars which appears on the Reuters
Screen LIBO Page as of 10:00 a.m., New York time, each day, PROVIDED that if at
least two rates appear on the Reuters Screen LIBO Page on any day, the "LIBOR
Rate" for such day shall be the arithmetic mean of such rates; or (iii) if the
Wall Street Journal does not publish such rate on a particular day and no such
rate appears on the Reuters Screen LIBO Page on such day, the rate per annum at
which deposits in U.S. dollars are offered to the principal London office of The
Chase Manhattan Bank, N.A. in the London Interbank market at approximately 11:00
A.M., London time, on such day in an amount approximately equal to the
outstanding principal amount of the Loan, for a period of one month, in each of
the foregoing cases as determined in good faith by GBC, which determination
shall be conclusive absent manifest error.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GBC, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by GBC in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, loan fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and GBC.
"PERMITTED LIENS" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes, or governmental fees, assessments or other
governmental charges or levies, either not delinquent or being contested in
good faith by appropriate proceedings, provided the same have no priority
over any of GBC's security interests and the Borrower maintains adequate
reserves therefor in accordance with generally accepted accounting
principles, consistently applied.; (iv) additional security interests and
liens which are subordinate to the security interest in favor of GBC and are
consented to in writing by GBC (which consent shall not be unreasonably
withheld); (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business
and securing obligations which are not delinquent more than 30 days, or are
being contested in good faith (provided such lien is not foreclosed); (vii)
liens incurred in connection with the extension, renewal or refinancing of
the indebtedness secured by liens of the type described above in clauses (i)
or (ii) above, provided that any extension, renewal or replacement lien is
limited to the property encumbered by the existing lien and the principal
amount of the indebtedness being extended, renewed or refinanced does not
increase; (viii) Liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of
goods; (ix) any judgment, attachment or similar lien, unless the judgment it
secures is not fully covered by insurance and has not been discharged or
execution thereof effectively stayed and bonded against pending appeal within
30 days of the entry thereof provided that, if the judgment is not fully
covered by insurance or execution thereof has not been so stayed and bonded,
GBC shall not be required to make any loans or otherwise extend credit to or
for the benefit of Borrower; (x) licenses or sublicenses granted to others
not interfering in any material respect with the business of Borrower; (xi)
Liens which constitute rights of set-off of a customary nature or banker's
liens on amounts on deposit, whether arising by contract or by operation of
law, in connection with arrangements entered into with depository
institutions in the ordinary course of business; and (xii) Liens noted on
Appendix 1 hereto. GBC will have the right to require, as a condition to its
consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on GBC's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of GBC, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any
obligation secured by the subordinate security interest shall also constitute
an Event of Default under this Agreement.
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<PAGE>
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
OTHER TERMS. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by GBC (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by GBC on account of the Obligations three Business Days after receipt
by GBC of immediately available funds. GBC shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to GBC in its discretion, and GBC may charge Borrower's Loan
account for the amount of any item of payment which is returned to GBC unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations
may be applied, and in GBC's sole discretion reversed and reapplied, to the
Obligations, in such order and manner as GBC shall determine in its sole
discretion.
9.3 CHARGES TO ACCOUNT. GBC may, in its discretion, require that borrower
pay monetary Obligations in cash to GBC, or charge them to Borrower's Loan
account, in which event they will bear interest at the same rate applicable to
the Loans.
9.4 MONTHLY ACCOUNTINGS. GBC shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by GBC), unless Borrower
notifies GBC in writing to the contrary within sixty days after each account is
rendered, describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to GBC or Borrower at the addresses shown in the heading to
this Agreement, or at any other address designated in writing by one party to
the other party. All notices shall be deemed to have been given upon delivery
in the case of notices personally delivered, or at the expiration of one
business day following delivery to the private delivery service, or upon
delivery in the case of notices sent by mail.
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<PAGE>
9.6 SEVERABILITY. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GBC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. THERE ARE NO ORAL
UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS SIGNED BY THE PARTIES
IN CONNECTION HEREWITH.
9.8 WAIVERS. The failure of GBC at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and GBC shall not waive or diminish
any right of GBC later to demand and receive strict compliance therewith. Any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent, and whether or not similar. None of the provisions of this
Agreement or any other agreement now or in the future executed by Borrower and
delivered to GBC shall be deemed to have been waived by any act or knowledge of
GBC or its agents or employees, but only by a specific written waiver signed by
an authorized officer of GBC and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or guaranty
at any time held by GBC on which Borrower is or may in any way be liable, and
notice of any action taken by GBC, unless expressly required by this Agreement.
9.9 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GBC.
9.10 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.11 ATTORNEYS' FEES AND COSTS. Borrower shall reimburse GBC for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by GBC, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
GBC incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce GBC's
security interest in, the Collateral; and otherwise represent GBC in any
litigation relating to Borrower. If either GBC or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys' fees and costs to which GBC may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.12 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GBC; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of GBC, and any prohibited assignment shall be
void. No consent by GBC to any assignment shall release Borrower from its
liability for the Obligations.
9.13 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.14 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against GBC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any
-15-
<PAGE>
other transaction contemplated hereby or thereby or relating hereto or thereto,
or any other matter, cause or thing whatsoever, occurred, done, omitted or
suffered to be done by GBC, its directors, officers, employees, agents,
accountants or attorneys, shall be barred unless asserted by Borrower by the
commencement of an action or proceeding in a court of competent jurisdiction by
the filing of a complaint within one year after Borrower learns of, or in the
exercise of reasonable diligence should have learned of, the act, occurrence
or omission upon which such claim or cause of action, or any part thereof, is
based, and the service of a summons and complaint on an officer of GBC, or on
any other person authorized to accept service on behalf of GBC, within thirty
(30) days thereafter. Borrower agrees that such one-year period is a
reasonable and sufficient time for Borrower to investigate and act upon any
such claim or cause of action. The one-year period provided herein shall not
be waived, tolled, or extended except by the written consent of GBC in its
sole discretion. This provision shall survive any termination of this Loan
Agreement or any other present or future agreement.
9.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used
in this Agreement for convenience. Borrower and GBC acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe,
limit, define or interpret any term or provision of this Agreement. The
term "including," whenever used in this Agreement, shall mean "including (but
not limited to)." This Agreement has been fully reviewed and negotiated
between the parties and no uncertainty or ambiguity in any term or provision
of this Agreement shall be construed strictly against GBC or Borrower under
any rule of construction or otherwise.
9.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of GBC and Borrower
shall be governed by the laws of the State of California. As a material part
of the consideration to GBC to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at GBC's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles
County; (ii) consents to the jurisdiction and venue of any such court and
consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all
rights Borrower may have to object to the jurisdiction of any such court, or
to transfer or change the venue of any such action or proceeding.
9.17 MUTUAL WAIVER OF JURY TRAIL. BORROWER AND GBC EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GBC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
------------------------------------
President or Vice President
By: /s/ [ILLEGIBLE]
------------------------------------
Secretary or Ass't Secretary
GBC:
GREYROCK BUSINESS CREDIT,
a Division of Greyrock Capital Group Inc.
By: /s/ [ILLEGIBLE]
------------------------------------
Title Managing Director
----------------------------------
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<PAGE>
APPENDIX 1
Additional Permitted Liens:
That certain UCC-1 Financing Statement executed by the Borrower and NationsBank
of Georgia, N.A. (the "Lender") and filed in Cobb County, Georgia, on July 20,
1995 (File No. 033199509749) and those certain UCC-1 Financing Statements
executed by the Borrower (under its former name The System Works, Inc.) and the
Lender and filed in Cobb County, Georgia, on September 30, 1993 (File
No. 93-8869) and July 20, 1995 (File No. 033199509750). The foregoing Liens are
subject to the terms of the Intercreditor Agreement dated as of November 17,
1995, between GBC and the Lender.
<PAGE>
EXHIBIT 10.1.2
PATENT AND TRADEMARK SECURITY AGREEMENT
This PATENT AND TRADEMARK SECURITY AGREEMENT ("Agreement") dated as of
November 17, 1995, is entered into between TSW INTERNATIONAL, INC., a Georgia
corporation ("Grantor"), which has a mailing address at 3301 Windy Ridge
Parkway, Atlanta, Georgia 30339, and GREYROCK BUSINESS CREDIT, a Division of
Greyrock Capital Group, Inc. ("GBC"), which has a mailing address at 300 North
Continental Blvd., Suite 200, El Segundo, California 90245.
RECITALS
A. Grantor and GBC are, contemporaneously herewith, entering into that
certain Loan and Security Agreement ("Loan Agreement") and other instruments,
documents and agreements contemplated thereby or related thereto (collectively,
together with the Loan Agreement, the "Loan Documents"); and
B. Grantor is the owner of certain intellectual property, identified
below, in which Grantor is granting a security interest to GBC.
NOW THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties hereinafter set forth and for other
good and valuable consideration, the parties hereto mutually agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. The following terms, as used in this Agreement,
have the following meanings:
"CODE" means the California Uniform Commercial Code, as amended
and supplemented from time to time, and any successor statute.
"COLLATERAL" means all of the following, whether now owned or
hereafter acquired:
(i) Each of the trademarks and rights and interest which are
capable of being protected as trademarks (including trademarks, service
marks, designs, logos, indicia, tradenames, corporate names, company names,
business names, fictitious business names, trade styles, and other source
or business identifiers, and applications pertaining thereto), which are
presently, or in the future may be, owned, created, acquired, or used
(whether pursuant to a license or otherwise) by Grantor, in whole or in
part, and all trademark rights with respect thereto throughout the world,
including all proceeds thereof (including license royalties and proceeds of
infringement suits), and rights to renew and extend such trademarks and
trademark rights;
1.
<PAGE>
(ii) Each of the patents and patent applications which are
presently, or in the future may be, owned, issued, acquired, or used
(whether pursuant to a license or otherwise) by Grantor, in whole or in
part, and all patent rights with respect thereto throughout the world,
including all proceeds thereof (including license royalties and proceeds of
infringement suits), foreign filing rights, and rights to extend such
patents and patent rights;
(iii) All of Grantor's right to the trademarks and trademark
registrations listed on EXHIBIT A attached hereto, as the same may be
updated hereafter from time to time;
(iv) All of Grantor's right, title, and interest, in and to
the patents and patent applications listed on EXHIBIT B attached hereto, as
the same may be updated hereafter from time to time;
(v) All of Grantor's right, title and interest to register
trademark claims under any state or federal trademark law or regulation of
any foreign country and to apply for, renew, and extend the trademark
registrations and trademark rights, the right (without obligation) to sue
or bring opposition or cancellation proceedings in the name of Grantor or
in the name of GBC for past, present, and future infringements of the
trademarks, registrations, or trademark rights and all rights (but not
obligations) corresponding thereto in the United States and any foreign
country;
(vi) All of Grantor's right, title, and interest in all
patentable inventions, and to file applications for patent under federal
patent law or regulation of any foreign country, and to request
reexamination and/or reissue of the patents, the right (without obligation)
to sue or bring interference proceedings in the name of Grantor or in the
name of GBC for past, present, and future infringements of the patents, and
all rights (but not obligations) corresponding thereto in the United States
and any foreign country;
(vii) the entire goodwill of or associated with the
businesses now or hereafter conducted by Grantor connected with or
symbolized by any of the aforementioned properties and assets;
(viii) All general intangibles relating to the foregoing and
all other intangible intellectual or other similar property of the Grantor
of any kind or nature, associated with or arising out of any of the
aforementioned properties and assets and not otherwise described above; and
(ix) All products and proceeds of any and all of the
foregoing (including, without limitation, license royalties and proceeds of
infringement suits) and, to the extent not otherwise included, all payments
under insurance, or any
2.
<PAGE>
indemnity, warranty, or guaranty payable by reason of loss or damage to or
otherwise with respect to the Collateral.
"OBLIGATIONS" means all obligations, liabilities, and
indebtedness of Grantor to GBC, whether direct, indirect, liquidated, or
contingent, and whether arising under this Agreement, the Loan Agreement,
any other of the Loan Documents, or otherwise, including all costs and
expenses described in Section 9.7 hereof.
1.2 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Any initially capitalized terms used but not defined herein shall
have the meaning set forth in the Loan Agreement. Any reference herein to any
of the Loan Documents includes any and all alterations, amendments, extensions,
modifications, renewals, or supplements thereto or thereof, as applicable.
Headings have been set forth herein for convenience only.
2. GRANT OF SECURITY INTEREST.
To secure the complete and timely payment and performance of all
Obligations, and without limiting any other security interest Grantor has
granted to GBC, Grantor hereby hypothecates to GBC and grants, assigns, and
conveys to GBC a security interest in Grantor's entire right, title, and
interest in and to the Collateral.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Grantor hereby represents, warrants, and covenants that:
3.1 TRADEMARKS; PATENTS. A true and complete schedule setting forth
all federal and state trademark registrations owned or controlled by Grantor or
licensed to Grantor, together with a summary description and full information in
respect of the filing or issuance thereof and expiration dates is set forth on
EXHIBIT A; and a true and complete schedule setting forth all patent and patent
applications owned or controlled by Grantor or licensed to Grantor, together
with a summary description and full information in respect of the filing or
issuance thereof and expiration dates is set forth on EXHIBIT B.
3.2 VALIDITY; ENFORCEABILITY. Each of the patents and trademarks is
valid and enforceable, and Grantor is not presently aware of any past, present,
or prospective claim by any third party that any of the patents or trademarks
are invalid or unenforceable, or that the use of any patents or trademarks
violates the rights of any third person, or of any basis for any such claims.
3.
<PAGE>
3.3. TITLE. Grantor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the patents, patent
applications, trademarks, and trademark registrations, free and clear of any
liens, charges, and encumbrances, including pledges, assignments, licenses, shop
rights, and covenants by Grantor not to sue third persons.
3.4 NOTICE. Grantor has used and will continue to use proper
statutory notice in connection with its use of each of the patents and
trademarks.
3.5 QUALITY. Grantor has used and will continue to use consistent
standards of high quality (which may be consistent with Grantor's past
practices) in the manufacture, sale, and delivery of products and services sold
or delivered under or in connection with the trademarks, including, to the
extent applicable, in the operation and maintenance of its merchandising
operations, and will continue to maintain the validity of the trademarks.
3.6 PERFECTION OF SECURITY INTEREST. Except for the filing of a
financing statement with the applicable filing office in the State of Georgia
and filings with the United States Patent and Trademark Office necessary to
perfect the security interests created hereunder, no authorization, approval, or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required either for the grant by Grantor of the security
interest hereunder or for the execution, delivery, or performance of this
Agreement by Grantor or for the perfection of or the exercise by GBC of its
rights hereunder to the Collateral in the United States.
4. AFTER-ACQUIRED PATENT OR TRADEMARK RIGHTS
If Grantor shall obtain rights to any new trademarks, any new
patentable inventions or become entitled to the benefit of any patent
application or patent for any reissue, division, or continuation, of any patent,
the provisions of this Agreement shall automatically apply thereto. Grantor
shall give prompt notice in writing to GBC with respect to any such new
trademarks or patents, or renewal or extension of any trademark registration.
Grantor shall bear any expenses incurred in connection with future patent
applications or trademark registrations. Without limiting Grantor's obligation
under this Section 4, Grantor authorizes GBC to modify this Agreement by
amending EXHIBITS A OR B to include any such new patent or trademark rights.
Notwithstanding the foregoing, no failure to so modify this Agreement or amend
EXHIBITS A OR B shall in any way affect, invalidate or detract from GBC's
continuing security interest in all Collateral, whether or not listed on EXHIBIT
A OR B.
5. LITIGATION AND PROCEEDINGS.
Grantor shall commence and diligently prosecute in its own name, as
the real party in interest, for its own benefit, and its own expense, such
suits, administrative proceedings, or other action for infringement or other
damages as are in its reasonable
4.
<PAGE>
business judgment necessary to protect the Collateral. Grantor shall provide to
GBC any information with respect thereto requested by GBC. GBC shall provide at
Grantor's expense all necessary cooperation in connection with any such suits,
proceedings, or action, including, without limitation, joining as a necessary
party. Following Grantor's becoming aware thereof, Grantor shall notify GBC of
the institution of, or any adverse determination in, any proceeding in the
United States Patent and Trademark Office, or any United States, state, or
foreign court regarding Grantor's claim of ownership in any of the patents or
trademarks, its right to apply for the same, or its right to keep and maintain
such patent or trademark rights.
6. POWER OF ATTORNEY.
Grantor hereby appoints GBC as Grantor's true and lawful attorney,
with full power of substitution, to do any or all of the following, in the name,
place and stead of Grantor: (a) file this Agreement (or an abstract hereof) or
any other document describing GBC's interest in the Collateral with the United
States Patent and Trademark Office; (b) execute any modification of this
Agreement pursuant to Section 4 of this Agreement; (c) take any action and
execute any instrument which GBC may deem necessary or advisable to accomplish
the purposes of this Agreement; and (d) following an Event of Default (as
defined in the Loan Agreement), (i) endorse Grantor's name on all applications,
documents, paper and instruments necessary for GBC to use or maintain the
Collateral; (ii) ask, demand, collect, sue for, recover, impound, receive, and
give acquittance and receipts for money due or to become due under or in respect
of any of the Collateral; (iii) file any claims or take any action or institute
any proceedings that GBC may deem necessary or desirable for the collection of
any of the Collateral or otherwise enforce GBC's rights with respect to any of
the Collateral, and (iv) assign, pledge, convey, or otherwise transfer title in
or dispose of the Collateral to any person.
7. RIGHT TO INSPECT.
Grantor grants to GBC and its employees and agents the right to visit
Grantor's plants and facilities which manufacture, inspect, or store products
sold under any of the patents or trademarks, and to inspect the products and
quality control records relating thereto at reasonable times during regular
business hours. Any such inspection shall be conducted by GBC, or its agents,
without material hindrance or interruption of Grantor's business.
8. SPECIFIC REMEDIES.
Upon the occurrence of any Event of Default (as defined in the Loan
Agreement), GBC shall have, in addition to, other rights given by law or in this
Agreement, the Loan Agreement, or in any other Loan Document, all of the rights
and remedies with respect to the Collateral of a secured party under the Code,
including the following:
5.
<PAGE>
8.1 NOTIFICATION. GBC may notify licensees to make royalty payments
on license agreements directly to GBC;
8.2 SALE. GBC may sell or assign the Collateral and associated
goodwill at public or private sale for such amounts, and at such time or times
as GBC deems advisable. Any requirement of reasonable notice of any disposition
of the Collateral shall be satisfied if such notice is sent to Grantor ten (10)
days prior to such disposition. Grantor shall be credited with the net proceeds
of such sale only when they are actually received by GBC, and Grantor shall
continue to be liable for any deficiency remaining after the Collateral is sold
or collected. If the sale is to be a public sale, GBC shall also give notice of
the time and place by publishing a notice one time at least ten (10) days before
the date of the sale in a newspaper of general circulation in the county in
which the sale is to be held. To the maximum extent permitted by applicable
law, GBC may be the purchaser of any or all of the Collateral and associated
goodwill at any public sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any public sale, to use and apply all or any part of the
Obligations as a credit on account of the purchase price of any collateral
payable by GBC at such sale.
9. GENERAL PROVISIONS.
9.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Grantor and GBC.
9.2 NO WAIVER. No course of dealing between Grantor and GBC, nor any
failure to exercise nor any delay in exercising, on the part of GBC, any right,
power, or privilege under this Agreement or under the Loan Agreement or any
other agreement, shall operate as a waiver. No single or partial exercise of
any right, power, or privilege under this Agreement or under the Loan Agreement
or any other agreement by GBC shall preclude any other or further exercise of
such right, power, or privilege or the exercise of any other right, power, or
privilege by GBC.
9.3 RIGHTS ARE CUMULATIVE. All of GBC's rights and remedies with
respect to the Collateral whether established by this Agreement, the Loan
Agreement, or any other documents or agreements, or by law shall be cumulative
and may be exercised concurrently or in any order.
9.4 SUCCESSORS. The benefits and burdens of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties; provided that Grantor may not transfer any of
the Collateral or any rights hereunder, without the prior written consent of
GBC, except as specifically permitted hereby.
6.
<PAGE>
9.5 SEVERABILITY. The provisions of this Agreement are severable.
If any provision of this Agreement is held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such provision, or part thereof, in each jurisdiction, and shall not
in any manner affect such provision or part thereof in any other jurisdiction,
or any other provision of this Agreement in any jurisdiction.
9.6 ENTIRE AGREEMENT. This Agreement is subject to modification only
by a writing signed by the parties, except as provided in Section 4 of this
Agreement. To the extent that any provision of this Agreement conflicts with
any provision of the Loan Agreement, the provision giving GBC greater rights or
remedies shall govern, it being understood that the purpose of this Agreement is
to add to, and not detract from, the rights granted to GBC under the Loan
Agreement. This Agreement, the Loan Agreement, and the documents relating
thereto comprise the entire agreement of the parties with respect to the matters
addressed in this Agreement.
9.7 FEES AND EXPENSES. Grantor shall pay to GBC on demand all costs
and expenses that the GBC pays or incurs in connection with the negotiation,
preparation, consummation, administration, enforcement, and termination of this
Agreement, including: (a) reasonable attorneys' and paralegals' fees and
disbursements of counsel to GBC; (b) costs and expenses (including reasonable
attorneys' and paralegals' fees and disbursements) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with this
Agreement and the transactions contemplated hereby; (c) costs and expenses of
lien and title searches; (d) taxes, fees, and other charges for filing this
Agreement at the United States Patent and Trademark Office, or for filing
financing statements, and continuations, and other actions to perfect, protect,
and continue the security interest created hereunder; (e) sums paid or incurred
to pay any amount or take any action required of Grantor under this Agreement
that Grantor fails to pay or take; (f) costs and expenses of preserving and
protecting the Collateral; and (g) costs and expenses (including reasonable
attorneys' and paralegals' fees and disbursements) paid or incurred to enforce
the security interest created hereunder, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of this Agreement, or to defend
any claims made or threatened against the GBC arising out of the transactions
contemplated hereby (including preparations for the consultations concerning any
such matters). The foregoing shall not be construed to limit any other
provisions of this Agreement or the Loan Documents regarding costs and expenses
to be paid by Grantor. The parties agree that reasonable attorneys' and
paralegals' fees and costs incurred in enforcing any judgment are recoverable as
a separate item in addition to fees and costs incurred in obtaining the judgment
and that the recovery of such attorneys' and paralegals' fees and costs is
intended to survive any judgment, and is not to be deemed merged into any
judgment.
9.8 INDEMNITY. Grantor shall protect, defend, indemnify, and hold
harmless GBC and GBC's assigns from all liabilities, losses, and costs
(including without limitation reasonable attorneys' fees) incurred or imposed on
GBC relating to the matters in this Agreement.
7.
<PAGE>
9.9 GOVERNING LAW. The validity and interpretation of this Agreement
and the rights and obligations of the parties shall be governed by the laws of
the State of California, excluding its conflict of law rules to the extent such
rules would apply the law of another jurisdiction, and the United States.
9.10 WAIVER OF RIGHT TO JURY TRIAL. GBC AND GRANTOR EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN GBC AND GRANTOR; OR (iii) ANY CONDUCT,
ACTS OR OMISSIONS OF GBC OR GRANTOR OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR
GRANTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
9.11 FURTHER ASSURANCES. At GBC's request, Grantor shall execute and
deliver to GBC any further instruments or documentation, and perform any acts,
that may be reasonably necessary or appropriate to implement this Agreement, the
Loan Agreement or any other agreement, and the documents relating thereto,
including without limitation any instrument or documentation reasonably
necessary or appropriate to create, maintain, perfect, or effectuate GBC's
security interests in the Collateral.
9.12 RELEASE. At such time as Grantor shall completely satisfy all of
the Obligations and the Loan Agreement shall be terminated, GBC shall execute
and deliver to Grantor all assignments and other instruments as may be
reasonably necessary or proper to terminate GBC's security interest in the
Collateral, subject to any disposition of the Collateral which may have been
made by GBC pursuant to this Agreement. For the purpose of this Agreement, the
Obligations shall be deemed to continue if GBC enters into any bankruptcy or
similar proceeding at a time when any amount paid to GBC could be ordered to be
repaid as a preference or pursuant to a similar theory, and shall continue until
it is finally determined that no such repayment can be ordered.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
TSW INTERNATIONAL, INC.
By /s/ John Bartels
------------------------------
Title Sr. V. P. & CFO
------------------------------
8.
<PAGE>
GREYROCK BUSINESS CREDIT, a Division
of Greyrock Capital Group Inc.
By /s/ [illegible]
------------------------------
Title Managing Director
------------------------------
9.
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On November ___, 1995, before me, ________________________________,
_______________________, Notary Public, personally appeared
__________________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
_____________________________
(Seal)
[STATE OF GEORGIA NOTARIZATION:]
10.
<PAGE>
EXHIBIT "A"
REGISTERED TRADEMARKS
Trademark Registration Date Registration No.
- --------- ----------------- ----------------
Curator September 3, 1991 1,655,435
PENDING TRADEMARKS
Trademark Filing Date Serial No.
- --------- ----------- ----------
Asset Care May 30, 1995 74-682,257
11.
<PAGE>
EXHIBIT "B"
PATENTS
Patent Description/Title Issue Date Patent No. Name of Inventor
- ------------------------ ---------- ---------- ----------------
(None.)
PATENT APPLICATIONS
Description Filing Date Serial No. Name of Inventor
- ----------- ----------- ---------- ----------------
(None.)
12.
<PAGE>
EXHIBIT 10.1.3
SECURITY AGREEMENT IN COPYRIGHTED WORKS
This Security Agreement in Copyrighted Works (this "Agreement"), dated as
of February 28, 1996, is made by TSW INTERNATIONAL, INC., a Georgia corporation
("Grantor"), which has a mailing address at 3301 Windy Ridge Parkway, Atlanta,
Georgia 30339, in favor of GREYROCK BUSINESS CREDIT, a Division of NationsCredit
Commercial Corporation ("GBC"), which has a mailing address at 300 North
Continental Blvd., Suite 200, El Segundo, California 90245.
RECITALS
A. GBC is providing financing to Grantor pursuant to the Loan and
Security Agreement dated November 17, 1995 between GBC and Grantor (as amended
from time to time, the "Loan Agreement"). Pursuant to the Loan Agreement,
Grantor has granted to GBC a security interest in all of Grantor's present and
future assets, including without limitation all of Grantor's present and future
general intangibles, and including without limitation the "Copyrights" (as
defined below), to secure all of its present and future indebtedness,
liabilities, guaranties and other obligations to GBC.
B. To supplement GBC's rights in the Copyrights, Grantor is executing and
delivering this Agreement.
NOW, THEREFORE, for valuable consideration, Grantor agrees as follows:
1. ASSIGNMENT. To secure the complete and timely payment and performance
of all "Obligations" (as defined in the Loan Agreement), and without limiting
any other security interest Grantor has granted to GBC, Grantor hereby
hypothecates to GBC and grants, assigns, and conveys to GBC a security interest
in Grantor's entire right, title, and interest in and to all of the following,
now owned and hereafter acquired (collectively, the "Collateral"):
(a) REGISTERED COPYRIGHTS AND APPLICATIONS FOR COPYRIGHT
REGISTRATIONS. All of Grantor's present and future United States registered
copyrights and copyright registrations, including, without limitation, the
registered copyrights listed in SCHEDULE A to this Agreement (and including all
of the exclusive rights afforded a copyright registrant in the United States
under 17 U.S.C. Section 106 and any exclusive rights which may in the future
arise by act of Congress or otherwise) and all of Grantor's present and future
applications for copyright registrations (including applications for copyright
registrations of derivative works and compilations) (collectively, the
"Registered Copyrights"), and any and all royalties, payments, and other amounts
payable to Grantor in connection with the Registered Copyrights, together with
all renewals and extensions of the Registered Copyrights, the right to recover
for all past, present, and future infringements of the Registered Copyrights,
and
1.
<PAGE>
all computer programs, computer databases, computer program flow diagrams,
source codes, object codes and all tangible property embodying or incorporating
the Registered Copyrights, and all other rights of every kind whatsoever
accruing thereunder or pertaining thereto.
(b) UNREGISTERED COPYRIGHTS. All of Grantor's present and future
copyrights which are not registered in the United States Copyright Office (the
"Unregistered Copyrights"), whether now owned or hereafter acquired, including
without limitation the Unregistered Copyrights listed in SCHEDULE B to this
Agreement, and any and all royalties, payments, and other amounts payable to
Grantor in connection with the Unregistered Copyrights, together with all
renewals and extensions of the Unregistered Copyrights, the right to recover for
all past, present, and future infringements of the Unregistered Copyrights, and
all computer programs, computer databases, computer program flow diagrams,
source codes, object codes and all tangible property embodying or incorporating
the Unregistered Copyrights, and all other rights of every kind whatsoever
accruing thereunder or pertaining thereto. The Registered Copyrights and the
Unregistered Copyrights collectively are referred to herein as the "Copyrights."
(c) LICENSES. All of Grantor's right, title and interest in and to
any and all present and future license agreements with respect to the
Copyrights, including without limitation the license agreements listed in
SCHEDULE C to this Agreement (the "Licenses").
(d) ACCOUNTS RECEIVABLE. All present and future accounts, accounts
receivable and other rights to payment arising from, in connection with or
relating to the Copyrights.
(e) All cash and non-cash proceeds of any and all of the foregoing.
2. REPRESENTATIONS. Grantor represents and warrants that:
(a) Each of the Copyrights is valid and enforceable (except to the
extent that the Unregistered Copyrights must be registered to be enforced);
(b) Except for the security interest granted hereby and the
non-exclusive licenses granted to Grantor's licensees with respect to the
Copyrights in the ordinary course of business of Grantor, Grantor is (and upon
creation of all future Copyrights, will be) the sole and exclusive owner of the
entire and unencumbered right, title, and interest in and to each of the
Copyrights and other Collateral, free and clear of any liens, charges, or
encumbrances;
(c) There is no pending claim that the use of any of the Copyrights
does or may infringe upon or violate the rights of any third person nor does
Grantor have knowledge of any pending or threatened infringement of any of the
Copyrights by any third person.
2.
<PAGE>
(d) Listed on SCHEDULES A AND B are all copyrights owned by Grantor,
in which Grantor has an interest, or which are used in Grantor's business.
(e) Listed on SCHEDULE C are all Licenses to which Grantor is a
party.
(f) Each employee, agent and/or independent contractor who has
participated in the creation of the property constituting the Collateral has
either executed an assignment of his or her rights of authorship to Grantor or
is an employee of Grantor acting within the scope of his or her employment and
was such an employee at the time of said creation.
(g) All of Grantor's present and future software, computer programs
and other works of authorship subject to United States copyright protection, the
sale, licensing or other disposition of which results in royalties receivable,
license fees receivable, accounts receivable or other sums owing to Grantor
(collectively, "Receivables"), have been and shall be registered with the United
States Copyright Office prior to the date Grantor requests or accepts any loan
from GBC with respect to such Receivables and prior to the date Grantor includes
any such Receivables in any accounts receivable aging, borrowing base report or
certificate or other similar report provided to GBC, and Grantor shall provide
to GBC copies of all such registrations promptly upon the receipt of the same.
Without limiting the generality of the foregoing, Grantor agrees to provide GBC
with a monthly report, signed by the president, chief financial officer, or
secretary of Grantor, whereby Grantor shall expressly renew the representations
and warranties contained in this Section 2, and which shall have attached
thereto updated versions of the Schedules provided for in this Section 2.
3. COVENANTS. Until all of the Obligations have been satisfied in full
and the Loan Agreement has terminated:
(a) Grantor shall not grant a security interest in any of the
Copyrights or other Collateral to any other person and shall not enter into any
agreement or take any action that is inconsistent with Grantor's obligations
hereunder or Grantor's other Obligations or would impair GBC's rights, under
this Agreement or otherwise, without GBC's prior written consent:
(b) Grantor shall ensure that each use of the Copyrights described in
Section 1 of this Agreement carries a complete and accurate copyright notice.
(c) Grantor shall use its best efforts to preserve and defend
Grantor's rights in the Copyrights unless Grantor, with the concurrence of GBC,
reasonably determines that a Copyright is not worth preserving or defending.
(d) Grantor shall undertake all reasonable measures to cause its
employees, agents and independent contractors to assign to Grantor all rights of
authorship to any
3.
<PAGE>
copyrighted material in which Grantor has or may subsequently acquire any right
or interest.
4. LICENSE RIGHTS. Grantor may license or sublicense the Copyrights only
in the ordinary course of business and only on a non-exclusive basis, and only
to the extent of Grantor's rights and subject to GBC's security interest and
Grantor's obligations under this Agreement.
5. GBC MAY SUPPLEMENT. Grantor authorizes GBC to modify this Agreement
by amending SCHEDULE A OR B to include any future copyrights to be included in
the Copyrights. Grantor shall from time to time update the lists of Registered
Copyrights and Unregistered Copyrights on SCHEDULES A AND B and lists of
License Agreements on Schedule C as Grantor obtains or acquires copyrights or
grants or obtains licenses in the future. Notwithstanding the foregoing, no
failure to so modify this Agreement or amend SCHEDULES A OR B OR C shall in any
way affect, invalidate or detract from GBC's continuing security interest in all
Copyrights, whether or not listed on SCHEDULE A OR B and all license agreements
whether or not listed on SCHEDULE C.
6. DEFAULT. Upon an Event of Default (as defined in the Loan Agreement)
GBC shall have, in addition to all of its other rights and remedies under the
Loan Agreement, all rights and remedies of a secured party under the Uniform
Commercial Code (as enacted in any jurisdiction in which the Copyrights or other
Collateral are located or deemed to be located) or other applicable law. Upon
occurrence of an Event of Default, Grantor shall, upon request of GBC, give
written notice to all parties to the Licenses that all payments thereunder shall
be made to GBC, and GBC may itself give such notice.
7. FEES AND EXPENSES. On demand by GBC, without limiting any of the
terms of the Loan Agreement, Grantor shall pay all reasonable fees, costs, and
expenses (including without limitation reasonable attorneys' fees and legal
expenses) incurred by GBC in connection with (a) preparing this Agreement and
all other documents relating to this Agreement, (b) consummating this
transaction, (c) filing or recording any documents (including all taxes in
connection therewith) in public offices; and (d) paying or discharging any
taxes, counsel fees, maintenance fees, encumbrances, or other amounts in
connection with protecting, maintaining, or preserving the Copyrights or
defending or prosecuting any actions or proceedings arising out of or related to
the Copyrights.
8. GBC'S RIGHTS. In the event that Grantor fails to use its best efforts
to preserve and defend Grantor's rights in the Copyrights (except as permitted
by paragraph 3(c) hereof) within a reasonable period of time after learning of
the existence of any actual or threatened infringement thereof, upon twenty (20)
days prior written notice to Grantor, GBC shall have the right, but shall in no
way be obligated to, bring suit or take any other action, in its own name or in
Grantor's name, to enforce or preserve GBC's or Grantor's rights in the
Copyrights. Grantor shall at the request of GBC and at Grantor's expense do any
lawful acts and execute any documents requested by GBC to assist with
such enforcement. In the event Grantor has not taken action to enforce or
preserve GBC's and Grantor's rights in the Copyrights and GBC thereupon takes
such action, Grantor, upon
4.
<PAGE>
demand, shall promptly reimburse and indemnify GBC for all costs and expenses
incurred in the exercise of GBC's or Grantor's rights under this Section 8.
9. NO WAIVER. No course of dealing between Grantor and GBC, nor any
failure to exercise nor any delay in exercising, on the part of GBC, any right,
power, or privilege under this Agreement or under the Loan Agreement or any
other agreement, shall operate as a waiver. No single or partial exercise of
any right, power, or privilege under this Agreement or under the Loan Agreement
or any other agreement by GBC shall preclude any other or further exercise of
such right, power, or privilege or the exercise of any other right, power, or
privilege by GBC.
10. RIGHTS ARE CUMULATIVE. All of GBC's rights and remedies with respect
to the Copyrights and other Collateral whether established by this Agreement,
the Loan Agreement, or any other documents or agreements, or by law shall be
cumulative and may be exercised concurrently or in any order.
11. COPYRIGHT OFFICE. At the request of GBC, Grantor shall execute any
further documents necessary or appropriate to create and perfect GBC's security
interest in the Copyrights, including without limitation any documents for
filing with the United States Copyright Office and/or any applicable state
office. GBC may record this Agreement, an abstract thereof, or any other
document describing GBC's interest in the Copyrights with the United States
Copyright Office, at the expense of Grantor.
12. INDEMNITY. Grantor shall protect, defend, indemnify, and hold
harmless GBC and GBC's assigns from all liabilities, losses, and costs
(including without limitation reasonable attorneys' fees) incurred or imposed on
GBC relating to the matters in this Agreement, including, without limitation, in
connection with GBC's defense of any infringement action brought by a third
party against GBC.
13. SEVERABILITY. The provisions of this Agreement are severable. If any
provision of this Agreement is held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such provision or part thereof in any other jurisdiction, or any
other provision of this Agreement in any jurisdiction.
14. ENTIRE AGREEMENT. This Agreement is subject to modification only by a
writing signed by the parties, except as provided in Section 5 of this
Agreement. To the extent that any provision of this Agreement conflicts with
any provision of the Loan Agreement, the provision giving GBC greater rights or
remedies shall govern, it being understood that the purpose of this Agreement is
to add to, and not detract from, the rights granted to GBC under the Loan
Agreement. This Agreement, the Loan Agreement, and the documents relating
thereto comprise the entire agreement of the parties with respect to the matters
addressed in this Agreement.
5.
<PAGE>
15. FURTHER ASSURANCES. At GBC's request, Grantor shall execute and
deliver to GBC any further instruments or documentation, and perform any acts,
that may be reasonably necessary or appropriate to implement this Agreement, the
Loan Agreement or any other agreement, and the documents relating thereto,
including without limitation any instrument or documentation reasonably
necessary or appropriate to create, maintain, perfect, or effectuate GBC's
security interests in the Copyrights or other Collateral.
16. RELEASE. At such time as Grantor shall completely satisfy all of the
Obligations and the Loan Agreement shall be terminated, GBC shall execute and
deliver to Grantor all assignments and other instruments as may be reasonably
necessary or proper to terminate GBC's security interest in the Copyrights,
subject to any disposition of the Copyrights which may have been made by GBC
pursuant to this Agreement. For the purpose of this Agreement, the Obligations
shall be deemed to continue if GBC enters into any bankruptcy or similar
proceeding at a time when any amount paid to GBC could be ordered to be repaid
as a preference or pursuant to a similar theory, and shall continue until it is
finally determined that no such repayment can be ordered.
17. TRUE AND LAWFUL ATTORNEY. Grantor hereby appoints GBC as Grantor's
true and lawful attorney, with full power of substitution, to do any or all of
the following, in the name, place and stead of Grantor: (a) execute an abstract
of this Agreement or any other document describing GBC's interest in the
Copyrights, for filing with the United States Copyright Office; (b) execute any
modification of this Agreement pursuant to Section 5 of this Agreement; and (c)
following an Event of Default (as defined in the Loan Agreement) execute any
assignments, notices or transfer documents for purposes of transferring title or
right to receive any of the Copyrights or other collateral to any person,
including without limitation GBC.
18. SUCCESSORS. The benefits and burdens of this Agreement shall inure to
the benefit of and be binding upon the respective successors and permitted
assigns of the parties; provided that Grantor may not transfer any of the
Collateral or any rights hereunder, without the prior written consent of GBC,
except as specifically permitted hereby.
19. GOVERNING LAW. The validity and interpretation of this Agreement and
the rights and obligations of the parties shall be governed by the laws of the
State of California, excluding its conflict of law rules to the extent such
rules would apply the law of another jurisdiction, and the United States.
20. WAIVER OF RIGHT TO JURY TRIAL. GBC AND GRANTOR EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN GBC AND GRANTOR; OR (iii) ANY CONDUCT,
ACTS OR OMISSIONS OF GBC OR GRANTOR OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED
6.
<PAGE>
WITH GBC OR GRANTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
WITNESS the execution hereof as of the date first written above.
Grantor:
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
---------------------------------
Title: CFO
------------------------------
Accepted.
GBC:
GREYROCK BUSINESS CREDIT,
a Division of NationsCredit Commercial Corporation
By: /s/ [illegible]
--------------------------------
Title: CEO
-----------------------------
7.
<PAGE>
Schedule A
to
Security Agreement
in Copyrighted Works
TSW INTERNATIONAL, INC.
REGISTERED COPYRIGHTS
Year of Registration Date of
Title of Work Creation Number Issuance
- ----------------- -------- ------------ --------
MPAC-UX 14.1 1989 TX 4-219-145 1/29/96
MPAC-UX 14.2 1989 TX 4-210-797 1/29/96
MPAC-UX 14.3 1990 TX 4-210-796 1/29/96
MPAC-UX 15.0 1991 TX 4-186-585 1/29/96
MPAC-UX 15.1 1992 TX 4-201-672 1/29/96
MPAC-UX 16.0 1992 TX 4-201-675 1/29/96
MPAC-UX 17.0 1994 TX 4-201-667 1/29/96
MPAC-UX-18.0 1995 TX 4-201-666 1/29/96
MPAC-2000 3.3 1991 TX 4-213-189 1/29/96
MPAC-2000 5.0 1994 TX 4-213-190 1/29/96
MPAC-SQL 2.0 1991 TX 4-194-383 1/29/96
MPAC-SQL 2.2 1992 TX 4-194-384 1/29/96
MPAC-SQL 3.1 1994 TX 4-194-382 1/29/96
MPAC-SQL 3.4 1994 TX 4-194-381 1/29/96
MPAC-SQL 3.5 1995 TX 4-194-380 1/29/96
EMPAC 6.0 1995 TX 4-213-188 1/29/96
EMPAC 6.1 1995 TXu 728-359 1/29/96
EPS 2.0 1995 TX 4-186-596 1/29/96
Curator 1.0 1994 TX 4-186-594 1/29/96
Curator 1.1 1994 TX 4-186-593 1/29/96
Curator 2.0 1995 TX 4-213-038 1/29/96
<PAGE>
Year of Registration Date of
Title of Work Creation Number Issuance
- ----------------- -------- ------------ --------
Curator 1994 TX 4-227-303 1/29/96
Hyperlinking 1.0
Natural Language 1992 TX 4-186-595 1/29/96
for MPAC-SQL 1.0
<PAGE>
Greyrock
Business
Credit
A NationsBank Company
EXHIBIT 10.1.4
AMENDMENT TO LOAN DOCUMENTS
BORROWER: TSW INTERNATIONAL, INC.
ADDRESS: 3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
DATE: AUGUST 1, 1996
THIS AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is entered into between
GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial Corporation
("GBC"), whose address is 300 North Continental Boulevard, Suite 200, El
Segundo, California 90245, and the Borrower named above ("Borrower").
The Parties agree to amend and supplement the Loan and Security Agreement
between them, dated November 17, 1995 (the "Loan Agreement"), effective as of
the date set forth above, as follows. (This Amendment, the Loan Agreement, any
prior written amendments to said agreements signed by GBC and the Borrower, and
all other written documents and agreements between GBC and the Borrower are
referred to herein collectively as the "Loan Documents." Capitalized terms used
but not defined in this Amendment shall have the meanings set forth in the Loan
Agreement.)
1. AMENDMENT TO CREDIT LIMIT. Provided that (i) Borrower executes and
delivers the documents and instruments listed below, (ii) GBC has received, in
form and substance satisfactory to it, results of such lien searches as it shall
request, and evidence of all filings and other actions as it shall require to
perfect its first priority security interest in the Additional Collateral (as
defined below), (iii) Borrower has paid the line increase fee referred to below,
and (iv) no Default or Event of Default has occurred or is continuing (after and
giving effect to the amendments contemplated hereby), Section 1 ("Credit Limit")
of the Schedule to the Loan Agreement is amended and restated in its entirety to
read as follows:
(Section 1.1): An amount not to exceed the lesser of (1) and (2) below:
(1) $15,000,000 at any one time outstanding; and
(2) an amount equal to the sum of the following (without
duplication):
(i) an amount equal to 80% of Borrower's Eligible
Receivables (as defined in Section 8 above);
PLUS
(ii) the amount from time to time outstanding under
the Term Note (as defined below); PLUS
-1-
<PAGE>
(iii) if requested by Borrower, and if deemed eligible
for borrowing by GBC in its sole judgment, an
amount not to exceed the lesser of (A)
$6,000,000 at any one time outstanding and (B)
an amount equal to 60% of Unbilled Receivables
(as defined below) of the Borrower; PLUS
(iv) an amount not to exceed the lesser of (A)
$1,000,000 at any one time outstanding and (B)
an amount equal to (1) 60% of Eligible
Receivables of the UK Sub (as defined below),
and (2) if requested by Borrower, and if deemed
eligible for borrowing by GBC in its sole
judgment, 45% of Unbilled Receivables of the UK
Sub; PLUS
(v) an amount not to exceed the lesser of (A)
$1,000,000 at any one time outstanding and (B)
an amount equal to 60% of Eligible Receivables
of the Australian Sub (as defined below).
The Borrower agrees to invoice, and to cause the Australian Sub or the UK
Sub, as the case may be, to invoice, any Unbilled Receivables as soon as
possible.
The availability of Loans under the amended Credit Limit set forth above
with respect to the Receivables of the UK Sub and the Australian Sub shall be
subject to the condition precedent that GBC shall have received each of the
following, in form and substance satisfactory to GBC and its counsel:
(i) THE UK Security Agreement (as defined below), duly executed by GBC
and the UK Sub;
(ii) the Australian Security Agreement (as defined below), duly executed
by GBC and the Australian Sub;
(iii) the UK Guaranty (as defined below), duly executed by the UK Sub;
(iv) the Australian Guaranty (as defined below), duly executed by the
Australian Sub;
(v) a certificate of the Secretary or other appropriate officer of the
UK Sub certifying (A) copies of the articles of incorporation and bylaws (or
other applicable organizational documents), of the UK Sub and the resolutions
and other actions taken or adopted by the UK Sub authorizing the execution,
delivery and performance of the UK Documents (as defined below), and (B) the
incumbency, authority and signatures of each officer of the UK Sub authorized to
execute and deliver the UK Documents and act with respect thereto;
(vi) a certificate of the Secretary or other appropriate officer of the
Australian Sub certifying (A) copies of the articles of incorporation and bylaws
(or other applicable organizational documents), of the Australian Sub and the
resolutions and other actions taken or adopted by the Australian Sub authorizing
the execution, delivery and performance of the Australian Documents (as defined
below), and (B) the incumbency, authority and signatures of each officer of the
Australian Sub authorized to execute and deliver the Australian Documents and
act with respect thereto;
(vii) a favorable legal opinion of English counsel to the UK Sub as to
such matters as GBC may reasonably request;
(viii) a favorable legal opinion of Australian counsel to the Australian
Sub as to such matters as GBC may reasonably request; and
-2-
<PAGE>
(ix) evidence that all filings, registrations and recordings have been
made in the appropriate governmental offices, and all other action has been
taken, which shall be necessary to create, in favor of GBC, a perfected first
priority pledge of and security interest in the Additional Collateral.
The availability of any Loans under the amended Credit Limit set forth
above shall be subject to the condition precedent that GBC shall have received
each of the following, in form and substance satisfactory to GBC and its
counsel:
(i) the Term Note, duly executed by the Borrower;
(ii) a certificate of the Secretary or other appropriate officer of the
Borrower certifying (A) the resolutions and other actions taken or adopted by
the Borrower authorizing the execution, delivery and performance of the this
Amendment and the Term Note, and (i) the incumbency, authority and signatures of
each officer of the Borrower authorized to execute and deliver this Amendment
and the Term Note and act with respect thereto; and
(iii) a favorable legal opinion of Georgia counsel to the Borrower as to
such matters as GBC may reasonably request.
As used herein, the following terms have the following meanings:
"ADDITIONAL COLLATERAL" means all property and interests in property and
proceeds thereof described as collateral in the UK Security Agreement and the
Australian Security Agreement.
"AUSTRALIAN DOCUMENTS" means the Australian Security Agreement, the
Australian Guaranty and all other certificates, documents, agreements and
instruments delivered by the Australian Sub, or the Borrower on behalf of the
Australian Sub, to GBC under or in connection with this Amendment.
"AUSTRALIAN GUARANTY" means a guaranty of the Australian Sub in favor of
GBC, in form and substance satisfactory to GBC, pursuant to which the Australian
Sub guarantees the obligations of the Borrower pursuant to the Loan Agreement.
"AUSTRALIAN SECURITY AGREEMENT" means a floating charge or other security
agreement between the Australian Sub and GBC, in form and substance satisfactory
to GBC, pursuant to which the Australian Sub pledges to GBC, and grants GBC a
security interest in the Australian Sub's accounts receivable and other property
and interests in property described therein.
"AUSTRALIAN SUB" means TSW International Pty Ltd.
"TERM NOTE" means the Secured Promissory Note, in favor of GBC, in the
original principal amount of $2,000,000, in substantially the form of EXHIBIT A
hereto.
"UK DOCUMENTS" means the UK Security Agreement, the UK Guaranty and all
other certificates, documents, agreements and instruments delivered by the UK
Sub, or the Borrower on behalf of the UK Sub, to GBC under or in connection with
this Amendment.
"UK GUARANTY" means a guaranty of the UK Sub in favor of GBC, in form and
substance satisfactory to GBC, pursuant to which the UK Sub guarantees the
obligations of the Borrower pursuant to the Loan Agreement.
"UK SECURITY AGREEMENT" means a floating charge or other security agreement
between UK Sub and GBC, in form and substance satisfactory to GBC, pursuant to
which the UK Sub pledges to GBC, and grants
-3-
<PAGE>
GBC a security interest in the UK Sub's accounts receivable and other property
and interests in property described therein.
"UK SUB" means TSW International Ltd.
"UNBILLED RECEIVABLES" means Receivables with respect to which the invoice
and other necessary billing documentation have not been submitted to the
applicable Account Debtor in connection with a completed (or contracted) sale of
goods, rendition of services or licensing of software but which otherwise
qualify as Eligible Receivables for purposes of the Loan Agreement.
In connection with this Amendment, Borrower agrees to pay a line increase
fee of $80,000. GBC acknowledges receipt of $20,000 of such fee; the balance
thereof shall be due simultaneously herewith.
2. AMENDMENTS TO DEFINITIONS. Effective simultaneously with the
amendments set forth in Section 1 above, the following definitions in the Loan
Agreement are amended as follows:
(i) In the definition of "Eligible Receivables" references to the Borrower
shall mean and be references to the Borrower, the UK Sub and the Australian Sub.
(ii) In the definition of "Receivables" references to the Borrower shall
mean and be references to the Borrower, the UK Sub and the Australian Sub.
3. REPRESENTATIONS TRUE. To induce GBC to enter into this Amendment, the
Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 3 of the Loan Agreement.
For the purposes of this Section 3 each reference in Section 3 of the Loan
Agreement to "this Agreement," and the words "hereof," "herein," "hereunder," or
words of like import in such Section, shall mean and be a reference to the Loan
Agreement as amended by this Amendment.
4. GENERAL PROVISIONS. GBC's execution and delivery of, or acceptance
of, this Amendment and any other documents and instruments in connection
herewith shall not be deemed to create a course of dealing or otherwise create
any express or implied duty by it to provide any other or further amendments,
consents or waivers in the future. This Amendment, the Loan Agreement, and the
other Loan Documents set forth in full all of the representations and agreements
of the parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended and
supplemented, all of the terms and provisions of the Loan Agreement and the
other Loan Documents shall continue in full force and effect and the same are
hereby ratified and confirmed. This Amendment forms part of the Loan Agreement
and the terms of the Loan Agreement are incorporated herein by reference.
BORROWER: GBC:
TSW INTERNATIONAL, INC. GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
BY /s/ [illegible]
--------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/ [illegible]
--------------------------------
TITLE COO
BY /s/ [illegible] -----------------------------
--------------------------------
SECRETARY OR ASS'T SECRETARY
-4-
<PAGE>
Greyrock
Business
Credit
A Nationsbank Company
EXHIBIT A
SECURED PROMISSORY NOTE
$2,000,000 Los Angeles, California August 1, 1996
FOR VALUE RECEIVED, the undersigned (the "Borrower") promises to pay to the
order of GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL
CORPORATION ("GBC"), at 300 North Continental Blvd., Suite 200, El Segundo,
California 90245, or at such other address as the holder of this Note shall
direct, the principal sum of TWO MILLION Dollars ($2,000,000), payable in 36
installments of $55,556.00 principal per month (except that the last such
installment shall be in the amount of $55,540.00), plus interest as hereinafter
provided, commencing on August 31, 1997 and continuing on the last day of each
succeeding month, until the earlier of the following dates (the "Maturity
Date"): (i) August 31, 2000, or (ii) the date the Loan and Security Agreement
between the Borrower and GBC dated November 17, 1995, as amended (as amended,
the "Loan Agreement") terminates by its terms or is terminated by either party
in accordance with its terms. On the Maturity Date the entire remaining unpaid
principal balance of this Note, plus any and all accrued and unpaid interest,
shall be due and payable.
This Note shall bear interest on the unpaid principal balance hereof from
time to time outstanding at a rate equal to the following: The interest rate in
effect throughout each calendar month during the term of this Note shall be the
highest "LIBOR Rate" in effect during such month, plus 5.25% per annum, provided
that the interest rate in effect in each month shall not be less than 8% per
annum. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. "LIBOR Rate" has the meaning set forth in the
Loan Agreement.
Accrued interest on this Note shall be payable monthly, in addition to any
principal payments provided above, commencing on August 31, 1996, and continuing
on the last day of each succeeding month. Any accrued interest not paid when
due shall bear interest at the same rate as the principal hereunder.
Principal of and interest on this Note shall be payable in lawful money of
the United States of America. If a payment hereunder becomes due and payable on
a Saturday, Sunday or legal holiday, the due date thereof shall be extended to
the next succeeding business day, and interest shall be payable thereon during
such extension.
In the event any payment of principal or interest on this Note is not paid
in full when due, or if any other default or event of default occurs hereunder,
under the Loan Agreement or under any other present or future instrument,
document, or agreement between the Borrower and GBC (collectively, "Events of
Default"), GBC may, at its option, at any time thereafter, declare the entire
unpaid principal balance of this Note plus all accrued interest to be
immediately due and payable, without notice or demand. Without limiting the
foregoing, and without limiting GBC's other rights and remedies, in the event
any installment of principal or interest is not paid in full on the date due
(whether
A-1.
<PAGE>
at stated maturity, by acceleration or otherwise), the Borrower shall pay
interest on such unpaid principal or interest, from the later of (i) the date
such amount becomes due and (ii) the Notice Date (as defined below), until the
date such amount is paid in full, payable from time to time on demand, at a rate
per annum equal at all times to the interest rate set forth above, PLUS an
additional four percent per annum. GBC shall send written notice to the
Borrower that overdue interest shall accrue hereunder (the date of such notice
the "Notice Date"). The acceptance of any installment of principal or interest
by GBC after the time when it becomes due, as herein specified, shall not be
held to establish a custom, or to waive any rights of GBC to enforce payment
when due of any further installments or any other rights, nor shall any failure
or delay to exercise any rights be held to waive the same.
All payments hereunder are to be applied first to costs and fees referred
to hereunder, second to the payment of accrued interest and the remaining
balance to the payment of principal. Any principal prepayment hereunder shall
be applied against principal payments in the inverse order of maturity. GBC
shall have the continuing and exclusive right to apply or reverse and reapply
any and all payments hereunder. Principal and interest becoming due hereunder
may, in GBC's discretion, be charged to Borrower's loan account under the Loan
Agreement, and the same shall thereafter bear interest at the same rate as the
other Loans under the Loan Agreement.
The Borrower agrees to pay all reasonable costs and expenses (including
without limitation reasonable attorneys' fees) incurred by GBC in connection
with or related to this Note, or its enforcement, whether or not suit be
brought. The Borrower hereby waives presentment, demand for payment, notice of
dishonor, notice of nonpayment, protest, notice of protest, and any and all
other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and the Borrower hereby
waives the benefits of any statute of limitations with respect to any action to
enforce, or otherwise related to, this Note.
This Note is secured by the Loan Agreement and all other present and future
security agreements between the Borrower and GBC and shall continue to be so
secured until the indefeasible payment in full of all amounts due and owing in
connection herewith and therewith (notwithstanding anything to the contrary in
any other agreement between the Borrower and GBC). Nothing herein shall be
deemed to limit any of the terms or provisions of the Loan Agreement or any
other present or future document, instrument or agreement, between the Borrower
and GBC, and all of GBC's rights and remedies hereunder and thereunder are
cumulative.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of GBC, and then only to the extent therein specifically set
forth. If more than one person executes this Note, their obligations hereunder
shall be joint and several.
GBC AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS NOTE;
(ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
A-2.
<PAGE>
AGREEMENT BETWEEN GBC AND BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF
GBC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER; IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
This Note is payable in, and shall be governed by the laws of, the State of
California.
TSW INTERNATIONAL, INC.
BY
-------------------------------------
PRESIDENT OR VICE PRESIDENT
BY
-------------------------------------
SECRETARY OR ASSISTANT SECRETARY
A-3.
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 10.1.5
Greyrock
Business
Credit
A NationsBank Company
SECURED PROMISSORY NOTE
$2,000,000 Los Angeles, California August 1, 1996
FOR VALUE RECEIVED, the undersigned (the "Borrower") promises to pay to the
order of GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL
CORPORATION ("GBC"), at 300 North Continental Blvd., Suite 200, El Segundo,
California 90245, or at such other address as the holder of this Note shall
direct, the principal sum of TWO MILLION Dollars ($2,000,000), payable in 36
installments of $55,556.00 principal per month (except that the last such
installment shall be in the amount of $55,540.00), plus interest as hereinafter
provided, commencing on August 31, 1997 and continuing on the last day of each
succeeding month, until the earlier of the following dates (the "Maturity
Date"): (i) August 31, 2000, or (ii) the date the Loan and Security Agreement
between the Borrower and GBC dated November 17, 1995, as amended (as amended,
the "Loan Agreement") terminates by its terms or is terminated by either party
in accordance with its terms. On the Maturity Date the entire remaining unpaid
principal balance of this Note, plus any and all accrued and unpaid interest,
shall be due and payable.
This Note shall bear interest on the unpaid principal balance hereof from
time to time outstanding at a rate equal to the following: The interest rate in
effect throughout each calendar month during the term of this Note shall be the
highest "LIBOR Rate" in effect during such month, plus 5.25% per annum, provided
that the interest rate in effect in each month shall not be less than 8% per
annum. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. "LIBOR Rate" has the meaning set forth in the
Loan Agreement.
Accrued interest on this Note shall be payable monthly, in addition to any
principal payments provided above, commencing on August 31, 1996, and continuing
on the last day of each succeeding month. Any accrued interest not paid when due
shall bear interest at the same rate as the principal hereunder.
Principal of and interest on this Note shall be payable in lawful money of
the United States of America. If a payment hereunder becomes due and payable on
a Saturday, Sunday or legal holiday, the due date thereof shall be extended to
the next succeeding business day, and interest shall be payable thereon during
such extension.
In the event any payment of principal or interest on this Note is not paid
in full when due, or if any other default or event of default occurs hereunder,
under the Loan Agreement or under any other present or future instrument,
document, or agreement between the Borrower and GBC (collectively, "Events of
Default"), GBC may, at its option, at any time thereafter, declare the entire
unpaid
1.
<PAGE>
GREYROCK BUSINESS CREDIT SECURED PROMISSORY NOTE
- --------------------------------------------------------------------------------
principal balance of this Note plus all accrued interest to be immediately due
and payable, without notice or demand. Without limiting the foregoing, and
without limiting GBC's other rights and remedies, in the event any installment
of principal or interest is not paid in full on the date due (whether at stated
maturity, by acceleration or otherwise), the Borrower shall pay interest on such
unpaid principal or interest, from the later of (i) the date such amount becomes
due and (ii) the Notice Date (as defined below), until the date such amount is
paid in full, payable from time to time on demand, at a rate per annum equal at
all times to the interest rate set forth above, PLUS an additional four percent
per annum. GBC shall send written notice to the Borrower that overdue interest
shall accrue hereunder (the date of such notice the "Notice Date"). The
acceptance of any installment of principal or interest by GBC after the time
when it becomes due, as herein specified, shall not be held to establish a
custom, or to waive any rights of GBC to enforce payment when due of any further
installments or any other rights, nor shall any failure or delay to exercise any
rights be held to waive the same.
All payments hereunder are to be applied first to costs and fees referred
to hereunder, second to the payment of accrued interest and the remaining
balance to the payment of principal. Any principal prepayment hereunder shall be
applied against principal payments in the inverse order of maturity. GBC shall
have the continuing and exclusive right to apply or reverse and reapply any and
all payments hereunder. Principal and interest becoming due hereunder may, in
GBC's discretion, be charged to Borrower's loan account under the Loan
Agreement, and the same shall thereafter bear interest at the same rate as the
other Loans under the Loan Agreement.
The Borrower agrees to pay all reasonable costs and expenses (including
without limitation reasonable attorneys' fees) incurred by GBC in connection
with or related to this Note, or its enforcement, whether or not suit be
brought. The Borrower hereby waives presentment, demand for payment, notice of
dishonor, notice of nonpayment, protest, notice of protest, and any and all
other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and the Borrower hereby
waives the benefits of any statute of limitations with respect to any action to
enforce, or otherwise related to, this Note.
This Note is secured by the Loan Agreement and all other present and future
security agreements between the Borrower and GBC and shall continue to be so
secured until the indefeasible payment in full of all amounts due and owing in
connection herewith and therewith (notwithstanding anything to the contrary in
any other agreement between the Borrower and GBC). Nothing herein shall be
deemed to limit any of the terms or provisions of the Loan Agreement or any
other present or future document, instrument or agreement, between the Borrower
and GBC, and all of GBC's rights and remedies hereunder and thereunder are
cumulative.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of GBC, and then only to the extent therein specifically set
forth. If more than one person executes this Note, their obligations hereunder
shall be joint and several.
2.
<PAGE>
GREYROCK BUSINESS CREDIT SECURED PROMISSORY NOTE
- --------------------------------------------------------------------------------
GBC AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS
NOTE; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN GBC
AND BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF GBC OR BORROWER OR ANY
OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH GBC OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
This Note is payable in, and shall be governed by the laws of, the State of
California.
TSW INTERNATIONAL, INC.
BY /s/ John Bartels
--------------------------------------
PRESIDENT OR VICE PRESIDENT
BY: /s/ illegible
--------------------------------------
SECRETARY OR ASSISTANT SECRETARY
<PAGE>
EXHIBIT 10.1.6
DATED 6 November 1996
(1) TSW INTERNATIONAL LIMITED
(2) GREYROCK BUSINESS CREDIT
(a division of NationsCredit
Commercial Corporation)
---------------------------------------
GUARANTEE
---------------------------------------
Kennedys
Longbow House
14-20 Chiswell Street
LONDON
EC1Y 4TY
REF: ERF KZD B409-1 JS
DRAFT: 03.10.96
JOB NO: JS-DOC10\B409-001
<PAGE>
THIS GUARANTEE is made BY DEED on the 6th day of November 1996
BY:
(1) TSW INTERNATIONAL LIMITED a company incorporated under the laws of
England having its registered office at Britannia Wharf, Monument
Road, Woking, Surrey GU21 5LW ("the Guarantor")
IN FAVOUR OF:
(2) GREYROCK BUSINESS CREDIT a division of Nations Credit Commercial
Corporation of 10880 Wilshire Boulevard, Suite 950, Los Angeles,
California 90024 USA ("the Creditor")
NOW THIS DEED WITNESSES and the Guarantor hereby agrees:
1. INTERPRETATION
1.1 Unless the context otherwise requires or unless otherwise defined in
this Guarantee, words and expressions shall have the same respective
meanings that are ascribed to them in the Facility Document.
1.2 In this Guarantee:
"FACILITY DOCUMENT" means the Loan and Security Agreement
between the Creditor and the Principal
Debtor dated 17 November 1995 as
amended as of 1 August 1996 and as
further amended from time to time
"INTEREST RATE" means the rate of interest specified in
the Facility Document
<PAGE>
2
"PRINCIPAL DEBTOR" means TSW International Inc of 3301
Windy Ridge Parkway, Atlanta,
GA30339
"RESERVATIONS" means (a) the principle that equitable
remedies are at the discretion of the
Court; (b) the limitation on enforcement
by laws relating to insolvency
liquidation, reorganisation, court
schemes, moratoria, administration and
other laws affecting the rights of
creditors generally; (c) the time
barring of claims and (d) similar
principles and rights
"OBLIGATIONS" means the obligations of the Principal
Debtor as defined and set out in the
Facility Document.
1.3 In this Guarantee:
(a) references to clauses are to be construed as references to the
clauses of this Guarantee;
(b) references to this Guarantee and any provisions of this Guarantee
or to any other document or agreement are to be construed as
references to this Guarantee, those provisions or that document
or agreement in force for the time being and as amended, varied,
supplemented, substituted or novated from time to time;
<PAGE>
3
(c) words importing the singular are to include the plural and vice
versa;
(d) references to a person are to be construed to include references
to a corporation, firm, company, partnership, joint venture,
unincorporated body of persons, individual or any state or any
agency of a state, whether or not a separate legal entity;
(e) references to any person are to be construed to include that
person's permitted assigns or transferees or successors in title,
whether direct or indirect;
(f) references to any statutory provision are to be construed as
references to that statutory provision as amended, supplemented,
re-enacted, or replaced from time to time (whether before or
after the date of this Guarantee) and are to include any orders,
regulations, instruments or other subordinate legislation made
under or deriving validity from that statutory provision;
(g) the words "other" and "otherwise" are not to be construed EIUSDEM
GENERIS with any foregoing words where the context admits of a
wider construction;
(h) references to liability are to include any liability whether
actual, contingent, present or future; and
(i) clause headings are for ease of references only and are not to
affect the interpretation of this Guarantee.
<PAGE>
4
(j) each of the provisions shall be severable and distinct from one
another and if one or more of such provisions is invalid or
unenforceable the remaining provisions shall not be affected in
any way.
2. REPRESENTATIONS AND WARRANTIES BY THE GUARANTOR
2.1 The Guarantor hereby represents and warrants to the Creditor that:
(a) the Guarantor is duly incorporated under the laws of England, has
the capacity to sue or be sued in its own name and has power to
carry on its business as now being conducted and to own its
property and other assets;
(b) the Guarantor has full power and authority to execute, deliver
and perform its obligations under this Guarantee and no
limitation on the powers of the Guarantor will be exceeded as a
result of the Guarantor entering into this Guarantee;
(c) the execution, delivery and performance by the Guarantor of this
Guarantee and the performance of its obligations under this
Guarantee have been duly authorised by all necessary corporate
action and do not contravene or conflict with:
(i) the Guarantor's memorandum and articles of association;
or
(ii) any existing law, statute, rule or regulation or any
judgment, decree or permit to which the Guarantor is
subject; or
<PAGE>
5
(iii) the terms of any agreement or other document to which
the Guarantor is a party or which is binding upon it or
any of its assets; and
(d) subject to the Reservations, this Guarantee is the legal, valid
and binding obligation of the Guarantor and is enforceable
against the Guarantor in accordance with its terms.
2.2 The Guarantor acknowledges that the Creditor has accepted this
Guarantee in full reliance on the representations and warranties set
out in this Clause 2.
3. GUARANTEE
3.1 The Guarantor irrevocably and unconditionally undertakes the
obligations and liabilities set out herein.
3.2 Subject to Clause 3.5 the Guarantor irrevocably and unconditionally
guarantees to pay to the Creditor on demand, and in the currency in
which the same falls due for payment, all monies and liabilities which
are now or at any time hereafter shall have become due from and shall
not have been paid by, the Principal Debtor to or in favour of the
Creditor under or in connection with the Facility Document; and
3.3 Subject to Clause 3.5 the Guarantor, as a principal obligor and as a
separate and independent obligation and liability from its obligations
and liabilities under Clause 3.2, irrevocably and unconditionally
agrees to indemnify the Creditor in full on demand against all losses,
costs and expenses fees and charges suffered or reasonably incurred by
the Creditor arising from or in connection with the failure of the
Principal
<PAGE>
6
[PAGE 6 IS MISSING FORM ORIGINAL DOCUMENT]
<PAGE>
7
shall remain in operation until all the Obligations have been duly
performed.
4.2 The Guarantor acknowledges and agrees that none of its liabilities
under this Guarantee shall be reduced, discharged or otherwise
adversely affected by:
(a) any variation, extension, discharge, compromise, dealing with,
exchange or renewal or any right or remedy which the Creditor may
now or hereafter have from or against any of the Principal Debtor
and any other person in respect of any of the obligations and
liabilities of any of the Principal Debtor and any other person
under and in respect of the Facility Document;
(b) any act or omission by the Creditor or any other person in taking
up, perfecting or enforcing any security or guarantee from or
against any of the Principal Debtor and any other person;
(c) any termination, amendment, variation, novation or supplement of
or to the Facility Document;
(d) any grant of time, indulgence, waiver or concession to the
Principal Debtor and any other person;
(e) any of the insolvency, bankruptcy, liquidation, administration,
winding-up, incapacity, limitation, disability, the discharge by
operation of law, and any change in the constitution, name and
style of the Principal Debtor and any other person;
<PAGE>
8
(f) any invalidity, illegality, unenforceability, irregularity or
frustration of any actual or purported obligation of the
Principal Debtor and of any other person;
(g) any claim or enforcement of payment from the Principal Debtor and
any other person; or
(h) any act or omission which would not have discharged or affected
the liability of the Guarantor had it been a principal debtor
instead of guarantor or indemnitor or by anything done or omitted
by any person which but for this provision might operate to
exonerate or discharge the Guarantor or otherwise reduce or
extinguish its liability under this Guarantee.
4.3 PRIMARY OBLIGATION
(a) The obligations and liabilities expressed to be undertaken by the
Guarantor under this Guarantee are those of primary obligor and
not merely as a surety.
(b) The Creditor shall not be obliged before taking steps to enforce
any of its rights and remedies under this Guarantee:
(i) to take action or obtain judgment in any court against
the Principal Debtor and any other person; or
(ii) to make or file any claim in a bankruptcy, liquidation,
administration or insolvency of the Principal Debtor
and any other person; or
<PAGE>
9
(iii) to make demand, enforce or seek to enforce any claim,
right or remedy against the Principal Debtor and any
other person.
4.4 NO SECURITY
(a) The Guarantor warrants to the Creditor that it has not taken or
received, and agrees not to take, exercise, or receive the
benefit of any security or other such right or benefit (whether
by set-off, counterclaim, subrogation, indemnity, proof in
liquidation or otherwise and whether from contribution or
otherwise, all together "Rights") from or against the Principal
Debtor and any other person in respect of any liability of or
payment by the Guarantor under this Guarantee or otherwise in
connection with this Guarantee.
(b) If any such Rights is taken, exercised or received by the
Guarantor, the Guarantor declares that such Rights and all monies
at any time received or held in respect of such Rights shall be
held by the Guarantor on trust for the Creditor for application
in or towards the discharge of the liabilities of the Guarantor
to the Creditor under this Guarantee.
(c) The Guarantor agrees that all other Rights and all monies from
time to time held on trust by the Guarantor for the Creditor
under or pursuant to Clause 4.4(b) shall be transferred, assigned
or, as the case may be, paid to the Creditor, promptly following
the Creditor's demand.
4.5 This Guarantee shall be in addition to and shall not affect or be
affected by or merge with any other judgment, security, right or
remedy obtained
<PAGE>
10
or held by the Creditor from time to time for the discharge and
performance of any of the liabilities and obligations of the Principal
Debtor to the Creditor.
5. INTEREST
5.1 The Guarantor agrees to pay interest to the Creditor at the Interest
Rate on all sums demanded under this Guarantee from the date of the
Creditor's demand under this Guarantee until, but excluding, the date
of actual payment.
5.2 The Guarantor agrees to pay interest to the Creditor at the Interest
Rate after as well as before judgment until the date of actual
payment.
5.3 The Creditor shall be entitled to recover any amount in respect of
interest both under this Guarantee and the Facility Document in
respect of any failure to pay any sum under the Facility Document.
6. SUSPENSE ACCOUNT
6.1 The Creditor shall place to the credit of an interest bearing suspense
account any monies received under or in connection with this Guarantee
in order to preserve the rights of the Creditor to prove for the full
amount of all of its claims against the Principal Debtor and any other
person.
6.2 The Creditor may, at any time, apply any of the monies referred to in
Clause 6.1 in or towards satisfaction and discharge of any of the
monies, obligations and liabilities the subject of this Guarantee as
the Creditor, in its absolute discretion, may from time to time
conclusively determine.
<PAGE>
11
7. APPROPRIATION
The Guarantor shall not and may not direct the application by the
Creditor of any sums received by the Creditor from the Guarantor
under, or pursuant to, any of the terms of this Guarantee.
8. NEW ACCOUNTS
8.1 If this Guarantee ceases to be continuing for any reason whatsoever,
then the Creditor may open a new account or accounts in the name of
the Principal Debtor.
8.2 If the Creditor does not open a new account or accounts pursuant to
Clause 8.1, it shall nevertheless be treated as if it had done so at
the time that this Guarantee ceases to be continuing (whether by
determination, calling in or otherwise) in relation to the Principal
Debtor.
8.3 As from that time, all payments made to the Creditor by or on behalf
of the Principal Debtor shall be credited or be treated as having been
credited to the new account or accounts and shall not operate to
reduce the amount for which this Guarantee is available at that time
nor shall the liability of the Guarantor under this Guarantee in any
manner be reduced or affected by any subsequent transactions, receipts
or payments into or out of any such accounts.
9. DISCHARGE TO BE CONDITIONAL
9.1 Any release, discharge or settlement between the Guarantor and the
Creditor in relation to this Guarantee shall be conditional upon no
right, security, disposition or payment to the Creditor by the
Guarantor and any other person being void, set aside or ordered to
be refunded
<PAGE>
12
pursuant to any enactment or law relating to breach of duty by any
person, bankruptcy, liquidation, administration, protection from
creditors generally or insolvency or for any other reason.
9.2 If any such right, security, disposition or payment is void or is at
any time so set aside or ordered to be refunded, the Creditor shall be
entitled subsequently to demand payment under and to enforce this
Guarantee against the Guarantor as if such release, discharge or
settlement had not occurred and any such security, disposition or
payment had not been made.
10. PAYMENTS AND TAXES
10.1 All sums payable by the Guarantor under this Guarantee shall be
payable in such currency as is reasonably specified by the
Creditor and shall be paid to the Creditor in full without:
(a) any set-off, condition or counterclaim whatsoever; and
(b) free and clear from all deductions or withholdings whatsoever
save only as may be required by law or regulation which in either
case is binding on it.
10.2 If any deduction or withholding is required by any law or
regulation in respect of any payment due from the Guarantor
under this Guarantee or is in any event made, the relative sum
payable by the Guarantor shall be increased so that, after
making the minimum deduction or withholding so required, the
Guarantor shall pay to the Creditor and the Creditor shall
receive and be entitled to retain on the due date for payment a
net sum at least equal to the sum which it would have received
had no such deduction or withholding been required to be, or
had in fact been, made.
<PAGE>
13
10.3 The Guarantor shall promptly deliver or procure the delivery to
the Creditor of all receipts issued to it evidencing each
deduction and withholding which it has made and in the event
that the Creditor is able to recover any amounts in respect of
the deductions or withholdings referred to in Clause 10.2, it
shall forthwith credit the Guarantor's account in the relevant
amount and the Guarantor's liability hereunder shall be
accordingly reduced.
11. DEMANDS AND NOTIFICATION BINDING
11.1 Any demand, notification or certificate given by a duly
authorised officer of the Creditor specifying amounts due and
payable under or in connection with any of the provisions of
this Guarantee shall, in the absence of manifest error, be
prima facie evidence of the amounts so due and payable.
12. SET-OFF
12.1 The Creditor may, without notice to the Guarantor, apply any
credit balance which is at any time held by any office or
branch of the Creditor for the account of the Guarantor in or
towards satisfaction of any sum then due and payable from the
Guarantor under this Guarantee.
12.2 For the purposes of exercising any rights under this clause, or
any rights under the general law, the Creditor may convert or
translate all or any part of such credit balance into another
currency United States Dollars, Australian Dollars or Pounds
Sterling as appropriate applying a rate which in the Creditor's
reasonable opinion fairly reflects the relative prevailing
rates of exchange.
<PAGE>
14
12.3 The Creditor is not obliged to exercise any of its rights under
this clause, which shall be without prejudice and in addition
to any rights under the general law.
12.4 In this clause "rights under the general law" means any rights
of set-off, combination or consolidation of accounts, lien or
similar right which the Creditor has under any applicable law.
13. SERVICE OF DEMAND
13.1 A demand for payment or any other demand or notice to the
Guarantor on behalf of the Creditor under this Guarantee may be
made or given by any duly authorised manager or officer of the
Creditor in writing or facsimile transmission addressed to the
Guarantor at its address specified at the head of this
Guarantee or such other address(es) or facsimile number as may
be notified in writing from time to time by the Guarantor to
the Creditor in accordance with this clause.
13.2 Any demand, notice or communication shall be deemed to have been
duly served:
(a) If delivered by hand, when left at the proper address for
service;
(b) If given or made by pre-paid first class post by recorded
delivery, at the commencement of business hours on the
second business day after posting; and
(c) If given or made by facsimile equipment, at the time
acknowledged as received by the Guarantor's facsimile
equipment;
<PAGE>
15
PROVIDED that where in the case of delivery by hand or transmission by
facsimile, such delivery or transmission occurs outside business
hours, service shall be deemed to occur on the commencement of the
business hours on the next following business day.
14. TRANSFERS
14.1 This Guarantee is freely assignable or transferable by the
Creditor to any assignee of its rights under the Facility
Document but not otherwise.
14.2 The Guarantor may not assign any of its rights and may not
transfer any of its obligations under this Guarantee or enter
into any transaction which would result in any of those rights
or obligations passing to another person.
15. CURRENCY AND GENERAL INDEMNITY
If, under any applicable law or regulation or pursuant to a judgment
or order being made or registered against the Guarantor or the
liquidation of the Guarantor or without limitation for any other
reason, any payment under or in connection with this Guarantee is made
or falls to be satisfied in a currency (the "payment currency") other
than the currency in which such payment is reasonably expressed by the
Creditor to be due under or in connection with this Guarantee (the
"contractual currency") then, to the extent that the amount of such
payment actually received by the Creditor, when converted into the
contractual currency at the rate of exchange, falls short of the
amount due under or in connection with this Guarantee, the Guarantor,
as a separate and independent obligation, shall indemnify and hold
harmless the creditor against the amount of such shortfall. For the
purposes of this clause, "rate of exchange" means the rate at which
the Creditor is able on or
<PAGE>
16
about the date of such payment to purchase, in accordance with its
normal practice, the contractual currency with the payment currency
and shall take into account (and the Guarantor shall be liable for)
any premium and other costs of exchange including any taxes or duties
incurred by reason of any such exchange.
16. MISCELLANEOUS
16.1 No delay or omission on the part of the Creditor in exercising
any right or remedy under this Guarantee shall impair that
right or remedy or operate as or be taken to be a waiver of it;
nor shall any single partial or defective exercise of any such
right or remedy preclude any other or further exercise under
this Guarantee of that or any other right or remedy.
16.2 The Creditor's rights under this Guarantee are cumulative and
not exclusive of any rights provided by law and may be
exercised from time to time and as often as the Creditor deems
expedient.
16.3 Any waiver by the Creditor of any terms of this Guarantee, or
any consent or approval given by the Creditor under it, shall
only be effective if given in writing and then only for the
purpose and upon the terms and conditions, if any, on which it
is given.
16.4 If at any time any one or more of the provisions of the
Guarantee is or becomes illegal, invalid or unenforceable in
any respect under any law of any jurisdiction, neither the
legality, validity and enforceability of the remaining
provisions of this Guarantee nor the legality, validity or
enforceability of such provision under the law of any other
jurisdiction shall be in any way affected or impaired as a
result.
<PAGE>
17
16.5 Any certificate or determination of the Creditor as to any
matter provided for in this Guarantee shall in the absence of
manifest error, be prima facie evidence of such matter.
16.6 This Guarantee is and will remain the property of the Creditor.
17. LANGUAGE
17.1 All notices, demands or communications under or in connection
with this Guarantee shall be in English.
18. LAW AND JURISDICTION
18.1 This Guarantee is governed by and shall be construed in
accordance with English law.
18.2 The Creditor shall be at liberty to enforce this Guarantee by
taking action or proceedings against the Guarantor in the High
Court of Justice of England and Wales or elsewhere in its
absolute discretion. If such proceedings are commenced in the
High Court of Justice aforesaid the Guarantor agrees to submit
to the jurisdiction of the said court in respect of all matters
concerned with its obligations and liabilities under or arising
out of or otherwise connected with this Guarantee.
18.3 Subject to Clause 18.2 above, any dispute or difference arising
under or otherwise in connection with this Guarantee shall be
referred to the exclusive jurisdiction of the High Court of
Justice of England and Wales.
IN WITNESS whereof this document has been duly executed and has been duly
delivered on the day and year first before within.
<PAGE>
18
EXECUTED as a DEED by )
TSW INTERNATIONAL LIMITED )
)
acting by: Chris Lane and )
Nicholas Browne in the presence
of: /s/ (illegible)
---------------------
Chris Smith Director
[illegible]
Four Elms
Grosvenor Road /s/ (illegible)
Goldalming, Sy. ---------------------
V.P. Development, TSW Secretary
Executed as a Deed by )
GREYROCK BUSINESS CREDIT )
A DIVISION OF NATIONSCREDIT )
COMMERCIAL CORPORATION )
)
acting by )
)
under its authority ) /s/ (illegible)
---------------------
Authorised Signatory
<PAGE>
EXHIBIT 10.1.7
DEED OF GUARANTEE AND INDEMNITY
Date: 14 November 1996
GREYROCK BUSINESS CREDIT
a Division of NationsCredit Commercial Corporation
Beneficiary
TSW INTERNATIONAL PTY LTD
ACN 062 583 528
Guarantor
[LETTERHEAD]
<PAGE>
DEED OF GUARANTEE AND INDEMNITY made at Brisbane on 14 November 1996
BETWEEN GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL
CORPORATION of 10880 Wilshire Boulevard, Suite 950, Los Angeles,
California, 90024, United States of America ("BENEFICIARY")
AND TSW INTERNATIONAL PTY LTD (ACN 062 583 528) incorporated in New
South Wales and having its Registered Office at Level 12, 300 Ann
Street, Brisbane, Queensland ("GUARANTOR")
RECITALS
A. The Guarantor has agreed on the following terms and conditions to
guarantee to the Beneficiary all of the Obligations (as hereinafter
defined) and to indemnify the Beneficiary against any loss arising
therefrom.
THIS DEED WITNESSES
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Guarantee and Indemnity unless the context indicates a contrary
intention:
"DEBTOR" means TSW International, Inc. of 3301 Windy Ridge, Parkway,
Atlanta, Georgia, 30339, United States of America.
"ENCUMBRANCE" means any mortgage, charge, pledge, lien, encumbrance,
assignment, hypothecation, security interest, title retention,
preferential right, trust arrangement and any other security agreement or
arrangement in favour of any person.
"EVENT OF DEFAULT" means any event which constitutes a breach of, or is
declared to be an event or default howsoever described by, any Transaction
Document.
"EVENT OF INSOLVENCY" in relation to a person means any of the following
events:
(a) in the case of a corporation:
(i) a liquidator, provisional liquidator, trustee, administrator,
manager, receiver and manager, controller or similar officer
is appointed in respect of the corporation or any of its
assets;
(ii) an application is made to a court for an order or an order is
made or a meeting is convened or a resolution is passed for
winding up the corporation or for implementing a scheme of
arrangement for the corporation or for placing the
corporation under official management;
<PAGE>
(b) in the case of a natural person:
(i) an order is made for the bankruptcy of that person;
(ii) that person dies or becomes mentally or physically incapable
of managing his affairs or an order is applied for or made to
place the assets and affairs of that person under
administration pursuant to any law relating to mental health,
or under any other administration;
(iii) a receiver is appointed in respect of any of the person's
assets;
(c) in every case:
(i) a moratorium of any debts of the person or an official
assignment or a composition or an arrangement, formal or
informal, with the person's creditors or any similar
proceeding or arrangement by which the assets of that person
are submitted to the control of its creditors, is applied for,
ordered or declared;
(ii) the person becomes or is declared insolvent within the meaning
of any applicable law or is unable, or admits in writing its
inability, to pay its debts as these fall due;
(iii) any distress, execution, attachment or other process is made
or levied against any asset of the person.
"OBLIGATIONS" means all the liabilities of the Debtor to the Beneficiary
under or by reason of any Transaction Document and without limiting the
generality of the foregoing includes such liabilities which:
(d) are unliquidated;
(e) are present, prospective or contingent;
(f) are already in existence prior to or come into existence after the
date hereof;
(g) relate to the payment of money or the performance or omission of any
act;
(h) sound in damages only; or
(i) accrue as a result of any Event of Default.
"RELATED BODY CORPORATE" has the meaning given in section 9 of the
Corporations Law.
"RELEVANT PERSON" means a several reference to the Debtor, each Guarantor
and each Related Body Corporate of the Debtor or Guarantor and when used
in clause 3 shall be extended to include any person from whom a Guarantor,
but for any provision of this instrument, would be entitled to seek
contribution in respect of money paid or payable by virtue of the
guarantee contained herein.
"SECURITY" means each of the following at any time held by the Beneficiary
(whether during the currency of this Guarantee and Indemnity or
otherwise):
2.
<PAGE>
(a) any guarantee, indemnity or contract of suretyship (other than this
Guarantee and Indemnity) for the performance of the whole or any
part of the Obligations; and
(b) any Encumbrance for the performance of the whole or any part of the
Obligations or of the liabilities and obligations to the Beneficiary
under this Guarantee and Indemnity or any abovementioned guarantee,
indemnity or contract of suretyship.
"SPECIFIED RATE" means such rate as the Beneficiary specifies from time to
time.
"SURETY" means each person, other than the Debtor or the Guarantor, who at
any time enters into or gives any Security.
"TAXES" means all present and future taxes, levies, imposts, deductions,
charges, fees and withholdings whatsoever, together with interest thereon,
penalties with respect therefor and any charges, fees or other amounts in
respect thereof.
"TRANSACTION DOCUMENT" means:
(a) this document;
(b) Loan and Security Agreement entered into between the Beneficiary and
the Debtor on 17 November 1995 (as amended);
(c) each Security; and
(d) each other document to which the Debtor and/or any Guarantor (on the
one hand) and the Beneficiary (on the other hand) are parties at any
time that:
(i) relates to any money that is declared by that document to be
part of the Obligations; or
(ii) is expressed to be, or is agreed by the said parties to be, a
Transaction Document for the purposes hereof,
and any such document to which other persons are also parties or which is,
or which is expressed to be, collateral or supplemental to any other
document that is then a Transaction Document.
1.2 INTERPRETATION
In this Guarantee and Indemnity unless the context indicates a contrary
intention:
(a) if there is more than one person identified herein as the "DEBTOR",
such expression shall be construed to refer to each of them
severally and every 2 or more of them jointly;
(b) if there is more than one person identified herein as the
"GUARANTOR", such expression shall be construed to refer to, and to
bind, each of them severally and every 2 or more of them jointly;
3.
<PAGE>
(c) the expression "THIS GUARANTEE AND INDEMNITY" means this Deed of
Guarantee and Indemnity;
(d) the expression "PERSON" includes an individual, the estate of an
individual, a body politic, corporation and a statutory or other
authority or association (incorporated or unincorporated);
(e) a reference to any party includes that party's executors,
administrators, successors, substitutes and assigns, including any
person taking by way of novation;
(f) a reference to this Guarantee and Indemnity, to a Security, to a
Transaction Document or to any other deed, agreement, document or
instrument includes, respectively, this Guarantee and Indemnity, the
Security, the Transaction Document or such other deed, agreement,
document or instrument as amended, novated, supplemented, varied or
replaced from time to time;
(g) words importing the singular include the plural (and vice versa) and
words denoting a given gender include all other genders;
(h) headings are for convenience only and do not affect interpretation;
(i) any agreement, undertaking, acknowledgment or other provision that
is made or given by the Guarantor herein shall be deemed to be a
covenant by the Guarantor in favor and for the benefit of the
Beneficiary;
2. GUARANTEE AND INDEMNITY
2.1 GUARANTEE
The Guarantor hereby irrevocably and unconditionally guarantees to the
Beneficiary the due and punctual performance by the Debtor of all the
Obligations.
2.2 INDEMNITY
The Guarantor as a separate, additional and primary liability hereby
irrevocably and unconditionally agrees to indemnify the Beneficiary and at
all times hereafter to keep the Beneficiary indemnified against any loss
or damage suffered by the Beneficiary arising out of:
(a) any failure by the Debtor to duly and punctually perform the
Obligations; or
(b) any obligation or liability that would otherwise form part of the
Obligations being void, violable or unenforceable against or
irrecoverable from the Debtor by the Beneficiary in full for any
reason whatsoever (whether or not the Beneficiary knew or ought to
have known of such reason), including without limiting the
generality of the foregoing, by reason of:
4.
<PAGE>
(i) any legal limitation, disability or incapacity of the Debtor;
(ii) any improper exercise of a power or authority in relation to
the Debtor;
(iii) any right of the Beneficiary to enforce or recover such
obligation or liability or to exercise any remedy or right it
has for the recovery of such obligation or liability being
suspended or postponed by order of any court or otherwise; or
(iv) any Event of Insolvency occurring in respect of the Debtor.
2.3 LIMITATION OF LIABILITY
(a) This clause 2.3:
(i) overrides all other provisions of this Guarantee and
Indemnity;
(ii) survives the termination of this Guarantee and Indemnity; and
(iii) is not several from this Guarantee and Indemnity.
(b) The Beneficiary agrees that the Obligations of the Guarantor and the
Secured Money secured by this Guarantee and Indemnity are expressly
and strictly limited at all times to a maximum principal amount not
exceeding US $1,000,000 together with interest, fees, and
enforcement costs which the Guarantor is from time to time liable to
pay to the Beneficiary under a Transaction Document.
3. PRESERVATION OF GUARANTEE AND INDEMNITY
3.1 PRINCIPAL OBLIGATION
Each obligation of the Guarantor hereunder constitutes a principal and not
a secondary or ancillary obligation of the Guarantor to the intent that
any limitation on the liability of a Guarantor which would otherwise arise
by reason of its status as a guarantor or co-guarantor is hereby
negatived.
3.2 ABSOLUTE LIABILITY
The liability of the Guarantor hereunder shall be absolute and shall not
be subject to the execution of this Guarantee and Indemnity, any
Transaction Document (or any document that but for such execution would be
a Transaction Document) or any other instrument or document by any person,
and shall not be subject to the performance of any condition precedent or
subsequent between or amongst any person or persons including without
limiting the generality of the foregoing, between any Relevant Person and
the Beneficiary or amongst any 2 or more Relevant Persons.
3.3 UNCONDITIONAL LIABILITY
The liability of the Guarantor hereunder shall not be affected by any act,
omission, matter or thing whatsoever that would otherwise operate in law
or in equity to reduce or release the Guarantor from such liability,
including without limiting the generality of the foregoing, any of the
following:
5.
<PAGE>
(a) (EVENT OF INSOLVENCY): the occurrence prior hereto or at any time
hereafter of any Event of Insolvency in relation to any Relevant
Person;
(b) (DISTRIBUTIONS): the receipt by the Beneficiary of any payment,
dividend or distribution after any Event of Insolvency in relation
to any Relevant Person;
(c) (EVENT OF DEFAULT): the occurrence of any Event of Default;
(d) (INVALIDITY, ETC.): this Guarantee and Indemnity, any Transaction
Document, any other instrument or transaction or any other
obligation or liability that would otherwise form part of the
Obligations being or becoming illegal, invalid, void, voidable or
unenforceable by reason of any past, present or future statute,
matter, act or omission by any person or by reason of the operation
of any past, present or future law or principle of equity;
(e) (NEW GUARANTORS): the Beneficiary accepting from any person any
guarantee, indemnity or contract of suretyship for the performance
of the whole or any part of the Obligations;
(f) (TIME OR INDULGENCE): the Beneficiary agreeing with any Relevant
Person to grant time, waiver or other indulgence or concession to,
or to make any composition or compromise with, that Relevant Person
or any other Relevant Person;
(g) (FORBEARANCE): the Beneficiary forbearing or neglecting to exercise
any remedy or right it has for the enforcement of this Guarantee and
Indemnity, any Transaction Document or any other obligation or
liability forming part of the Obligations;
(h) (LACHES, ETC.): any laches, acquiescence or other act, neglect,
default, omission or mistake by the Beneficiary;
(i) (REPUDIATION): the determination, rescission, repudiation or
termination, or the acceptance of any of the foregoing, by the
Beneficiary or any Relevant Person of this Guarantee and Indemnity,
any Transaction Document or any other obligation or liability
forming part of the Obligations;
(j) (VARIATION): any variation, whether by way of insertion, deletion,
modification, novation or otherwise to this Guarantee and Indemnity,
any Transaction Document or any other obligation or liability
forming part of the Obligations, whether or not such variation is
substantial or material or imposes any additional liability upon or
is onerous on any Relevant Person including, without limiting the
generality of the foregoing, any extension of the term or increase
in the limit for, or imposition of any condition or variation in the
rate of interest in respect of, advances or financial accommodation
to the Debtor;
(k) (RELEASE): the full, partial or conditional release or discharge,
whether before or after any demand has been made on the Guarantor
hereunder by the Beneficiary or by operation of law of any Relevant
Person or any other
6.
<PAGE>
person from this Guarantee and Indemnity, any Transaction Document
or any other obligation or liability forming part of the
Obligations;
(l) (SECURITY PROPERTY): the release of any property from any Security
or the substitution of any property in place of any other property
now or hereafter the subject of a Security;
(m) (SECURITIES): the Beneficiary wasting, destroying, abandoning,
prejudicing or not perfecting, maintaining, preserving, enforcing or
realising or negligently or not bona fide enforcing or realising any
Security;
(n) (LOSS OF SECURITIES): the failure to obtain any Security or the
loss or impairment of any Security by operation of law or otherwise
(whether or not the same is in breach of an express or implied
condition to obtain or preserve such Security or in breach of any
equitable duty which might otherwise have been imposed upon the
Beneficiary);
(o) (PRIORITY OF SECURITIES): the Beneficiary agreeing to any order of
priorities with respect to any Security or to any variation or
surrender of any then previously agreed order of priority;
(p) (ACCOUNTS): the opening or operation of any new account with the
Beneficiary by any Relevant Person;
(q) (CHANGE OF CONSTITUTION): any change in membership, whether by
death or retirement of an existing member, admission of a new member
or otherwise, in the place of business or in the name of, any
partnership, firm or association in which any Relevant Person is a
member;
(r) (TRANSFER): the transfer or assignment of the benefit of any
Transaction Document or any other obligation or liability forming
part of the Obligations; or
(s) (DISCLOSURE): any failure by the Beneficiary to disclose to the
Guarantor any fact, circumstance, event or thing known to, or which
ought to have been known by, the Beneficiary relating to or
affecting any Relevant Person at any time prior to or during the
currency of this Guarantee and Indemnity, whether prejudicial or not
to the rights and liabilities of the Guarantor hereunder or under
any Transaction Document and whether or not the Beneficiary was
under a duty to disclose such circumstance, event or thing to the
Guarantor or any other Relevant Person.
(t) (ADMINISTRATION): the provisions of section 440J of the Corporations
Law so operating as to prevent or delay;
(i) the enforcement of this Guarantee against any Guarantor other
than a Guarantor in respect of whose liability the section
applies; and/or
(ii) any claim for contribution against any Guarantor.
7.
<PAGE>
3.4 NO OBLIGATION TO GAIN CONSENT
Nothing herein shall be construed as a requirement that the Guarantor
consent to or be made aware of any event referred to in clause 3.3, any
transaction between the Beneficiary and any one or more Relevant Persons
or any particulars concerning any obligation or liability that forms part
of the Obligations.
3.5 NO MARSHALLING
The Beneficiary shall be under no obligation to marshal or appropriate in
favour of any Guarantor or to exercise, apply, transfer or recover in
favour of any Guarantor any Security or any funds or assets that the
Beneficiary holds, has a claim upon, or is entitled to receive.
3.6 VOID OR VOIDABLE TRANSACTIONS
If any claim is upheld, conceded or compromised such that a transaction
affecting in any way the Obligations is void or voidable under any law
relating to bankruptcy, insolvency or liquidation:
(a) (RESTITUTION OF RIGHTS): the Beneficiary shall forthwith upon such
claim being upheld, conceded or compromised become entitled against
the Guarantor to all such rights in respect of the Obligations as it
would have had if the transaction or so much thereof as is held or
conceded to be void or voidable or is foregone on compromise had not
taken place;
(b) (RESTORE BENEFICIARY'S POSITION): the Guarantor shall upon such
claim being upheld, conceded or compromised take all steps and sign
all such documents as may be necessary or convenient to restore to
the Beneficiary any Security held by it from the Guarantor
immediately prior to such transaction;
(c) (COSTS AND EXPENSES): in any such case, notwithstanding anything
herein contained, there shall be recoverable by the Beneficiary from
the Guarantor all costs and expenses (including legal costs and
expenses as between solicitor and own client) incurred by the
Beneficiary in or in connection with any negotiations or proceedings
relating to any such claims as aforesaid; and
(d) (INDEMNITY): the Guarantor shall indemnify and keep indemnified the
Beneficiary against any failure by the Debtor to pay all or any part
of the Obligations at the time or times such Obligations should have
been paid apart from the upholding, concession or compromise of such
claim.
3.7 INSOLVENCY
The Guarantor shall not lodge any proof of debt or similar claim on the
occurrence of an Event of Insolvency in relation to any Relevant Person in
competition with the Beneficiary and the Guarantor irrevocably authorises
the Beneficiary to prove as its attorney for all money howsoever arising
which it may be entitled to from that Relevant Person and to retain and to
carry to a suspense account and appropriate at the discretion of the
Beneficiary any amounts so received until with the aid thereof the
8.
<PAGE>
Beneficiary has been paid 100 cents in the dollar in respect of the
indebtedness of the Debtor or the Guarantor (as the case may be).
3.8 NO SET-OFF, COUNTERCLAIM, ETC.
The liability of the Guarantor hereunder shall not be reduced or avoided
by any defence, set-off or counterclaim available to any other Relevant
Person against the Beneficiary.
3.9 RESTRICTION ON GUARANTOR'S DEALINGS
The Guarantor shall not without the Beneficiary's prior written consent
(which need not be given until, inter alia, the Guarantor has directed
payment of the proceeds therefrom to the Beneficiary in reduction of the
Guarantor's actual or contingent liability hereunder):
(a) (NO PROCEEDINGS): institute any proceedings against any other
Relevant Person; or
(b) (NO ENFORCEMENT OF ENCUMBRANCES): enforce any Encumbrance now or
hereafter held by it either alone or with others in respect of any
such liability as aforesaid.
3.10 RELEASE OF RELEVANT PERSON
Notwithstanding any presumption or principle of law to the contrary, the
Beneficiary may, in relation to any Relevant Person, enter into a covenant
not to sue, issue process, sign judgment and execute or commence
proceedings for the bankruptcy or liquidation of any one or more of such
resultant judgment debtors, participate in any official management scheme
of arrangement or reconstruction, prove in any bankruptcy or liquidation
and do any other act, matter or thing in respect of that Relevant Person's
liability without thereby in any way impairing or reducing the liability
of any Guarantor or other Guarantor (as the case may be) to the
Beneficiary under this Guarantee and Indemnity.
3.11 CONDITIONS PRECEDENT UNDER TRANSACTION DOCUMENT
The Beneficiary may, in its absolute discretion, waive, dispense with or
accept such evidence as it sees fit in relation to the satisfaction of any
condition precedent contained in any Transaction Document or otherwise for
the grant of any advances or financial accommodation to or for the account
of, the Debtor, and the Guarantor's liability to the Beneficiary hereunder
shall not be affected or in any way impaired by any exercise by the
Beneficiary of such discretion.
3.12 CLAIM ON THE GUARANTOR
The Beneficiary shall not be required to make any claim or demand on the
Debtor or on any other Relevant Person or to enforce any Transaction
Document or any other right, power or remedy against any Relevant Person
before making any demand or claim upon any Guarantor hereunder.
9.
<PAGE>
3.13 SUBROGATION
The Guarantor will not seek the transfer to it of any Security which is
subject to an agreed order of priority in the Beneficiary's hands pursuant
to any right of subrogation, unless and until it has entered into a deed
under which it undertakes to be bound by the priority affecting such
Security with the other parties to such agreed order of priority.
3.14 NO REPRESENTATION BY BENEFICIARY ETC.
The Guarantor acknowledges that it has not entered into this Guarantee and
Indemnity as a result of any representation, promise, statement or
inducement to the Guarantor by or on behalf of the Beneficiary, any
Relevant Person or any other person.
3.15 GENERAL WAIVER BY GUARANTOR
The Guarantor waives all rights inconsistent with the provisions of this
Guarantee and Indemnity, including all rights as to contribution,
indemnity or subrogation which it might otherwise be entitled to claim and
enforce.
4. REPRESENTATIONS AND WARRANTIES
4.1 CORPORATE REPRESENTATIONS AND WARRANTIES
The Guarantor or, if there is more than one Guarantor, each Guarantor that
is or purports to be a body corporate hereby further represents and
warrants to the Beneficiary that:
(a) (DUE INCORPORATION): it is duly incorporated and has the corporate
power to own its property and to carry on its business as is now
being conducted;
(b) (MEMORANDUM AND ARTICLES): the execution, delivery and performance
of this Guarantee and Indemnity does not violate the Memorandum and
Articles of Association of the Guarantor and, if the Guarantor is
listed on the Australian Stock Exchange Limited or its subsidiaries
or on any other stock exchange, the listing (or equivalent)
requirements thereof;
(c) (CORPORATE POWER): it has the power, and has taken all corporate
and other action required, to enter into this Guarantee and
Indemnity and to authorise the execution and delivery of this
Guarantee and Indemnity and the performance of its obligations
hereunder; and
(d) (FILINGS): it has filed all corporate notices and effected all
registrations with the Australian Securities Commission or similar
office in its jurisdiction of incorporation and in any other
jurisdiction as required by law and all such filings and
registrations are current, complete and accurate.
4.2 REPRESENTATIONS AND WARRANTIES REPEATED
Each representation and warranty contained in the preceding clauses of
this clause 4 shall be repeated on each day whilst any money the payment
or repayment of which form part of the Obligations remain outstanding
(whether or not then due for payment)
10.
<PAGE>
with reference to the facts and circumstances then subsisting, as if made
on each such day.
5. PAYMENTS
5.1 ON DEMAND
Unless otherwise provided herein, all money payable hereunder by the
Guarantor shall be paid on demand from the Beneficiary in immediately
available funds to the account, and in the manner, notified from time to
time by the Beneficiary to the Guarantor.
5.2 PAYMENT IN GROSS
All money received or recovered by the Beneficiary on account of the
Obligations shall be treated as payments in gross.
5.3 APPROPRIATION OF PAYMENTS
The Beneficiary may appropriate any money paid to it by any Relevant
Person under this Guarantee and Indemnity or any Transaction Document in
such manner and at such times as the Beneficiary in its absolute
discretion determines.
5.4 INTEREST
(a) The Guarantor shall pay to the Beneficiary interest on any moneys
owing hereunder for the period that such moneys remain unpaid:
(i) at the rate designated in the Loan and Security Agreement
entered into between the Beneficiary and the Debtor on 17
November 1995 (as amended); or
(ii) if such rate cannot be ascertained, at the Specified Rate.
(b) Any interest payable shall be calculated on daily balances and shall
accrue from day to day and be payable on the earlier of demand by
the Beneficiary and the last day of each calendar month and if
unpaid shall itself attract interest as herein provided.
5.5 MERGER
If the liability of the Guarantor to pay to the Beneficiary any money
hereunder becomes merged in any judgment or order then as an independent
obligation the Guarantor shall pay interest on the amount of such money at
the rate which is the higher of that payable hereunder and that fixed by
or payable under such judgment or order.
5.6 NO SET-OFF OR DEDUCTION
All payments by the Guarantor under this Guarantee and Indemnity shall be
free of any set-off or counterclaim and without deduction or withholding
for any present or future Taxes unless the Guarantor is compelled by law
to deduct or withhold the
11.
<PAGE>
same, in which event the Guarantor shall pay to the Beneficiary such
additional amounts necessary to enable the Beneficiary to receive, after
all deductions and withholdings for such Taxes, a net amount equal to the
full amount which would otherwise have been payable hereunder had no such
deduction or withholding been required to be made.
5.7 CURRENCY
Each amount payable hereunder:
(a) if it relates to given Obligations, is payable in the currency in
which such given Obligations are denominated; and
(b) otherwise is payable in the lawful currency from time to time of the
Commonwealth of Australia.
5.8 CURRENCY INDEMNITY
If a judgment or an order is rendered by any court or tribunal for the
payment of any amount owing to the Beneficiary pursuant to this Guarantee
and Indemnity or in relation to any other instrument or transaction
incidental to or contemplated by this Guarantee and Indemnity or for the
payment of damages in respect to any breach of this Guarantee and
Indemnity, and such judgment or order is expressed in a currency
("JUDGMENT CURRENCY") other than in the currency payable by the Guarantor
hereunder ("AGREED CURRENCY"), the Guarantor shall indemnify and keep
indemnified the Beneficiary against any deficiency in the amount received
by the Beneficiary in the Agreed Currency arising or resulting from any
variation as between:
(a) the rate of exchange at which the Agreed Currency is converted to
the Judgment Currency for the purposes of such judgment or order;
and
(b) the rate of exchange at which the Beneficiary is able to purchase
the Agreed Currency with the amount of the Judgment Currency
actually received by the Beneficiary,
and such indemnity shall constitute a separate and independent obligation
of the Guarantor and shall continue in full force and effect
notwithstanding any such judgment or order.
6. EXPENSES AND STAMP DUTY
6.1 EXPENSES
The Guarantor shall on demand reimburse the Beneficiary for, and keep the
Beneficiary indemnified against, all expenses including reasonable legal
costs and disbursements (on a solicitor/own client) basis incurred by the
Beneficiary in connection with:
(a) (PREPARATION): the preparation and execution of this Guarantee and
Indemnity and any subsequent consent, agreement, approval or waiver
hereunder or amendment hereto; and
12.
<PAGE>
(b) (ENFORCEMENT): the enforcement, attempted enforcement or
preservation of any rights under this Guarantee and Indemnity, any
Transaction Document, or arising in respect of any other obligations
or liabilities forming part of the Obligations, including without
limitation, any expenses incurred in the evaluation of any matter of
material concern to the Beneficiary.
6.2 STAMP DUTIES
The Guarantor shall:
(a) (PAYMENT OF ALL DUTIES): pay all stamp, loan transaction,
registration and similar Taxes, including fines and penalties,
financial institutions duty and debits tax, which may be payable to
or required to be paid by any appropriate authority or determined to
be payable in connection with the execution, delivery, performance
or enforcement of this Guarantee and Indemnity or any payment,
receipt or other transaction contemplated herein; and
(b) (INDEMNITY): indemnify and keep indemnified the Beneficiary against
any loss or liability incurred or suffered by it as a result of the
delay or failure by the Guarantor to pay such Taxes.
7. ASSIGNMENTS
7.1 ASSIGNMENTS BY THE BENEFICIARY
The Beneficiary may at any time assign or otherwise transfer all or any
part of its rights hereunder to any other bank or financial institution
and may disclose to a proposed assignee or transferee any information in
the possession of the Beneficiary relating to the Guarantor.
7.2 ASSIGNMENTS BY THE GUARANTOR
The Guarantor shall not assign any of its rights hereunder without the
prior written consent of the Beneficiary.
8. GOVERNING LAW AND JURISDICTION
8.1 GOVERNING LAW
This Guarantee and Indemnity shall be governed by and construed in
accordance with the laws of Queensland.
8.2 JURISDICTION
(a) (ACCEPTANCE OF JURISDICTION): The Guarantor irrevocably submits to
and accepts, generally and unconditionally, the non-exclusive
jurisdiction of the courts and appellate courts of Queensland with
respect to any legal action or proceedings which may be brought at
any time relating in any way to this Guarantee and Indemnity.
13.
<PAGE>
(b) (NO OBJECTION TO INCONVENIENT FORUM): The Guarantor irrevocably
waives any objection it may now or in the future have to the venue
of any such action or proceedings and any claim it may now or in the
future have that any such action or proceedings have been brought in
an inconvenient forum.
9. MISCELLANEOUS
9.1 CERTIFICATE OF BENEFICIARY
A certificate in writing signed by an officer of the Beneficiary
certifying the amount payable by the Debtor or the Guarantor to the
Beneficiary or stating any other act, matter or thing relating to this
Guarantee and Indemnity, any Transaction Document or any other obligations
or liabilities forming part of the Obligations, shall be conclusive and
binding on the Guarantor in the absence of manifest error on the face of
the certificate.
9.2 NOTICES
Every notice or other communication of any nature whatsoever required to
be given, served or made under or arising from this Guarantee and
Indemnity;
(a) shall be in writing in order to be valid;
(b) shall be sufficient if executed by the party giving, serving or
making the same or on its behalf by any attorney, director,
secretary, other duly authorized officer or solicitor of such party;
(c) shall be deemed to have been duly given, served or made in relation
to a person if it is delivered or posted by prepaid post to the
address, or sent by telex or facsimile to the number of that person
set out herein (or at such other address or number as may be
notified in writing by that person to the other parties from time to
time); and
(d) shall be deemed to be given, served or made:
(i) (in the case of prepaid post) on the fifth day after the date
of posting;
(ii) (in the case of telex) on receipt by the sender of the
recipient's answer back code and number;
(iii) (in the case of facsimile) on receipt of a transmission report
confirming successful transmission; and
(iv) (in the case of delivery by hand) on delivery.
9.3 CONTINUING OBLIGATION
This Guarantee and Indemnity shall be a continuing obligation
notwithstanding any termination by the Guarantor, settlement of account,
intervening payment, express or implied revocation or any other matter or
thing whatsoever, and shall continue to entitle the Beneficiary to the due
and punctual performance of all the Obligations and any contingent
liability for advances or other financial accommodation to or for the
account of the Debtor made after such termination, settlement of account,
payment,
14.
<PAGE>
revocation or other matter or thing until a final discharge thereof has
been given to the Guarantor.
9.4 DISCHARGE
Any settlement or discharge between the Guarantor and the Beneficiary
shall be conditional upon any security or payment given or made to the
Beneficiary by any Relevant Person or any other person in relation to the
Obligations not being avoided, repaid or reduced by virtue of any
provision or enactment relating to bankruptcy, insolvency or liquidation
for the time being in force. If any such security or payment is so
avoided, repaid, or reduced, the Beneficiary shall be entitled to recover
the value or amount of such security or payment avoided, repaid or reduced
from the Guarantor subsequently as if such settlement or discharge had not
occurred.
9.5 FURTHER ASSURANCE
The Guarantor shall immediately on demand by the Beneficiary and at the
entire cost and expense of the Guarantor perform all such acts and execute
all such agreements, assurances and other documents and instruments as the
Beneficiary reasonably requires to perfect or improve the rights and
powers afforded, created, or intended to be afforded or created, by this
Guarantee and Indemnity.
9.6 SEVERABILITY OF PROVISIONS
Any provision of this Guarantee and Indemnity which is illegal, void or
unenforceable shall be ineffective to the extent only of such illegality,
voidness or unenforceability without invalidating the remaining
provisions.
9.7 REMEDIES CUMULATIVE
The rights and remedies conferred by this Guarantee and Indemnity upon the
Beneficiary are cumulative and in addition to all other rights or remedies
available to the Beneficiary by law or by virtue of any Transaction
Document.
9.8 WAIVER
A failure to exercise or enforce or a delay in exercising or enforcing or
the partial exercise or enforcement of any right, remedy, power or
privilege hereunder by the Beneficiary shall not in any way preclude or
operate as a waiver of any further exercise or enforcement thereof or the
exercise or enforcement of any other right, remedy, power or privilege
hereunder or provided by law.
9.9 CONSENTS AND APPROVALS
Where any act, matter or thing hereunder depends on the consent or
approval of the Beneficiary, then unless expressly provided otherwise
herein, such consent or approval may be given or withheld in the absolute
and unfettered discretion of the Beneficiary and may be given subject to
such conditions as the Beneficiary thinks fit in its absolute and
unfettered discretion.
15.
<PAGE>
9.10 WRITTEN WAIVER, CONSENT AND APPROVAL
Any waiver, consent or approval given by the Beneficiary under this
Guarantee and Indemnity shall only be effective and shall only bind the
Beneficiary if it is given in writing, or given verbally and subsequently
confirmed in writing, and executed by the Beneficiary or on its behalf by
an officer for the time being of the Beneficiary.
9.11 TIME OF ESSENCE
Time is of the essence in respect of the Guarantor's obligations
hereunder.
9.12 MORATORIUM LEGISLATION
To the fullest extent permitted by law, the provisions of all legislation
whether existing now or in the future operating directly or indirectly:
(a) to lessen or otherwise to vary or affect in favour of the Guarantor
any obligation under this Guarantee and Indemnity; or
(b) to delay or otherwise prevent or prejudicially affect the exercise
of any rights or remedies conferred on the Beneficiary under this
Guarantee and Indemnity,
are hereby expressly waived, negatived and excluded.
9.13 DEBIT ACCOUNTS AND SET-OFF
The Guarantor authorises the Beneficiary to apply without prior notice any
credit balance whether or not then due to which the Guarantor or Related
Body Corporate is at any time entitled on any account at any office of the
Beneficiary, in or towards satisfaction of any sum then due and unpaid
from the Guarantor to the Beneficiary under this Guarantee and Indemnity,
or on any other account whatsoever. The Guarantor further authorises the
Beneficiary without prior notice to set-off any amount owing whether
present or future, actual, contingent or prospective and on any account
whatsoever by the Beneficiary to the Guarantor or Related Body Corporate
against any liability whether present, future, actual, contingent or
prospective of the Guarantor to the Beneficiary hereunder or on any other
account whatsoever. The Beneficiary shall not be obliged to exercise any
of its rights under this clause 10.13, which shall be without prejudice
and in addition to any right of set-off, combination of accounts, lien or
other right to which it is at any time otherwise entitled whether by
operation of law, contract or otherwise.
9.14 BINDING ON EACH SIGNATORY
This Guarantee and Indemnity shall bind each of the signatories hereto
notwithstanding that any one or more of the named parties hereto does not
execute this Guarantee, that there is any invalidity, forgery or
irregulatory touching any execution hereof or that this Guarantee and
Indemnity is or becomes unenforceable, void or voidable against any such
named party.
16.
<PAGE>
9.15 COUNTERPARTS
This Guarantee and Indemnity may be executed in a number of counterparts
and all such counterparts taken together shall be deemed to constitute one
and the same instrument.
EXECUTED as a deed.
THE COMMON SEAL of )
TSW INTERNATIONAL PTY LTD ) [SEAL]
ACN 062 583 528 was affixed by the )
authority of the Board of Directors in the )
presence of:
/s/ Bronwyn Jeanette Heffensetz-Wright /s/ Richard Campbell Thompson
- -------------------------------------- --------------------------------
(Signature of Secretary/Director) (Signature of Director)
Bronwyn Jeanette Heffensetz-Wright Richard Campbell Thompson
- -------------------------------------- --------------------------------
(Name of Secretary/Director in Full) (Name of Director in Full)
17.
<PAGE>
EXHIBIT 10.1.8
Greyrock
Business
Credit
A NationsBank Company
SECOND AMENDMENT TO LOAN DOCUMENTS
BORROWER: TSW INTERNATIONAL, INC.
ADDRESS: 3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
DATE: APRIL 3, 1997
THIS AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is entered into
between GREYROCK BUSINESS CREDIT, a Division of NationsBank Commercial
Corporation ("GBC"), whose address is 10880 Wilshire Boulevard, Suite 950,
Los Angeles, California 90024, and the Borrower named above ("Borrower").
The Parties agree to amend and supplement the Loan and Security
Agreement between them, dated November 17, 1995 and amended on August 1, 1996
(as amended the "Loan Agreement"), effective as of the date set forth above,
as follows. (This Amendment, the Loan Agreement, any prior written amendments
to said agreements signed by GBC and the Borrower, and all other written
documents and agreements between GBC and the Borrower are referred to herein
collectively as the "Loan Documents." Capitalized terms used but not defined
in this Amendment shall have the meanings set forth in the Loan Agreement.)
1. AMENDMENT TO CREDIT LIMIT. Provided that (i) Borrower executes and
delivers the documents and instruments listed below, (ii) GBC has received,
in form and substance satisfactory to it, results of such lien searches as it
shall request, and evidence of all filings and other actions as it shall
require to perfect and continue perfected its first priority security
interest in the Collateral (as defined below), (iii) Borrower has paid the
line increase fee referred to below, and (iv) no Default or Event of Default
has occurred or is continuing (after and giving effect to the amendments
contemplated hereby), Section 1 ("Credit Limit") of the Schedule to the Loan
Agreement is amended and restated in its entirety to read as follows:
(Section 1.1): An amount not to exceed the lesser of (1) and (2) below:
(1) $20,000,000 at any one time outstanding; and
(2) an amount equal to the sum of the following
(without duplication):
(i) an amount equal to 80% of Borrower's Eligible
Receivables (as defined in Section 8 above): plus
-1-
<PAGE>
GREYROCK BUSINESS CREDIT AMENDMENT TO LOAN DOCUMENTS
- --------------------------------------------------------------------------------
(ii) the amount from time to time outstanding under
the Term Note (as defined below): plus
(iii) if requested by Borrower, and if deemed eligible
for borrowing by GBC in its sole judgment, an
amount not to exceed the lesser of (A) $9,000,000
at any one time outstanding and (B) an amount equal
to 60% of Unbilled Receivables (as defined below)
of the Borrower; plus
(iv) an amount not to exceed the lesser of (A)
$1,000,000 at any one time outstanding and (B) an
amount equal to (1) 60% of Eligible Receivables of
the UK Sub (as defined below), and (2) if requested
by Borrower, and if deemed eligible for borrowing
by GBC in its sole judgment, 45% of Unbilled
Receivables of the UK Sub; plus
(v) an amount not to exceed the lesser of (A)
$1,000,000 at any one time outstanding and (B) an
amount equal to 60% of Eligible Receivables of the
Australian Sub (as defined below).
The availability of any Loans under the amended Credit Limit set forth
above shall be subject to the condition precedent that GBC shall have
received each of the following, in form and substance satisfactory to GBC and
its counsel:
(i) a certificate of the Secretary or other appropriate officer of the
Borrower certifying (A) the resolutions and other actions taken or adopted by
the Borrower authorizing the execution, delivery and performance of this
Amendment, and (B) the incumbency, authority and signatures of each officer
of the Borrower authorized to execute and deliver this Amendment and act with
respect thereto;
(ii) the UK Consent (as defined below), in form and substance attached
hereto, duly executed by the UK Sub;
(iii) the Australian Consent (as defined below), in form and substance
attached hereto, duly executed by the Australian Sub; and
(iv) the shareholder consent, in form and substance attached hereto,
duly executed by Warburg, Pincus & Co.
As used herein, the following terms have the following meanings:
"AUSTRALIAN CONSENT" means the Consent to Amendment of the Australian
Sub in favor of GBC, in form and substance satisfactory to GBC.
"AUSTRALIAN SUB" means TSW International Pty Ltd.
"TERM NOTE" means the Secured Promissory Note, in favor of GBC, in the
original principal amount of $2,000,000, dated August 1, 1996.
"UK CONSENT" means the Consent to Amendment executed by the UK Sub in
favor of GBC, in form and substance satisfactory to GBC.
"UK SUB" means TSW International Ltd.
-2-
<PAGE>
GREYROCK BUSINESS CREDIT AMENDMENT TO LOAN DOCUMENTS
- --------------------------------------------------------------------------------
"UNBILLED RECEIVABLES" means Receivables with respect to which the
invoice and other necessary billing documentation have not been submitted to
the applicable Account Debtor in connection with a completed (or contracted)
sale of goods, rendition of services or licensing of software but which
otherwise qualify as Eligible Receivables for purposes of the Loan Agreement.
2. LINE INCREASE FEE. In connection with this Amendment, Borrower
agrees to pay a line increase fee of $50,000 due simultaneously herewith.
3. AMENDMENT OF SCHEDULE TO LOAN AGREEMENT. Section 4 of the Schedule
to the Loan Agreement is amended by deleting "November 30, 1996" and
inserting "March 31, 1998" in its place.
4. REPRESENTATIONS TRUE. To induce GBC to enter into this Amendment,
the Borrower hereby confirms and restates, as of the date hereof, the
representations and warranties made by it in Section 3 of the Loan Agreement.
For the purposes of this Section 4 each reference in Section 3 of the Loan
Agreement to "this Agreement," and the words "hereof," "herein," "hereunder,"
or words of like import in such Section, shall mean and be a reference to the
Loan Agreement as amended by this Amendment.
5. GENERAL PROVISIONS. GBC's execution and delivery of, or acceptance
of, this Amendment and any other documents and instruments in connection
herewith shall not be deemed to create a course of dealing or otherwise
create any express or implied duty by it to provide any other or further
amendments, consents or waivers in the future. This Amendment, the Loan
Agreement, and the other Loan Documents set forth in full all of the
representations and agreements of the parties with respect to the subject
matter hereof and supercede all prior discussions, representations,
agreements and understandings between the parties with respect to the subject
hereof. Except as herein expressly amended and supplemented, all of the terms
and provisions of the Loan Agreement and the other Loan Documents shall
continue in full force and effect and the same are hereby ratified and
confirmed. This Amendment forms part of the Loan Agreement and the terms of
the Loan Agreement are incorporated herein by reference.
BORROWER: GBC:
TSW INTERNATIONAL, INC. GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
BY /s/ Christopher R. Lane BY /s/ [Illegible]
--------------------------------- ---------------------------------
PRESIDENT OR VICE PRESIDENT TITLE
------------------------------
BY /s/ JOHN BARTELS
---------------------------------
SECRETARY OR ASS'T SECRETARY
-3-
<PAGE>
EXHIBIT 10.2.1
The System Works, Inc.
3301 Windy Ridge Parkway
Marietta, Georgia 30067
SECURITIES PURCHASE AGREEMENT
Dated as of June 20, 1994
To Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Dear Sirs:
The System Works, Inc., a Georgia corporation (the "Company"), hereby
agrees with Warburg, Pincus Investors, L.P., a Delaware limited partnership (the
"Purchaser") as follows:
SECTION 1. AUTHORIZATION OF SHARES
(a) The Board of Directors of the Company has approved the Restated
Articles of Incorporation in the form attached hereto as Exhibit A (the
"Articles Amendment") so as to authorize 6,000,000 shares of Common Stock, $0.01
par value per share (the "Common Stock"); reclassify the outstanding shares of
Class A and Class B common stock, $0.01 par value per share (the "Old Common
Stock") into shares of Common Stock (the "Common Reclassification"); authorize
1,897,028 shares of preferred stock, $0.01 par value per share, designated as
Series A Preferred Stock (the "Series A Preferred Stock"), having the rights,
restrictions, privileges, redemption rights and preferences as set forth herein
and in the Articles Amendment; authorize 393,965 shares of preferred stock,
$0.01 par value per share, designated as Series B Preferred Stock (the "Series B
Preferred Stock"), having the rights, restrictions, privileges, redemption
rights and preferences as set forth herein and in the Articles Amendment; and
reclassify the outstanding shares of Series C Preferred Stock and Series D
Preferred Stock into Series A Preferred Stock (the "Preferred
Reclassification").
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -2-
(b) The Company shall, prior to the Closing Date (as defined
below), (i) convene a meeting of its shareholders for the purpose of obtaining
approval by the shareholders of the Articles Amendment, to the extent required
by law, and (ii) file with the Secretary of the State of Georgia the Articles
Amendment.
SECTION 2. PURCHASE AND SALE OF SECURITIES AND WARRANT
(a) Subject to the terms and conditions set forth in this Agreement
and in reliance upon the Company's and the Purchaser's representations set forth
herein, on the Closing Date the Company shall sell to the Purchaser, and the
Purchaser shall purchase from the Company, at a purchase price equal to $7.615
per share, 393,965 shares of Series B Preferred Stock (the "Purchased Stock")
for an aggregate purchase price of $3,000,000. Such sale and purchase shall be
effected on the Closing Date by the Company executing and delivering to the
Purchaser, duly registered in the Purchaser's name, stock certificates
evidencing the 393,965 shares of Series B Preferred Stock to be purchased,
against payment by Warburg of an aggregate amount of $3,000,000, which payment
shall be effected by the wire transfer to the Company, at such account or
accounts as the Company shall specify, of $3,000,000.
(b) Subject to the terms and conditions set forth in this Agreement
and in reliance upon the Company's and the Purchaser's representations set forth
herein, on the Closing Date the Company shall sell to the Purchaser, and the
Purchaser shall purchase from the Company, $4,000,000 of a subordinated floating
rate note due July 31, 1999 having the terms and conditions set forth on Exhibit
"B" attached hereto (the "Note") for an aggregate purchase price of $4,000,000.
As used herein, the Purchased Stock and the Note shall sometimes be collectively
referred to herein as the "Purchased Securities." Such sale and purchase shall
be effected on the Closing Date by the Company executing and delivering to the
Purchaser the appropriate form of subordinated note evidencing the $4,000,000 of
the Note to be purchased, against payment by Warburg of an aggregate amount of
$4,000,000, which payment shall be effected by the wire transfer to the Company,
at such account or accounts as the Company shall specify, of $4,000,000.
(c) Simultaneously with the sale of the Purchased Securities to the
Purchaser, the Company will utilize the proceeds from such sale to repurchase
from David P. Welden an aggregate of 785,000 shares of common stock, at a
purchase price of $8.9172 per share. Such purchase shall be pursuant to the
Stock Repurchase Agreement.
(d) Simultaneously with the sale of the Purchased Securities to the
Purchaser, the Company will issue to the Purchaser a stock purchase warrant (the
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -3-
"Warrant"), in the form attached hereto as Exhibit "C" providing for the
purchase of 111,356 shares of the Common Stock of the Company at a price of
$7.615 per share.
(e) The transactions described in subsections (a), (b), (c) and (d)
above are cross conditioned so that they shall only occur on the Closing Date if
all of such transactions occur on the Closing Date.
(f) The closing of such sales and purchases shall take place at
such date as is specified as the "Closing Date" in the Stock Repurchase
Agreement (the "Closing Date"), at the offices of Troutman Sanders, 600
Peachtree Street, N.E., Suite 5200, Atlanta, Georgia, or such other location as
the Purchaser and the Company shall mutually select.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
3.1 CORPORATE ORGANIZATION
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia.
3.2 CAPITALIZATION
(a) On the date hereof, the authorized capital stock of the
Company consists of 4,600,000 shares of Class A Common Stock, 1,100,000 shares
of Class B Common Stock and 1,897,028 shares of preferred stock. The authorized
preferred stock consists of 832,592 shares designated as Series C Preferred
Stock, and 1,064,436 shares designated as Series D Preferred Stock. On the date
hereof, the issued and outstanding shares of capital stock of the Company
consists of 834,016 shares of Class A Common Stock, 0 shares of Class B Common
Stock, 832,592 shares of Series C Preferred Stock and 1,064,436 shares of Series
D Preferred Stock. On the Closing Date, after giving effect to the Common
Reclassification and the Preferred Reclassification and the transaction
contemplated hereby, the authorized capital stock of the Company shall consist
of 6,000,000 shares of Common Stock, 1,897,028 shares of Series A Preferred
Stock and 393,965 shares of Series B Preferred Stock. On the Closing Date,
after giving effect to the Common Reclassification and the Preferred
Reclassification and the transaction contemplated hereby, the issued and
outstanding shares of capital stock of the Company shall consist of 49,016
shares of Common Stock (plus any shares issued as a result of the exercise of
employ stock
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -4-
options subsequent to March 31, 1994), 1,897,028 shares of Series A Preferred
Stock and 393,965 shares of Series B Preferred Stock.
(b) All the outstanding shares of capital stock of the Company
have been duly and validly issued and are fully paid and non-assessable. Upon
the Common Reclassification as contemplated hereby, the shares of Common Stock
will be duly authorized, validly issued, fully paid and non-assessable shares of
the Company, free of all preemptive or similar rights. Upon issuance, sale and
delivery as contemplated by this Agreement, the shares of the Purchased Stock to
be issued hereunder will be duly authorized, validly issued, fully paid and non-
assessable shares of the Company, free of all preemptive or similar rights. The
foregoing representations with respect to preemptive rights are premised, in
each instance, upon the repurchase by the Company of the shares to be purchased
as contemplated by Section 2(c) hereof and the cancellation of such shares.
(c) Except for the conversion and redemption rights in respect
of the Series C Preferred Stock and Series D Preferred Stock (which are to be
reclassified as a part of the Preferred Reclassification and which shall be
provided for in the Articles Amendment in respect of the Series A Preferred
Stock) and the Series B Preferred Stock, and except for the stock options listed
on Schedule 3.2 hereto, there are no shares of Common Stock issuable upon
conversion of any security of the Company nor are there any rights, options or
warrants outstanding or other agreements to acquire shares of Common Stock nor
is the Company contractually obligated to purchase, redeem or otherwise acquire
any of its outstanding shares of Common Stock. Except as disclosed on such
Schedule 3.2, no shareholder of the Company is entitled to any preemptive
rights, rights of first refusal, redemption rights or similar rights.
3.3 CORPORATE PROCEEDINGS, ETC.
(a) The Board of Directors of the Company has duly authorized
the execution and delivery of this Agreement and the performance by the Company
of its obligations hereunder. The Board has authorized the creation and
designation of the Series A Preferred Stock and the Series B Preferred Stock,
the creation of the Common Stock, the Common Reclassification, the Preferred
Reclassification and the issuance and sale of the Note in accordance with this
Agreement and the repurchase and cancellation of shares of common stock
contemplated by Section 2(c) hereof (collectively the "Recapitalization"), and
the Company has reserved for issuance shares of Common Stock initially issuable
upon conversion of the Series A Preferred Stock and the Series B Preferred
Stock. Except for the shareholder action contemplated by Section 6.4 herein, no
other corporate action is necessary to authorize the performance by the Company
of its obligations hereunder.
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -5-
(b) This Agreement constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforceability may be limited by equitable principles or
bankruptcy, insolvency, reorganization or similar laws from time to time in
effect affecting the enforcement of creditor's rights generally.
3.4 CONSENTS AND APPROVALS
Except for the shareholder action contemplated in Section 6.4
and consents and filings described in Schedule 6.5 hereto, the execution and
delivery by the Company of this Agreement, the performance by the Company of its
obligations hereunder, and the consummation by the Company of the transactions
contemplated hereby do not require the Company to obtain any consent, approval
or action of, or make any filing with or give any notice to, any corporation,
person or firm or any public, governmental or judicial authority.
3.5 FINANCIAL STATEMENTS, MATERIAL LIABILITIES
(a) The Company has previously delivered to the Purchaser its
balance sheet as at March 31, 1994, and the related statement of income,
stockholders' equity and cash flow for the year then ended (the "Financial
Statements"), accompanied by an opinion of KPMG Peat Marwick, independent
certified public accountants. Such financial statements, including the notes
thereto, and subject to any qualifications set forth in such management letters,
have been prepared from the books and records of the Company and present fairly
the financial position and the results of operations and cash flows of the
Company as at and for the period indicated, in each case in conformity with
generally accepted accounting principles ("GAAP") consistently applied.
(b) Except as set forth in the Financial Statements, the
company has no material liabilities or obligations, absolute or contingent,
except (i) obligations and liabilities incurred in the ordinary course of
business since the date of such statement, none of which is material, or (ii)
obligations which are not required to be reflected in the Financial Statements.
3.6 PENDING ACTIONS
There is no action, suit, investigation or proceeding pending
or, to the knowledge of the Company threatened, against the Company or any of
its properties or assets by or before any court, arbitrator or governmental
body, department, commission, board, bureau, agency or instrumentality, which
questions the validity of this Agreement, the
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -6-
Articles Amendment or any action taken or to be taken pursuant hereto or
thereto, or which is reasonably likely to result in a Material Adverse Effect,
and the Company is not in default with respect to any judgment, order, writ,
injunction, decree, or award having applicability to it or its business or
properties which default could reasonably be expected to have a Material Adverse
Effect.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
(a) The Purchaser is acquiring the Purchased Securities (and will
acquire Common Stock upon conversion of the Series A Preferred Stock and Series
B Preferred Stock) for its own account for investment and not with a view
towards the resale, transfer or distribution thereof, nor with any present
intention of distributing such Purchased Securities (or the shares of Common
Stock acquired upon conversion of the Series A Preferred Stock and Series B
Preferred Stock), but subject, nevertheless, to any requirement of law that the
disposition of the Purchaser's property shall at all times be within the
Purchaser's control, and without prejudice to such Purchaser's right at all
times to sell or otherwise dispose of all or any part of such securities under a
registration under the 1933 Act or under an exemption from said registration
available under the 1933 Act.
(b) The Purchaser has full power and legal right to execute and
deliver this Agreement and to perform its obligations hereunder.
(c) The Purchaser is a validly existing legal entity, duly
organized under the laws of the jurisdiction of its organization.
(d) The Purchaser has taken all action necessary for the
authorization, execution, delivery, and performance of this Agreement and its
obligations hereunder, and upon execution and delivery by the Company, this
Agreement shall constitute a valid and legally binding obligation of the
Purchaser.
(e) There are no claims for brokerage commissions or finder's fees
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of the Purchaser.
(f) The Purchaser has such knowledge and experience in financial
and business matters that the Purchaser is capable of evaluating the merits and
risks of the
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -7-
investment by the Purchaser in the Company as contemplated by this Agreement,
and the Purchaser is able to bear the economic risk of such investment for an
indefinite period of time. The Purchaser has been furnished access to such
information and documents as the Purchaser has requested and has been afforded
an opportunity to ask questions of and receive answers from representatives of
the Company concerning the terms and conditions of this Agreement and the
purchase of securities contemplated hereby.
(g) The execution and delivery by the Purchaser of this Agreement,
the performance by the Purchaser of its obligations hereunder and the
consummation by the Purchaser of the transactions contemplated hereby do not
require the Purchaser to obtain any consent, approval or action of, or make any
filing with or give any notice to, any corporation, person or firm or any
public, governmental or judicial authority, and do not and will not result in a
breach of any of the terms, conditions or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust, credit agreement, note
or other evidence of indebtedness, the Limited Partnership Agreement of the
Purchaser, or other material agreement of the Purchaser or any rule or
regulation of any court or federal or state regulatory board or body or
administrative agency having jurisdiction over the Purchaser or over its
properties or businesses.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES.
5.1 RESALE OF SECURITIES
(a) The Purchaser covenants that it will not sell or otherwise
transfer the Purchased Securities purchased hereunder (or any shares of Common
Stock acquired upon conversion of the Series A Preferred Stock or Series B
Preferred Stock) except pursuant to an effective registration under the 1933 Act
or in a transaction which, in the opinion of counsel reasonably satisfactory to
the Company, qualifies as an exempt transaction under the 1933 Act and the rules
and regulations promulgated thereunder and any applicable state securities laws.
(b) The certificates evidencing the Purchased Stock and shares
of Common Stock issuable upon conversion of the Series A Preferred Stock and
Series B Preferred Stock and the Note, will bear a legend substantially
reflecting the foregoing restrictions on the transfer of such securities:
"The securities evidenced hereby have not
been registered under the Securities Act of
1933, as amended or the Georgia Securities Act
of
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -8-
1973, as amended (the "Acts") and may not be
transferred except pursuant to an effective
registration under the Acts or in a
transaction which, in the opinion of counsel
reasonably satisfactory to the Company,
qualifies as an exempt transaction under the
Acts and the rules and regulations promulgated
thereunder."
5.2 COVENANTS PENDING CLOSING
Pending the closing of the transactions contemplated hereby, the
Company will not, without the Purchaser's prior written consent, take any action
which would result in any of the representations or warranties contained in this
Agreement not being true at and as of the time immediately after such action, or
in any of the covenants contained in this Agreement becoming incapable of
performance. The Company will promptly advise the Purchaser of any action or
event of which it becomes aware which has the effect of making incorrect any of
such representations or warranties or which has the effect of rendering any of
such covenants incapable of performance. The Company shall not issue or
purchase shares of capital stock of the Company except pursuant to the terms of
this Agreement and except for the issuance of Class A Common Stock or Old Common
Stock to employees pursuant to the exercise of stock option agreements in
accordance with the Company's Stock Option Plan.
5.3 FURTHER ASSURANCE
Each of the parties shall execute such documents and other papers
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby. Each
such party shall use its best efforts to fulfill or obtain the fulfillment of
the conditions to the Closing as promptly as practicable.
SECTION 6. PURCHASER'S CLOSING CONDITIONS
The obligation of the Purchaser to purchase and pay for the
Purchased Securities to be purchased by the Purchaser on the Closing Date, as
provided in Section 2 hereof, shall be subject to the performance by the Company
of its agreements theretofore to be performed hereunder and to the satisfaction,
prior thereto or concurrently therewith, of the following further conditions,
except as otherwise waived by the Purchaser in writing:
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -9-
6.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained in this
Agreement shall be true on and as of the Closing Date as though such warranties
and representations were made at and as of such date, except as otherwise
affected by the transactions contemplated hereby.
6.2 COMPLIANCE WITH AGREEMENT
The Company shall have performed and complied with all agreements,
covenants and conditions contained in this Agreement which are required to be
performed or complied with by the Company prior to or on the Closing Date.
6.3 APPROVAL OF PROCEEDINGS
All proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
satisfactory in form and substance to the Purchaser and its counsel; and the
Purchaser shall have received copies of all documents or other evidence which
the Purchaser or its counsel may request in connection with such transactions
and of all records of corporate proceedings in connection therewith in form and
substance satisfactory to the Purchaser or its counsel.
6.4 SHAREHOLDER ACTION
The Company shall have convened a meeting of its shareholders at
which the shareholders shall have approved the Articles Amendment as
contemplated by Section 1(b)(i) herein.
6.5 CORPORATE ACTION
The Company shall have filed with the Secretary of the State of
Georgia the Articles Amendment as contemplated by Section 1(b)(ii) herein.
6.6 EXECUTION AND DELIVERY OF STOCK REPURCHASE AGREEMENT
David P. Welden and the Company shall have executed, delivered and
performed to Purchaser the Stock Repurchase Agreement.
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -10-
6.7 EXECUTION AND DELIVERY OF RESTATED STOCKHOLDERS AGREEMENT
John W. Blend, III shall have executed and delivered to the
Purchaser the Restated Stockholders Agreement in the form of Exhibit D attached
hereto.
6.8 EXECUTION AND DELIVERY OF RESTATED REGISTRATION RIGHTS AGREEMENT
The Restated Registration Rights Agreement in the form of Exhibit E
attached hereto shall have been executed and delivered by the parties thereto.
6.9 EXECUTION OF AGREEMENT WITH ALICE K. WELDEN
The Stock Option Cancellation and Severance Agreement between the
Company and Alice K. Welden in the form of Exhibit F attached hereto shall have
been executed and delivered by the parties thereto.
SECTION 7. COMPANY CLOSING CONDITIONS
The obligation of the Company to issue and deliver the Purchased
Securities to be sold by the Company on the Closing Date, as provided in Section
2 hereof, shall be subject to the performance by the Purchaser of its agreements
theretofore to be performed hereunder and to the satisfaction, prior thereto or
concurrently therewith, of the following further conditions:
7.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Purchaser contained in
this Agreement shall be true on and as of the Closing Date as though such
warranties and representations were made at and as of such date, except as
otherwise affected by the transactions contemplated hereby.
7.2 COMPLIANCE WITH AGREEMENT
The Purchaser shall have performed and complied with all agreements,
covenants and conditions contained in this Agreement which are required to be
performed or complied with by the Purchaser prior to or on the Closing Date.
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -11-
7.3 APPROVAL OF PROCEEDINGS
All proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
satisfactory in form and substance to the Company; and the Company shall have
received copies of all documents or other evidence which the Company and its
counsel may reasonably request in connection with such transactions and of all
records of corporate proceedings in connection therewith in form and substance
satisfactory to the Company and its counsel.
7.4 EXECUTION AND DELIVERY OF STOCK REPURCHASE AGREEMENT
David P. Welden shall have executed and delivered to the Company the
Stock Repurchase Agreement.
SECTION 8. INTERPRETATION OF THIS AGREEMENT
8.1 TERMS DEFINED
As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
EXCHANGE ACT: shall mean the Securities Exchange Act of 1934, as
amended.
STOCK REPURCHASE AGREEMENT: shall mean the agreement to be dated the
Closing Date between David P. Welden and the Company.
PERSON: shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
1933 ACT: shall mean the Securities Act of 1933, as amended.
8.2 ACCOUNTING PRINCIPLES
Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP at the
time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -12-
8.3 DIRECTLY OR INDIRECTLY
Where any provision in this Agreement refers to action to be taken
by any Person, or which such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by such
Person.
8.4 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia without giving effect to the choice-of-law
provisions thereof.
8.5 PARAGRAPH AND SECTION HEADINGS
The headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
thereof.
SECTION 9. MISCELLANEOUS
9.1 NOTICES
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been given or made if in writing
and shall be deemed to have been given or made if in writing and delivered
personally, sent by courier or sent by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses:
(a) If to the Purchaser, to:
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10022
with a copy to:
___________________________
___________________________
___________________________
Attention: _______________
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -13-
(b) If to the Company, to:
The System Works, Inc.
3301 Windy Ridge Parkway
Marietta, Georgia 30067
Attention: Chief Executive Officer
with a copy to:
Troutman Sanders
Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attention: Robert W. Grout, Esquire
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 9 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 9.
9.2 REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications which may hereafter
be executed, (b) documents received by the Purchaser on the Closing Date, and
(c) financial statements, certificates and other information previously or
hereafter furnished to the Purchaser, may be reproduced by the Purchaser by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process and the Purchaser may destroy any original document so
reproduced. All parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Purchasers in the regular
course of business) and that any enlargement, facsimile or further reproduction
of such reproduction shall likewise be admissible in evidence.
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -14-
9.3 TERMINATION AND SURVIVAL
Unless the Closing Date has occurred prior thereto, this Agreement
and, except as herein provided, all the rights of the parties hereto, shall
terminate on July 31, 1994 (unless such date is extended by mutual written
consent). All warranties, representations, and covenants made by the Purchaser
and the Company herein or in any certificate or other instrument delivered by
the Purchaser or the Company under this Agreement shall be considered to have
been relied upon by the Company or the Purchaser, as the case may be, and shall
survive all deliveries to the Purchaser of the Series A Preferred Stock and
Series B Preferred Stock, or payment to the Company for such Series A Preferred
Stock and Series B Preferred Stock, regardless of any investigation made by the
Company or the Purchaser, as the case may be, or on the Company's or the
Purchaser's behalf. All statements in any such certificate or other instrument
shall constitute warranties and representation by the Company or the Purchaser
hereunder.
9.4 SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
successor and permitted assigns of each of the parties. Neither this Agreement
nor the rights of the parties hereunder may be assigned without the written
consent of the Company and the Purchaser.
9.5 ENTIRE AGREEMENT; AMENDMENT AND WAIVER
This Agreement and the attached Exhibits and Schedules constitute
the entire understandings of the parties hereto and supersede all prior
agreements or understandings with respect to the subject matter hereof between
such parties. This Agreement may be amended, and the observance of any term of
this Agreement may be waived, with (and only with) the written consent of the
Company and the Purchaser.
9.6 SEVERABILITY
This Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforceability of this Agreement or of any other term or provision hereof.
Furthermore, in lieu of any such invalid or unenforceable term or provision, the
parties hereto intend that there shall be added as a part of this Agreement a
provision as similar in terms to such invalid or unenforceable provision as may
be possible and be valid and enforceable.
<PAGE>
Warburg, Pincus Investors, L.P.
June 20, 1994
Page -15-
9.7 LIMITATION ON ENFORCEMENT OF REMEDIES
The Company hereby agrees that it will not assert against the
limited partners of the Purchaser any claim it may have under this Agreement by
reason of any failure or alleged failure by the Purchaser to meet its
obligations hereunder. The foregoing shall not limit the Company's rights
against the general partner of the Purchaser.
9.8 COUNTERPARTS
This Agreement may be executed in one or more counterparts with the
same effect as if the parties executing the counterparts had each executed one
instrument as of the day and year first above written.
Very truly yours,
THE SYSTEM WORKS, INC.
By: /s/ John W. Blend, III
--------------------------------
WARBURG, PINCUS INVESTORS, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By: /s/ Joseph P. Landy
---------------------------
Joseph P. Landy, Partner
<PAGE>
EXHIBIT 10.2.2
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement"),
dated this 20TH day of June, 1994, among Warburg, Pincus Investors, L.P., a
Delaware limited partnership having its principal offices at 466 Lexington
Avenue, New York, New York 10028 ("Warburg"); Mr. John W. Blend, III (the
"Executive Stockholder"); The System Works, Inc., a Georgia corporation, having
its principal offices at 3301 Windy Ridge Parkway, Marietta, Georgia 30067 (the
"Company"); and David P. Welden, as Withdrawing Stockholder (the "Withdrawing
Stockholder");
WHEREAS, Warburg, the Executive Stockholder, the Company and the
Withdrawing Stockholder are parties to that certain Stockholders Agreement dated
September 16, 1992 (the "Original Agreement");
WHEREAS, pursuant to the Securities Repurchase Agreement between the
Company and the Withdrawing Stockholder, and the Securities Purchase Agreement
between the Company and Warburg, each of even date herewith, the Company is
repurchasing all of the capital stock of the Company held by the Withdrawing
Stockholder, and the Withdrawing Stockholder shall cease to hold any equity
interest in and any board or management position with the Company;
WHEREAS, the parties desire to amend and restate the Original
Agreement to reflect that the Withdrawing Stockholder is no longer a stockholder
of the Company and is no longer an officer and director of the Company, and to
address certain matters relating to the operations of the Company and the
disposition of shares of capital stock in the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto hereby agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the meanings indicated:
(a) "Common Stock" shall mean all of the shares of Common Stock, par
value $0.01 per share, of the Company.
(b) "New Preferred Stock" shall mean all of the shares of Series A
Preferred Stock and Series B Preferred Stock.
(c) "Reclassification" shall mean the reclassification of the
Company's outstanding shares of Class A and Class B Common Stock, $0.01 par
value per share, into shares of the Company's Common Stock, and the
reclassification of the Company's
<PAGE>
outstanding shares of Series C Preferred Stock and Series D Preferred Stock into
Series A Preferred Stock.
(d) "Series A Preferred Stock" shall mean all of the shares of
Preferred Stock, par value $0.01 per share, designated as Series A Preferred
Stock.
(e) "Series B Preferred Stock" shall mean all of the shares of
Preferred Stock, par value $0.01 per share, designated as Series B Preferred
Stock.
(f) "Stock" shall mean (i) all of the shares of Common Stock of the
Company owned by the Executive Stockholder on the date hereof, (ii) all
additional shares of Common Stock and all other shares of capital stock of the
Company of any class which may hereafter be issued to the Executive Stockholder,
(iii) all shares of capital stock of any other entity which the Executive
Stockholder acquires in respect of his shares of Common Stock or other shares of
capital stock covered by this Agreement in connection with any exchange, merger,
consolidation or other reorganization to which the Company is a party.
(g) "Stockholder" shall mean any of Warburg and the Executive
Stockholder.
2. DIRECTORS AND OFFICERS
(a) DIRECTORS.
(i) During the term of this Agreement, while the Executive
Stockholder is an employee of the Company, Warburg shall cause the
Executive Stockholder to be nominated to the Board of Directors.
(ii) The Stockholders shall vote their shares in favor of the
election of the directors nominated pursuant to the foregoing provisions of
this paragraph 2.
(iii) The foregoing rights shall be personal to the Executive
Stockholder and shall not be assignable to any transferee of shares from
the Executive Stockholder.
(b) OFFICERS. All of the officers of the Company shall serve at the
discretion and under the general direction of the Board of Directors. Officers
shall be elected by majority action of the Board of Directors and may be removed
from office, with or without cause, by majority action of the Board of
Directors. Subject to the foregoing, simultaneously with the execution of this
Agreement, the Board of Directors shall have taken all necessary action to
confirm the election of the Executive Stockholder as Executive Vice President of
the Company. The Board of Directors shall also from time to time elect such
additional officers as shall be consistent with the By-laws of the Company and
as in the
-2-
<PAGE>
judgment of the Board of Directors shall be needed for the management of the
business of the Company.
(c) COMPENSATION COMMITTEE. The Board of Directors shall annually
select from its members a Compensation Committee consisting of the Chairman of
the Board (who shall not vote on matters affecting the Chairman of the Board)
and not fewer than two other members who are not officers of the Company, one of
whom shall be designated as the chairman of such committee. The Compensation
Committee shall also constitute the stock option committee under existing or
future stock option plans of the Company and shall award stock options to
existing or future management, including the Executive Stockholder, as such
committee shall deem appropriate.
3. EXECUTIVE STOCKHOLDER OBLIGATIONS
(a) EXTENT OF SERVICES. The Executive Stockholder shall devote
substantially all of his time, attention and energies to the business of the
Company and shall not, while serving as an officer and director of the Company,
be engaged in any other business activity whether or not such business activity
is pursued for gain, profit or other pecuniary advantage; but this shall not be
construed as preventing the Executive Stockholder from investing his personal
assets in businesses which do not compete with the Company in such form or
manner as will not require any services on the part of the Executive Stockholder
in the operation of the affairs of the companies in which such investments are
made and in which his participation is solely that of an investor or, upon
notice to the Board of Directors of the Company, from serving on the Boards of
Directors of corporations or non-profit entities; and except that the Executive
Stockholder may purchase securities in any corporation whose securities are
regularly traded provided that such purchase shall not result in his
collectively owning beneficially at any time one percent (1%) or more of the
equity securities of any corporation engaged in a business competitive to that
of the Company.
(b) DISCLOSURE OF INFORMATION. The Executive Stockholder recognizes
and hereby acknowledges that the trade secrets, know-how and proprietary
processes owned by the Company as they may exist from time to time are valuable,
special and unique assets of the business of the Company, access to and
knowledge of which are essential to the performance of the Executive
Stockholder's duties as an officer of the Company. The Executive Stockholder
will not, during or after the term of his employment by the Company, in whole or
in part, disclose such secrets, know-how or processes to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever
(other than to vendors, customers or other persons in the ordinary course of
business under protection of written non-disclosure agreements substantially in
the form currently used by the Company), nor shall the Executive Stockholder
make use of any such property for his own purposes or for the benefit of any
person, firm, corporation or other entity except the Company or a member of the
Company) under any circumstances during or after the term of his employment,
PROVIDED that the foregoing restriction shall not apply to the extent the
Executive Stockholder is required by applicable law or legal process to disclose
information
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and PROVIDED FURTHER that after the term of his employment these restrictions
shall not apply to such secrets, know-how and processes which are then in the
public domain (provided that the Executive Stockholder was not responsible,
directly or indirectly, for such secrets, know-how or processes entering the
public domain without the Company's consent).
(c) INVENTIONS. The Executive Stockholder hereby sells, transfers
and assigns to the Company or to any person or entity designated by the Company
all of the entire right, title and interest of the Executive Stockholder in and
to all inventions, ideas, disclosures and improvements, whether patented or
unpatented, and copyrightable material, made or conceived by the Executive
Stockholder, solely or jointly, during the term hereof which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company or any of its subsidiaries, or which
otherwise relate to or pertain to the business, functions or operations of the
Company or any of its subsidiaries or which arise from the efforts of the
Executive Stockholder during the course of his employment for the Company or any
of its subsidiaries. The Executive Stockholder shall communicate promptly and
disclose to the Company, in such form as the Company requests, all information,
details and data pertaining to the aforementioned inventions, ideas, disclosures
and improvements; and the Executive Stockholder shall execute and deliver to the
Company such formal transfers and assignments and such other papers and
documents as may be necessary or required of the Executive Stockholder to permit
the Company or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain
copyright thereof. Any invention relating to the business of the Company and
disclosed by the Executive Stockholder within one year following the termination
of this Agreement shall be deemed to fall within the provisions of this
paragraph unless proved to have been first conceived and made following such
termination.
(d) COVENANTS NOT TO COMPETE OR INTERFERE. For a period ending on
the later of (i) twelve months from and after the date of termination of an
Executive Stockholder's employment by the Company or (ii) the end of the Salary
Continuation Period described in paragraph 5(b)(iii), except in either case for
a termination of employment pursuant to paragraph 5(a)(i) or 5(a)(iii) or a
voluntary termination by the Executive Stockholder following any change in
control of the Company or the sale or transfer of the Company to, or the merger
of the Company with or into, a party not controlled by, or under common control
of Warburg, the Executive Stockholder shall not engage in any business (whether
as an officer, director, owner, stockholder, partner or other direct or indirect
participant) which is engaged in the development or marketing of software or
systems of the type then being sold by, installed by, or under development by,
the Company or its subsidiaries as of the date of such termination of
employment, including without limitation maintenance planning and control
systems, in any geographic area where the Company or such subsidiaries are then
so marketing such products, nor shall the Executive Stockholder interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Company and any customer, supplier, lessor, lessee or employee of
the Company. The Executive Stockholder hereby acknowledges having been advised
that
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Warburg has made a substantial investment in the Company in part in reliance
upon the Executive Stockholder's willingness to enter into the foregoing
covenant.
(e) INJUNCTIVE RELIEF. If there is a breach or threatened breach of
the provisions of paragraphs (b), (c) or (d) of this Section 3, the Company
shall be entitled to an injunction restraining the Executive Stockholder from
such breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies for such breach or threatened breach.
4. EXECUTIVE STOCKHOLDER COMPENSATION
(a) BASE SALARY AND FRINGE BENEFITS. For all services rendered by
the Executive Stockholder to the Company (and any subsidiary of the Company
which may hereafter be established), the Company shall pay the Executive
Stockholder a salary at the rate set by the Compensation Committee (the "Base
Salary"), and payable (after deduction of applicable payroll taxes) in equal
semi-monthly installments on the 1st and 16th day of each month or on the
preceding business day if such day is a Saturday, Sunday or holiday. The
Executive Stockholder shall also be eligible for and participate in such fringe
benefits as shall be generally provided to executives of the Company, including
(but not limited to) the following: medical insurance and other welfare benefit
programs; incentive savings and retirement programs which may be adopted from
time to time by the Company; stock option plans; and club memberships. The
Executive Stockholder shall be entitled to paid vacation consistent with
existing Company policy. The Company shall continue to maintain existing
disability and "split-dollar" insurance agreements with respect to the Executive
Stockholder on terms no less favorable to the Executive Stockholder than now
existing.
(b) BONUS DETERMINATIONS AND SALARY REVIEW. The Compensation
Committee of the Company has established a bonus program for the officers and
senior executives of the Company and has set forth such criteria for the grant
of bonuses under such program, subject to change, as it shall deem appropriate
from time to time. Such bonuses may include an allocation of Company stock
options. The Executive Stockholder shall participate in such program. The
Compensation Committee shall review the Executive Stockholder's compensation at
least once a year and award such bonuses under such program and effect such
increases in the Base Salary as the Compensation Committee, in its sole
discretion, determines are merited, based upon the Executive Stockholder's
performance and consistent with the Company's compensation policies.
5. COMPANY TERMINATION RIGHTS AND OBLIGATIONS
(a) TERMINATION OF EMPLOYMENT. The Company, by action of a majority
of the Board of Directors, may at its election, subject to paragraph 5(b) below,
terminate the employment of the Executive Stockholder and relieve him of his
office or offices with the Company as follows:
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(i) Upon 30 days notice if the Executive Stockholder becomes
physically or mentally incapacitated or is injured so that he is unable to
perform the services required of him hereunder and such inability to
perform continues for a period in excess of six months and is continuing at
the time of such notice; or
(ii) For "Cause" upon notice of such termination to the
Executive Stockholder. For purposes of this Agreement, the Company shall
have "Cause" to terminate its obligations hereunder upon (A) the
determination by a majority of the Board of Directors of the Company that
the Executive Stockholder has ceased to perform his duties to the Company
(other than as a result of his incapacity due to physical or mental illness
or injury), which cessation amounts to an intentional and extended neglect
of his duties to the Company, (B) the commission by the Executive
Stockholder of an act of fraud or embezzlement against the Company or the
Board's determination that the Executive Stockholder has willfully taken
action injurious to the business or prospects of the Company, (C) the
Executive Stockholder's having been convicted of a felony involving moral
turpitude, or (D) the Board's determination that the Executive Stockholder
has materially breached any of the material covenants or agreements of the
Executive Stockholder contained in this Agreement; or
(iii) Without Cause upon 30 days notice of such termination to
the Executive Stockholder; or
(iv) Upon the death of the Executive Stockholder.
Neither the Executive Stockholder nor any of his nominees to the Board of
Directors may participate in the voting by the Board where such vote relates to
the termination of employment of the Executive Stockholder.
Upon any termination of the Executive Stockholder's employment with
the Company, the Executive Stockholder shall immediately resign from the Board
of Directors.
(b) CONSEQUENCES OF EMPLOYMENT TERMINATION.
(i) If the employment of the Executive Stockholder is
terminated pursuant to paragraph 5(a)(i) above, the Executive Stockholder
shall receive disability pay from the date of such termination until age 65
at the rate of 50% of the Base Salary or any higher rate provided by any
policies held at the time by the Company, reduced by applicable payroll
taxes and further reduced by the amount received by the Executive
Stockholder during such period under any Company-maintained disability
insurance policy or plan or under Social Security or similar laws. Such
disability payments shall be paid periodically to the Executive Stockholder
as provided in paragraph 4(a) for the payment of Base Salary.
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(ii) If the employment of the Executive Stockholder is
terminated pursuant to paragraph 5(a)(ii) or 5(a)(iv) above, the Executive
Stockholder shall receive no salary continuation pay or severance pay.
(iii) If the employment of the Executive Stockholder is
terminated pursuant to paragraph 5(a)(iii) above under circumstances other
than those described in paragraph 5(f) hereof (a termination under such
circumstances to be governed by such paragraph 5(f)), the Executive
Stockholder shall, receive salary continuation pay from the date of such
termination for a period of twelve months (the "Salary Continuation
Period") equal to his Base Salary. Such salary continuation payments (less
applicable payroll taxes) shall be paid periodically to the Executive
Stockholder as provided in paragraph 4(a) for the payment of the Base
Salary.
(c) NO DUTY TO MITIGATE. During the Salary Continuation Period, the
Executive Stockholder shall be under no obligation to mitigate the costs to the
Company of the salary continuation payments, and, provided that the Executive
Stockholder is not in breach of his obligations under paragraph 3(d) hereof, no
compensation that the Executive Stockholder may receive from another employer
during the Salary Continuation Period shall be offset against amounts owed to
the Executive Stockholder hereunder.
(d) DEATH OF THE EXECUTIVE STOCKHOLDER. If the Executive Stockholder
should die during the term of this Agreement, the Company shall purchase, and
the estate of the Executive Stockholder shall sell to the Company, at a price
equal to the then Current Repurchase Price, such number of shares of the
Company's Stock owned by the deceased Executive Stockholder as shall result from
dividing the aggregate insurance proceeds from the term life insurance policy
maintained by the Company on the life of the Executive Stockholder (as described
in subparagraph (e) below) by the then Current Repurchase Price. The "Current
Repurchase Price" shall initially be $7.615 per share of Stock, which price
shall be subject to annual review by action of a majority of the Board of
Directors based upon their best judgment as to the then fair market value of a
share of Stock, PROVIDED that the Current Repurchase Price shall not be reduced
below $4.50 per share and PROVIDED, FURTHER that in the absence of an agreement
as to the establishment of a new Current Repurchase Price, the prior price shall
continue in effect. Such review shall occur at the first meeting of the Board
of Directors occurring after each successive anniversary of the date of this
Agreement.
(e) LIFE INSURANCE. The Company shall obtain term life insurance on
the life of the Executive Stockholder in an amount equal to $625,000. The
Company shall be the sole owner and sole beneficiary of such policies and may
apply any dividends on such policies toward the payment of premiums. The
Executive Stockholder shall cooperate fully with the issuer of such policies,
including submitting to such periodic physical examinations and furnishing such
information as may be required, and shall comply with all such other
requirements of the issuer which are necessary conditions precedent to the
issuance of such life insurance policies.
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6. STOCK RIGHTS
(a) SUBSCRIPTION RIGHT. If at any time after the date hereof and
prior to the effective date of the registration statement covering the Company's
initial public offering, the Company proposes to issue equity securities of any
kind (the term "equity securities" shall include for these purposes any
warrants, options or other rights to acquire equity securities and debt
securities convertible into equity securities) of the Company (other than the
issuance of securities (x) upon the Reclassification or pursuant to the
conversion of the New Preferred Stock, (y) pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all of
the assets or other form of reorganization, or (z) pursuant to an employee stock
option plan, stock bonus plan, stock purchase plan or other management equity
program), then, as to each Stockholder who then holds in excess of five percent
(5%) of the then outstanding shares of Common Stock, the Company shall:
(i) give written notice setting forth in reasonable detail (1)
the designation and all of the terms and provisions of the securities
proposed to be issued (the "Proposed Securities"), including, where
applicable, the voting powers, preferences and relative participating,
optional or other special rights, and the qualification, limitations or
restrictions thereof and interest rate and maturity; (2) the price and
other terms of the proposed sale of such securities; (3) the amount of such
securities proposed to be issued; and (4) such other information as the
Stockholder may reasonably request in order to evaluate the proposed
issuance; and
(ii) offer to issue to each such Stockholder a portion of the
Proposed Securities equal to a percentage determined by dividing (x) the
number of shares of Common Stock held by such Stockholder and issuable to
such Stockholder, assuming conversion in full of any convertible securities
then held by such Stockholder, by (y) the total number of shares of Common
Stock then outstanding, including for purposes of this calculation all
shares of Common Stock issuable upon conversion in full of any then
outstanding convertible securities.
Each such Stockholder must exercise his or its purchase rights
hereunder within ten (10) days after receipt of such notice from the Company. If
all of the Proposed Securities offered to such Stockholders are not fully
subscribed by such Stockholders, the remaining Proposed Securities will be
reoffered to the Stockholders purchasing their full allotment upon the terms set
forth in this paragraph, until all such Proposed Securities are fully subscribed
for or until all such Stockholders have subscribed for all such Proposed
Securities which they desire to purchase, except that such Stockholders must
exercise their purchase rights within five days after receipt of all such
reoffers. To the extent that the Company offers two or more securities in
units, Stockholders must purchase such units as a whole and will not be given
the opportunity to purchase only one of the securities making up such unit.
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Upon the expiration of the offering periods described above, the
Company will be free to sell such Proposed Securities that the Stockholders have
not elected to purchase during the ninety (90) days following such expiration on
terms and conditions no more favorable to the purchasers thereof than those
offered to such holders. Any Proposed Securities offered or sold by the Company
after such 90 day period must be reoffered to the Stockholders pursuant to this
Section.
The election by a Stockholder not to exercise his or its subscription
rights under this paragraph in any one instance shall not affect his or its
right (other than in respect of a reduction in his or its percentage holdings)
as to any subsequent proposed issuance. Any sale of such securities by the
Company without first giving the Stockholders the rights described in this
Section shall be void and of no force and effect.
(b) TAG ALONG RIGHT. If Warburg shall elect to cause the transfer of
more than twenty percent (20%) of the capital stock of the Company which it then
holds (measured in terms of aggregate numbers of shares) in a transaction or
series of related transactions (other than the Reclassification, the issuance of
shares of capital stock upon conversion of the New Preferred Stock or a transfer
to one or more of its Affiliates) pursuant to a bona fide offer from a third
party (the "Buyer") who does not desire to purchase all of the shares of
Preferred Stock and Common Stock then held by the Executive Stockholder, whether
pursuant to one transaction or a series of related transactions, Warburg shall
notify the Executive Stockholder, in writing, of such offer and its terms and
conditions. The Executive Stockholder shall have the right, exercisable by
notice to Warburg given within 10 days of receipt of the terms and conditions of
the offer, to sell to the Buyer, in lieu of the sale to the Buyer by Warburg
only, on the same terms and conditions as the shares being sold by Warburg, that
number of shares of Preferred Stock and/or Common Stock which represents the
same percentage of the Executive Stockholder's shares of Preferred Stock and/or
Common Stock as the percentage of shares of Preferred Stock and/or Common Stock
that Warburg would otherwise have sold to the Buyer but for the operation of the
provisions of this paragraph. The election by the Executive Stockholder not to
exercise his rights under this paragraph in any one instance shall not affect
his right as to any subsequent proposed sale.
The foregoing right shall terminate upon the effective date of the
registration statement covering the Company's initial public offering.
(c) CONVERSION FOR PURPOSE OF CALCULATION. For purposes of this
paragraph 6, any Stockholder, including without limitation Warburg, holding both
Common Stock and/or Preferred Stock shall be deemed to own the number of shares
of Common Stock which he or it would hold assuming full conversion of all
Preferred Stock held. Similarly all calculations of sale percentages shall be
made for purpose of this paragraph 6 on an as converted basis.
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<PAGE>
7. TERM OF AGREEMENT
This Agreement shall continue as to each party to this Agreement for
as long as any such party owns stock of the Company.
8. MISCELLANEOUS.
(a) NOTICES. All notices, request, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given as
delivered personally, sent by courier or mailed, registered mail, return receipt
requested:
(i) To Warburg:
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Mr. Joseph P. Landy
(ii) To the Executive Stockholder:
John W. Blend, III
c/o The System Works, Inc.
3301 Windy Ridge Parkway
Marietta, Georgia 30067
(iii) To the Company:
The System Works
3301 Windy Ridge Park
Marietta, Georgia 30067
Attention: Chief Executive Officer
Copy to:
Robert W. Grout, Esq.
Troutman Sanders
600 Peachtree Street, N.E.
Atlanta, Georgia 30308
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(iv) To the Withdrawing Stockholder:
David P. Welden
c/o The System Works, Inc.
3301 Windy Ridge Parkway
Marietta, Georgia 30067
Copy to:
Allison Wade, Esq.
Booth, Wade & Campbell
3100 Cumberland Circle
Suite 1500
Atlanta, Georgia 30339
(b) ASSIGNMENT. This Agreement shall not be assignable by any party
hereto.
(c) SURVIVAL. Except as otherwise provided herein, this Agreement
and the obligations of the parties created hereunder shall survive any
termination of employment or disability of the Executive Stockholder.
(d) ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matters
covered hereby and supersedes any prior agreements between the Company and the
Executive Stockholder relating to his compensation, severance benefits or the
terms under which he is employed by the Company. If and to the extent that any
provisions of the Certificate of Incorporation or By-laws of the Company shall
be inconsistent with any provision of this Agreement, the provisions of this
Agreement shall prevail. This Agreement shall not be modified or amended except
by an instrument in, writing signed by or on behalf of each of the parties
hereto.
(e) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Any telecopy of a
party's signature shall constitute an original signature for purposes of this
Agreement.
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<PAGE>
(g) PARAGRAPH HEADINGS. The paragraph headings in this Agreement are
for convenience of reference only and shall not be deemed to alter or affect any
provisions hereof. Reference to numbered sections, paragraphs and subparagraphs
and lettered exhibits refer to sections, paragraphs and subparagraphs of this
Agreement and exhibits annexed hereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE SYSTEM WORKS, INC. WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co.,
its General Partner
By /s/ John W. Blend By /s/ Joseph P. Landy
---------------------------- ------------------------------
Joseph P. Landy, Partner
EXECUTIVE STOCKHOLDER:
/s/ John W. Blend, III
----------------------------------------
John W. Blend, III
WITHDRAWING STOCKHOLDER:
/s/ David P. Welden
----------------------------------------
David P. Welden
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EXHIBIT A
ARTICLES OF AMENDMENT
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<PAGE>
EXHIBIT 10.2.3
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement"), dated as of June 20th, 1994, by and among The System Works, Inc.,
a Georgia corporation (the "Company"), Warburg, Pincus Investors, L.P., a
Delaware limited partnership ("Warburg"), John W. Blend, III ("Blend"), and
David P. Welden, as Withdrawing Stockholder ("Withdrawing Stockholder").
WHEREAS, the Company, Warburg, Blend and the Withdrawing Stockholder
are parties to that certain Registration Rights Agreement dated September 16,
1992 (the "Original Agreement");
WHEREAS, Warburg has entered into the Securities Purchase Agreement of
even date herewith (the "Securities Purchase Agreement") with the Company,
pursuant to which Warburg has agreed to purchase and the Company has agreed to
sell to Warburg 393,965 shares of the Company's Series B Preferred Stock (the
"Purchased Stock");
WHEREAS, pursuant to the Securities Purchase Agreement and the Stock
Repurchase Agreement of even date herewith (the "Repurchase Agreement") between
the Company and the Withdrawing Stockholder, the Company has agreed to use the
proceeds from the sale of the Purchased Stock to repurchase all of the shares of
common stock of the Company owned by the Withdrawing Stockholder;
WHEREAS, upon the consummation of the transactions contemplated by the
Securities Purchase Agreement and the Repurchase Agreement, the Withdrawing
Stockholder shall cease to be a shareholder of the Company;
WHEREAS, as a condition to the effectiveness of the transaction, the
Withdrawing Stockholder desires to relinquish any and all rights with respect to
the Original Agreement;
WHEREAS, Warburg, the Company, Blend and the Withdrawing Stockholder
are entering into the Amended and Restated Stockholders Agreement of even date
herewith (the "Stockholders Agreement"), which will govern certain matters
relating to the operations of the Company and the disposition of shares of
capital stock in the Company;
WHEREAS, the execution and delivery of this Agreement is a condition
to the closing under the Securities Purchase Agreement and the Repurchase
Agreement and a material inducement to entering into the Stockholders Agreement;
and
WHEREAS, the parties hereto desire that all the registration rights
relating to the Company's capital stock be restated and amended and reflected
herein;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants herein contained, the parties hereto hereby agree as
follows:
SECTION 1. REGISTRATION RIGHTS
1.1 DEFINITIONS
As used in this Section 1:
(a) the term "Affiliate" means a Person (other than a subsidiary)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) the term "Common Stock" means the Common Stock of the Company,
$0.01 par value per share, including any Common Stock of the Company that may be
issued upon the reclassification of the Old Common Stock contemplated by the
Securities Purchase Agreement;
(c) the term "Form S-3" means such form under the 1933 Act as in
effect on the date hereof or any registration form under the 1933 Act
subsequently adopted by the Securities and Exchange Commission (the "SEC") which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC;
(d) the term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.3(h);
(e) the term "Old Common Stock" means the shares of Class A and Class
B Common Stock, $0.01 par value per share, of the Company outstanding
immediately prior to the Reclassification;
(f) the term "Reclassification" means the reclassification of the
Company's outstanding shares of Class A and Class B Common Stock, $0.01 par
value per share, into shares of the Company's Common Stock, and the
reclassification of the Company's outstanding shares of Series C Preferred Stock
and Series D Preferred Stock into Series A Preferred Stock.
(g) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "1933 Act") (and any
post-effective amendments
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<PAGE>
filed or required to be filed) and the declaration or ordering of effectiveness
of such registration statement;
(h) the term "Registrable Securities" means (i) the shares of Common
Stock issuable in connection with the Reclassification, (ii) the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock, (iii) the shares of Common Stock held on the date
hereof by Blend, (iv) any shares of Common Stock which the parties hereto may
hereafter acquire and (v) any capital stock of the Company issued as a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the shares of Common Stock referred to in clauses (i)-(v) above; and
(i) the number of shares of "Registrable Securities then outstanding"
shall be determined by adding the number of shares of Common Stock outstanding
which are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which upon issuance would be, Registrable
Securities.
1.2 REQUESTED REGISTRATION
(a) REQUEST FOR REGISTRATION. If the Company shall receive at any
time a written request from the Holder or Holders of in excess of 50% of the
Registrable Securities then outstanding and entitled to registration rights
under this Section 1 (the "Initiating Holders") that the Company effect a
registration, qualification or compliance with respect to all or a part of the
Registrable Securities, the Company will, within five (5) days of the receipt
thereof, give written notice of such request to all Holders and shall within
sixty (60) days of its receipt of such written request, file a registration
statement on a form deemed appropriate by the Company's counsel with the SEC
covering all the Registrable Securities which the Holders shall in writing
request (given within twenty (20) days of receipt of the notice given by the
Company pursuant to this Section 1.2(a)) to be included in such registration and
the Company shall use reasonable efforts to cause such registration statement to
become effective no later than 120 days after the receipt of such request.
The Company shall also, as soon as practicable, use reasonable efforts
to effect all such other registration, qualification and compliance (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under the applicable blue sky, or other
state securities laws, and appropriate compliance with exemptive regulations
issued under the 1933 Act, to the extent applicable) as may be so requested and
as would permit or facilitate the sale and distribution of all or such portion
of the Registrable Securities of such Holders as are specified in such request.
No request under this Section 1.2(a) may be made, however, during the 120 day
period immediately following the date on which the Company has given the Holders
notice pursuant to Section 1.3 of any registration statement with respect to
which the Holders can cause Registrable Securities to be included therein.
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The Company shall not be obligated to effect such registration,
qualification or compliance pursuant to Section 1.2(a) hereof (A) after the
Company already has effected two (2) such registrations pursuant to this Section
1.2(a) and such registrations have been declared or ordered effective or (B) in
any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance, unless the Company is already subject to service in
such jurisdiction and except as may be required by the 1933 Act or applicable
rules or regulations thereunder.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 1.2(b) below,
include other securities of the Company which are held by officers or directors
of the Company, but the Company shall have no absolute right to include any of
its securities in any such registration.
The registration rights set forth in this Section 1.2 shall be
assignable at the option of each of the Holders, in whole or in part, to any
transferee of Registrable Securities; PROVIDED, that the Company is given
written notice by such Holder at the time or within a reasonable time after said
transfer, stating the name and address of such transferee or assignee and
identifying the securities with respect to which such registration rights are
assigned.
(b) UNDERWRITING. If the Initiating Holders intend to distribute the
Registrable Securities covered by such request by means of an underwriting, they
shall so advise the Company as a part of such request made pursuant to Section
1.2(a). The Company shall enter into an agreement in customary form for a
secondary distribution with the underwriter or underwriters selected by such
Initiating Holders for such underwriting, provided such underwriters are
reasonably acceptable to the Company, but the Company shall not be required to
pay any commission to the underwriter in respect of the sale of Registrable
Securities.
If officers or directors of the Company (other than Blend) holding
other securities of the Company shall request inclusion in any registration
pursuant to this Section 1.2, the Holders shall offer to include the securities
of such officers and directors in the underwriting and may condition such offer
on their acceptance by such officers and directors of the further applicable
provisions of this Section 1. The Company shall (together with all officers and
directors proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by the
Initiating Holders reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 1.2, if the managing underwriter advises the
Holders in writing that marketing factors require a limitation on the number of
shares to be underwritten, the securities of the Company held by officers and
directors of the Company (other than Blend) shall be excluded from the
underwriting by reason of the underwriter's marketing limitation to the extent
so required by such limitation.
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If the number of Registrable Securities included in the registration statement
still exceeds the underwriter's marketing limitations, then the Registrable
Securities of the Holders shall be excluded on a pro rata basis according to the
total amount of Registrable Securities entitled to be included therein owned by
each selling Holder, or in such other apportions as shall be mutually agreed to
by such selling Holders, No Registerable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any officer or director
who has requested inclusion in such registration as provided above disapproves
of the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Initiating Holders. The
securities so withdrawn shall also be withdrawn from registration. If the
underwriter has not limited the number of Registrable Securities or other
securities to be underwritten, the Company may include its securities for its
own account in such registration if the underwriter so agrees and if the number
of Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
1.3 COMPANY REGISTRATION
(a) INCLUSION IN REGISTRATION. If the Company shall determine to
register any of its securities on a form (other than Form S-8 or Form S-4 or
their successor forms) which would permit the registration of any Registrable
Securities, the Company will:
(i) promptly give to the Holders written notice thereof (which
shall include a list of the jurisdictions, if any, in which the Company
intends to qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein which must be a firm offer underwriting, all the Registrable
Securities specified in a written request or requests made by each of the
Holders, within 30 days after receipt of the written notice from the
Company described in clause (i) above; provided, however, that if the
offering is underwritten, relates only to securities to be sold by the
Company and is the first public offering by the Company of its securities
and the Holders are advised in writing by the managing underwriter that the
sale of Registrable Securities by the Holders within 120 days of the
effective date of such registration statement, could adversely affect such
underwriting, the Holders shall not sell any of their Registrable
Securities included therein for 120 days after the effective date of such
registration statement (or such shorter time as the managing underwriter
may request).
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a). In such event the
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right of the Holders to registration pursuant to the Section 1.3 shall be
conditioned upon the Holders' participation in such underwriting and the
inclusion of the Holders' Registrable Securities in the underwriting to the
extent provided herein. The Holders shall (together with the Company
distributing its securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company and shall use their best efforts to
arrange for all documents and opinions required to be delivered thereunder in
respect of their participation as selling shareholders to be delivered.
Notwithstanding any other provision of this Section 1.3, if the managing
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, then the Company shall include in the underwriting
only that number of such securities, including Registrable Securities, which the
managing underwriter believes will not jeopardize the success of the offering
(the securities so included to be apportioned as follows: first all securities
which stockholders other than the Holders seek to include in the offering shall
be excluded from the offering to the extent limitation on the number of shares
included in the underwriting is required, then the number of shares held by
Holders that may be included in the underwriting shall be apportioned pro rata
among the selling Holders according to the total amount of Registrable
Securities entitled to be included therein owned by each selling Holder or in
such other apportions as shall be mutually agreed to by such selling Holders)
but in no event shall the amount of securities of the selling Holders included
in the offering be reduced below 25% of the total amount of securities included
in such offering, unless such offering is the initial public offering of the
Company's securities in which case the selling Holders may be excluded if the
managing underwriter makes the determination described above and no securities
other than those of the Company are included. If any of the Holders or any
officer or director disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration,
(c) NUMBER AND TRANSFERABILITY. The Holders shall be entitled to
have their shares included in an unlimited number of registrations pursuant to
this Section 1.3. The registration rights granted pursuant to this Section shall
be assignable at the option of each of the Holders, in whole or in part, to any
transferee of the Registrable Securities (i) so long as such transferee owns at
least 2% of the Common Stock (computed on a fully diluted basis) of the Company
or (ii) the transferee is an Affiliate of the Holder; PROVIDED, that the Company
is given written notice by such Holder at the time or within a reasonable time
after said transfer, stating the name and address of such transferee or assignee
and identifying the securities with respect to which such registration rights
are assigned.
1.4 FORM S-3
The Company shall use reasonable efforts to qualify for registration
on Form S-3 for secondary sales. After the Company has qualified for the use of
Form S-3, Holders of Registrable Securities shall have the right to request an
unlimited number of registrations
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on Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of shares by such holders), subject only to the following:
(i) The Company shall not be required to effect a registration
pursuant to this Paragraph 1.4 unless the Holder or Holders of Registrable
Securities requesting registration propose to dispose of shares of
Registrable Securities having an aggregate price to the public (before
deduction of underwriting discounts and expenses of sale) of more than
$500,000.
(ii) The Company shall not be required to effect a registration
pursuant to this Paragraph 1.4 unless the Holder or Holders of in excess of
50% of Registrable Securities then outstanding and entitled to registration
rights under this Section 1 consent in writing to such registration.
(iii) The Company shall not be required to effect a registration
pursuant to this Paragraph 1.4 within 180 days of the effective date of the
most recent registration pursuant to this Section 1 in which securities
held by the requesting Holder could have been included for sale or
distribution.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this
Paragraph 1,4 and shall provide a reasonable opportunity for other Holders of
Registrable Securities to participate in the registration, provided that if the
registration is for an underwritten offering, the terms of Paragraph 1.2(b)
shall apply to all participants in such offering. Subject to the foregoing, the
Company will use its best efforts to effect promptly the registration of all
shares of Registrable Securities on Form S-3 to the extent requested by the
Holder or Holders thereof for purposes of disposition.
1.5 EXPENSES OF REGISTRATION
All expenses incurred in connection with each registration,
qualification or compliance pursuant to this Section 1 including, without
limitation, all registration, filing and qualification fees, accounting fees and
printing expenses, fees and disbursements of counsel for the Company and the
reasonable fees and expenses of one counsel for the selling Holders and expenses
incidental to or required by each registration shall be borne by the Company,
provided, however, the Company shall not be required to pay an amount in excess
of $30,000 towards the fees and expenses of such counsel related to each
registration. Underwriting discounts and commissions shall be borne and paid
ratably by the Holders of the Registrable Securities included in any such
registration.
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1.6 OTHER OBLIGATIONS OF THE COMPANY
In connection with the Company's obligations to the Holders with
respect to the sale of Registrable Securities pursuant to a public offering
thereof as provided in this Section 1, the Company shall use reasonable efforts
to register Registrable Securities as required, or permitted if any Holder so
requests, by Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act") and, if the Registrable Securities to be sold meet the criteria for
listing on any exchange on which the Common Stock is then listed, apply for
listing of such Registrable Securities on such exchange.
1.7 REGISTRATION PROCEDURES
In the case of each registration, qualification or compliance effected
by the Company pursuant to this Section 1, the Company shall:
(i) Notify each Holder as to the filing of the Registration
Statement and of all amendments or supplements thereto filed prior to the
effective date of said Registration Statement;
(ii) Notify each Holder, promptly after it shall receive notice
thereof, of the time when said Registration Statement becomes effective or
when any amendment or supplement to any prospectus forming a part of said
Registration Statement has been filed;
(iii) Notify each Holder promptly of any request by the SEC for
the amending or supplementing of such Registration Statement or prospectus
or for additional information;
(iv) Prepare and promptly file with the SEC and promptly notify
each Holder of the filing of any amendments or supplements to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the 1933 Act, any
event with respect to the Company shall have occurred as a result of which
any such prospectus or any other prospectus as then in effect would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and, in addition,
prepare and file with the SEC, promptly upon the written request of any
Holder, any amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection
with the distribution of the Registrable Securities;
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(v) Advise each Holder promptly after the Company shall receive
notice or obtain knowledge of the issuance of any stop order by the SEC
suspending the effectiveness of any such Registration Statement or
amendment thereto or of the initiation or threatening of any proceeding for
that purpose, and promptly use its best efforts to prevent the issuance of
any stop order or obtain its withdrawal promptly if such stop order should
be issued;
(vi) Use reasonable efforts to qualify as soon as reasonably
practicable the Registrable Securities included in the Registration
Statement for sale under the securities or blue-sky laws of such states and
jurisdictions within the United States as shall be reasonably requested by
any Holder; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business, to become
subject to taxation or to file a consent to service of process generally in
any o-f the aforesaid states or jurisdictions; and
(vii) Furnish each Holder, as soon as available, copies of any
Registration Statement and each preliminary or final prospectus, or
supplement or amendment required to be prepared pursuant hereto, all in
such quantities as any Holder may from time to time reasonably request.
At its expense, the Company shall keep such registration effective for
a period of one hundred twenty (120) days or until each Holder has completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, that in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the 1933 Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the 1933 Act governing the
obligation to file a post-effective amendment which reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement permit the incorporation by reference of information
required to be included above to be contained in periodic reports filed pursuant
to Section 13 or 15(d) of the Exchange Act in the registration statement.
1.8 INDEMNIFICATION
(a) The Company shall indemnify each Holder, each of its officers,
directors and general and limited partners, and its Affiliates, on whose behalf
registration, qualification or compliance has been effected pursuant to this
Section 1, and each underwriter and each Affiliate thereof, of Registrable
Securities held by or issuable to each Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including any
related registration
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statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
1933 Act or any rule or regulation promulgated thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
Holder, each of its officers, directors and partners and each of its Affiliates,
and each such underwriter and each of its Affiliates, for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; PROVIDED, however, that the
Company shall not be liable to a Holder in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information furnished to the
Company by such Holder or the underwriter of any such Holder and stated to be
specifically for use therein.
(b) Each of the Holders shall, if Registrable Securities held by them
are included in the securities as to which such registration, qualification or
compliance is being effected, severally indemnify the Company, each of its
directors and officers who sign such registration statement, each Affiliate of
the Company, each underwriter, if any, of the Company's securities covered by
such registration statement, each other Holder and each Affiliate thereof
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such directors, officers, employees, Affiliates, other Holders or
underwriters for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of each Holder hereunder shall
be limited to an amount equal to the net proceeds to each Holder of securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 1 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any
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litigation resulting therefrom, shall be approved by the Indemnified Party, and
the Indemnified Party may participate in such defense at such party's expense,
and; provided further that the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 1. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of the Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.8 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten public offering contemplated by
this Agreement are in conflict with the foregoing provisions, the provisions in
such underwriting agreement shall be controlling.
1.9 LOCKUP AGREEMENT
In consideration for the Company agreeing to its obligations under
this Section 1, each Holder agrees in connection with any registration effected
by the Company hereunder (other than (i) a registration relating solely to
employee benefit plans on Form S-1, S-8 or similar forms which may be
promulgated in the future, or (ii) a registration on Form S-4 or similar form
which may be promulgated in the future relating solely to a SEC Rule 145
transaction) of the Company's securities, upon the request of the underwriters
managing any underwritten offering of the Company's securities, not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities
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(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed 120 days) from the effective date of such registration as
the Company or the underwriters may specify; PROVIDED, HOWEVER, that (i) such
Holder shall have no obligation to enter into the agreement described herein
unless all executive officers and directors of the Company enter into similar
agreements, and (ii) nothing herein shall prevent any Holder that is a
partnership from making a distribution of Registrable Securities to the partners
thereof that is otherwise in compliance with applicable securities laws, based
on an opinion of counsel, which opinion and counsel are each reasonably
satisfactory to the Company.
1.10 INFORMATION ABOUT THE HOLDERS
Each Holder shall promptly furnish to the Company such information
regarding itself, its Affiliates or subsidiaries and the distribution proposed
by it as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 1.
1.11 CONDITIONS TO REGISTRATION
As a condition to the Company's obligation hereunder to cause a
registration statement to be filed or Registrable Securities to be included in a
registration statement, each Holder shall provide such information and execute
such documents as may reasonably be required in connection with such
registration. In addition, the Company shall not be obligated to file a
registration statement or to include Registrable Securities in a registration
statement hereunder, (i) if, in the opinion of counsel to the Company the
proposed disposition of such Registrable Securities may be effected without
registration under the 1933 Act or (ii) if, in the opinion of counsel to the
Company all of such Registrable Securities may be sold by such Holder pursuant
to Rule 144 under the 1933 Act (or any successor rule) (without giving effect to
the provisions of Rule 144(k)) within a period of not more than three calendar
months from the date of such opinion.
1.12 RULE 144
With a view to making available the benefits of certain rules and
regulations of the SEC which may permit the sale of the restricted securities to
the public without registration, the Company agrees to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the 1933 Act at all times from and
after ninety (90) days following the effective date of the first registration
under the 1933 Act filed by the Company for an offering of its securities to the
general public;
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(b) Use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Exchange Act at
any time after it has become subject to such reporting requirements; and
(c) After the Company has become subject to such reporting
requirements, so long as each Holder owns any Registrable Securities, furnish to
each Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and of the 1933 Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as each Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing the Holder to sell any such securities without registration.
1.13 RIGHTS GRANTED TO SUBSEQUENT INVESTORS
Without the written consent of Holders of at least 50% of the
outstanding Registrable Securities (assuming conversions), the Company may not
grant registration rights to future investors in the Company except as described
in this Section 1.13. The Company may grant to future investors registration
rights pertaining only to shares of the Company's Common Stock (including shares
of Common Stock into which any other securities of the Company may be
convertible) and only on the following terms:
(a) Prior to the closing of the first Company-initiated underwritten
public offering of the Company's securities, the Company shall not grant to
future investors any registration rights other than (i) the right to request
inclusion in registrations initiated by the Company, but only in respect of that
portion of such registration as is available to the Holders, with the allocation
of the number of shares to be included by each such holder to be pro rata based
on the number of shares of the Company's Common Stock (assuming conversion) with
registration rights held by the respective holders (including the Holders), and
(ii) the right to request registration, provided that the Holders simultaneously
are granted the right to participate in such requested registration on a
nonpreferential, pro rata basis in accordance with the relative amounts of
Common Stock (assuming conversion) with registration rights held by the
respective holders (including the Holders).
(b) The Company shall not grant any registration rights with respect
to presently outstanding securities of the Company other than the right to
participate in registrations initiated by the Company or its shareholders
(including the Holders), and such rights may be granted only as to such portion
of the registration available after all shares requested to be included in such
registration by the Holders have been so included.
1.14 PARTNERSHIP DISTRIBUTION.
In the event that any Holder which is a limited partnership advises
the Company that it desires to exercise one of the registration rights granted
to it under Sections
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1.2, 1.3 or 1.4 of this Agreement as a Holder of Registrable Securities in order
to effect a distribution of some or all of such Registrable Securities to its
partners, then, notwithstanding any provision of this Agreement conditioning the
inclusion of Registrable Securities in a registration statement upon the
Holder's participation in an underwriting, such Holder may refrain from
including such shares in an underwriting and nevertheless cause such shares to
be included in the applicable registration statement, provided only that (a)
such registration is not the initial registration hereunder of the Company's
securities, and (b) such Holder agrees not to effect such distribution until the
expiration of a standstill period after the effective date of such registration,
such period, not to exceed 90 days, to be of that duration requested by the
managing underwriter of the underwriting of the other securities included in
such registration.
SECTION 2. NOTICES.
All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been given or made if in writing
and delivered personally, sent by courier or sent by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses:
(a) If to Warburg, to:
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10022
Attention: Mr. Joseph P. Landy
(b) If to the Company, to:
The System Works, Inc.
3301 Windy Ridge Parkway
Marietta, Georgia 30067
Attention: Chief Executive Officer
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with a copy to:
Troutman Sanders
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308
Attention: Robert W. Grout, Esq.
(c) If to Blend, to:
John W. Blend, III
c/o The System Works, Inc.
3301 Windy Ridge Parkway
Marietta, Georgia 30067
or to such other persons or at such other addresses as shall be furnished by the
party by like notice to the other parties hereto, and such notice or
communication shall be deemed to have been given or made as of the date so
delivered or mailed. No change in any of such addresses shall be effective
insofar as notices under this Section 2 are concerned unless such changed
address is located in the United States of America and notice of such change
shall have been given to such other party hereto as provided in this Section 2.
SECTION 3. ASSIGNABILITY.
This Agreement shall be binding upon and inure to the benefit of the
respective heirs, personal representatives, successors and assigns of the
parties hereto.
SECTION 4. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia.
SECTION 5. AMENDMENT.
Any modification, amendment or waiver of this Agreement or any
provision hereof shall be in writing and executed by Holders of not less than
50% of the Registrable Securities; PROVIDED, HOWEVER, that no such modification,
amendment or waiver shall reduce the aforesaid percentage of Registrable
Securities without the consent of all of the Holders of the Registrable
Securities.
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SECTION 6. TERM.
This Agreement shall continue as to each party to this Agreement for
so long as any such party owns stock of the Company.
SECTION 7. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument. Any telecopy of a party's signature shall constitute an original
signature for purposes of this Agreement.
SECTION 8. WAIVER BY WITHDRAWING STOCKHOLDER.
The Withdrawing Stockholder hereby consents to the adoption and
effectiveness of this Agreement and hereby waives, relinquishes and forever
discharges any and all rights that the Withdrawing Stockholder may have had
pursuant to the Original Agreement.
IN WITNESS WHEREOF, the Company and each of the undersigned parties
has executed this Agreement effective for all purposes as of the ___ day of May,
1994.
"THE COMPANY":
THE SYSTEM WORKS, INC.
By /s/ John W. Blend, III
--------------------------------
"WARBURG":
WARBURG, PINCUS INVESTORS, L.P.
By: WARBURG, PINCUS & CO.
General Partner
By /s/ Joseph P. Landy
---------------------------
Joseph P. Landy, Partner
[signatures continued on next page]
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[signatures continued from previous page]
"BLEND":
/s/ John W. Blend, III
------------------------------
John W. Blend, III
"WITHDRAWING STOCKHOLDER":
/s/ David P. Welden
------------------------------
David P. Welden
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EXHIBIT 10.3
STOCKHOLDER'S RIGHTS AGREEMENT
THIS STOCKHOLDER'S RIGHTS AGREEMENT (the "Agreement"), is made and
entered into this 30th day of August, 1994, by and among WARBURG, PINCUS
INVESTORS, L.P., a Delaware limited partnership ("Warburg"), ALAN JOHNSTON, an
Alabama resident ("Johnston"), and THE SYSTEM WORKS, INC., a Georgia corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to address certain matters relating
to the operations of the Company and the disposition of shares of capital stock
in the Company;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
(a) "Affiliate" shall mean a Person (other than a subsidiary) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, a Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise;
(b) "Common Stock" shall mean all of the shares of Common Stock, par
value $0.01 per share, of the Company.
(c) "Form S-3" shall mean such form under the Securities Act of 1933,
as amended (the "1933 Act"), as in effect on the date hereof or any registration
form under the 1933 Act subsequently adopted by the Securities and Exchange
Commission (the "SEC") which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC;
(d) "Holder" shall mean any Person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 3(c);
(e) "Parity Holders" shall mean those Persons defined as "Holders"
under that certain Amended and Restated Registration Rights Agreement dated June
20, 1994 between the Company, Warburg, John W. Blend, III ("Blend") and the
other parties named therein (the "Blend Agreement").
<PAGE>
(f) "Person" shall mean an individual, partnership, corporation or
other entity.
(g) "Preferred Stock" shall mean all of the shares of Series A
Preferred Stock and Series B Preferred Stock.
(h) "Register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the 1933 Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;
(i) "Registrable Securities" shall mean (i) the shares of Common
Stock held on the date hereof by Johnston (ii) any shares of Common Stock which
Johnston may hereafter acquire and (iii) any capital stock of the Company issued
as a dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (i)-(iii)
above; and
(j) The number of shares of "Registrable Securities then outstanding"
shall be determined by adding the number of shares of Common Stock outstanding
which are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which upon issuance would be, Registrable
Securities hereunder and under the Blend Agreement.
(k) "Series A Preferred Stock" shall mean all of the shares of
Preferred Stock, par value $0.01 per share, of the Company designated as Series
A Preferred Stock.
(l) "Series B Preferred Stock" shall mean all of the shares of
Preferred Stock, par value $0.01 per share, of the Company designated as Series
B Preferred Stock.
(m) "Stock" shall mean (i) all of the shares of Common Stock of the
Company owned by Johnston on the date hereof, (ii) all additional shares of
Common Stock and all other shares of capital stock of the Company of any class
which may hereafter be issued to Johnston, (iii) all shares of capital stock of
any other entity which Johnston acquires in respect of his shares of Common
Stock or other shares of capital stock covered by this Agreement in connection
with any exchange, merger, consolidation or other reorganization to which the
Company is a party.
2. STOCK RIGHTS
(a) SUBSCRIPTION RIGHT. If at any time after the date hereof and
prior to the effective date of the registration statement covering the Company's
initial public offering, the Company proposes to issue equity securities of any
kind (the term "equity securities" shall include for these purposes any
warrants, options or other rights to acquire equity securities and debt
securities convertible into equity securities) of the Company (other than
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the issuance of securities (x) pursuant to the conversion of the Preferred
Stock, (y) pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other form of
reorganization, or (z) pursuant to an employee stock option plan, stock bonus
plan, stock purchase plan or other management equity program), then, if Johnston
then holds in excess of five percent (5%) of the then outstanding shares of
Common Stock, the Company shall:
(i) give written notice to him setting forth in reasonable
detail (1) the designation and all of the terms and provisions of the
securities proposed to be issued (the "Proposed Securities"), including,
where applicable, the voting powers, preferences and relative
participating, optional or other special rights, and the qualification,
limitations or restrictions thereof and interest rate and maturity; (2) the
price and other terms of the proposed sale of such securities; (3) the
amount of such securities proposed to be issued; and (4) such other
information as Johnston may reasonably request in order to evaluate the
proposed issuance; and
(ii) offer to issue to Johnston a portion of the Proposed
Securities equal to a percentage determined by dividing (x) the number of
shares of Common Stock held by Johnston and issuable to Johnston, assuming
conversion in full of any convertible securities then held Johnston, by (y)
the total number of shares of Common Stock then outstanding, including for
purposes of this calculation all shares of Common Stock issuable upon
conversion in full of any then outstanding convertible securities.
Johnston must exercise his purchase rights hereunder within ten (10)
days after receipt of such notice from the Company. If all of the Proposed
Securities offered to Johnston are not fully subscribed by Johnston, the
remaining Proposed Securities will be reoffered to the other stockholders of the
Company who have fully exercised their subscription rights, until all such
Proposed Securities are fully subscribed for or until all such other
stockholders have subscribed for all such Proposed Securities which they desire
to purchase, except that such other stockholders must exercise their purchase
rights within five days after receipt of all such reoffers. To the extent that
the Company offers two or more securities in units, Stockholders must purchase
such units as a whole and will not be given the opportunity to purchase only one
of the securities making up such unit.
Upon the expiration of the offering periods described above, the
Company will be free to sell such Proposed Securities that Johnston and the
other stockholders have not elected to purchase during the ninety (90) days
following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to such holders. Any Proposed Securities
offered or sold by the Company after such 90 day period must be reoffered to
Johnston and the other stockholders pursuant to this Section.
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The election by Johnston not to exercise his subscription rights under
this paragraph in any one instance shall not affect his right (other than in
respect of a reduction in his percentage holdings) as to any subsequent proposed
issuance. Any sale of such securities by the Company without first giving
Johnston the rights described in this Section shall be void and of no force and
effect.
(b) TAG ALONG RIGHT. If Warburg shall elect to cause the transfer of
more than twenty percent (20%) of the capital stock of the Company which it then
holds (measured in terms of aggregate numbers of shares) in a transaction or
series of related transactions (other than the issuance of shares of capital
stock upon conversion of the Preferred Stock or a transfer to one or more of its
affiliates) pursuant to a bona fide offer from a third party (the "Buyer") who
does not desire to purchase all of the shares of Preferred Stock and Common
Stock then held by Johnston, whether pursuant to one transaction or a series of
related transactions, Warburg shall notify Johnston, in writing, of such offer
and its terms and conditions. Johnston shall have the right, exercisable by
notice to Warburg given within 10 days of receipt of the terms and conditions of
the offer, to sell to the Buyer, in lieu of the sale to the Buyer by Warburg
only, on the same terms and conditions as the shares being sold by Warburg, that
number of shares of Preferred Stock and/or Common Stock which represents the
same percentage of Johnston's shares of Preferred Stock and/or Common Stock as
the percentage of shares of Preferred Stock and/or Common Stock that Warburg
would otherwise have sold to the Buyer but for the operation of the provisions
of this paragraph. The election by Johnston not to exercise his rights under
this paragraph in any one instance shall not affect his right as to any
subsequent proposed sale.
The foregoing right shall terminate upon the effective date of the
registration statement covering the Company's initial public offering.
(c) CONVERSION FOR PURPOSE OF CALCULATION. For purposes of this
Section 2, Johnston and each other stockholder of the Company, including without
limitation Warburg, holding both Common Stock and/or Preferred Stock shall be
deemed to own the number of shares of Common Stock which he or it would hold
assuming full conversion of all Preferred Stock held. Similarly all
calculations of sale percentages shall be made for purpose of this Section 2 on
an as converted basis.
3. COMPANY REGISTRATION
(a) INCLUSION IN REGISTRATION. If the Company shall determine to
register any of its securities on a form (other than Form S-8 or Form S-4 or
their successor forms) which would permit the registration of any Registrable
Securities, the Company will:
(i) promptly give to the Holders written notice thereof (which
shall include a list of the jurisdictions, if any, in which the Company
intends to qualify such securities under the applicable blue sky or other
state securities laws); and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein which must be a firm offer underwriting, all
the Registrable Securities specified in a written request or requests made
by each of the Holders, within 30 days after receipt of the written notice
from the Company described in clause (i) above; provided, however, that if
the offering is underwritten, relates only to securities to be sold by the
Company and is the first public offering by the Company of its securities
and the Holders are advised in writing by the managing underwriter that the
sale of Registrable Securities by the Holders and the Parity Holders within
120 days of the effective date of such registration statement, could
adversely affect such underwriting, the Holders shall not sell any of their
Registrable Securities included therein for 120 days after the effective
date of such registration statement (or such shorter time as the managing
underwriter may request).
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3(a). In such event the right of the Holders to
registration pursuant to this Section 3 shall be conditioned upon the Holders'
participation in such underwriting and the inclusion of the Holders' Registrable
Securities in the underwriting to the extent provided herein. The Holders shall
(together with the Company distributing its securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for underwriting by the Company and shall
use their best efforts to arrange for all documents and opinions required to be
delivered thereunder in respect of their participation as selling shareholders
to be delivered. Notwithstanding any other provision of this Section 3, if the
managing underwriter determines that marketing factors require a limitation on
the number of shares to be underwritten, then the Company shall include in the
underwriting only that number of such securities, including Registrable
Securities, which the managing underwriter believes will not jeopardize the
success of the offering (the securities so included to be apportioned as
follows: first all securities which stockholders other than the Holders and
Parity Holders seek to include in the offering shall be excluded from the
offering to the extent limitation on the number of shares included in the
underwriting is required, then the number of shares held by Holders and Parity
Holders that may be included in the underwriting shall be apportioned pro rata
among the selling Holders and Parity Holders according to the total amount of
Registrable Securities entitled to be included therein owned by each selling
Holder or Parity Holder or in such other apportions as shall be mutually agreed
to by such selling Holders and Parity Holders) but in no event shall the
aggregate amount of securities of the selling Holders and Parity Holders
included in the offering be reduced below 25% of the total amount of securities
included in such offering, unless such offering is the initial public offering
of the Company's securities in which case the selling Holders and Parity Holders
may be excluded if the managing underwriter makes the determination described
above and no securities other than those of the Company are included. If any of
the Holders or any officer or director disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities or other
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securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(c) NUMBER AND TRANSFERABILITY. The Holders shall be entitled to
have their shares included in an unlimited number of registrations pursuant to
this Section 3. The registration rights granted pursuant to this Section shall
be assignable at the option of each of the Holders, in whole or in part, to any
transferee of the Registrable Securities (i) so long as such transferee owns at
least 2% of the Common Stock (computed on a fully diluted basis) of the Company
or (ii) the transferee is an Affiliate of the Holder; PROVIDED, that the Company
is given written notice by such Holder at the time or within a reasonable time
after said transfer, stating the name and address of such transferee or assignee
and identifying the securities with respect to which such registration rights
are assigned.
4. EXPENSES OF REGISTRATION
All expenses incurred in connection with each registration,
qualification or compliance pursuant to Section 3 including, without limitation,
all registration, filing and qualification fees, accounting fees and printing
expenses, fees and disbursements of counsel for the Company and the reasonable
fees and expenses of one counsel for the selling Holders and Parity Holders and
expenses incidental to or required by each registration shall be borne by the
Company, provided, however, the Company shall not be required to pay an amount
in excess of $30,000 towards the fees and expenses of such counsel related to
each registration. Underwriting discounts and commissions shall be borne and
paid ratably by the Holders of the Registrable Securities included in any such
registration.
5. OTHER OBLIGATIONS OF THE COMPANY
In connection with the Company's obligations to the Holders with
respect to the sale of Registrable Securities pursuant to a public offering
thereof as provided in this Section 3, the Company shall use reasonable efforts
to register Registrable Securities as required, or permitted if any Holder so
requests, by Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act") and, if the Registrable Securities to be sold meet the criteria for
listing on any exchange on which the Common Stock is then listed, apply for
listing of such Registrable Securities on such exchange.
6. REGISTRATION PROCEDURES
In the case of each registration, qualification or compliance effected
by the Company pursuant to Section 3, the Company shall:
(i) Notify each Holder as to the filing of the registration
statement prepared pursuant to Section 3 (the "Registration Statement") and
of all amendments or supplements thereto filed prior to the effective date
of said Registration Statement;
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(ii) Notify each Holder, promptly after it shall receive notice
thereof, of the time when said Registration Statement becomes effective or
when any amendment or supplement to any prospectus forming a part of said
Registration Statement has been filed;
(iii) Notify each Holder promptly of any request by the SEC for
the amending or supplementing of such Registration Statement or prospectus
or for additional information;
(iv) Prepare and promptly file with the SEC and promptly notify
each Holder of the filing of any amendments or supplements to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the 1933 Act, any
event with respect to the Company shall have occurred as a result of which
any such prospectus or any other prospectus as then in effect would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and, in addition,
prepare and file with the SEC, promptly upon the written request of any
Holder, any amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection
with the distribution of the Registrable Securities;
(v) Advise each Holder promptly after the Company shall receive
notice or obtain knowledge of the issuance of any stop order by the SEC
suspending the effectiveness of any such Registration Statement or
amendment thereto or of the initiation or threatening of any proceeding for
that purpose, and promptly use its best efforts to prevent the issuance of
any stop order or obtain its withdrawal promptly if such stop order should
be issued;
(vi) Use reasonable efforts to qualify as soon as reasonably
practicable the Registrable Securities included in the Registration
Statement for sale under the securities or blue-sky laws of such states and
jurisdictions within the United States as shall be reasonably requested by
any Holder; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business, to become
subject to taxation or to file a consent to service of process generally in
any of the aforesaid states or jurisdictions; and
(vii) Furnish each Holder, as soon as available, copies of any
Registration Statement and each preliminary or final prospectus, or
supplement or amendment required to be prepared pursuant hereto, all in
such quantities as any Holder may from time to time reasonably request.
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At its expense, the Company shall keep such registration effective for
a period of one hundred twenty (120) days or until each Holder has completed the
distribution described in the registration statement relating thereto, whichever
first occurs; provided, however, that in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor rule
under the 1933 Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the 1933 Act governing the
obligation to file a post-effective amendment which reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement permit the incorporation by reference of information
required to be included above to be contained in periodic reports filed pursuant
to Section 13 or 15(d) of the Exchange Act in the registration statement.
7. INDEMNIFICATION
(a) The Company shall indemnify each Holder, each of its officers,
directors and general and limited partners, and its Affiliates, on whose behalf
registration, qualification or compliance has been effected pursuant to Section
3, and each underwriter and each Affiliate thereof, of Registrable Securities
held by or issuable to each Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the 1933 Act or any rule or regulation promulgated thereunder
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each Holder, each of its officers, directors and partners and
each of its Affiliates, and each such underwriter and each of its Affiliates,
for any legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
PROVIDED, however, that the Company shall not be liable to a Holder in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or the underwriter of any
such Holder and stated to be specifically for use therein.
(b) Each of the Holders shall, if Registrable Securities held by them
are included in the securities as to which such registration, qualification or
compliance is being effected, severally indemnify the Company, each of its
directors and officers who sign such registration statement, each Affiliate of
the Company, each underwriter, if any, of the Company's securities covered by
such registration statement, each other Holder and each Affiliate thereof
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a
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material fact contained in any such registration statement, prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such directors,
officers, employees, Affiliates, other Holders or underwriters for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
and stated to be specifically for use therein; provided, however, that the
obligations of each Holder hereunder shall be limited to an amount equal to the
net proceeds to each Holder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party, and the Indemnified Party
may participate in such defense at such party's expense, and; provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
7. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 7 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a
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material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with any underwritten public offering contemplated by
this Agreement are in conflict with the foregoing provisions, the provisions in
such underwriting agreement shall be controlling.
8. LOCKUP AGREEMENT
In consideration for the Company agreeing to its obligations under
Sections 3 through 13, each Holder agrees in connection with any registration
effected by the Company hereunder (other than (i) a registration relating solely
to employee benefit plans on Form S-1, S-8 or similar forms which may be
promulgated in the future, or (ii) a registration on Form S-4 or similar form
which may be promulgated in the future relating solely to a SEC Rule 145
transaction) of the Company's securities, upon the request of the underwriters
managing any underwritten offering of the Company's securities, not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 120
days) from the effective date of such registration as the Company or the
underwriters may specify; PROVIDED, HOWEVER, that (i) such Holder shall have no
obligation to enter into the agreement described herein unless all executive
officers and directors of the Company enter into similar agreements, and (ii)
nothing herein shall prevent any Holder that is a partnership from making a
distribution of Registrable Securities to the partners thereof that is otherwise
in compliance with applicable securities laws, based on an opinion of counsel,
which opinion and counsel are each reasonably satisfactory to the Company.
9. INFORMATION ABOUT THE HOLDERS
Each Holder shall promptly furnish to the Company such information
regarding itself, its Affiliates or subsidiaries and the distribution proposed
by it as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in Sections 3 through 13.
10. CONDITIONS OF REGISTRATION
As a condition to the Company's obligation hereunder to cause
Registrable Securities to be included in a registration statement, each Holder
shall provide such information and execute such documents as may reasonably be
required in connection with such registration. In addition, the Company shall
not be obligated to include Registrable
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Securities in a registration statement hereunder, (i) if, in the opinion of
counsel to the Company the proposed disposition of such Registrable Securities
may be effected without registration under the 1933 Act or (ii) if, in the
opinion of counsel to the Company all of such Registrable Securities may be sold
by such Holder pursuant to Rule 144 under the 1933 Act (or any successor rule)
(without giving effect to the provisions of Rule 144(k)) within a period of not
more than three calendar months from the date of such opinion.
11. RULE 144
With a view to making available the benefits of certain rules and
regulations of the SEC which may permit the sale of the restricted securities to
the public without registration, the Company agrees to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the 1933 Act at all times from and
after ninety (90) days following the effective date of the first registration
under the 1933 Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Exchange Act at
any time after it has become subject to such reporting requirements; and
(c) After the Company has become subject to such reporting
requirements, so long as each Holder owns any Registrable Securities, furnish to
each Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, and of the 1933 Act and
the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as each Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing the Holder to sell any such securities without registration.
12. RIGHTS GRANTED TO SUBSEQUENT INVESTORS
Without the written consent of Holders and Parity Holders of at least
50% of the outstanding Registrable Securities (assuming conversions), the
Company may not grant registration rights to future investors in the Company
except as described in this Section 12. The Company may grant to future
investors registration rights pertaining only to shares of the Company's Common
Stock (including shares of Common Stock into which any other securities of the
Company may be convertible) and only on the following terms:
(a) Prior to the closing of the first Company-initiated underwritten
public offering of the Company's securities, the Company shall not grant to
future investors any registration rights other than (i) the right to request
inclusion in registrations initiated by the Company, but only in respect of that
portion of such registration as is available to the Holders and the Parity
Holders, with the allocation of the number of shares to be included by
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each such holder to be pro rata based on the number of shares of the Company's
Common Stock (assuming conversion) with registration rights held by the
respective holders (including the Holders and the Parity Holders), and (ii) the
right to request registration, provided that the Holders simultaneously are
granted the right to participate in such requested registration on a
nonpreferential, pro rata basis in accordance with the relative amounts of
Common Stock (assuming conversion) with registration rights held by the
respective holders (including the Holders and the Parity Holders).
(b) The Company shall not grant any registration rights with respect
to presently outstanding securities of the Company other than the right to
participate in registrations initiated by the Company or its shareholders
(including the Holders), and such rights may be granted only as to such portion
of the registration available after all shares requested to be included in such
registration by the Holders and the Parity Holders have been so included.
13. PARTNERSHIP DISTRIBUTION
In the event that any Holder which is a limited partnership advises
the Company that it desires to exercise registration rights granted to it under
Section 3 of this Agreement as a Holder of Registrable Securities in order to
effect a distribution of some or all of such Registrable Securities to its
partners, then, notwithstanding any provision of this Agreement conditioning the
inclusion of Registrable Securities in a registration statement upon the
Holder's participation in an underwriting, such Holder may refrain from
including such shares in an underwriting and nevertheless cause such shares to
be included in the applicable registration statement, provided only that (a)
such registration is not the initial registration hereunder of the Company's
securities, and (b) such Holder agrees not to effect such distribution until the
expiration of a standstill period after the effective date of such registration,
such period, not to exceed 90 days, to be of that duration requested by the
managing underwriter of the underwriting of the other securities included in
such registration.
14. TERM OF AGREEMENT
This Agreement shall continue as to each party to this Agreement for
as long as any such party owns stock of the Company.
15. REPRESENTATION AND WARRANTY OF THE COMPANY.
The Company hereby represents and warrants to Johnston that the rights
granted to Johnston under this Agreement with respect to the Stock are the same
in all material respects as the rights Blend has with respect to the shares of
Common Stock owned by Blend.
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16. MISCELLANEOUS.
(a) NOTICES. All notices, request, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given as
delivered personally, sent by courier or mailed, registered mail, return receipt
requested:
(i) To Warburg:
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Mr. Joseph P. Landy
(ii) To Johnston:
Alan T. Johnston
1738 Ridgemont Drive
Tuscaloosa, Alabama 35404
(iii) To the Company:
The System Works
3301 Windy Ridge Park
Atlanta, Georgia 30039
Attention: Chief Executive Officer
(b) ASSIGNMENT. Except as otherwise provided in Section 3(c) hereof,
this Agreement shall not be assignable by any party hereto.
(c) SURVIVAL. This Agreement and the obligations of the parties
created hereunder shall survive any termination of employment or disability of
Johnston.
(d) ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the
entire agreement between the parties hereto with respect to the subject matters
covered hereby. This Agreement shall not be modified or amended except by an
instrument in writing signed by or on behalf of each of the parties hereto.
(e) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Any telecopy of a
party's signature shall constitute an original signature for purposes of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE SYSTEM WORKS, INC. WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ Christopher R. Lane By: /s/ William H. Janeway
--------------------------- -----------------------------
Title: President and CEO Title: Managing Director
------------------------ --------------------------
/s/ Alan T. Johnston
--------------------------------------
Alan T. Johnston
-14-
<PAGE>
EXHIBIT 10.4.1
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of May 5, 1995
To: Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Dear Sirs:
TSW International, Inc., a Georgia corporation (the
"Company"), hereby agrees with Warburg, Pincus Investors L.P. a
Delaware limited partnership (the "Purchaser") as follows:
SECTION 1. PURCHASE AND SALE OF NOTE AND WARRANT
(a) Subject to the terms and conditions set forth in this
Agreement and in reliance upon the Company's and the Purchaser's
representations set forth herein, on the Closing Date the Company
shall sell to the Purchaser, and the Purchaser shall purchase
from the Company, a subordinated floating rate note having the
terms and conditions set forth on Exhibit "A" attached hereto
(the "Note") due May 5, 2000 in the principal amount of up to
$1,500,000, for an aggregate purchase price of up to $1,500,000
subject to the terms and conditions of the Note.
(b) Simultaneously with the execution of the Note, the
Company will issue to the Purchaser a stock purchase warrant (the
"Warrant"), in the form attached hereto as Exhibit "B" granting
Purchaser the right to purchase up to 130,662 shares of the
Common Stock of the Company at a price equal to $11.48 per share
subject to the terms and conditions of the Warrant.
(c) The transactions described in subsections (a) and (b)
above are cross-conditioned so that they shall only occur on the
Closing Date if all of such transactions occur on the Closing
Date.
(d) The closing of such sales and purchases shall take
place on May 5, 1995 (the "Closing Date").
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser that:
2.1 CORPORATE ORGANIZATION
The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Georgia.
<PAGE>
Warburg, Pincus Investors, L.P.
February 14, 1995
Page 2
2.2 CAPITALIZATION
(a) On the date hereof, the authorized capital stock
of the Company consists of 6,000,000 shares of Common Stock,
1,897,028 shares of Series A Preferred Stock and 393,965 shares
of Series B Preferred Stock. On the Closing Date, the issued and
outstanding shares of capital stock of the Company shall consist
of 189,855 shares of Common Stock, 1,897,028 shares of Series A
Preferred Stock and 393,965 shares of Series B Preferred Stock.
(b) All the outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and
non-assessable.
(c) Except for the conversion and redemption rights in
respect of the Series A Preferred Stock and the Series B
Preferred Stock, and except for the stock options and warrants
listed on Schedule 2.2 hereto, there are no shares of Common Stock
issuable upon conversion of any security of the Company nor are
there any rights, options or warrants outstanding or other
agreements to acquire shares of Common Stock nor is the Company
contractually obligated to purchase, redeem or otherwise acquire
any of its outstanding shares of Common Stock. Except as
disclosed on such Schedule 2.2, no shareholder of the Company is
entitled to any preemptive rights, rights of first refusal,
redemption rights or similar rights.
2.3 CORPORATE PROCEEDINGS, ETC
(a) The Board of Directors of the Company has duly
authorized the execution and delivery of this Agreement and the
performance by the Company of its obligations hereunder. The
Board has authorized the issuance and sale of the Note and the
Warrant in accordance with this Agreement, and the Company has
reserved for issuance shares of Common Stock sufficient to
satisfy its obligations under the Warrant. No other corporate
action is necessary to authorize the performance by the Company
of its obligations hereunder.
(b) This Agreement constitutes the valid and binding
obligation of the Company, enforceable against the Company
in accordance with its terms, except as enforceability may be
limited by equitable principles or bankruptcy, insolvency,
reorganization or similar laws from time to time in effect
affecting the enforcement of creditor's rights generally.
2.4 CONSENTS AND APPROVALS
The execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations
hereunder, and the consummation by the Company of the
transactions contemplated hereby do not require the Company to
obtain any consent, approval or action of, or make any filing with
or give any notice to, any corporation, person or firm or any
public, governmental or judicial authority other than certain
consents of NationsBank of Georgia N.A. and NationsBank Leasing
Corporation that are being obtained in connection with the
transaction.
2.5 PENDING ACTIONS
There is no action, suit, investigation or proceeding
pending or, to the knowledge of the Company, threatened against
the Company or any of its properties or assets by or before any
court arbitrator, or governmental body, department, commission,
<PAGE>
Warburg, Pincus Investors, L.P.
February 14, 1995
Page 3
board, bureau, agency or instrumentality, which questions the validity
of this Agreement, or any action taken or to be taken pursuant
hereto or thereto, or which is reasonably likely to result in a
material adverse effect on the Company's business, assets,
properties, liabilities or condition (financial or otherwise) of the
Company ("Material Adverse Effect"), and the Company is not in
default with respect to any judgment, order, injunction, decree, or
award having applicability to it or its business or properties
which default could reasonably be expected to have a Material
Adverse Effect.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
(a) The Purchaser is acquiring the Note and Warrant for
its own account for investment and not with a view towards the
resale, transfer or distribution thereof, nor with any present
intention of distributing such Note or Warrant but subject,
nevertheless, to any requirement of law that the disposition of
the Purchaser's property shall at all times be within the
Purchaser's control, and without prejudice to such Purchaser's
right at all times to sell or otherwise dispose of all or any part
of such securities under a registration under the 1933 Act or
under an exemption from said registration available under the 1933
Act.
(b) The Purchaser has full power and legal right to
execute and deliver this Agreement and to perform its obligations
hereunder.
(c) The Purchaser is a validly existing legal entity, duly
organized under the laws of the jurisdiction of its organization.
(d) The Purchaser has taken all action necessary for the
authorization, execution, delivery, and performance of this
Agreement and its obligations hereunder, and upon execution and
delivery by the Company, this Agreement shall constitute a valid
and legally binding obligation of the Purchaser.
(e) There are no claims for brokerage commissions or
finder's fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any
arrangement made by or on behalf of the Purchaser.
(f) The Purchaser has such knowledge and experience in
financial and business matters that the Purchaser is capable of
evaluating the merits and risks of the investment by the
Purchaser in the Company as contemplated by this Agreement, and
the Purchaser is able to bear the economic risk of such
investment for an indefinite period of time. The Purchaser has
been furnished access to such information and documents as the
Purchaser has requested and has been afforded an opportunity to
ask questions of and receive answers from representatives of the
Company concerning the terms and conditions of this Agreement and
the purchase of securities contemplated hereby.
(g) The execution and delivery by the Purchaser of this
Agreement, the performance by the Purchaser of its obligations
hereunder and the consummation by the Purchaser of the
transactions contemplated hereby do not require the Purchaser to
obtain any consent, approval or action of, or make any filing with
or give any notice to any corporation, person or firm or any
public, governmental or judicial authority, and do not and will
not result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, any material
indenture, mortgage, deed of trust, credit agreement, note or other
evidence of indebtedness, the Limited Partnership Agreement of
the Purchaser, or other material agreement of the Purchaser or any
rule or regulation of any court or federal
<PAGE>
Warburg, Pincus Investors, L.P.
February 14, 1995
Page 4
or state regulatory board or body or administrative agency having
jurisdiction over the Purchaser or over its properties or
business.
(h) Purchaser holder of warrants to acquire up to 970,726
shares (the "Warrant Shares") of Common Stock of the Company
pursuant to those certain Stock Purchase Warrants dated June 20,
1994, November 10, 1994, January 4, 1995 and February 14, 1995,
respectively (the "Existing Stock Purchase Warrants"), and is the
holder of 1,897,028 shares of Series A Preferred Stock and 303,965
shares of Series B Preferred Stock ("Preferred Shares"). Purchaser
represents, warrants, acknowledges and agrees that, prior to and as
of the Closing Date, there has been no adjustment to: (i) the
number of Warrant Shares; (ii) the number of Preferred Shares;
(iii) the "Conversion Rate" (as defined in the Company's Articles
of Incorporation) or other change affecting the number of shares of
Common Stock issuable upon conversion of the Preferred Shares; or
(iv) any exercise or conversion price payable upon exercise of the
Existing Stock Purchase Warrants or conversion of the Preferred
Shares. Purchaser further represents, warrants, acknowledges and
agrees that the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (including,
without limitation, issuance of the Note and the Stock Purchase
Warrant to Purchaser) and the issuance of shares pursuant to the
Company's current and former stock option plans for employees and
outside directors, shall not result in, effect or otherwise require
an adjustment to any of the items listed in clauses (i) through
(iv) of the foregoing.
SECTION 4. ADDITIONAL COVENANTS OF THE PARTIES
4.1 RESALE OF SECURITIES
(a) The Purchaser covenants that it will not sell
or otherwise transfer the Note or the Warrant purchased hereunder
except pursuant to an effective registration under the 1933 Act
or in a transaction which, in the opinion of counsel reasonably
satisfactory to the Company, qualifies as an exempt transaction
under the 1933 Act and the rules and regulations promulgated
thereunder and any applicable state securities laws.
(b) The Note and Warrant will bear a legend
substantially reflecting the foregoing restrictions on the
transfer of such securities:
"The securities evidenced hereby have not been
registered under the Securities Act of 1933, as
amended or the Georgia Securities Act of 1973,
as amended (the"Acts") and may not be transferred
except pursuant to an effective registration
under the Acts or in a transaction which, in the
opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under
the Acts and the rules and regulations promulgated
thereunder."
4.2 FURTHER ASSURANCES
Each of the parties shall execute such documents and
other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the
transactions contemplated hereby. Each such party shall use its
best efforts to fulfill or obtain fulfillment of the conditions to
the Closing as promptly as practicable.
<PAGE>
Warburg, Pincus Investors, L.P.
February 14, 1995
Page 5
SECTION 5. INTERPRETATION OF THIS AGREEMENT
5.1 TERMS DEFINED
As used in this Agreement, the following terms have
the respective meanings set forth below or set forth in the
Section hereof following such terms:
PERSON: shall mean an individual, partnership,
corporation, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
1933 ACT: shall mean the Securities Act of 1933, as
amended.
5.2 ACCOUNTING PRINCIPLES
Where the character or amount of any asset or amount
of any asset or liability or item of income or expense is required
to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this
Agreement, this shall be done in accordance with GAAP at the time
in effect, to the extent applicable, except where such principles
are inconsistent with the requirements of this Agreement.
5.3 DIRECTLY OR INDIRECTLY
Where any provision in this Agreement refers to
action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such
Person.
5.4 GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without giving
effect to the choice-of-law provisions thereof.
5.5 PARAGRAPH AND SECTION HEADINGS
The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof.
SECTION 6. MISCELLANEOUS
6.1. NOTICES
All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have
been given or made if in writing and shall be deemed to have been
given or made if in writing and delivered personally, sent by
courier or sent by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following
addresses:
(a) If to the Purchaser, to
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Joseph P. Landy
<PAGE>
Warburg, Pincus Investors, L.P.
February 14, 1995
Page 6
(b) If to the Company, to:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
Attention: Chief Executive Officer
with a copy to:
Troutman Sanders
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Robert W. Grout, Esq.
or to such other persons or at such other addresses as shall be
furnished by either party by like notice to the other, and such
notice or communication shall be deemed to have been given or
made as of the date so delivered or mailed. No change in any of
such addresses shall be effective insofar as notices under this
Section 6 are concerned unless such changed address is located in
the United States of America and notice of such change shall have
been given to such other party hereto as provided in this Section
6.
6.2. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto,
including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) documents
received by the Purchaser on the Closing Date, and (c) financial
statements, certificates and other information previously or
hereafter furnished to the Purchaser, may be reproduced by the
Purchaser by any photographs, photostatic, microfilm, micro-card,
miniature photographic or other similar process and the Purchaser
may destroy any original document so reproduced. All parties
hereto agree and stipulate that any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the
Purchasers in the regular course of business) and that any
enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
6.3 TERMINATION AND SURVIVAL
All warranties, representations, and covenants made
by the Purchaser and the Company herein or in any certificate or
other instrument delivered by the Purchaser or the Company under
this agreement shall be considered to have been relied upon by
the Company or the Purchaser, as the case may be. All statements
in any such certificate or other instrument shall constitute
warranties and representations by the Company or the Purchaser
hereunder.
6.4 SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be
binding upon the successor and permitted assigns of each of the
parties. Neither this Agreement nor the
<PAGE>
Warburg, Pincus Investors, L.P.
February 14, 1995
Page 7
rights of the parties hereunder may be assigned without the written consent of
the Company and the Purchaser.
6.5 ENTIRE AGREEMENT: AMENDMENT AND WAIVER
This Agreement and the attached Exhibits and Schedules constiitute the
entire understandings of the parties hereto and supersede all prior agreements
or understandings with respect to the subject matter hereof between such
parties. This Agreement may be amended, and the observance of any term of this
Agreement may be waived with (and only with) the written consent of the Company
and the Purchaser.
6.6 SEVERABILITY
This Agreement shall be deemed severable and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity
or enforeability of this Agreement or of any other term or provision hereof.
Futhermore, in lieu of any such invalid or unenforceable term or provision, the
parties hereto intend that there shall be added as a part of this Agreement a
provision as similar in terms to such invalid or unenforceable provision as may
be possible and be valid and enforceable.
6.7 LIMITATION ON ENFORCEMENT OF REMEDIES
The Company hereby agrees that it will not assert against the limited
partners of the Purchaser any claim it may have under this Agreement by reason
of any failure or alleged failure by the Purchaser to meet its obligations
hereunder. The foregoing shall not limit the Company's rights against the
general partner of the Purchaser.
6.8 COUNTERPARTS
This Agreement may be executed in one or more counterparts with the
same effect as if the parties executing the counterparts had each executed one
instrument as of the day and year first above written.
Very truly yours,
TSW INTERNATIONAL, INC.
By: /s/ CHRISTOPHER R. LANE
---------------------------
WARBURG, PINCUS INVESTORS, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By: /s/ Joseph P. Landy
---------------------------
<PAGE>
EXHIBIT "A"
-----------
SUBORDINATED FLOATING RATE NOTE
<PAGE>
EXHIBIT "B"
-----------
STOCK PURCHASE WARRANT
<PAGE>
SCHEDULE 2.2
------------
1. Stockholders Agreement dated June 20, 1994 among the Company,
Purchaser and John W. Blend.
2. 920,890 stock options issued to employees of the Company pursuant to
stock option plans.
3. 7,500 stock options issued to an outside director of the Company
pursuant to a stock option plan for outside directors of the Company.
4. Up to 970,726 warrants issued to Purchaser by the Company in connection
with three previous Subordinated Debentures issued by the Company on June 20,
1994, November 10, 1994, January 4, 1995 and February 14, 1995.
<PAGE>
SCHEDULE TO EXHIBIT 10.4.1
SCHEDULE OF TERMS OF
NOTE AND WARRANT PURCHASE AGREEMENTS
BETWEEN TSW INTERNATIONAL, INC. AND WARBURG, PINCUS INVESTORS, L.P.
DATE OF WARRANT WARRANT
AGREEMENT DEBT ISSUED NOTE DUE DATE SHARES EXERCISE PRICE
- ----------- ------------- -------------- --------- ---------------
11/10/94 $2,500,000 11/10/99 302,595 $7.93
1/4/95 3,500,000 1/4/00 423,633 7.93
2/14/95 1,100,000 2/24/00 133,142 7.93
5/5/95 1,500,000 5/5/00 130,662 11.48
6/27/95 400,000 6/27/00 34,843 11.48
10/13/95 2,500,000 10/13/00 217,770 11.48
<PAGE>
EXHIBIT 10.4.2
SUBORDINATED FLOATING RATE NOTE
DUE MAY 5, 2000
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM, OR IN THE ABSENCE OF RECEIPT BY THE
COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT IT
MAY BE SOLD OR TRANSFERRED WITHOUT SUCH REGISTRATION.
TSW INTERNATIONAL, INC.
May 5, 1995 $1,500,000
TSW INTERNATIONAL, INC., a Georgia corporation (herein, together with its
successors and assigns, the "Company"), for value received, hereby promises to
pay on May 5, 2000 (the "Stated Maturity") to Warburg, Pincus Investors, L.P.,
or its registered assigns, the principal amount (the "Principal Amount")which is
limited to amounts disbursed to the Company under this Subordinated Floating
Rate Note ("Note"), but in no event shall the total advances exceed One Million
Five Hundred Thousand Dollars ($1,500,000), all amounts advanced to the Company
being shown on the attached Schedule of Loan Disbursements as described in
Section 3 below.
1. Interest
(a) Subject to the provisions of Section 5 hereof, the Company promises to
pay interest on the Principal Amount of this Note at a rate per annum equal to
the Prime Rate plus one and one-half percent (1-1/1%) (the "Applicable Prime
Rate") from date of advance to the Stated Maturity. All interest will be
calculated on the basis of a 360-day year and the actual number of days elapsed.
Interest payments will accrue monthly in arrears and will be paid at the Stated
Maturity. Interest on the Note shall accrue on each installment from the date of
advance of each installment to the date of repayment; PROVIDED, HOWEVER, that if
such payment occurs after 12:00 noon, New York City time, interest shall be
deemed to accrue thereon until the following Business Day. To the extent lawful,
the Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at a rate equal to 2%
per annum in excess of the interest rate then applicable to the Note; it shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest without regard to any
applicable grace period) at the same rate to the extent lawful.
(b) As used in this Note, the following terms shall have the following
meanings:
"Accrued Amount" means, at any particular time, the Principal Amount then
outstanding together with any and all unpaid and accrued interest.
"Prime Rate" shall mean, as of any given date, the average of the prime,
base, or equivalent rates of interest as are publicly announced, or published,
by Morgan Guaranty Trust Company of New York, Citibank, N.A., Chemical Bank and
The Chase Manhattan Bank (National Association), or the successor by merger or
consolidation to any of such banks (with the understanding that such rates may
merely serve as a basis upon which
<PAGE>
effective rates of interest are calculated for loans making reference thereto
and that such rates are not necessarily the lowest or best rates at which such
banks calculate interest or extend credit). Any change in the Prime Rate will be
effective on the date such change is announced by each of, or any of, such
banks.
2. Method of Payment
The payment of the Accrued Amount of this Note shall be made in lawful
money of the United States of America against the presentation of this Note at
the principal office of the Company located at 3301 Windy Ridge Parkway,
Atlanta, Georgia 30339 to the registered holder of this Note (the "holder") at
the Stated Maturity; provided, however, that payment of the Accrued Amount may
be made only if and to the extent that payment of a distribution to the
Company's shareholders can then be made under O.C.G.A. Section 14-2-640 or any
successor thereto.
3. Method of Recording Advances
Holder shall record on the Schedule of Loan Disbursements attached hereto
and made a part hereof appropriate notations to evidence the date and amount of
each advance made by it to the Company. Holder is hereby irrevocably authorized
by the Company to make such recording upon each advance and notice thereof to
the Company and to attach as a part of this Note a continuation of such Schedule
as and when required, provided that the failure of Holder to do so shall not
affect the obligations of the Company hereunder.
4. Subordination
(a) SUBORDINATION TO SENIOR INDEBTEDNESS. This Note is subordinated in
right of payment to all existing and future Senior Indebtedness. Senior
Indebtedness is the principal of, interest on (including, without limitation,
interest accruing after the occurrence of any bankruptcy or similar proceeding
whether or not such interest constitutes an allowable claim in such proceeding)
and all other amounts, payable in connection with any Debt of the Company except
Debt that by its terms is not superior in right of payment to this Note. A Debt
is (i) any indebtedness to NationsBank of Georgia, N.A. or any affiliate thereto
(A) for borrowed money, (B) evidenced by a note, debenture or similar instrument
(including a purchase money obligation) given in connection with the acquisition
of any property or assets (other than inventory or similar property acquired in
the ordinary course of business) or(C) for the payment of money relating to a
capitalized lease obligation; (ii) any guarantee by the Company of indebtedness
for borrowed money or indebtedness incurred as described in (i)(B) or (C) above,
and (iii) any renewal, extension, refunding or amendment of any indebtedness,
obligation or guarantee. For purposes of the Agreement, Senior Indebtedness
shall include the indebtedness evidenced by (i) that certain Loan Agreement
dated August 19, 1993, between NationsBank of Georgia N.A. ("NationsBank") and
the Company; (ii) that certain Promissory Note in the amount of $2,000,000 dated
September 1, 1994 by Company in favor of NationsBank; (iii) that certain
Promissory Note in the amount of $550,000 dated September 1, 1994 by Company in
favor of NationsBank; (iv) that certain Security Agreement dated September 1,
1994 between NationsBank and the Company; (v) that certain Promissory Note in
the amount of $450,000 dated June 20, 1994 by Company in favor of NationsBank;
(vi) that certain Equipment Leasing Facility dated February 7, 1994 between
NationsBanc Leasing Corporation and the Company; and (vii) any successor loans,
modifications or amendments to any of the agreements specified in clauses (i) -
(vi) of the foregoing or new borrowings (collectively, the "NationsBank
Indebtedness").
<PAGE>
(b) LIQUIDATION, DISSOLUTION; BANKRUPTCY. Upon any distribution to
creditors of the Company in a liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(i) the holder of Senior Indebtedness shall be entitled to receive
payment in full in cash of the principal thereof and interest thereon to the
date of payment of the Senior Indebtedness and all other amounts payable in
connection therewith before the Holder shall be entitled to receive any payment
on this Note; and
(ii) until the Senior Indebtedness is paid in full in cash, any
distribution to which the Holder would otherwise be entitled shall be made to
holders of the Senior Indebtedness as their interest may appear, except that the
Holder may receive securities that are subordinated to Senior Indebtedness to at
least the same extent as this Note.
(c) ACCELERATION OF NOTE. If payment of this Note is accelerated because
of an Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of the acceleration. The Company shall pay this Note when 120 days
pass after acceleration occurs if the terms of this Note permit payment at that
time.
(d) DEFAULT ON SENIOR INDEBTEDNESS. The Company may not pay the Accrued
Amount of this Note and may not acquire this Note for cash or property other
than capital stock of the Company if:
(i) a default on Senior Indebtedness occurs and is continuing or
would occur by such payment that permits holders of Senior Indebtedness or, as
the case may be, holders of indebtedness or other obligations that are the
subject of a guarantee constituting Senior Indebtedness to accelerate the
maturity of such Senior Indebtedness, indebtedness or obligations or if the
Senior Indebtedness is not paid at the maturity thereof, or
(ii) the Senior Indebtedness has been accelerated.
The Company may resume payments on this Note and may acquire it when the
default is cured or waived, if the terms of this Note otherwise permit the
payment or acquisition at that time.
(e) WHEN DISTRIBUTION MUST BE PAID OVER. If a distribution is made to the
Holder that, because of the terms hereof, should not have been made to the
Holder, the Holder shall hold the distribution in trust for holders of the
Senior Indebtedness and, upon demand by the Company or any holder of Senior
Indebtedness, pay it over to them as their interests may appear.
(f) RELATIVE RIGHTS. This Section defines the relative rights of the
Holder and holders of Senior Indebtedness. Nothing in this Note shall:
(i) impair, as between the Company and the Holder the obligation of
the Company, which is absolute and unconditional, to pay the Principal Amount of
this Note in accordance with the terms hereof;
(ii) affect the relative rights of the Holder and creditors of the
Company other than holders of Senior Indebtedness; or
<PAGE>
(iii) prevent the Holder from exercising its available remedies upon
an Event of Default, subject to the rights of holders of Senior Indebtedness to
receive distributions otherwise payable to the Holder.
If the Company fails because of this Section to pay the Accrued Amount of
this Note on the due date, the failure is still an Event of Default.
(g) SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder
of Senior Indebtedness to enforce the subordination of the indebtedness
evidenced by this Note shall be impaired by any act or failure to act by the
Company or by its failure to comply with the terms hereof.
5. Restriction on Payments, Redemptions
Notwithstanding anything in this Note to the contrary, as long as Senior
Indebtedness to NationsBank or any affiliate thereto remains outstanding,
without the consent of NationsBank or such affiliate, the Company shall make no
payments of or redeem any portion of the Accrued Amount.
6. Optional Redemption
The Company may redeem, on any interest payment date, all or any portion of
the Principal Amount at a price equal to the amount of the Principal Amount
redeemed, plus accrued interest to the redemption date.
7. No Mandatory Redemption
The Principal Amount is not subject to mandatory redemption absent a
registration of the Company's capital stock effected by the filing of a
registration statement in compliance with the Securities Act of 1933, as amended
(the "1933 Act") (and any post-effective amendments filed or required to be
filed) and the declaration or ordering of effectiveness of such registration
statement, in which event the entire Principal Amount shall be redeemed at a
price equal to the total amount of the Principal Amount then outstanding, plus
interest to the redemption date.
8. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to the Holder at its registered address. This
Note may be redeemed in part but only in whole multiples of $250,000, unless the
remaining Principal Amount is to be redeemed. On and after the redemption date
interest ceases to accrue on this Note or any portion called for redemption.
9. Denominations
This Note is in registered form without coupons in a single denomination of
up to $1,100,000.
10. Person Deemed Owners
The registered holder of this Note will be treated as its owner for all
purposes.
<PAGE>
11. Defaults and Remedies
(a) Events of Default. An "Event of Default" occurs if:
(i) the Company defaults in the payment of the Principal Amount and
accrued interest on this Note when the same becomes due and payable at its
Stated Maturity, whether or not such payment shall be prohibited by Section 5:
(ii) the Company fails to comply with any of its agreements in this
Note (other than those referred to in clause (i) above) and such failure
continues for 30 days after receipt by the Company of notice of default from the
Holder;
(iii) the Company pursuant to or within the meaning of Title 11 of the
United States Code, or any similar federal or state law for the relief of
debtors (a "Bankruptcy Law"):
A. commences a voluntary case or proceeding;
B. consents to the entry of any order for relief against it in
any involuntary case or proceeding or the commencement of
any case against it;
C. consents to the appointment of any receiver, trustee,
assignee, liquidator, custodian or similar official under
any Bankruptcy Law (a "Custodian"), of the Company or for
any substantial part of its property;
D. makes a general assignment for the benefit of its creditors;
E. files a petition in bankruptcy or answer or consent seeking
reorganization or relief; or
F. consents to the filing of such petition or the appointment
of or taking possession by a Custodian; or
(iv) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
A. is for relief against the Company in an involuntary case or
proceeding or adjudicates the Company insolvent or bankrupt;
B. appoints a Custodian of the Company or for any substantial
part of its property; or
C. orders the winding up or liquidation of the Company;
and the order or decree remains unstayed and in effect for 60 days.
(b) ACCELERATION. If any Event of Default occurs and is continuing, the
Holder, by written notice to the Company, may declare the Accrued Amount on this
Note to be due and payable. Upon such a declaration, such Accrued Amount shall
become and be immediately due and payable without presentment, demands protest,
notice of non-payment or any other notice required by law relative thereto, all
of which are hereby expressly
<PAGE>
waived by the Company. The Holder, by written notice to the Company, may rescind
an acceleration and its consequences if the recission would not conflict with
any judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of the Accrued Amount and any interest thereon pursuant
to Section 1 hereof that has become due solely as a result of acceleration. No
such recission shall affect any subsequent Event of Default or impair any right
consequent thereto.
(c) OTHER REMEDIES. If any Event of Default occurs and is continuing, the
Holder may pursue any available remedy to collect the payment of the Accrued
Amount on this Note or to enforce the performance of any provision hereof. A
delay or omission by the Holder in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or constitute a waiver
of, or acquiescence in, the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
(d) COSTS OF ENFORCEMENT. The Company agrees to pay or reimburse the
Holder for all its costs and expenses, including attorneys' fees, in connection
with the enforcement of its rights under this Note.
12. Notices
All notices and other communications required to be given hereunder shall
be in writing and shall be deemed to have been duly given upon delivery, if
delivery by hand; if given by mail, three (3) days after the date of mailing,
postage prepaid, certified or registered mail to a party hereto at the address
set forth below; if given by facsimile, upon transmission to the number set
forth below provided written confirmation is sent to the address below; if given
by overnight delivery service addressed to the address set forth below, the
business day following the day on which such notice is sent:
If to the Company:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
Attention: Chief Executive Officer
Facsimile: (404) 989-4461
With a copy to:
Troutman Sanders
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Robert W. Grout, Esq.
Facsimile: (404) 885-3947
If to the Holder:
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Attention: Joseph P.Landy
Facsimile: (212) 878-9359
<PAGE>
Either party hereto may change its address for purposes of receiving notices
pursuant to this Note by giving notice to such new address to the other party
hereto.
13. Amendments, Supplements and Waivers
This Note may be amended or supplemented, with the consent of the Holder.
The Holder may waive an existing Event of Default and its consequences. When an
Event of Default is waived, it is deemed cured, but no such waiver shall extend
to any subsequent or other Event of Default or impair any consequent right.
14. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under this Note
or for any claim based on, in respect of or by reason of, such obligations or
their creation. The Holder by accepting this Note waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
this Note.
15. Governing Law
The laws of the State of Georgia shall govern this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its
officer hereunder authorized, as of the date first above written.
TSW INTERNATIONAL, INC.
By: /s/ Chris Lane
----------------------
Name: Chris Lane
Title: President
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: {I or We} assign and transfer this
Note to:
- --------------------------------------------------------------------------------
(insert assignee's soc. sec. no. or tax I.D. no.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date:
-----------------------
Your Signature:
-----------------------------------
(Sign exactly as your name appears on the
face of this Note.)
Signature Guarantee.
<PAGE>
SCHEDULE OF LOAN DISBURSEMENTS
ATTACHED TO AND FORMING
A PART OF SUBORDINATED FLOATING RATE NOTE
DATED AS OF FEBRUARY 14, 1995
Loan Disbursement
(Principal Amount) Date of Advance
- ------------------ ---------------
<PAGE>
SCHEDULE TO EXHIBIT 10.4.2
SCHEDULE OF TERMS OF
SUBORDINATED FLOATING RATE NOTES
PAYABLE BY TSW INTERNATIONAL, INC. TO WARBURG, PINCUS INVESTORS, L.P.
DATE OF AGREEMENT DEBT ISSUED NOTE DUE DATE
- ----------------- ----------- -------------
6/20/94 $4,000,000 7/31/99
11/10/94 2,500,000 11/10/99
1/4/95 3,500,000 1/4/00
2/14/95 1,100,000 2/24/00
5/5/95 1,500,000 5/5/00
6/27/95 400,000 6/27/00
10/13/95 2,500,000 10/13/00
<PAGE>
EXHIBIT 10.4.3
This Warrant will be void after 5:00 p.m. Eastern Daylight Time, May 5, 2000
NEITHER THIS WARRANT NOR THE SHARES USABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM, OR IN ABSENCE OF RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE WARRANT OR SHARES
SOUGHT TO BE SOLD OR TRANSFERRED MAY BE SOLD OR TRANSFERRED WITHOUT SUCH
REGISTRATION.
STOCK PURCHASE WARRANT
To Subscribe For and Purchase Common Stock of
TSW INTERNATIONAL, INC.
(Transferability Restricted as Provided in Paragraph 2 Below)
THIS CERTIFIES THAT, for value received, WARBUG, PINCUS INVESTORS,
L.P., a Delaware limited partnership ("Warburg"), or registered assigns, is
entitled to subscribe for and purchase from TSW INTERNATIONAL, INC., a
Georgia corporation (the "Company"), at the price of Eleven Dollars and
Forty-Eight Cents ($11.48) per share at time from February 14, 1995 (the
"Effective Date") to and including May 5, 2000 up to 130,662 shares of the
Company's fully paid and nonassessable Common Stock, $0.01 par value per
share (the "Warrant Shares"); subject, however, to the provisions and upon
the terms and conditions hereinafter set forth.
1. The rights subject to this Warrant shall be determined by the
amount of disbursements made pursuant to Subordinated Floating Rate Note
("Note") dated May 5, 1995 between the Company and Warburg and shown on a
Schedule of Loan Disbursements ("Schedule") attached to that Note. Subject to
the provisions of Paragraph 6 hereof, the number of shares into which this
Warrant may be exercised at any time (the "Then Exercisable Amount") shall be
equal to the product (rounding down to the nearest whole number) obtained by
multiplying (a) 130,662 and (b) a fraction, the numerator of which shall be
total funds disbursed pursuant to the Note as shown on the Schedule and the
denominator of which shall be $1,500,000. Absent an adjustment pursuant to
Paragraph 6 below, in no event shall the number of shares into which this
Warrant may be exercised exceed 130,662 Warrant Shares (the "Maximum Amount")
if Warburg fully funds the Note.
2. The right represented by this Warrant may be exercised by the
holder hereof, in whole or in part (but not as to a fractional share of Common
Stock), by the surrender of this Warrant (properly endorsed, if required), at
the principal office of the Company (or such other office as the Company may
designate by notice in writing to the holder hereof, and upon payment to the
Company, by cash or by certified check or bank draft, of the purchase price
for such Warrant Shares. The Company agrees that the shares so purchased
shall be deemed to be issued to the holder hereof as the record owner of such
shares, as of the close of business of the date on which this Warrant shall
have been surrendered and payment made for such shares, as aforesaid.
Certificates for the shares so purchased shall be delivered to the holder
hereof within a reasonable time, not exceeding ten (10) days, after the
rights represented by this Warrant shall have been so exercised, and, unless
this Warrant has expired.
<PAGE>
3. The Warrant will be exercisable, assignable and transferable for a
period of five (5) years from the Effective Date; provided however, that any
transfer or assignment of the Warrant to any person must be made in
accordance with provisions of the Securities Act of 1933, as amended, or any
similar federal statute then in effect (the "Federal Act") and the Georgia
Securities Act 1973, as amended (the "Georgia Act") and any applicable state
securities statute (collectively, the "Securities Laws").
4. The holder of this Warrant, by acceptance hereof, acknowledges and
agrees that, prior to the disposition of any shares of Common Stock
theretofore purchased upon the exercise hereof under circumstances that
might require registration of such shares under the Security Laws, such
holder shall therefore comply with the provisions of the following
subdivisions:
(a) If, in the opinion of the Company's counsel, the
proposed disposition does not require registration under the Securities
Laws, of the shares of Common Stock issuable or issued upon the exercise
of the Warrant, the Company shall, as promptly as practicable, notify
the holder hereof of such opinion, whereupon such holder shall be
entitled to dispose of such shares theretofore issued upon the exercise
hereof, all in accordance with the terms of the notice delivered by such
holder to the Company.
(b) If, in the option of the Company's counsel, such proposed
disposition requires a registration of the shares of Common Stock
issuable or issued upon exercise of this Warrant, the Company shall
promptly give written notice to all then holders of the Warrant, at the
respective addresses thereof shown on the books of the Company, of a
proposed registration under the Securities Laws or of a post-effective
amendment to the Company's Registration Statement previously filed, with
respect to share of Common Stock issuable or issued upon the exercise of
the Warrant, and the Company shall, as expeditiously as possible, use
its best efforts to effect such registration or post-effective
amendment, under such Securities Laws, provided the participating
holders bear all expenses pro rata, including but not limited to legal,
accounting and printing expenses, of the shares of Common Stock issuable
or issued upon exercise of this Warrant, all to the extent requisite to
permit the sale of the Common Stock referred to in the forgoing clause,
upon the terms of offering supplied in writing to the Company by the
participating holders thereof, and upon the effectiveness of such
registration or pro rata, keep effective such registration or
post-effective amendment and, from time to time, amend or supplement the
prospectus used in connection therewith, for the period and to the
extent necessary in order to comply with the Securities Laws with
respect to the Common Stock referred to in the foregoing clause during
such period. Notwithstanding the foregoing, the Company shall not be
required to effect more than one registration or post-effective
amendment pursuant to this Paragraph 4 (b).
(c) If any shares of Common Stock issuable pursuant to this
Warrant require declaration or registration with, or approval of, any
governmental official or authority (other than registration under
Securities Laws) before shares issued pursuant hereto may be
transferred, or before such shares may be issued on the exercise hereof,
the Company, at the participating warrant holder's expense pro rata,
will take all requisite action in connection with such declaration, and
will use its best efforts to cause such shares and/or this Warrant to be
duly registered or approved, as may be required.
<PAGE>
5. The Company covenants and agrees that all shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the use thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue). The
Company further covenants and agrees that, during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant, and will, at its expense, expeditiously upon each such reservation
of shares, procure the listing thereof (subject to issuance or notice of
issuance) on all stock exchanges, if any, on which the Common Stock is then
listed.
6. In the event that the Company shall, at any time or from time to time
during the period this Warrant shall be exercisable, issue any shares of
Common Stock (other than shares issuable pursuant to options outstanding as
of May 5, 1995 and shares issuable pursuant to incentive stock plans adopted
for benefit of the Company's employees and option plans adopted for benefit
of the Company's outside directors) for a consideration per share less than
the Warrant purchase price in effect immediately prior to the issuance of
such shares, or without consideration, then, and thereafter successively upon
each such issuance, the Warrant purchase price in effect immediately prior to
the issuance of such shares shall forthwith be reduced to a price (calculated
to the nearest full cent) determined by dividing (a) an amount equal to (i)
the total number of shares of Common Stock outstanding immediately prior to
such issuance, multiplied by the Warrant purchase price in effect immediately
prior to such issuance, plus (ii) the consideration, in any, received by the
Company upon such issuance, by (b) the total number of shares of Common Stock
outstanding immediately after such issuance. After each adjustment of the
Warrant purchase price, the total number of shares of Common Stock
purchasable upon exercise of this Warrant shall be proportionately adjusted,
that is, adjusted to such a number of shares as the Warrant purchase price,
multiplied by the number of shares of Common Stock, will pay for at the
adjusted Warrant purchase price. For purpose of this Paragraph 6, the
following provisions shall be applicable:
(a) In the case of the issuance of shares of Common Stock or
other securities of the Company for cash, the consideration received by
the Company therefor shall be deemed to be the cash proceeds received by
the Company therefor, less any commissions or other expenses paid or
incurred by the Company for any underwriting of, or otherwise in
connection with, the issuance thereof.
(b) In case of the issuance of shares of Common Stock or other
securities of the Company for a consideration other than cash, or a
consideration a part of which shall be other than cash, the amount of
the consideration received by the Company therefor shall be deemed to be
the cash proceeds, in any, received by the Company, plus the fair market
value of the consideration other than cash, as determined by the Board
of Directors of the Company, less any commissions or other expenses paid
or incurred by the Company for any underwriting of, or otherwise in
connection with, such issuance; provided, however, that the amount of
such consideration other than cash shall in no event exceed the cost
thereof as recorded on the books of the Company.
(c) In case of the issuance by the Company of (i) any
security that is convertible into or exchangeable for shares of Common
Stock, or (ii) any rights, warrants (other than this Warrant and any
warrants previously issued to Warburg) or options to purchase shares of
Common Stock, the Company shall be deemed to have issued the maximum
number of shares of Common Stock in to which such
<PAGE>
convertible or exchangeable securities may be converted or exchanged, or
the maximum number of shares of Common Stock deliverable upon the
exercise of such rights, warrants or option, as the case may be, for the
consideration (determined as provided in Paragraph 6(a) and 6(b) above)
received by the Company for such convertible or exchangeable securities,
or for such rights or options, as the case may be, plus the minimum
aggregate price at which shares of Common Stock are to be delivered upon
the exercise of such rights, warrants or options, as the case may be. On
the expiration of such rights, warrants or options, or the termination
of such right to convert or exchange, the Warrant purchase price
hereunder shall be readjusted to such Warrant purchase price as would
have obtained had the adjustments made upon the issuance of such rights,
warrants or options, or convertible or exchangeable securities been made
upon the basis of the delivery of, and receipt of the consideration or
adjustment payment, if any, actually paid for, only the number of shares
of Common Stock actually delivered upon the exercise of such rights,
warrants or options, or upon the conversion or exchange of such
securities. Except as provided in the next preceding sentence, no
further adjustment of the Warrant purchase price shall be made as a
result of the actual issuance of shares of Common Stock referred to in
this Paragraph 6(c).
(d) The consideration for any securities issued as a stock
dividend shall be deemed to be zero.
(e) The number of shares of stock of any class at any time
outstanding shall include all shares of stock of that class then owned
or held by or for the account of the Company.
(f) If at any time or from time to time, the Company shall, by
subdivision, consolidation or reclassification of shares, or otherwise,
change as a whole the outstanding shares of Common Stock into a
different number or class of shares, the number and class of shares as
so changed shall, for the purpose of each Warrant and the terms and
conditions hereof, replace the shares outstanding immediately prior to
such change, and the Warrant purchase price in effect, and the number of
shares purchasable under each Warrant, immediately prior to the date on
which such change shall become effective, shall be proportionately
adjusted.
(g) Irrespective of any adjustment or change in the Warrant
purchase price or the number of shares of Common Stock actually
purchasable under each warrant of like tenor, the Warrants theretofore
and thereafter issued may continue to express the Warrant purchase price
per share and the number of shares purchasable thereunder as if the Warrant
purchase price per share and the number of shares purchasable were
expressed on the Warrant when initially issued.
(h) All adjustments pursuant to this Paragraph 6 shall be
deemed to affect both the Maximum Amount and the Then Exercisable Amount
and the exercise price therefor, it being the intention of Warburg and the
Company that the highest number of Warrant Shares (whether or not
Warburg shall then have the right to purchase such Shares) be affected
by any such adjustment.
7. If at any time while Warrant is outstanding, the Company shall
consolidate with or merge into another corporation, the holder hereof shall
thereafter be entitled upon exercise hereof to purchase, with respect to each
share of Common Stock purchasable hereunder immediately prior to the date on
which such consolidation or merger shall become effective, the securities or
property to which a holder of one share of Common Stock would have been
entitled upon such consolidation or merger, without any
<PAGE>
change in, or payment in addition to, the Warrant purchase price in effect
immediately prior to such merger or consolidation, and the Company shall take
such steps in connection with such consolidation or merger as may be
necessary to assure that all the provisions of each Warrant shall thereafter
be applicable, as nearly as reasonably may be, in relation to any securities
or property thereafter deliverable upon the exercise of each Warrant. The
Company shall not effect any such consolidation or merger unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting therefrom shall assume, by written instrument executed and mailed
to the registered holder of each Warrant at the address of such holder such
securities or property as in accordance with the foregoing provisions such
holder shall be entitled to purchase.
8. If the Company shall at any time or from time to time (a)
distribute (otherwise than as a dividend in cash, or in Common Stock or
securities convertible into, or exchangeable for Common Stock) to the holders
of Common Stock, or grant any rights to such holders to acquire, assets
without any consideration paid or to be paid by them, or for a consideration
less than the fair market value of such assets, as determined by the Board of
Directors of the Company, or (b) declare a dividend upon the Common Stock (to
the extent payable otherwise than out of earnings or earned surplus, as
indicated by the accounting treatment of such dividend in the books of the
Company, and otherwise than in Common Stock, or securities convertible into,
or exchangeable for, Common Stock), the Company shall reserve, and the holder
of each Warrant shall thereafter upon exercise thereof be entitled to
receive, for each share of Common Stock purchasable thereunder on the record
date established by the Company for the determination of holders of Common
Stock entitled to receive such distribution, right or dividend (or if no such
record date shall have been established, on the date of such distribution,
grant of such right or payment of such dividend), and without increase in,
or, except in respect of the consideration, if any, paid for such assets by
stockholders, payment in addition to, the then-current Warrant purchase price,
(i) the amount of such assets that would have been distributable to, (ii) the
amount of such dividend (to the extent thereof above-stated) that such holder
would have received, had such holder been a holder of one share of Common Stock
on such record (or other) date.
9. Upon the happening of any event requiring an adjustment of the
Warrant purchase price hereunder, the Company shall forthwith give written
notice thereof to the registered holder of each Warrant, stating the adjusted
Warrant purchase price and the adjusted number of shares of Common Stock
purchasable upon the exercise thereof resulting from such event, and setting
forth in reasonable detail the method of calculation and the facts on which
such calculation is based. The certificate of the Company's independent
public accountants shall be conclusive evidence of the correctness of any
computation made hereunder. In case any voluntary or involuntary dissolution,
liquidation or winding-up of the Company shall at any time be proposed, the
Company shall give at least twenty (20) days' prior written notice thereof to
the registered holder of each Warrant, stating the date on which such event is
to take place and the date (which shall be at least twenty (20) days after the
giving of such notice) as of which the holders of Common Stock of record shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon such dissolution, liquidation or winding-up (on which date,
in the event such dissolution, liquidation or winding-up shall actually take
place, each Warrant and all rights with respect thereto shall terminate).
Notices pursuant to this Paragraph shall be given by first class mail,
postage prepaid, addressed to the registered holder of each Warrant at the
address of such holder appearing in the records of the Company.
<PAGE>
10. In case, at any time during the period this Warrant shall be
exercisable,
(a) the Company shall pay any dividend payable in stock on its
Common Stock, or make any distribution (other than cash dividends paid at
an established annual or quarterly rate) to the holders of its Common
Stock;
(b) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class, or
other rights;
(c) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
then, in any one or more of such cases, the Company shall give to the holder
of this Warrant (i) at least twenty (20) days' prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights, or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation winding-up, and (ii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, at least twenty (20) days'
prior written notice of the date when the same shall take place. Such notice
in accordance with the foregoing clause (i) shall also specify, in the case
of any such dividend, distribution or subscription rights, the date on which
the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify when the holders
of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be. Each such written notice shall be given by
first class mail, postage prepaid, addressed to the holder of the Warrant at the
address of such holder as shown on the books of the Company.
11. As used herein, the term "Common Stock" shall mean and include the
Company's Common Stock authorized on the Effective Date, and shall also
include any capital stock of any class of the Company thereafter authorized
that shall not be limited to a fixed use or percentage in respect of the
rights of the holders thereof to participate in dividends and in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding-up of the Company; provided, that the shares purchasable
pursuant to this Warrant shall include only shares of such class referred to in
the first paragraph hereof designated in the Company's Articles of Incorporation
as Common Stock on the Effective Date, or, in the case of any reorganization,
reclassification, consolidation, merger or sale of assets of the character
referred to in Paragraph 6 hereof, the stock, securities or assets provided
for in such paragraph.
12. This Warrant is exchangeable, upon its surrender by a registered
holder at such office of the Company, for new Warrants of like tenor,
representing, in the aggregate, the right to subscribe for the purchase the
number of shares that may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by the registered holder at the time
of such surrender. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction, upon delivery of a bond of indemnity
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender or cancellation of this Warrant, the Company will issue to the
registered holder a new Warrant of like tenor, in lieu of this Warrant,
<PAGE>
representing the right to subscribe for the purchase the number of shares
that may be subscribed for and purchased hereunder. Nothing herein is
intended to authorize the transfer of this Warrant, except as permitted under
Paragraph 3.
IN WITNESS WHEREOF, the undersigned has caused this Warrant to be signed
by its duly authorized officers under its corporate seal, and to be dated
this 5th day of May, 1995.
TSW INTERNATIONAL, INC.
By: /s/[illegible]
------------------------
Attest:
/s/ Craig J. Huffaker
- ----------------------
Secretary
(Corporate Seal)
<PAGE>
SCHEDULE TO EXHIBIT 10.4.3
SCHEDULE OF TERMS OF
STOCK PURCHASE WARRANT AGREEMENTS
BETWEEN TSW INTERNATIONAL, INC. AND WARBURG, PINCUS INVESTORS, L.P.
DATE OF WARRANT WARRANT WARRANT
AGREEMENT SHARES EXERCISE PRICE EXPIRATION DATE
--------- ------- -------------- ---------------
6/2/94 111,356 $7.615 6/24/04
11/10/94 302,595 7.93 11/10/99
1/4/95 423,633 7.93 1/4/00
2/14/95 133,142 7.93 2/14/00
5/5/95 130,662 11.48 5/5/00
6/27/95 34,843 11.48 6/27/00
10/13/95 217,770 11.48 10/13/00
<PAGE>
EXHIBIT 10.4.4
TSW INTERNATIONAL, INC.
3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
December 16, 1996
Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Re: Amendment to the August 14, 1996 Preferred Stock Purchase Agreement
Dear Sirs:
TSW International, Inc., a Georgia corporation (the "Company"), and Warburg,
Pincus Investors, L.P., a Delaware limited partnership (the "Purchaser"),
entered into a Preferred Stock Purchase Agreement on August 14, 1996 (the
"Purchase Agreement"). Notwithstanding Section 2 of the Purchase Agreement which
requires that the Company file certain amendments to the Company's Articles of
Incorporation with the Georgia Secretary of State on or before December 31,
1996, the Company and the Purchaser hereby agree to further extend the date of
such filing to March 31, 1997. This extension amends the Purchase Agreement. All
other terms and conditions of the Purchase Agreement remain in full force and
effect.
Very truly yours,
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
----------------------------
John Bartels
WARBURG, PINCUS INVESTORS, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By: /s/ Joseph P. Landy
---------------------------
<PAGE>
TSW INTERNATIONAL, INC.
3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
PREFERRED STOCK PURCHASE AGREEMENT
Dated April 14, 1996
To: Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10017
Dear Sirs:
TSW International, Inc., a Georgia corporation (the "Company"), hereby
agrees with Warburg, Pincus Investors, L.P., a Delaware limited partnership (the
"Purchaser") as follows:
Section 1. PURCHASE AND SALE OF SERIES D CUMULATIVE PREFERRED STOCK
Subject to the terms and conditions set forth in this Agreement, the
Company hereby sells to Purchaser, and Purchaser hereby purchases from the
Company, on a when issued basis, 216,685 shares of a new series of Preferred
Stock of the Company to be designated "Series D Cumulative Preferred Stock."
The Series D Cumulative Preferred Stock shall, from and after the date on
which it is authorized by the shareholders of the Company, have the rights,
preferences, privileges and restrictions as set forth in the Articles of
Amendment of the Company (the ""Amendment'') with respect to such Series D
Cumulative Preferred Stock. The Company acknowledges the receipt as of the
date hereof of the amount of Two Million Dollars ($2,000,000) paid by the
Purchaser for the Series D Cumulative Preferred Stock.
Section 2. AMENDMENT OF ARTICLES
On or before December 31, 1996, the Company will cause to be filed
with the Secretary of State of the State of Georgia the Amendment to provide
for the creation and authorization of the Series D Cumulative Preferred Stock
purchased hereby, it being recognized and acknowledged that such amendment
requires the prior approval of the Company's shareholders, but that in any
event the date of this instrument as indicated above shall be the effective
date of the sale and purchase of Series D Cumulative Preferred Stock effected
hereby.
<PAGE>
Section 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
(a) The Purchaser is acquiring the Series D Cumulative Preferred
Stock for its own account for investment and not with a view towards the resale,
transfer or distribution thereof, nor with any present intention of distributing
such Series D Cumulative Preferred Stock, but subject, nevertheless, to any
requirement of law that the disposition of the Purchaser's property shall at all
times be within the Purchaser's control, and without prejudice to such
Purchaser's right at all times to sell or otherwise dispose of all or any part
of such securities under a registration under the 1933 Act or under an exemption
from said registration available under the 1933 Act.
(b) The Purchaser has such knowledge and experience in financial
and business matters that the Purchaser is capable of evaluating the merits and
risks of the investment by the Purchaser in the Company as contemplated by this
Agreement, and the Purchaser is able to bear the economic risk of such
investment for an indefinite period of time. The Purchaser has been furnished
access to such information and documents as the Purchaser has requested and has
been afforded an opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
Agreement and the purchase of securities contemplated hereby.
Section 4. ADDITIONAL COVENANTS OF THE PARTIES.
4.1 RESALE OF SECURITIES
(a) The Purchaser covenants that it will not sell or otherwise
transfer the Series D Cumulative Preferred Stock purchased hereunder except
pursuant to an effective registration under the 1933 Act or in a transaction
which, in the opinion of counsel reasonably satisfactory to the Company,
qualifies as an exempt transaction under the 1933 Act and the rules and
regulations promulgated thereunder and any applicable state securities laws.
(b) The Series D Cumulative Preferred Stock will bear a legend
substantially reflecting the foregoing restrictions on the transfer of such
securities:
"The securities evidenced hereby have not been registered
under the Securities Act of 1933, as amended or the Georgia
Securities Act of 1973, as amended (the "Acts") and may not be
transferred except pursuant to an effective registration under
the Acts or in a transaction which, in the opinion of counsel
reasonably satisfactory to the Company, qualifies as an exempt
<PAGE>
transaction under the Acts and the rules and regulations
promulgated thereunder."
4.2 FURTHER ASSURANCES
Each of the parties shall execute such documents and other papers
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby.
Section 5. MISCELLANEOUS
5.1 NOTICES
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been given or made if in
writing and shall be deemed to have been given or made if in writing and
delivered personally, sent by courier or sent by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses:
(a) If to the Purchaser, to: Warburg, Pincus Investors, L.P.
466 Lexington Avenue
New York, New York 10022
(b) If to the Company, to: TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
Attention: Chief Executive Officer
with a copy to: Troutman Sanders LLP
Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
Attention: Robert W. Grout, Esquire
or to such other persons or at such other addresses as shall be furnished by
either party by like notice to the other, and such notice or communication shall
be deemed to have been given or made as of the date so delivered or mailed. No
change in any of such addresses shall be effective insofar as notices under this
Section 5.1 are concerned unless such changed address is located in the United
States of America and notice of such change shall have been given to such other
party hereto as provided in this Section 5.1.
<PAGE>
5.2 GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia without giving effect to the choice-of-law
provisions thereof.
5.3 SECTION HEADINGS
The headings of the sections and subsections of this Agreement
are inserted for convenience only and shall not be deemed to constitute a part
thereof.
5.4 ENTIRE AGREEMENT; AMENDMENT AND WAIVER
This Agreement constitutes the entire understandings of the
parties hereto and supersede all prior agreements or understandings with respect
to the subject matter hereof between such parties. This Agreement may be
amended, and the observance of any term of this Agreement may be waived, with
(and only with) the written consent of the Company and the Purchaser.
5.5 COUNTERPARTS
This Agreement may be executed in one or more counterparts with the
same effect as if the parties executing the counterparts had each executed one
instrument as of the day and year first above written.
Very truly yours,
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
----------------------------------
John Bartels
WARBURG, PINCUS INVESTORS, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By: /s/ Joseph P. Landy
--------------------------
Partner
<PAGE>
ARTICLES OF AMENDMENT
OF
TSW INTERNATIONAL, INC.
ARTICLE I.
The Articles of Amendment of TSW INTERNATIONAL, INC. are as follows:
ARTICLE II.
The name of the corporation is TSW INTERNATIONAL, INC. (the "Corporation")
and its charter number is 8603931.
ARTICLE III.
The Amended and Restated Articles of Incorporation of the Corporation are
hereby amended to create two new series of preferred stock of the
Corporation, one to be designated "Series C Cumulative Preferred Stock" and
the other to be designated "Series D Cumulative Preferred Stock." To effect
this change, Article IV of the Articles of Incorporation of the Corporation
is hereby deleted in its entirety and the following is substituted therefor:
"Article IV.
A. AUTHORIZED CAPITAL STOCK.
The Corporation shall be authorized to issue 6,000,000 shares of
$0.01 par value common stock (the "Common Stock").
The Corporation shall also be authorized to issue 3,390,993
shares of series preferred stock (the "Preferred Stock"), of which
1,897,028 shares shall be denominated "Series A Preferred Stock,"
393,965 shares shall be denominated "Series B Preferred Stock,"
500,000 shares shall be denominated "Series C Cumulative Preferred
Stock" and 600,000 shares shall be denominated "Series D Cumulative
Preferred Stock." Each share of Preferred Stock shall have a par
value of $0.01.
B. COMMON STOCK.
The rights of the Common Stock shall be as follows:
<PAGE>
1. DIVIDENDS.
Subject to the preferences and other rights of the Preferred
Stock, the holders of Common Stock shall be entitled to receive
dividends as and when declared by the Board of Directors out of funds
legally available therefor. Holders of Common Stock shall be entitled
to share equally, share for share, in dividends declared on the
Common Stock.
2. LIQUIDATION.
In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, voluntary or involuntary, after payment or
provision for payment to the holders of the Preferred Stock of the
amounts to which they may be entitled, the remaining assets of the
Corporation available to stockholders shall be distributed equally per
share to the holders of Common Stock.
3. VOTING RIGHTS.
Except as otherwise provided herein or by law, each holder of
Common Stock shall be entitled to one vote in respect of each share of
Common Stock held of record on all matters submitted to a vote of
stockholders.
4. RECLASSIFICATIONS.
In the event of any stock split, combination or other
reclassification of shares of Common Stock, each share of Common Stock
shall be treated equally.
C. PREFERRED STOCK.
The relative rights, preferences, privileges and restrictions
granted to and imposed upon the Series A Preferred Stock, Series B
Preferred Stock, Series C Cumulative Preferred Stock and Series D
Cumulative Preferred Stock are as follows:
1. SERIES A AND SERIES B PREFERRED STOCK DIVIDENDS.
(a) The holders of Series A Preferred Stock shall be
entitled to receive noncumulative dividends at the rate of $0.315
per share per annum as and when declared by the Board of
Directors out of funds legally available therefor and the holders
of Series B Preferred Stock shall be entitled to receive
noncumulative dividends at the rate of $0.533 per share per annum
as and when declared by the Board of
2
<PAGE>
Directors out of funds legally available therefor. All such
dividends on the Series A Preferred Stock and Series B Preferred
Stock will be payable quarterly and before any dividends shall be
set apart for or paid in any year upon the Common Stock or any
Junior Stock (as hereinafter defined). If any such distribution
shall be insufficient to pay the holders of Series A Preferred
Stock or Series B Preferred Stock the full amount to which they
shall be entitled, the holders of the Series A Preferred Stock and
Series B Preferred Stock shall share ratably in any distribution
in proportion to the respective amounts which would otherwise be
payable in respect to the shares held by them upon such
distribution if all amounts payable on or with respect to said
shares were paid in full.
(b) Dividends on the Series A and Series B Preferred Stock
shall be noncumulative, whether or not in any fiscal year net
profits or surplus are available for the payment of dividends in
such fiscal year, so that if in any fiscal year or years,
dividends in whole or in part are not paid upon the Series A
Preferred Stock or Series B Preferred Stock, unpaid dividends
shall not accumulate as against the holders of the Series C
Cumulative Preferred Stock, the Series D Cumulative Preferred
Stock or the Junior Stock and no sums in any later years shall be
paid to the holders of the Series A Preferred Stock or the Series
B Preferred Stock with respect to any prior year or years when
dividends were not paid.
2. SERIES C AND SERIES D CUMULATIVE PREFERRED STOCK DIVIDENDS.
(a) The holders of Series C Cumulative Preferred Stock
shall be entitled to receive cumulative dividends at the rate of
$1.03 per share per annum as and when declared by the Board of
Directors out of funds legally available therefor. The holders of
Series D Cumulative Preferred Stock shall be entitled to receive
cumulative dividends at the rate of $0.83 per share per annum as
and when declared by the Board of Directors out of funds legally
available therefore. All such dividends on the Series C
Cumulative Preferred Stock and the Series D Cumulative Preferred
Stock will be payable quarterly and before any dividends shall be
set apart for or paid in any year upon (i) the Common Stock or
any other stock ranking on liquidation junior to the Preferred
Stock (such stock being referred to hereinafter collectively as
"Junior Stock"), (ii) the Series A Preferred Stock or (iii) the
Series B Preferred Stock. If any such distribution shall be
insufficient to pay the holders of Series C Cumulative Preferred
Stock or the Series D Cumulative Preferred Stock the full amount
to which they shall be entitled, the holders of the Series C
Cumulative Preferred Stock and the Series D Cumulative Preferred
Stock shall share ratably in any
3
<PAGE>
distribution in proportion to the respective amounts which would
otherwise be payable in respect to the shares held by them upon
such distribution if all amounts payable on or with respect to
said shares were paid in full.
(b) If any dividends payable on the Series C Cumulative
Preferred Stock and the Series D Cumulative Preferred Stock with
respect to any fiscal year of the Corporation are not paid for
any reason, the right of the holders of the Series C Cumulative
Preferred Stock and the Series D Cumulative Preferred Stock to
receive payment of such dividend shall not lapse or terminate,
but said unpaid dividend or dividends shall accumulate
and shall be paid without interest to the holders of the Series C
Cumulative Preferred Stock and the Series D Cumulative Preferred
Stock, when and as authorized by the Board of Directors of the
Corporation, before any sum or sums shall be set aside for or
applied to the purchase, redemption or other acquisition for
value of shares of any other class (including, without
limitation, Junior Stock, Series A Preferred Stock and Series B
Preferred Stock) and before any dividend shall be paid or
declared, or any other distribution shall be ordered or made,
upon shares of any other class (including, without limitation,
Junior Stock, Series A Preferred Stock and Series B Preferred
Stock).
3. RESTRICTION ON JUNIOR STOCK DIVIDENDS. As long as any
Preferred Stock remains outstanding, the Corporation shall not pay any
dividend on the Junior Stock, whether in cash or other property (other
than shares of Junior Stock), or purchase, redeem or otherwise acquire
any such Junior Stock unless, in addition to the payment of the
dividend to the holders of Preferred Stock as described above, the
Corporation has redeemed all shares of Preferred Stock which it would
theretofore have been required to redeem under Section IV.C.9 hereof.
4. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the
holders of the Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for
distribution to its stockholders, after and subject to the
payment in full of all amounts required to be distributed to the
holders of any other preferred stock of the Corporation ranking
on liquidation prior and in preference to the Preferred Stock
(such preferred stock being referred to hereinafter as "Senior
Preferred Stock") upon such liquidation, dissolution or winding
up, but before any payment shall be made to the holders of Junior
Stock, an amount equal to $1.90 per share with respect to the
Series A
4
<PAGE>
Preferred Stock, $7.615 per share with respect to the Series B
Preferred Stock, $11.48 per share with respect to the Series C
Cumulative Preferred Stock and $9.23 per share with respect to
the Series D Cumulative Preferred Stock, PLUS any dividends
declared but unpaid thereon, and PLUS with respect to the Series
C Cumulative Preferred Stock and Series D Cumulative Preferred
Stock, any accumulated and unpaid dividends, if not yet declared
(subject, in each case, to adjustment in the event of any stock
dividend, stock split, stock distribution or combination with
respect to such shares). If upon any such liquidation,
dissolution or winding up of the Corporation the remaining assets
of the Corporation available for the distribution of its
stockholders after payment in full of amounts required to be paid
or distributed to holders of Senior Preferred Stock shall be
insufficient to pay the holders of Preferred Stock the full
amount to which they shall be entitled, the holders of the
Preferred Stock, and any class of stock ranking on liquidation on
a parity with the Preferred Stock, shall share ratably in any
distribution of the remaining assets and funds of the Corporation
in proportion to the respective amounts which would otherwise be
payable in respect to the shares held by them upon such
distribution if all amounts payable on or with respect to said
shares were paid in full.
(b) After the payment of all preferential amounts required
to be paid to the holders of Senior Preferred Stock and Preferred
Stock and any other series of preferred stock upon the
liquidation, dissolution or winding up of the Corporation, the
holders of shares of Common Stock then outstanding shall be
entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) The merger or consolidation of the Corporation into or
with another corporation in which the holders of the
Corporation's outstanding shares before the consolidation or
merger do not retain a majority of the voting power of the
surviving corporation, or the sale, conveyance, mortgage, pledge
or lease of all or substantially all the assets of the
Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section
IV.C.4.
5. VOTING RIGHTS OF PREFERRED STOCK
(a) Each issued and outstanding share of Series A Preferred
Stock, Series B Preferred Stock, Series C Cumulative Preferred
Stock and Series D Cumulative Preferred Stock shall be entitled
to the number of votes equal to the number of share of Common
Stock into
5
<PAGE>
which each such share of Series A Preferred Stock, Series B
Preferred Stock, Series C Cumulative Preferred Stock and Series D
Cumulative Preferred Stock is convertible (as adjusted from time
to time pursuant to Section IV.C.7 hereof), at each meeting of
stockholders of the Corporation with respect to any and all
matters presented to the stockholders of the Corporation for
their action or consideration, including the election of
directors. Except as provided by law, by the provisions of
Sections IV.C.5(b) and (c) below or by the provisions
establishing any other series of preferred stock, holders of
Preferred Stock and of any other outstanding preferred stock
shall vote together with the holders of Common Stock as a single
class.
(b) In addition to any other rights provided by law, the
Corporation shall not without first obtaining the affirmative
vote or written consent of the holders of a majority of the
outstanding shares of each of the Series A Preferred Stock,
Series B Preferred Stock, Series C Cumulative Preferred Stock and
Series D Cumulative Preferred Stock:
(i) amend or repeal any provision of the Corporation's
Articles of Incorporation or Bylaws, including without
limitation a change in the number of members of the Board of
Directors of the Corporation;
(ii) authorize or effect the payment of dividends or
the redemption or repurchase of any capital stock of the
Corporation or rights to acquire capital stock of the
Corporation except as otherwise required by the Articles of
Incorporation;
(iii) authorize or effect the issuance by the
Corporation of any shares of capital stock or rights to
acquire capital stock other than (A) pursuant to options,
warrants, conversion or subscription rights in existence on
the initial date of issuance of the Series A Preferred Stock
and the Series B Preferred Stock or (B) pursuant to stock
option, stock bonus or other employee stock plans for the
benefit of the employees of the Corporation or its
subsidiaries;
(iv) authorize or effect (A) any sale, lease, transfer
or other disposition of all or substantially all the assets
of the Corporation out of the ordinary course of the
Corporation's business; (B) any merger or consolidation or
other reorganization of the Corporation with or into another
corporation, (C) the acquisition by the Corporation of
another corporation by means of a purchase of all or
substantially all the
6
<PAGE>
assets of such corporation, merger, consolidation or other
reorganization, (D) any joint ventures by the Corporation
outside of its ordinary course of business of (E) a
liquidation, winding up, dissolution or adoption of any plan
for the same;
(v) enter into any transaction, other than employment
agreements approved by the Board of Directors or
stockholders agreements to which the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C
Cumulative Preferred Stock and Series D Cumulative Preferred
Stock shall be parties, with any officer, director or
beneficial owner of five percent (5%) or more of the Common
Stock of the Corporation or any affiliate of any of the
foregoing; or
(vi) authorize the incurrence of indebtedness for
borrowed money in an amount in excess of $1,000,000.
(c) The Corporation shall not amend, alter or repeal the
preference, special rights or other powers of the Series A
Preferred Stock, Series B Preferred Stock, the Series C Cumulative
Preferred Stock and/or the Series D Cumulative Preferred Stock so
as to affect adversely the Series A Preferred Stock, Series B
Preferred Stock, Series C Cumulative Preferred Stock and/or the
Series D Cumulative Preferred Stock, without the written consent
or affirmative vote of the holders of at least 50% of the then
outstanding aggregate number of shares of such adversely affected
Preferred Stock given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class.
For this purpose, the authorization or issuance of any series of
Preferred Stock with preference or priority over, or being on a
parity with the Series A Preferred Stock, Series B Preferred
Stock, the Series C Cumulative Preferred Stock and/or the Series
D Cumulative Preferred Stock as to the voting rights or the right
to receive either dividends or amounts distributable upon
liquidation, dissolution or winding up of the Corporation shall
be deemed so to affect adversely the Series A Preferred Stock,
Series B Preferred Stock, the Series C Cumulative Preferred Stock
and/or the Series D Cumulative Preferred Stock, as applicable.
6. OPTIONAL CONVERSION.
(a) Each share of Series A Preferred Stock, Series B Preferred
Stock, Series C Cumulative Preferred Stock and/or the Series D
Cumulative Preferred Stock may be converted at any time, at the option
of the holder thereof, in the manner hereinafter provided, into one
fully paid and nonassessable share of Common Stock, subject, in each
case, to adjustments
7
<PAGE>
described below; PROVIDED, HOWEVER that on any redemption of any
Preferred Stock or any liquidation of the Corporation, the right of
conversion shall terminate at the close of business on the full
business day next preceding the date fixed for such redemption or for
the payment of any amounts distributable on liquidation. (The number
of shares of Common Stock into which each share of Preferred Stock may
be converted is herein called the "Conversion Rate").
(b) Whenever the Conversion Rate shall be adjusted as provided
in Section IV.C.7 hereof, the Corporation shall forthwith file at each
office designated for the conversion, a statement, signed by the
Chairman of the Board, the President, any Vice President or Treasurer
of the Corporation, showing in reasonable detail the facts requiring
such adjustment and the Conversion Rate that will be effective after
such adjustment. The Corporation shall also cause a notice setting
forth any such adjustments to be sent by mail, first class, postage
prepaid, to each record holder of Preferred Stock at his or its
address appearing on the stock register.
(c) In order to exercise the conversion privilege, the holder of
any Preferred Stock to be converted shall surrender his or its
certificate or certificates therefor to the principal office of the
transfer agent (or if there is no transfer agent appointed at that
time, then the Corporation at its principal office), and shall give
written notice to the Corporation at such office that the holder
elects to convert the Preferred Stock represented by such
certificates, or any number thereof. Such notice shall also state the
name or names (with address) in which the certificate or certificates
for shares of Common Stock issuable on such conversion shall be
issued, subject to any restrictions on transfer relating to shares of
the Preferred Stock or shares of Common Stock upon the conversion
thereof. If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by written instrument
or instruments of transfer, in form satisfactory to the Corporation,
duly authorized in writing. The date of receipt by the transfer agent
(or by the Corporation if the Corporation serves as its own transfer
agent) of the certificates and notice shall be the conversion date. As
soon as practicable after receipt of such notice and surrender of the
certificate or certificates for Preferred Stock as aforesaid, the
Corporation shall cause to be issued and delivered at such office to
such holder, or on his or its written order, a certificate or
certificates for the number of full shares of Common Stock issuable on
such conversion in accordance with the provisions hereof.
(d) The Corporation shall at all times when the Preferred Stock
shall be outstanding reserve and keep available out of its authorized
but unissued stock, for the purposes of effecting the conversion of
the Preferred Stock such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Preferred Stock.
8
<PAGE>
(e) Upon any such conversion, no adjustment to the Conversion
Rate shall be made for declared and unpaid dividends on the Preferred
Stock surrendered for conversion, any accumulated and unpaid dividends
on the Series C Cumulative Preferred Stock and the Series D Cumulative
Preferred Stock, if not yet declared, or on the Common Stock
delivered.
(f) All Preferred Stock which shall have been surrendered for
conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall forthwith cease
and terminate except only the right of the holder thereof to receive
shares of Common Stock in exchange therefor and payment of any
declared and unpaid (and, with respect to the Series C Cumulative
Preferred Stock or the Series D Cumulative Preferred Stock, any
accumulated and unpaid, if not yet declared) dividends thereon. Any of
the Preferred Stock so converted shall be retired and canceled and
shall not be reissued, and the Corporation may from time to time take
such appropriate action as may be necessary to reduce the authorized
Series A Preferred Stock, Series B Preferred Stock, Series C
Cumulative Preferred Stock and the Series D Cumulative Preferred Stock
accordingly.
7. ANTI-DILUTION PROVISIONS.
The Conversion Rate shall be subject to adjustment as follows:
(a) In case the Corporation shall (i) pay a dividend in shares
of its capital stock, (ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its
shares of Common Stock any shares of the Corporation, the Conversion
Rate in effect immediately prior thereto shall be adjusted so that the
holder of any Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of the Corporation
which he or it would have owned or have been entitled to receive after
the happenings of any of the events described above, had such
Preferred Stock been converted immediately prior to the happening of
such event. An adjustment made pursuant to this Section IV.C.7(a)
shall become effective immediately after the record date in the case
of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) If any event occurs as to which, in the opinion of the Board
of Directors of the Corporation, the provisions of this Section IV.C.7
are not strictly applicable or if strictly applicable would not
protect the holders of the Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the
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<PAGE>
application of such provisions, in accordance with such essential
intent and principles, so as to protect such rights as aforesaid.
8. CONVERSION.
(a) Each share of Series A Preferred Stock, Series B Preferred
Stock, Series C Cumulative Preferred Stock and Series D Cumulative
Preferred Stock shall automatically be converted into the corresponding
number of shares of Common Stock at the then effective Conversion Rate
at any time upon the closing of an underwritten public offering
pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation to the public generally at a price
to the public which places upon the Corporation a value (prior to the
receipt of proceeds of such offering) of at least $40 million and in
which the net proceeds to the Corporation are not less than $10
million (herein referred to as a "Qualified Public Offering"). In
addition, each share of Series A Preferred Stock, Series B Preferred
Stock, Series C Cumulative Preferred Stock and Series D Cumulative
Preferred Stock shall automatically be converted into shares of Common
Stock at the then effective Conversion Rate for such shares upon the
vote to so convert of the holders of a least a majority of the shares
of Series A Preferred Stock, Series B Preferred Stock, Series C
Cumulative Preferred Stock and Series D Cumulative Preferred Stock,
respectively, then outstanding.
(b) All holders of record of Preferred Stock will be given at
least 10 days' prior written notice of the date fixed and the place
designated for mandatory conversion of shares pursuant to this Section
IV.C.8. Such notice will be sent by mail, first class, postage
prepaid, to each record holder of Preferred Stock at such holder's
address appearing on the stock register. On or before the date fixed
for conversion each holder of Preferred Stock shall surrender his or
its certificates or certificates for all such shares to the
Corporation at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Common
Stock to which such holder is entitled pursuant to this Section IV.C.8
On the date fixed for conversion, all rights with respect to the
Preferred Stock so converted will terminate, except only the rights of
the holders thereof, upon surrender of their certificate or
certificates therefor, to receive certificates for the number of
shares of Common Stock into which such Preferred Stock have been
converted and payment of any declared and unpaid (and, with respect
to the Series C Cumulative Preferred Stock and the Series D Cumulative
Preferred Stock, any accumulated and unpaid, if not yet declared)
dividends thereon. If so required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his
attorneys duly authorized in writing. All certificates evidencing
Preferred
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<PAGE>
Stock which are required to be surrendered for conversion in
accordance with the provisions hereof shall, from and after the date
such certificates are so required to be surrendered, be deemed to have
been retired and canceled and the Preferred Stock represented thereby
converted into Common stock for all purposes, notwithstanding the
failure of the holder or holders thereof to surrender such
certificates on or prior to such date. As soon as practicable after
the date of such mandatory conversion and the surrender of the
certificate or certificates for the Preferred Stock as aforesaid, the
Corporation shall cause to be issued and delivered to such holder, or
on his or its written order, a certificate or certificates for the
number of full shares of Common Stock issuable on such conversion in
accordance with the provisions hereof
9. REDEMPTION.
(a) Corporation shall redeem (to the extent that such redemption
shall not violate any applicable provision of the laws of the State of
Georgia) the Series A Preferred Stock at a price of $1.90 per share,
the Series B Preferred Stock at a price of $7.615 per share, the
Series C Cumulative Preferred Stock at a price of $11.48 per share and
the Series D Cumulative Preferred Stock at a price of $9.23 per share
(subject to adjustment in the event of any stock dividend, stock
split, stock distribution or combination with respect to such shares),
PLUS an amount equal to any dividends declared but unpaid thereon and
PLUS with respect to the Series C Cumulative Preferred Stock and the
Series D Cumulative Preferred Stock, any accumulated and unpaid
dividends, if not yet declared (such amount is hereinafter inferred to
as the "Redemption Price"), on the 1st day of January (the "Redemption
Date") of each of the years 2000 through 2002 thirty-three and
one-third percent (33-1/3%) of the Preferred Stock outstanding on the
first Redemption Date. In respect of each such redemption, shares of
Series A Preferred Stock, Series B Preferred Stock, Series C
Cumulative Preferred Stock and Series D Cumulative Preferred Stock
shall be redeemed in proportion to the respective numbers of shares of
each such series outstanding on the first Redemption Date. If the
Corporation is unable at any Redemption Date to redeem any Preferred
Stock then to be redeemed because such redemption would violate the
applicable laws of the State of Georgia, then the Corporation shall
redeem such Preferred Stock as soon thereafter as redemption would not
violate such laws.
(b) In the event of any redemption of only a part of the then
outstanding Preferred Stock, the Corporation shall effect such
redemption pro rata within each Series among the holders thereof
(based on the number of shares of Preferred Stock held on the date of
notice of redemption).
(c) At least thirty days prior to each Redemption Date, written
notice shall be mailed, postage prepaid, to each holder of record of
Preferred
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Stock to be redeemed at his or its address last shown on the records
of the Corporation, notifying such holder of the number of shares so
to be redeemed, specifying the Redemption Date and the date on which
such holder's conversion rights (pursuant to Section IV.C.6 hereof) as
to such shares terminate and calling upon such holder to surrender to
the Corporation, in the manner and at the place designated, his or its
certificate or certificates representing the shares to be redeemed
(such notice is hereinafter referred to as the "Redemption Notice").
On or prior to each Redemption Date, each holder of Preferred Stock to
be redeemed shall surrender his or its certificate or certificates
representing such shares to the Corporation, in the manner and at the
place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be canceled. In
the event less than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the
remaining shares. From and after the Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all
rights of the holders of Preferred Stock of the Corporation (except
the right to receive the Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
(d) Except as provided in Section IV.C.9(a) above, the
Corporation shall have no right to redeem the Preferred Stock. Any
Preferred Stock so redeemed shall be permanently retired, shall no
longer be deemed outstanding and shall not under any circumstances be
reissued, and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce the
authorized Series A Preferred Stock, Series B Preferred Stock, Series
C Cumulative Preferred Stock and Series D Cumulative Preferred Stock
accordingly. Nothing herein contained shall prevent or restrict the
purchase by the Corporation, from time to time either at public or
private sale, of the whole or any part of the Series A Preferred
Stock, Series B Preferred Stock, Series C Cumulative Preferred Stock
or Series D Cumulative Preferred Stock subject to the provisions of
applicable law.
ARTICLE IV.
The proposed amendment of the Articles of Incorporation as set forth above
was recommended to the shareholders of the Corporation by the Board of Directors
of the Corporation on the 29th day of November, 1995.
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<PAGE>
ARTICLE V.
The foregoing Amendment to the Articles of Incorporation of the
Corporation was duly approved by the shareholders of the Corporation in
accordance with the provisions of Section 14-2-1003 of the Georgia Business
Corporation Code on the _____ day of _______________.
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<PAGE>
IN WITNESS WHEREOF, TSW International, Inc. has caused its duly authorized
officer to execute these Articles of Amendment as of this _____ day of
_______________, 19___.
TSW INTERNATIONAL, INC.
By:_____________________________
Title:__________________________
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<PAGE>
SCHEDULE TO EXHIBIT 10.4.4
SCHEDULE OF TERMS OF
PREFERRED STOCK PURCHASE AGREEMENT
BETWEEN TSW INTERNATIONAL, INC. AND WARBURG, PINCUS INVESTORS, L.P.
DATE OF SERIES OF SHARES OF
AGREEMENT PREFERRED STOCK PRICE PREFERRED STOCK
---------- --------------- ---------- ----------------
9/11/92 A $8,536,626 1,897,028
6/20/94 B 3,000,000 393,965
11/29/95 C 2,000,000 174,216
4/15/96 C 3,000,000 261,324
8/14/96 D 2,000,000 216,685
<PAGE>
EXHIBIT 10.5.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), made and entered into this 19th day of July,
1994, by and between CHRISTOPHER R. LANE, an individual currently a resident of
the United Kingdom (hereinafter referred to as "Employee"), and THE SYSTEM
WORKS, INC., a Georgia corporation (hereinafter referred to as the "Company"):
W I T N E S S E T H :
WHEREAS, Company desires to employ Employee, and Employee desires to be
employed by Company, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. EMPLOYMENT.
Subject to the terms hereof, Company hereby employs Employee, and Employee
hereby accepts such employment. Employee shall serve as the President and Chief
Executive Officer of Company in accordance with the Bylaws of the Company. In
such capacity, Employee shall devote his full business time (except for such
responsibilities to serving on other boards of directors and other commitments
as shall be approved by the Company) and best efforts to the performance of his
duties on behalf of the Company, as directed by the Board of Directors (the
"Board") of the Company. Unless Company and Employee agree otherwise,
Employee's principal office shall be located in the Company's corporate offices
in the vicinity of metropolitan Atlanta, Georgia. The Company shall use its best
efforts to cause the Employee to be nominated and elected to its Board.
SECTION 2. TERM.
2.1 GENERAL. The employment of Employee hereunder shall commence as of
May 23, 1994 and shall continue until August 15, 1995 or until earlier
terminated upon the occurrence of any of the following events:
(i) The death or total disability of Employee (total disability
meaning the failure of Employee to perform his normal required services
hereunder
<PAGE>
for a period of two (2) or more months during any consecutive 6 month
period during the term hereof by reason of Employee's mental or physical
disability;
(ii) The mutual written agreement of the Company and Employee to
terminate this Agreement; and
(iii) The termination of Employee's employment hereunder by the
Company for "good cause." For the purpose of this Agreement, "good cause"
shall mean (a) a material breach by Employee of his obligations hereunder;
or (b) conduct by Employee amounting to fraud, dishonesty or negligence.
2.2 NO REPAYMENT OBLIGATION OF EMPLOYEE. In the event this Agreement is
terminated pursuant to Section 2.1 herein, Employee shall have no obligation to
repay any amounts or benefits previously paid to Employee pursuant to this
Agreement, and, except for amounts due to Employee through the date of
termination, including any accrued Base Salary to the date of termination, the
Company shall have no obligation to pay Employee any further amounts and further
benefits after the date of termination.
SECTION 3. COMPENSATION; EXPENSES.
3.1 SALARY. Employee shall be paid a base salary (the "Base Salary")
during the term of his employment hereunder at the rate of Two Hundred Fifty
Thousand Dollars ($250,000) per annum for the period commencing on the date
hereof and ending upon the termination of Employee's employment hereunder.
Unless otherwise increased by the Board of Director in its sole discretion, the
Base Salary will continue to be Two Hundred Fifty Thousand Dollars ($250,000)
during the term of Employee's employment hereunder. The Base Salary shall be
paid to Employee in equal installments on normal Company pay dates, but in no
event less often than monthly in arrears, less all applicable withholding taxes.
3.2 BONUS PLANS. Company shall allow Employee to participate at a level
consistent with his status as President and Chief Executive Officer in any
pension or profit sharing plan now or as may hereafter be provided or offered to
the Company's senior executive officers in accordance with the terms and
requirements of the applicable plan. The Company agrees to work with Employee
in designing and implementing an incentive bonus plan for Employee to commence
with the fiscal year beginning April 1, 1994.
3.3 EXPENSES. Employee shall be reimbursed for all ordinary and
reasonable business expenses incurred by Employee at the request and on behalf
of Company upon the presentation of appropriate supporting documentation to the
Company.
2
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SECTION 4. ADDITIONAL EMPLOYMENT BENEFITS.
Company shall provide Employee with the following additional employment
benefits during the term of his employment hereunder:
4.1 MEDICAL INSURANCE. Company shall pay for and shall use its best
efforts to provide Employee and his immediate family with such life, medical,
dental, disability and other insurance benefits as if Employee and his immediate
family were resident in the United Kingdom. All such insurance coverage shall
commence as soon as practicable after the date hereof.
4.2 VACATION. Employee shall receive four (4) weeks of paid vacation time
per 12 month period during the term of his employment hereunder.
4.3 OTHER BENEFITS. Company shall provide Employee with any other
benefits that Company generally provides to its senior executive officers.
SECTION 5. RELOCATION RELATED BENEFITS.
The Company shall provide the Employee with the following benefits and
allowances in connection with Employee's relocation from the United Kingdom to
the metropolitan Atlanta, Georgia area and with Employee's continued ownership
of a residence in the United Kingdom:
5.1 SPECIFIC ALLOWANCES. The Company shall pay or otherwise reimburse
Employee for the following:
(i) The amount of $3,000 for home security expenses in the
United Kingdom;
(ii) the amount of $375 per month for "housesitting" expenses in
the United Kingdom;
(iii) A payment of $900 per year representing an increase in
Employee's homeowner's insurance coverage in the United Kingdom;
(iv) A payment of up to a maximum of $3,000 for the shipping and
transport of Employee's household goods and belongings from the United Kingdom
to the metropolitan Atlanta, Georgia area (and the Company agrees to pay a
similar sum for reshipping such goods and belongings back to the United Kingdom
if such reshipping occurs within sixty (60) days following the termination of
this Agreement);
(v) Provide Employee with a resident housing allowance of up to
$4,000 per month;
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<PAGE>
(vi) Provide Employee with a furniture rental allowance of up to
$500 per month;
(vii) Provide Employee with an automobile leasing allowance for
two automobiles at an aggregate total of $700 per month;
(viii) Provide Employee with a private school tuition allowance of
up to $7,000 per full school year during the term hereof; and
(ix) Provide Employee with a tax advisor allowance of up to
$3,000 per year.
In the event that the Company leases a car and/or house for Employee,
rather than Employee's leasing such car and/or house himself, Employee shall
maintain each in good working order, reasonable wear and tear, and shall be
responsible for all maintenance obligations of the lessee under any such lease
(subject, however, to the Company's right, at Employee's cost and expense, to
provide or have provided such maintenance in the event Employee fails within a
timely manner to do so). Upon termination of Employee's employment, Employee
shall deliver all keys to any house or car leased on his behalf, with such house
or car being in sufficient condition for the Company to redeliver such house or
car to the lessor thereof, without penalty or additional expense.
5.2 REASONABLENESS OF ALLOWANCES. The Employee agrees that the payments,
allowances and reimbursements provided in the foregoing Section 5.1 shall be the
maximum for which the Company shall be obligated; and the Employee shall use
reasonable and diligent efforts to minimize the actual obligation of the
Company.
5.3 SPECIFIC TRAVEL ALLOWANCE. The Company shall pay or otherwise
reimburse the Employee for reasonable travel expenses for "business class"
travel for himself, his immediate family and his mother-in-law for three trips
to the United Kingdom during the term hereof; provided, however, that the timing
and duration of any such travel involving the Employee shall be subject to the
commitment by the Employee to his duties and responsibilities to the Company
hereunder.
5.4 UNDERTAKING TO OBTAIN HEALTH INSURANCE COVERAGE. During the term of
this Agreement, in the event Employee's mother-in-law moves to the metropolitan
Atlanta, Georgia area, the Company shall endeavor to have Employee's
mother-in-law included in the Company's health insurance plan with coverage
levels generally available to employees of the Company at the Company's cost and
expense; provided, however, that nothing in this Paragraph 5.4 shall require the
Company to hire Employee's mother-in-law or to obtain any such coverage for her
from any insurer (or to self-insure her coverage) in the event the Company's
primary insurance carrier refuses to cover Employee's mother-in-law; and
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<PAGE>
provided further that Employee shall attempt to minimize any Company obligation
by purchasing travelers insurance for his mother-in-law.
5.5 REIMBURSEMENT FOR CERTAIN TAX LIABILITY. In the event Employee incurs
additional tax liability as a result of Employee's intent to remain in the
United States under current Internal Revenue Service regulations, then Company
shall reimburse Executive for such additional tax liability by issuing to
Employee Common Stock of the Company having a value at the date of issuance
equal to the amount of the additional tax liability.
SECTION 6. GRANT OF STOCK OPTIONS. Concurrently herewith the Company
has granted to Employee, and does hereby affirm the grant of, an incentive stock
option to purchase 170,300 shares of the common stock of the Company, par value
$0.01 per share, at the fair market price of $4.50 per share in accordance with
the terms and conditions set forth on Exhibit "A" attached hereto. This option
shall be evidenced by a written stock option agreement in form customarily used
by the Company for its employee stock options.
SECTION 7. RESTRICTIONS.
7.1 OWNERSHIP. All Work Product when and as it is created or conceived,
including all intellectual property rights therein, shall be disclosed to and
owned exclusively by Company. For purposes of this Agreement, "Work Product"
refers to all inventions, discoveries and improvements and all other information
of value or importance concerning the business and actions of Employee while
acting on behalf of Company (but limited to the Company's management
information systems business) including (without limitation) information
concerning software development, customer prospects and accounts, personnel,
marketing and business strategies. Notwithstanding the preceding sentence,
Work Product shall exclude all inventions, discoveries and improvements and all
other information of value or importance concerning the business and actions of
Employee while acting on behalf of parties other than Company, if undertaken
with the consent of the board of directors of the Company. To the greatest
extent possible, any Work Product shall be deemed to be "work made for hire"
(as defined in the Copyright Act, 17 U.S.C.A. Section 101 ET SEQ., as amended)
and owned exclusively by the Company. Employee hereby unconditionally and
irrevocably transfers and assigns to the Company all rights, title and interest
Employee may currently have (or in the future may have) by operation of law or
otherwise in or to any Work Product, including, without limitation, all patents,
copyrights, trademarks, service marks and other intellectual property rights.
Employee agrees to execute and deliver to the Company any transfers,
assignments, documents or other instruments which the Company may deem necessary
or appropriate to vest complete title and ownership of any Work Product, and all
associated rights, exclusively in the Company.
7.2 CONFIDENTIALITY. Employee shall maintain in strict confidence and
shall not use or disclose (except as required to perform Employee's duties under
this Agreement) any "Trade Secrets" or "Confidential Information" of Company,
its affiliates and customers. With respect to the Company's Trade Secrets, this
obligation shall apply during and after the
5
<PAGE>
term of this Agreement for so long as the pertinent information remains a Trade
Secret, and shall apply whether or not the Trade Secret is in written or
tangible form. With respect to the Company's Confidential Information, this
obligation shall apply during the term of this Agreement and for three (3) years
after its termination. As provided by Georgia statutes, "Trade Secret" shall
mean any information (including, but not limited to, technical or non-technical
data, a formula, a pattern, a compilation, a process, financial data, financial
plans, product plans or a list of actual or potential customers) that: (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy. In
the case of the Company's business, Company's Trade Secrets include (without
limitation) information regarding software programs, names and addresses of any
customers, sales personnel, account invoices, training and educational manuals,
administrative manuals, prospective customer leads, in whatever form, whether or
not computer or electronically accessible "on-line." As used in this Agreement,
the Company's "Confidential Information" shall refer to valuable, non-public
competitively sensitive data and information relating to the Company's business
or its clients business, other than Trade Secrets, that is not generally known
by or readily available to competitors of the Company; it also includes any
information or data specifically identified as a "Trade Secret" in the
immediately preceding sentence that is determined by a court of competent
jurisdiction not to be a "Trade Secret."
7.3 DELIVERY. Upon the request of Company, and, in any event, upon the
termination of Employee's employment, (1) Employee shall take such steps as
Company may reasonably request in order to transfer, disclose, and give
Company the full benefit of any Work Product remaining in Employee's
possession; and (2) Employee shall deliver to Company all memoranda, notes,
records, drawings, manuals, disks and other documents and media, regardless
of form, that certain Work Product or Trade Secrets. Employee shall not
retain any such materials (whether in original or duplicate form) following
such delivery.
7.4 NON RECRUITMENT. Employee agrees that during his employment by the
Company and for a period of two (2) years following any termination of such
employment, he will not, either directly or indirectly, on his own behalf or in
the service or on behalf of others solicit or attempt to solicit on behalf of
or for the benefit of any entity which competes with the Company (i) any person
employed by the Company, whether or not such employee is a full-time employee or
a temporary employee of the Company and whether or not such employee is pursuant
to a written agreement and whether or not such employment is for a determined
period or is at will, or (ii) any person or entity that is an agent or
independent contractor of the Company in the continental United States; nor will
Employee at any time during such period, either directly or indirectly, induce
or attempt to induce any such agent or independent contractor to terminate,
breach or otherwise fail fully to perform any agency or agreement with the
Company.
7.5 NAMES AND MARKS. Following the termination of Employee's employment,
Employee shall not, for the benefit of his own or any other person or entity's
business, use
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<PAGE>
or display the names, marks, logos or slogans of the Company or its affiliates,
or any name, mark, logo or slogan similar thereto, without the prior written
consent of the Company.
7.6 LIMITATION ON SOLICITING CLIENTS. Employee agrees that during his
employment, Employee will not, either directly or indirectly, alone or in
conjunction with any other party, solicit, divert or appropriate or attempt to
solicit, divert or appropriate any "Client" for the purpose of providing the
Client with services or products competitive with those offered by the Company
during the Employment Term. For purposes of this Agreement, "Clients" shall
mean actual clients or actively sought prospective clients of the Company during
the term of Employee's employment by the Company. Employee agrees that for
eighteen (18) months after the last day of his employment, Employee will not,
either directly or indirectly, alone or in conjunction with any other party,
solicit, divert or appropriate or attempt to solicit, divert or appropriate any
Client of the Company for the purpose of providing the Client with services or
products competitive with those offered by the Company during his employment;
provided that the covenant in this sentence shall limit Employee's conduct only
with respect to those Clients with whom Employee had substantial contact
(through direct or supervisory interaction with the Client or the Client's
account) during a period of time up to but no greater than two (2) years prior
to the last day of his employment.
7.7 RELIEF. In the event of any breach or threatened breach by Employee
of any covenant contained in this Section 7, the resulting injuries to
Company would be difficult or impossible to estimate accurately, even though
irreparable injury or damages may result. Accordingly, an award of legal
damages, if without other relief, may be inadequate to protect the Company.
Employee therefore agrees that, in the event of any such breach, Company shall
be entitled to apply to a court of competent jurisdiction to obtain an
injunction to restrain the breach or anticipated breach of any such covenant,
and to obtain any other available legal, equitable, statutory, or contractual
relief. In the event the Company seeks damages from Employee for any breach
of any covenant contained in this Section 7, Employee's liability shall be
limited to the then fair market value of any shares of the Company's capital
stock owned by the Employee ("shares" shall include any shares of the
Company's capital stock to which Employee holds options to purchase and any
shares purchased pursuant to such options, but shall exclude any other shares
purchased by Employee).
7.8 REASONABLENESS OF COVENANTS. Employee recognizes and acknowledges
that the covenants in this Section 7 are reasonable as to time, geographical
coverage and restricted conduct and are necessary to protect Company's business
and Trade Secrets. Employee further acknowledges that (a) Employee has entered
into this Agreement freely as a result of balanced arm's length bargaining and
with the full benefit of qualified counsel of his choosing and (b) Company would
not have engaged Employee without Employee's having agreed to these covenants.
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<PAGE>
SECTION 8. MISCELLANEOUS.
8.1 BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon Employee and Company and its successors and assigns.
Employee may not assign his rights or delegate his obligations hereunder
without the prior written consent of the Company.
8.2 GOVERNING LAWS. Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Georgia.
8.3 HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
8.4 NOTICES. Unless otherwise agreed to in writing by the parties
hereto, all communications provided for hereunder shall be in writing and
shall be deemed to be given when delivered in person or three (3) business
days after being sent by registered or certified mail, postage prepaid,
and:
(a) If to Employee, addressed to:
Christopher R. Lane
___________________________
___________________________
(b) If to Company, addressed to:
The System Works, Inc.
3301 Windy Ridge Parkway
Marietta, Georgia 30067
8.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
8.6 ENTIRE AGREEMENT. This Agreement is intended by the parties
hereto to be the final expression of their agreement with respect to the
subject matter hereof and is the complete and exclusive statement of the
terms thereof, notwithstanding any representations, statements or
agreements to the contrary heretofore made.
8
<PAGE>
8.7 MODIFICATIONS: WAIVERS. This Agreement may be modified only by a
written instrument signed by each of the parties hereto. No waiver shall
be effective unless made in writing and signed by the party against whom
enforcement is sought.
8.8 SEVERABILITY. Should any aspect or provisions of this Agreement
prove invalid or unenforceable for any reason, the remainder of the
Agreement shall nonetheless be fully enforced to the fullest extent
permitted by law, regardless of whether the invalid of unenforceable aspect
or provision is facially severable from the remainder of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE SYSTEM WORKS, INC.
[CORPORATE SEAL] By: /s/ Joseph P. Landy
-----------------------------
Title: For the Board of Directors
-----------------------------
Attest: EMPLOYEE:
By: /s/ Joseph P. Landy
--------------------
Title: Managing Director /s/Christopher R. Lane
-------------------------------
Christopher R. Lane
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<PAGE>
EXHIBIT "A"
To Employment Agreement Between
Christopher R. Lane
and
The System Works, Inc.
The following provisions relate to the grant by the Company to
Employee of a stock option to purchase 170,300 shares of the common stock
of the Company.
1. Option Price: $4.50 per share
2. Term of Option: 10 years
3. Vesting Provision: Exercisable immediately with respect to 25%
of shares; exercisable with respect to an
additional 25% of shares upon each of the
first three anniversary dates of the option,
so that the option will be exercisable in
full three years from its date.
4. Termination of Employment: No further vesting after termination of
employment; vested portions of option may be
exercised within three months following
termination of employment and within one year
following death; Company may elect to permit
Employee to hold non-vested portions of
option, in whole or in part and/or at
modified vesting terms.
5. Payment upon Exercise: Cash in full.
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT ("Amendment"), made and entered into this 15th day of
December, 1994, by and between CHRISTOPHER R. LANE (hereinafter referred to as
"Employee"), and THE SYSTEM WORKS, INC., a Georgia corporation (hereinafter
referred to as "Company");
WITNESSETH:
WHEREAS, Employee and Company have previously entered into an Employment
Agreement dated the 19th day of July, 1994 (hereinafter referred to as
"Agreement") and desire to amend that Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements, contained herein, the parties hereto, intending to be legally
bound, with all terms of the Agreement remaining the same except for the
following terms which are hereby modified as follows:
SECTION 1. TERM.
Section 2.1 of the Agreement is amended to continue Employee's employment
until December 31, 1995.
SECTION 2. ADDITIONAL EMPLOYMENT BENEFITS.
The medical insurance and other benefits provided pursuant to Sections 4.1
and 4.3 of the Agreement shall cease in the event Employee relocates to England
and Employee shall be provided with benefits similar to those offered to other
senior officers of the Company located in England.
SECTION 3. RELOCATION RELATED BENEFITS.
All benefits provided pursuant to Section 5 of the Agreement shall cease in
the event Employee relocates from Atlanta.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
<PAGE>
THE SYSTEM WORKS, INC.
By: /s/ Joseph P. Landy
---------------------------
Title: Director
------------------------
EMPLOYEE:
/s/ Christopher R. Lane
- ------------------------------
Christopher R. Lane
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT ("Amendment"), made and entered into this 1st day of
December, 1995, by and between CHRISTOPHER R. LANE (hereinafter referred to as
"Employee"), and TSW INTERNATIONAL, INC., a Georgia corporation (hereinafter
referred to as "Company"):
WITNESSETH:
WHEREAS, Employee and Company have previously entered into an Employment
Agreement dated the 19th of July, 1994 (hereinafter referred to as "Agreement")
which was amended on the 15th day of December 1994 and desire to amend that
Agreement a second time;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements, contained herein, the parties hereto, including to be legally
bound, with all terms of the Agreement remaining the same except for the
following terms which are hereby modified as follows:
SECTION 1. TERM.
Section 2.1 of the Agreement is amended to continue Employee's employment
until December 31, 1996.
SECTION 2. ADDITIONAL EMPLOYMENT BENEFITS.
The medical insurance and other benefits provided pursuant to Sections 4.1
and 4.3 of the Agreement shall cease in the event Employee relocates to England
and Employee shall be provided with benefits similar to those offered to other
senior officers of the Company located in England.
SECTION 3. RELOCATION RELATED BENEFITS.
3.1 All benefits provided pursuant to Section 51.(i), (ii), (iii), and
(viii) plus section 5.4 of the Agreement are hereby deleted.
3.2 Section 5.3 of the Agreement is hereby amended by deleting the words
"his mother-in-law."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
TSW INTERNATIONAL, INC.
By: /s/ Joseph P. Landy
---------------------------
Title: Director and Member of
------------------------
Compensation Committee
EMPLOYEE:
/s/ Christopher R. Lane
- ------------------------------
Christopher R. Lane
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT ("Amendment"), made and entered into this 4th day of
December, 1996, by and between CHRISTOPHER R. LANE (hereinafter referred to as
"Employee"), and TSW INTERNATIONAL, INC., a Georgia corporation (hereinafter
referred to as "Company"):
WITNESSETH:
WHEREAS, Employee and Company have previously entered into an Employment
Agreement dated the 19th day of July, 1994 (hereinafter referred to as
"Agreement") which was amended on the 15th day of December, 1994 and the 1st of
December, 1995 and desire to amend that Agreement a third time;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements, contained herein, the parties hereto, intending to be legally
bound, with all terms of the Agreement remaining the same except for the
following terms which are hereby modified as follows:
SECTION 1. TERM
Section 2.1 of the Agreement is amended to continue Employee's employment
until December 31, 1997.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
--------------------------------
Title: CFO
----------------------------
EMPLOYEE:
/s/ Christopher R. Lane
- ---------------------------------
Christopher R. Lane
<PAGE>
EXHIBIT 10.5.2
SUPPLEMENTAL SEVERANCE AGREEMENT
This agreement (the "Agreement") is entered into as of December 15, 1994,
between The System Works, Inc., a Georgia corporation (the "Company") and
Christopher R. Lane ("Employee").
RECITALS
A. The Company desires to continue to retain the services of Employee.
B. This Agreement with Employee is in furtherance of that aim of the
Company.
AGREEMENT
THE PARTIES AGREE AS FOLLOWS:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following definitions:
1.1 The "Board" means the Board of Directors of the Company.
1.2 "Date of Termination" means: (i) in the event of Termination for
Disability, 30 days after Notice of Termination is given (provided that Employee
has not returned to the performance of Employee's duties on a full-time basis
during such 30-day period); (ii) in the event of Termination For Cause, the date
specified in the Notice of Termination; and (iii) in the event of Termination
for any other reason, the date on which a Notice of Termination is given.
1.3 "Disability" means the total and permanent inability of Employee
to perform the usual duties of Employee's employment due to illness, accident
or other physical and mental incapacity, as determined by a physician selected
by the Company and acceptable to Employee or Employee's legal representative
(which agreement as to acceptability shall not be unreasonably withheld).
1.4 "Notice of Termination" means a notice of Termination indicating
the specific provisions of this Agreement under which the Termination is
effected and setting forth
1
<PAGE>
circumstances providing a basis for such Termination. Any purported Termination
during the term of the Agreement by either the Company or Employee will be
communicated by a written Notice of Termination.
1.5 "Termination" means termination of the Employee's employment by
the Company and all of the Company's subsidiaries such that Employee is not
employed by any of the Company or the Company's subsidiaries.
1.6 "Termination for Cause" means Termination by the Company upon the
affirmative vote of at least a majority of the Board Members by reason of (i)
Employee's willful material dishonesty towards, fraud upon, or deliberate injury
or attempted injury to, the Company or (ii) Employee's willful deliberate
repeated failure to perform Employee's reasonable employment duties (other than
by reason of Employee's incapacity due to physical or mental illness) resulting
in material injury to the Company, where such failure is not remedied within a
reasonable period of time after receipt of written notice from the Company;
provided, that a Termination shall not be deemed to be a Termination for Cause
if such Termination is effected on the basis of any act or omission believed by
Employee in good faith to have been in, or not opposed to, the best interests of
the Company.
1.7 "Termination for Disability" means Termination by the Company due
to the Employee's Disability which Disability has continued in excess of six
months.
1.8 "Termination for Good Reason" shall mean Termination by
Employee by reason of any of the following:
(a) A reduction in the overall level of Employee's compensation
or benefits;
(b) A significant reduction in Employee's duties,
responsibilities, or authority;
(c) The Company requiring Employee to be based (other than on a
temporary basis), at any office or location other than the Company's executive
office at Marietta, Georgia; or the Company's offices at London, England.
2
<PAGE>
2. Termination Payments.
2.1 Salary. If the Employee's employment is terminated by the
Company other than as a Termination for Cause or Termination for Disability or
terminated by the Employee as a Termination for Good Reason, the Employee shall
receive salary continuation pay from the Date of Termination for a period of
twelve months equal to Employee's then current base salary less any amounts
earned by Employee as a consultant or employee during such twelve month period.
Such salary continuation payments shall be paid periodically to the Employee in
accordance with the schedule used to make salary payments to the Company's
regular full-time employees.
2.2 Not Exclusive. The payments made by the Company under this
Agreement shall be in addition to all other benefits to which Employee may be
entitled under any plan or arrangement with the Company.
3. Term. This Agreement shall be effective as of December 15, 1994 and
shall continue in effect for so long as Employee is employed by the Company.
4. Miscellaneous.
4.1 Employment at Will. The Company and Employee each acknowledge
that the employment of the Employee is "at will" and may be terminated by the
Employee or by the Company at any time.
4.2 Withholding. The Company shall withhold from any amounts payable
to Employee under this Agreement such federal, state and local taxes and other
amounts as shall be required to be withheld pursuant to any applicable law or
regulation.
4.3 Assignment. The rights and benefits of Employee under this
Agreement are personal to Employee and shall not be assigned except with prior
written consent of the Company. This Agreement shall, however, inure to the
benefit of Employee's legal representatives, executors, administrators and
heirs.
4.4 Notices. Any notice under this Agreement shall be in writing,
signed by the party making the notice, and shall be
3
<PAGE>
delivered personally, or sent by certified or registered mail, postage pre-paid
addressed as follows:
If to the Employee: Christopher R. Lane
2970 Rivermeade Drive
Atlanta, Georgia 30327
If to Company: Craig J. Huffaker
Chief Financial Officer
The System Works, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
A party may change such party's address by notice given to the other party.
4.5 No Mitigation. In no event shall Employee be obligated to seek
other employment or to take any other action by way of mitigation of the amounts
payable under this Agreement, which amounts shall be paid in full
notwithstanding Employee obtaining other employment.
4.6 Governing Law. This Agreement shall be governed by and enforced
in accordance with the laws of the State of Georgia applicable to contracts
entered into and wholly to be performed in the state of Georgia by Georgia
residents.
4.7 Arbitration; Attorney's Fees. Any dispute or controversy arising
under in connection with this Agreement shall be settled exclusively by
arbitration in Atlanta, Georgia, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court of competent jurisdiction. The parties shall
use their best efforts to conduct any arbitration called for under this
Agreement within 45 days after either party gives notice of demand for
arbitration. If Employee is the prevailing party in any arbitration or other
legal action, Employee shall be entitled to attorneys fees and costs of suit.
4.8 Enforcement. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
4
<PAGE>
The parties have executed this Agreement as of the date set forth at the
beginning of this Agreement.
THE SYSTEM WORKS, INC.
By: /s/ Joseph P. Landy
-------------------------------
Title: Director
-----------------------------
EMPLOYEE:
/s/ Christopher R. Lane
-----------------------------------
Name: Christopher R. Lane
5
<PAGE>
EXHIBIT 10.6.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made and entered into as of the
22nd day of December, 1996, by and between TSW INTERNATIONAL, INC., a Georgia
corporation ("Lender"), and CHRISTOPHER R. LANE ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow from Lender, and Lender has agreed to
loan to Borrower, the sum of ONE HUNDRED THOUSAND AND NO/100 ENGLISH POUNDS
(L100,000.00) upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premise, the mutual
promises, covenants and agreements contained herein, and good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
I. GENERAL TERMS
SECTION 1.1 LOAN. Subject to the terms and conditions contained in
this Agreement, Lender agrees to loan to Borrower One Hundred Thousand and
No/100 English Pounds (L100,000.00) (the "Loan"). The Loan shall be
evidenced by a Promissory Note from Borrower in the form of EXHIBIT "A"
attached hereto and incorporated herein by reference (the "Note").
SECTION 1.2 REPAYMENT OF PRINCIPAL; PREPAYMENTS.
(a) REPAYMENT OF PRINCIPAL. The principal amount of the Loan shall, if
not voluntarily or mandatorily prepaid sooner pursuant to the terms of
subparagraphs (b) or (c) of this Section 1.2, be due and payable on April 30,
1999.
(b) VOLUNTARY PREPAYMENTS. Borrower may, at any time and from time to
time, without the consent of Lender and without paying any penalty or premium
therefor, prepay all or any portion of the outstanding principal of the Loan;
provided, however, that Borrower first pay any and all accrued and unpaid
interest on the principal of the Loan.
(c) MANDATORY PREPAYMENTS.
(i) SALE OF SHARES. Notwithstanding anything herein to the
contrary, upon any sale or disposition of any of the "Option Shares" (as such
term is defined in Section 1.4 hereof), any proceeds from such sale or
disposition, net of any applicable United States,
1
<PAGE>
Georgia or United Kingdom taxes, shall be paid to Lender by Borrower first
towards the payment of all accrued and unpaid interest of the Loan as of that
time, and secondly, if all accrued and unpaid interest of the Loan as of that
time has been paid, towards the payment of the outstanding principal balance
of the Loan as of that time.
(ii) GRANT OF BONUS. Notwithstanding anything contained herein to
the contrary, upon any payment of a cash bonus or other similar form of cash
compensation by the Lender (or an affiliate of the Lender) to the Borrower,
the full amount of such cash bonus or other similar form of cash incentive
compensation, net of any applicable United States, Georgia or United Kingdom
taxes, shall be paid to Lender by Borrower first towards the payment of all
accrued and unpaid interest of the Loan as of that time, and secondly, if all
accrued and unpaid interest of the Loan as of that time has been paid,
towards the payment of the outstanding principal balance of the Loan as of
that time.
(iii) CESSATION OF EMPLOYMENT. Notwithstanding anything contained
herein to the contrary, upon the cessation of Borrower's employment with the
Lender for any reason or for no reason, the outstanding principal balance of
the Loan and all accrued and unpaid interest thereon shall be due and payable
within ninety (90) days of the date of such cessation of employment.
SECTION 1.3 APPLICABLE INTEREST RATE; PAYMENT TERMS.
(a) INTEREST RATE. The outstanding principal balance of the Loan shall
bear interest from the date of advance of the Loan at the rate of six percent
(6%) per annum, expressed in simple interest terms and computed on a three
hundred sixty-five (365)-day year.
(b) PAYMENT DATES. Interest on the Loan shall be payable: (i) on April
30, 1997 and April 30, 1998 and (ii) at maturity of the Loan, whether by
reason of acceleration, payment, prepayment or otherwise (the "Maturity
Date"). Notwithstanding the foregoing, if Lender (or an affiliate of the
Lender) does not pay Borrower a cash bonus or other similar form of cash
incentive compensation sufficient to pay accrued and unpaid interest,
Borrower may defer his unpaid interest on the Loan until the Maturity Date.
SECTION 1.4 SECURITY FOR THE LOAN. Borrower's obligations and
indebtedness to Lender under this Agreement and under the Note (collectively,
the "Obligations") shall be secured at all times by that certain Collateral
Assignment of even date herewith (the "Assignment") pursuant to which
Borrower collaterally assigned and granted to Lender a first priority
security interest in and to Borrower's rights (the "Option Shares") to
purchase (i) eighty-eight thousand eight hundred and eighty-eight (88,888)
shares of Lender's One Cent ($.01) par value common stock ("Common Stock")
under that certain Stock Option Agreement dated as of August 17, 1994, by and
between Borrower and Lender; (ii) eighty-one thousand four hundred and twelve
(81,412) shares of Common Stock under that certain Stock Option Agreement,
dated as of August 17, 1994, by and between Borrower and Lender; (iii) sixty
thousand six hundred and thirty-four (60,634) shares of Common Stock under that
certain
2
<PAGE>
Stock Option Agreement, dated as of May 4, 1995, by and between Borrower and
Lender; (iv) twenty-one thousand eight hundred and seventy-five (21,875) shares
of Common Stock under that certain Stock Option Agreement, dated as of November
4, 1996, by and between Borrower and Lender; and (v) seventy-six thousand
(76,000) shares of Common Stock under that certain Stock Option Agreement, dated
as of December 11, 1996, by and between Borrower and Lender.
SECTION 1.5 DISBURSEMENT OF LOAN; CLOSING. The closing shall be held
on the date hereof at 3301 Windy Ridge Parkway, Atlanta, Georgia 30339. At
closing, the Loan proceeds will be disbursed to Borrower. At closing,
Borrower shall execute and deliver to Lender the Note and the Assignment,
together with any other documents required or contemplated by the terms
thereof, including, without limitation, such documents as Lender may
reasonably request in order to create, perfect or maintain a security
interest in the Option Shares.
II. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender (which representations
and warranties shall survive the delivery of the Note and the making of the
Loan) that:
SECTION 2.1 INDIVIDUAL CAPACITY. Borrower has the power and capacity
to execute, deliver and perform his obligations under this Agreement, the
Note and the Assignment.
SECTION 2.2 GOOD TITLE. Borrower is the lawful owner of full and
marketable title to the Option Shares, and the Option Shares are free and
clear from all liens, pledges, hypothecations, claims, security interests and
encumbrances of any kind whatsoever.
III. COVENANTS
SECTION 3.1 NOTICE OF DEFAULT. Borrower shall promptly notify Lender in
writing upon the occurrence of any Event of Default hereunder.
SECTION 3.2 FURTHER ASSURANCES. Borrower shall, from time to time
hereafter, execute and deliver such additional instruments, certificates and
documents, and take all such actions, as Lender shall reasonably request for
the purpose of implementing or effectuating the provisions of this Agreement,
the Note or the Assignment.
SECTION 3.3 SALE AND LIENS. Borrower shall not, directly or indirectly,
without the prior written consent of Lender: (i) exercise, transfer or assign
any of the Option Shares or (ii) create, assume or permit to exist any lien,
pledge, hypothecation, claim, security interest or encumbrance of any kind
whatsoever on the Option Shares.
3
<PAGE>
IV. DEFAULT
SECTION 4.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute an "Event of Default" hereunder:
(a) Borrower's failure to make any payment of principal or interest when
due under the Note or hereunder;
(b) a breach by Borrower of any provision of this Agreement;
(c) an "Event of Default" under the Assignment;
(d) the entry of a decree or order for relief by a court having
jurisdiction over Borrower in an involuntary case under federal
bankruptcy law, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
law, and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) consecutive days;
(e) the commencement by Borrower of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
law; or
(f) Borrower becomes insolvent or admits in writing his inability to pay
his debts as they mature.
SECTION 4.2 REMEDIES ON DEFAULT. Upon the occurrence of an Event of
Default, Lender may: (i) terminate all obligations of Lender to Borrower;
(ii) declare the Note, including, without limitation, the outstanding
principal amount and all accrued interest thereon, to be immediately due and
payable; (iii) exercise any and all of the rights and remedies available to a
secured creditor under the Uniform Commercial Code or other applicable law;
and (iv) pursue any remedy available to it under this Agreement, the Note or
the Assignment, or available at law or in equity, all of which shall be
cumulative. Notwithstanding anything to the contrary herein or in the Note or
the Assignment, Lender hereby expressly agrees: (i) that Borrower shall be
liable for the outstanding principal balance of the Loan only to the full
extent of Borrower's interest in and to the Option Shares; and (ii) that
Lender's remedies following a default in the payment of principal of the Loan
shall be limited to the preservation, enforcement and foreclosure of Lender's
security interests in the Option Shares. With respect to a default in the
payment of any accrued interest on the principal of the Loan, Lender shall be
entitled to seek and obtain all available remedies and damages, whether
existing in law, in equity, hereunder or under the Note or the Assignment.
V. MISCELLANEOUS
4
<PAGE>
SECTION 5.1 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia.
SECTION 5.2 WAIVER. Neither the failure nor any delay on the part of
any party in exercising any right, power, or privilege granted pursuant to
this Agreement, the Note or the Assignment shall operate as a waiver thereof,
nor shall a single or partial exercise thereof preclude any other or further
exercise or the exercise of any other right, power or privilege.
SECTION 5.3 CURRENCY. Payments made by Borrower to Lender pursuant to
Sections 1.2 and 1.3 hereof may be made in English Pounds or an equivalent
amount in United States Dollars.
SECTION 5.4 MODIFICATION. No modification, amendment or waiver of any
provision of this Agreement, the Note or the Assignment shall be effective
unless in writing and signed by the party against whom enforcement of such
modification, amendment or waiver is sought.
SECTION 5.5 NOTICES. All notices and other communications required or
authorized to be given under this Agreement shall be in writing and shall be
deemed to have been given or submitted: (i) when delivered by hand; or (ii)
three (3) days after the date deposited in the mail in registered or
certified form, first class, postage prepaid, addressed to a party at the
following address, or at such other address as each party may hereafter
specify from time to time by notice to the other party.
If to Borrower: Christopher R. Lane
c/o TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
If to Lender: TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
Attention: John Bartels
SECTION 5.6 CAPTIONS. The captions of the Sections and other
subdivisions of this Agreement are inserted only as a matter of convenience
for the parties and shall have no effect on the meaning of the provisions
hereof.
SECTION 5.7 ENTIRETY OF AGREEMENT. This Agreement comprises the entire
agreement between the parties hereto with respect to the subject matter
hereof, and there are no agreements, understandings, covenants, conditions or
undertakings, oral or written, express or implied, between the parties
concerning such subject matter that are not merged herein or superseded
hereby, other than the Note and the Assignment.
5
<PAGE>
SECTION 5.8 SEVERABILITY. If any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been included.
SECTION 5.9 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same agreement; and any signature page from any such
counterpart or any electronic facsimile thereof may be attached or appended
to any other counterpart to complete a fully executed counterpart of this
Agreement, and any telecopy or other facsimile transmission of any signature
shall be deemed an original and shall bind such party.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this Agreement under seal as of
the day and year first above written.
"Borrower"
/s/ Christopher R. Lane (SEAL)
-------------------------------
Christopher R. Lane
"Lender"
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
---------------------------
Its: CFO
------------------------
[CORPORATE SEAL]
6
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
L100,000.00 December 22, 1996
Atlanta, Georgia
FOR VALUE RECEIVED, on or before April 30, 1999 (the "Maturity Date"),
the undersigned, CHRISTOPHER R. LANE ("Obligor"), promises to pay to the
order of TSW INTERNATIONAL, INC., a Georgia corporation (together with any
subsequent holder or transferee hereof, "Holder"), at 3301 Windy Ridge
Parkway, Atlanta, Georgia, or at such other place as Holder may from time to
time designate in writing, the principal sum of ONE HUNDRED THOUSAND AND
NO/100 ENGLISH POUNDS (L100,000.00), together with accrued interest on so
much thereof as from time to time shall be outstanding and unpaid, accruing
on and after the date hereof at the rate of six percent (6%) per annum,
expressed in simple interest terms and computed on a three hundred sixty-five
(365)-day year.
Interest payments hereunder shall be due and payable: (i) on April 30,
1997 and April 30, 1998 and (ii) at maturity of the Loan, whether by reason
of acceleration, payment, prepayment or otherwise, as provided in Section
1.3(b) of that certain Loan Agreement of even date herewith by and between
Obligor and Holder (the "Loan Agreement"). Notwithstanding anything to the
contrary herein or in the Loan Agreement, the outstanding principal balance
hereof and all accrued interest thereon must be paid in full no later than
the Maturity Date.
Obligor may be required to prepay the outstanding principal balance
hereof, together with all accrued interest thereon, in accordance with the
terms and conditions set forth in Section 1.2(c) of the Loan Agreement.
Obligor shall also be entitled, at any time and from time to time, without
the consent of Holder and without paying any penalty or premium therefor, to
prepay all or any portion of the outstanding principal balance hereof,
together with all accrued interest thereon.
As collateral security for its payment obligations hereunder and under
the Loan Agreement, Obligor has assigned his rights to purchase (i)
eighty-eight thousand eight hundred and eighty-eight (88,888) shares of
Holder's One Cent ($.01) par value common stock ("Common Stock") under that
certain Stock Option Agreement dated as of August 17, 1994, by and between
Obligor and Holder; (ii) eighty-one thousand four hundred and twelve (81,412)
shares of Common Stock under that certain Stock Option Agreement, dated as of
August 17, 1994, by and between Obligor and Holder; (iii) sixty thousand six
hundred and thirty-four (60,634) shares of Common Stock under that certain
Stock Option Agreement, dated as of May 4, 1995, by and between Obligor and
Holder; (iv) twenty-one thousand eight hundred and seventy-five (21,875)
shares of Common Stock under that certain Stock Option Agreement, dated as of
November 4, 1996 by and between Obligor and Holder, and (v) seventy-six
thousand (76,000) shares of Common Stock under that certain Stock Option
Agreement, dated as of December 11, 1996, by and between Obligor and Holder,
pursuant to that Collateral Assignment of even date herewith by and between
Obligor and Holder, which is incorporated herein by reference (the
"Assignment").
7
<PAGE>
Upon the occurrence of an "Event of Default" under the Loan Agreement or
the Assignment, (i) Holder shall have the right to declare the entire
outstanding principal balance hereof and all accrued interest thereon to be
immediately due and payable; and (ii) Holder shall be entitled to seek and
obtain all available remedies and damages, whether existing in law, in
equity, hereunder or under the Loan Agreement or the Assignment.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under
this Note. Waiver of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
This Note shall be governed by and construed in accordance with the laws
of the State of Georgia and shall be binding upon Obligor, and inure to the
benefit of Holder, and their permitted heirs, successors and assignees.
Time is of the essence in the payment and performance of this Note.
Obligor waives presentment, demand for payment, notice of dishonor, notice of
protest, protest, and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Note.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the day and year first above written.
"Obligor"
(SEAL)
------------------------------
Christopher R. Lane
2
<PAGE>
EXHIBIT 10.6.2
PROMISSORY NOTE
L100,000.00 December 22, 1996
Atlanta, Georgia
FOR VALUE RECEIVED, on or before April 30, 1999 (the "Maturity Date"), the
undersigned, CHRISTOPHER R. LANE ("Obligor"), promises to pay to the order of
TSW INTERNATIONAL, INC., a Georgia corporation (together with any subsequent
holder or transferee hereof, "Holder"), at 3301 Windy Ridge Parkway, Atlanta,
Georgia, or at such other place as Holder may from time to time designate in
writing, the principal sum of ONE HUNDRED THOUSAND AND NO/100 ENGLISH POUNDS
(L100,000.00), together with accrued interest on so much thereof as from time to
time shall be outstanding and unpaid, accruing on and after the date hereof at
the rate of six percent (6%) per annum, expressed in simple interest terms and
computed on a three hundred sixty-five (365)-day year.
Interest payments hereunder shall be due and payable: (i) on April 30, 1997
and April 30, 1998 and (ii) at maturity of the Loan, whether by reason of
acceleration, payment, prepayment or otherwise, as provided in Section 1.3(b) of
that certain Loan Agreement of even date herewith by and between Obligor and
Holder (the "Loan Agreement"). Notwithstanding anything to the contrary herein
or in the Loan Agreement, the outstanding principal balance hereof and all
accrued interest thereon must be paid in full no later than the Maturity Date.
Obligor may be required to prepay the outstanding principal balance hereof,
together with all accrued interest thereon, in accordance with the terms and
conditions set forth in Section 1.2(c) of the Loan Agreement. Obligor shall
also be entitled, at any time and from time to time, without the consent of
Holder and without paying any penalty or premium therefor, to prepay all or any
portion of the outstanding principal balance hereof, together with all accrued
interest thereon.
As collateral security for its payment obligations hereunder and under the
Loan Agreement, Obligor has assigned his rights to purchase (i) eighty-eight
thousand eight hundred and eighty-eight (88,888) shares of Holder's One Cent
($.01) par value common stock ("Common Stock") under that certain Stock Option
Agreement dated as of August 17, 1994, by and between Obligor and Holder; (ii)
eighty-one thousand four hundred and twelve (81,412) shares of Common Stock
under that certain Stock Option Agreement, dated as of August 17, 1994, by and
between Obligor and Holder; (iii) sixty thousand six hundred and thirty-four
(60,634) shares of Common Stock under that certain Stock Option Agreement, dated
as of May 4, 1995, by and between Obligor and Holder; (iv) twenty-one thousand
eight hundred and seventy-five (21,875) shares of Common Stock under that
certain Stock Option Agreement, dated as of November 4, 1996 by and between
Obligor and Holder, and (v) seventy-six thousand (76,000) shares of Common Stock
under that certain Stock Option Agreement, dated as of December 11, 1996, by and
between Obligor and Holder, pursuant to that Collateral Assignment of even date
herewith by and between Obligor and Holder, which is incorporated herein by
reference (the "Assignment").
<PAGE>
Upon the occurrence of an "Event of Default" under the Loan Agreement or
the Assignment, (i) Holder shall have the right to declare the entire
outstanding principal balance hereof and all accrued interest thereon to be
immediately due and payable; and (ii) Holder shall be entitled to seek and
obtain all available remedies and damages, whether existing in law, in equity,
hereunder or under the Loan Agreement or the Assignment.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under this
Note. Waiver of any right or remedy on any one occasion shall not be construed
as a bar to or waiver of any right or remedy on any future occasion.
This Note shall be governed by and construed in accordance with the laws of
the State of Georgia and shall be binding upon Obligor, and inure to the benefit
of Holder, and their permitted heirs, successors and assignees.
Time is of the essence in the payment and performance of this Note. Obligor
waives presentment, demand for payment, notice of dishonor, notice of protest,
protest, and all other notices or demands in connection with the delivery,
acceptance, performance or default of this Note.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the day and year first above written.
"Obligor"
/s/ Christopher R. Lane (SEAL)
--------------------------
Christopher R. Lane
2
<PAGE>
EXHIBIT 10.6.3
COLLATERAL ASSIGNMENT
THIS COLLATERAL ASSIGNMENT (the "Agreement") is made and entered into as of
the 22 day of December, 1996, by and between CHRISTOPHER R. LANE ("Assignor"),
and TSW INTERNATIONAL, INC., a Georgia corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan Agreement of even date herewith by
and between Assignee and Assignor (the "Loan Agreement"), Assignee has loaned
Assignor One Hundred Thousand and No/100 English Pounds (L100,000.00), as
evidenced by that certain Promissory Note of even date herewith made by
Assignor payable to the order of Assignee in the principal amount of One
Hundred Thousand and No/100 English Pounds (L100,000.00) (the "Note");
WHEREAS, as collateral and security for the Assignor's obligations and
indebtedness to Assignee under the Loan Agreement and the Note (collectively,
the "Obligations"), Assignor desires to assign his rights (the "Option
Shares") to purchase (i) eighty-eight thousand eight hundred and eighty-eight
(88,888) shares of Assignee's One Cent ($.01) par value common stock ("Common
Stock") under that certain Stock Option Agreement dated as of August 17,
1994, by and between Assignor and Assignee; (ii) eighty-one thousand four
hundred and twelve (81,412) shares of Common Stock under that certain Stock
Option Agreement, dated as of August 17, 1994, by and between Assignor and
Assignee; (iii) sixty thousand six hundred and thirty-four (60,634) shares of
Common Stock under that certain Stock Option Agreement, dated as of May 4,
1995, by and between Assignor and Assignee; (iv) twenty-one thousand eight
hundred and seventy-five (21,875) shares of Common Stock under that certain
Stock Option Agreement, dated as of November 4, 1996, by and between Assignor
and Assignee; and (v) seventy-six thousand (76,000) shares of Common Stock
under that certain Stock Option Agreement, dated as of December 11, 1996, by
and between Assignor and Assignee (collectively, the "Option Agreements"),
and Assignee has agreed to accept Assignor's assignment of the Option Shares;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. OBLIGATIONS SECURED AND ASSIGNMENT. Subject to the terms and
conditions contained in this Agreement, Assignor hereby assigns a first
priority security interest in and to the Option Shares under the Option
Agreements as collateral and security for the due and punctual payment of the
Obligations.
<PAGE>
2. REPRESENTATION AND WARRANTY OF ASSIGNOR. Assignor hereby represents
and warrants to Assignee that, as of the date hereof and at all times until
the Obligations are paid in full, except as set forth herein or as approved
by Assignee, Assignor will not exercise any rights, powers or privileges with
respect to the Option Shares under the Option Agreements.
3. FURTHER ASSURANCE. Assignor shall, from time to time hereafter,
execute and deliver such additional instruments, certificates and documents,
and take all such actions, as Assignee shall reasonably request for the
purpose of implementing or effectuating the provisions of this Agreement.
4. EVENTS OF DEFAULT.
(a) The occurrence of any one or more of the following shall
constitute an "Event of Default" hereunder:
(i) a breach by Assignor of any provision of this Agreement;
(ii) the entry of a decree or order for relief by a court having
jurisdiction over Assignor in an involuntary case under federal
bankruptcy law, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
law, and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) consecutive days;
(iii) the commencement by Assignor of a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended,
or any other applicable federal or state bankruptcy, insolvency or
other similar law;
(iv) Assignor becomes insolvent or admits in writing his
inability to pay his debts as they mature; or
(v) an "Event of Default" under the Loan Agreement.
(b) Upon the occurrence of an Event of Default, and subject to the
terms and conditions set forth in Section 4.2 of the Loan Agreement, in
addition to those rights and remedies available at law, in equity, granted
herein or in any other agreement now or hereafter in effect between Assignor
and Assignee, Assignee's rights and remedies with respect to the Option
Shares shall, in all respects, events and contingencies, be those of a
secured party under the Uniform Commercial Code and under any other
applicable law, as the same may from time to time be in effect.
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(c) Assignee and Assignor hereby agree that, unless and until an
Event of Default shall occur, Assignee shall not exercise or seek to exercise
any of the rights, powers or privileges with respect to the Option Shares
under the Option Agreements.
(d) Assignor agrees that any notice from Assignee of any sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the Uniform Commercial Code or otherwise, shall
constitute reasonable notice to Assignor if such notice is personally
delivered or mailed by regular or certified mail, postage prepaid, at least
ten (10) days prior to such action, to Assignor's principal residence or to
any address which Assignor has specified in writing to Assignee as the
address to which notices hereunder shall be given to Assignor.
(e) Assignor agrees to pay all reasonable costs and expenses
(including, without limitation, all court costs and reasonable attorney's
fees) incurred by Assignee in exercising any of its rights or remedies under
this Agreement following the occurrence of an Event of Default hereunder.
5. TERM. This Agreement shall remain in full force and effect until
the Obligations are satisfied. At that time, both this Agreement and all
rights herein assigned shall terminate, and all rights, powers and
privileges with respect to the Option Shares under the Option Agreements
shall revert to Assignor.
6. MISCELLANEOUS. This Agreement shall not be modified or amended
except through a writing signed by Assignor and Assignee. This Agreement
shall in all respects be governed by and construed in accordance with the
laws of the State of Georgia. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. This Agreement
represents the full and complete understanding of the parties hereto relating
to the assignment of the rights, powers and privileges associated with the
Option Shares under the Option Agreements. All of the terms, covenants and
conditions contained herein shall be binding upon and shall inure to the
benefit of each of the parties hereto and their permitted heirs, successors
and assignees.
IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this Agreement under seal as of
the day and year first above written.
"Assignor"
CHRISTOPHER R. LANE
/s/ Christopher R. Lane (SEAL)
--------------------------
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<PAGE>
"Assignee"
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
-----------------------
Its: CFO
-----------------------
[CORPORATE SEAL]
4
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), made and entered into as of this 30th day
of October, 1995, by and between JOHN BARTELS, an individual currently a
resident of Fulton County, Georgia (hereinafter referred to as "Employee"),
and TSW INTERNATIONAL, INC., a Georgia corporation (hereinafter referred to
as "Company");
WITNESSETH:
WHEREAS, Company desires to employ Employee, and Employee desires to be
employed by Company, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. EMPLOYMENT.
Subject to the terms hereof, Company hereby employs Employee, and
Employee hereby accepts such employment. Employee shall serve as the Chief
Financial Officer of Company in accordance with the Bylaws of the Company.
In such capacity, Employee shall report to the Chief Executive Officer of the
Company and devote his full business time (except for such responsibilities
to serving on other boards of directors and other commitments as shall be
approved by the Company) and best efforts to the performance of his duties on
behalf of Company, as directed by the Chief Executive Officer and the Board
of Directors (the "Board") of the Company. Unless Company and Employee agree
otherwise, Employee's principal office shall be located in the Company's
corporate offices in the vicinity of metropolitan Atlanta, Georgia.
SECTION 2. TERM.
2.1 GENERAL. The employment of Employee hereunder shall commence as of
October 30, 1995 and shall continue until terminated upon the occurrence of
any of the following events:
(i) The death of Employee;
(ii) The mutual written agreement of the Company and Employee to
terminate this Agreement;
<PAGE>
(iii) The resignation by Employee upon thirty (30) days prior written
notice to the Company; provided, however, that in the event any such
resignation by Employee occurs as a result of a Relocation (as hereinafter
defined) the Company shall continue to pay to Employee, in full
satisfaction of its obligations hereunder, his Base Salary (as defined in
Section 3.1) for a period of twelve (12) months from the date of such
resignation. As used in this subsection, "Relocation" shall mean the
relocation of the Employee's principal place of employment (or that of the
key members of the staff reporting to the Chief Financial Officer of the
Company) to a location other than the metropolitan Atlanta, Georgia area;
(iv) The termination of Employee's employment hereunder by the
Company for "good cause." For the purpose of this Agreement, "good cause"
shall mean (a) a material breach by Employee of his obligations hereunder;
or (b) conduct by Employee amounting to fraud, dishonesty or negligence;
and
(v) The termination of Employee's employment hereunder by the
Company without good cause; provided, however, that upon any such
termination under this subsection (v) the Company shall continue to pay to
Employee, in full satisfaction of its obligations hereunder, his Base
Salary (as defined in Section 3.1) for a period of twelve (12) months from
the date of such termination.
2.2 NO REPAYMENT OBLIGATION OF EMPLOYEE. In the event this Agreement
is terminated pursuant to Section 2.1 herein, Employee shall have no
obligation to repay any amounts or benefits previously paid to Employee
pursuant to this Agreement, and the Company shall have no obligation to pay
Employee any further amounts and further benefits after the date of
termination except for such amounts or benefits, if any, (i) which are
required to be paid or offered to Employee under any applicable federal or
state law, (ii) which accrued prior to the date of termination, or (iii)
which are payable pursuant to subsections (iii) or (v) of Section 2.1 above.
SECTION 3. COMPENSATION; EXPENSES.
3.1 SALARY. Employee shall be paid a base salary (the "Base Salary")
during the term of his employment hereunder at the rate of Two Hundred Twenty
Thousand Dollars ($220,000) per annum for the period commencing on the date
hereof and ending upon the termination of Employee's employment hereunder.
Unless otherwise increased by the Board of Director in its sole discretion,
the Base Salary will continue to be Two Hundred Twenty Thousand Dollars
($220,000) during the term of Employee's employment hereunder. The Base
Salary shall be paid to Employee in equal installments on normal Company pay
dates, but in no event less often than monthly in arrears, less all
applicable withholdings.
3.2 SIGNING BONUS. The Company shall pay to the Employee a "Signing
Bonus" of Forty Thousand Dollars ($40,000), less all applicable withholdings,
which shall be paid on or before January 31, 1996.
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<PAGE>
3.3 BONUS PLANS. Company shall allow Employee to participate at a
level consistent with his status as Chief Financial Officer in any pension or
profit sharing plan now or as may hereafter be provided or offered to the
Company's senior executive officers in accordance with the terms and
requirements of the applicable plan. The Company agrees to work with
Employee in designing and implementing an incentive bonus plan for Employee
to commence with the fiscal year beginning April 1,1996.
3.4 EXPENSES. Employee shall be reimbursed for all ordinary and
reasonable business expenses incurred by Employee at the request and on
behalf of Company upon the presentation of appropriate supporting
documentation to the Company.
SECTION 4. ADDITIONAL EMPLOYMENT BENEFITS.
Company shall provide Employee with the following additional employment
benefits during the term of his employment hereunder:
4.1 MEDICAL INSURANCE. Company shall pay for and shall provide
Employee with such life, medical, dental, disability and other insurance
benefits as is made available from time to time to the senior executive
officers of the Company. All such insurance coverage shall commence as soon
as practicable after the date hereof.
4.2 VACATION. Employee shall be entitled to paid vacation time in
accordance with the Company's vacation policy for senior executives in effect
from time to time, provided, however, that such paid vacation time shall not
be less than four (4) weeks per annum.
4.3 OTHER BENEFITS. Company shall provide Employee with any other
benefits that Company generally provides to its senior executive officers.
SECTION 5. GRANT OF STOCK OPTIONS.
Concurrently herewith the Company has granted to Employee, and does
hereby affirm the grant of, an incentive stock option to purchase 141,600
shares of the common stock of the Company, par value $0.01 per share, at a
price per share of $11.48 in accordance with the terms and conditions set
forth on Exhibit "A" attached hereto. This option shall be evidenced by a
written stock option agreement in form customarily used by the Company for
its employee stock options.
SECTION 6. RESTRICTIONS.
6.1 OWNERSHIP. All Work Product when and as it is created or
conceived, including all intellectual property rights therein, shall be
disclosed to and owned exclusively by Company. For purposes of this
Agreement, "Work Product" refers to all inventions, discoveries and
improvements and all other information of value or importance concerning the
business and actions of Employee while acting on behalf of Company (but
limited to the
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<PAGE>
Company's management information systems business), including (without
limitation) information concerning software development, customer prospects
and accounts, personnel, marketing and business strategies. Notwithstanding
the preceding sentence, Work Product shall exclude all inventions,
discoveries and improvements and all other information of value or importance
concerning the business and actions of Employee while acting on behalf of
parties other than Company, if undertaken with the consent of the board of
directors of the Company. To the greatest extent possible, any Work Product
shall be deemed to be "work made for hire" (as defined in the Copyright Act,
17 U.S.C.A. Section 101 ET AL., as amended) and owned exclusively by the
Company. Employee hereby unconditionally and irrevocably transfers and
assigns to the Company all rights, title and interest Employee may currently
have (or in the future may have) by operation of law or otherwise in or to
any Work Product, including, without limitation, all patents, copyrights,
trademarks, service marks and other intellectual property rights. Employee
agrees to execute and deliver to the Company any transfers, assignments,
documents or other instruments which the Company may deem necessary or
appropriate to vest complete title and ownership of any Work Product, and all
associated rights, exclusively in the Company.
6.2 CONFIDENTIALITY. Employee shall maintain in strict confidence and
shall not use or disclose (except as required to perform Employee's duties
under this Agreement) any "Trade Secrets" or "Confidential Information" of
Company, its affiliates and customers. With respect to the Company's Trade
Secrets, this obligation shall apply during and after the term of this
Agreement for so long as the pertinent information remains a Trade Secret,
and shall apply whether or not the Trade Secret is in written or tangible
form. With respect to the Company's Confidential Information, this
obligation shall apply during the term of this Agreement and for three (3)
years after its termination. As provided by Georgia statutes, "Trade Secret"
shall mean any information (including, but not limited to, technical or
non-technical data, a formula, a pattern, a compilation, a process, financial
data, financial plans, product plans, or a list of actual or potential
customers) that: (i) derives economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from its disclosure or use;
and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy. In the case of Company's business,
Company's Trade Secrets include (without limitation) information regarding
software programs, names and addresses of any customers, sales personnel,
account invoices, training and educational manuals, administrative manuals,
prospective customer leads, in whatever form, whether or not computer or
electronically accessible "on-line." As used in this Agreement, the
Company's "Confidential Information" shall refer to valuable, non-public
competitively sensitive data and information relating to the Company's
business or its clients business, other than Trade Secrets, that is not
generally known by or readily available to competitors of the Company; it
also includes any information or data specifically identified as a "Trade
Secret" in the immediately preceding sentence that is determined by a court
of competent jurisdiction not to be a "Trade Secret."
6.3 DELIVERY. Upon the request of Company, and, in any event, upon the
termination of Employee's employment, (1) Employee shall take such steps as
Company may
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<PAGE>
reasonably request in order to transfer, disclose, and give Company the full
benefit of any Work Product remaining in Employee's possession; and (2)
Employee shall deliver to Company all memoranda, notes, records, drawings,
manuals, disks and other documents and media, regardless of form, that
certain Work Product or Trade Secrets. Employee shall not retain any such
materials (whether in original or duplicated form) following such delivery.
6.4 NON RECRUITMENT. Employee agrees that during his employment by the
Company and for a period of two (2) years following any termination of such
employment, he will not, either directly or indirectly, on his own behalf or
in the service or on behalf of others solicit or attempt to solicit on behalf
of or for the benefit of any entity which competes with the Company (i) any
person employed by the Company, whether or not such employee is a full-time
employee or a temporary employee of the Company and whether or not such
employee is pursuant to written agreement and whether or not such employment
is for a determined period or is at will, or (ii) any person or entity that
is an agent or independent contractor of the Company in the continental
United States; nor will Employee at any time during such period, either
directly or indirectly, induce or attempt to induce any such agent or
independent contractor to terminate, breach or otherwise fail fully to
perform any agency or agreement with the Company.
6.5 NAMES AND MARKS. Following the termination of Employee's
employment, Employee shall not, for the benefit of his own or any other
person or entity's business, use or display the names, marks, logos or
slogans of the Company or its affiliates, or any name, mark, logo or slogan
similar thereto, without the prior written consent of the Company.
6.6 LIMITATION ON SOLICITING CLIENTS. Employee agrees that during his
employment, Employee will not, either directly or indirectly, alone or in
conjunction with any other party, solicit, divert or appropriate or attempt
to solicit, divert or appropriate any "Client" for the purpose of providing
the Client with services or products competitive with those offered by the
Company during the Employment Term. For purposes of this Agreement,
"Clients" shall mean actual clients or actively sought prospective clients of
the Company during the term of Employee's employment by the Company.
Employee agrees that for eighteen (18) months after the last day of his
employment, Employee will not, either directly or indirectly, alone or in
conjunction with any other party, solicit, divert or appropriate or attempt
to solicit, divert or appropriate any Client of the Company for the purpose
of providing the Client with services or products competitive with those
offered by the Company during his employment; provided that the covenant in
this sentence shall limit Employee's conduct only with respect to those
Clients with whom Employee had substantial contact (through direct or
supervisory interaction with the Client or the Client's account) during a
period of time up to but no greater than two (2) years prior to the last day
of his employment.
6.7 NO COMPETE COVENANT. In the event that the Company terminates this
Agreement prior to the expiration of the term hereof pursuant to Section 2.2
hereof, for so long as the Company is making severance payments to the
Employee, Employee agrees that
5
<PAGE>
he will not, either directly or indirectly, enter into any employment or
other relationship with any entity or enterprise which is engaged, wholly or
partly, in any business competitive with the Company whereby Employee is
required to or does perform services similar to those he provides to the
Company hereunder.
6.8 RELIEF. In the event of any breach or threatened breach by
Employee of any covenant contained in this Section 6, the resulting injuries
to Company would be difficult or impossible to estimate accurately, even
though irreparable injury or damages may result. Accordingly, an award of
legal damages, if without other relief, may be inadequate to protect the
Company. Employee therefore agrees that, in the event of any such breach,
Company shall be entitled to apply to a court of competent jurisdiction to
obtain an injunction to restrain the breach or anticipated breach of any such
covenant, and to obtain any other available legal, equitable, statutory, or
contractual relief. In the event the Company seeks damages from Employee for
any breach of any covenant contained in this Section 6, Employee's liability
shall be limited to the then fair market value of any shares of the Company's
capital stock owned by the Employee ("shares" shall include any shares of the
Company's capital stock to which Employee holds options to purchase and any
shares purchased pursuant to such options, but shall exclude any other shares
purchased by Employee).
6.9 REASONABLENESS OF COVENANTS. Employee recognizes and acknowledges
that the covenants in this Section 6 are reasonable as to time, geographical
coverage and restricted conduct and are necessary to protect Company's
business and Trade Secrets. Employee further acknowledges that (a) Employee
has entered into this Agreement freely as a result of balanced arm's length
bargaining and with the full benefit of qualified counsel of his choosing and
(b) Company would not have engaged Employee without Employee's having agreed
to these covenants.
SECTION 7. MISCELLANEOUS.
7.1 BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon Employee and Company and its successors and assigns.
Employee may not assign his rights or delegate his obligations hereunder
without the prior written consent of the Company.
7.2 GOVERNING LAWS. Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in
accordance with, the laws of the State of Georgia.
7.3 HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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7.4 NOTICES. Unless otherwise agreed to in writing by the parties
hereto, all communications provided for hereunder shall be in writing and
shall be deemed to be given when delivered in person or three (3) business
days after being sent by registered or certified mail, postage prepaid, and:
(a) If to Employee, addressed to:
John Bartels
4757 Riverview Road, N.W.
Atlanta, Georgia 30327
(b) If to Company, addressed to:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
7.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
7.6 ENTIRE AGREEMENT. This Agreement is intended by the parties hereto
to be the final expression of their agreement with respect to the subject
matter hereof and is the complete and exclusive statement of the terms
thereof, notwithstanding any representations, statements or agreements to the
contrary heretofore made.
7.7 MODIFICATIONS, WAIVERS. This Agreement may be modified only by a
written instrument signed by each of the parties hereto. No waiver shall be
effective unless made in writing and signed by the party against whom
enforcement is sought.
7.8 SEVERABILITY. Should any aspect or provisions of this Agreement
proven valid or unenforceable for any reason, the remainder of the Agreement
shall nonetheless be fully enforced to the fullest extent permitted by law,
regardless of whether the invalid of unenforceable aspect or provision is
facially severable from the remainder of the Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
TSW INTERNATIONAL, INC.
[CORPORATE SEAL]
By: /s/ Christopher R. Lane
-------------------------------------
Title: CEO
----------------------------------
EMPLOYEE:
/s/ John Bartels
----------------------------------------
John Bartels
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<PAGE>
EXHIBIT "A"
TO EMPLOYMENT AGREEMENT BETWEEN
JOHN BARTELS
AND
TSW INTERNATIONAL, INC.
The following provisions relate to the grant by the Company to Employee of
a stock option to purchase 141,600 shares of the common stock of the Company.
1. Option Price: $11.48 per share
2. Term of Option: ten (10) years
3. Vesting Provision: Not exercisable immediately; exercisable with respect
to 25% of shares upon each of the first four
anniversary dates of the option, so that the option
will be exercisable in full four years from its date.
4. Termination of No further vesting after termination of employment,
Employment: provided that if the termination of employment occurs
by reason of Employee's resignation due to a
Relocation, outstanding options will immediately vest
in full; vested portions of option may be exercised
within three months following termination of
employment and within one year following death;
Company may elect to permit Employee to hold non-
vested portions of option, in whole or in part and/or
at modified vesting terms.
5. Change of Control: Outstanding options will immediately vest in full upon
a "change in control" which shall be defined as any
event which results in Warburg, Pincus Investors, L.P.
owning less than 50.1% of the outstanding common stock
of the Company.
6. Payment upon Cash in full.
Exercise:
<PAGE>
EXHIBIT 10.9.1
NONRECOURSE LOAN AGREEMENT
THIS NONRECOURSE LOAN AGREEMENT (the "Agreement") is made and entered
into as of the 16th day of September, 1992, by and between THE SYSTEM WORKS,
INC., a Georgia corporation ("Lender"), and JOHN W. BLEND, III, a Georgia
resident ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow from Lender, and Lender has agreed to
loan to Borrower, the sum of TWO HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS
($230,000.00) upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premise, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
I. GENERAL TERMS
SECTION 1.1 LOAN. Subject to the terms and conditions contained in
this Agreement, Lender agrees to loan to Borrower Two Hundred Thirty Thousand
and No/100 Dollars ($230,000.00) (the "Loan"). The Loan shall be evidenced
by a Nonrecourse Promissory Note from Borrower in the form of EXHIBIT "A"
attached hereto and incorporated herein by reference (the "Note").
SECTION 1.2 REPAYMENT OF PRINCIPAL; PREPAYMENTS.
(a) REPAYMENT OF PRINCIPAL. The principal amount of the Loan shall, if
not voluntarily or mandatorily prepaid sooner pursuant to the terms of
subparagraphs (b) or (c) of this Section 1.2, be due and payable on December
31, 1998.
(b) VOLUNTARY PREPAYMENTS. Borrower may, at any time and from time to
time, without the consent of Lender and without paying any penalty or premium
therefor, prepay all or any portion of the outstanding principal of the Loan;
provided, however, that Borrower first pay any and all accrued interest on
the principal of the Loan.
(c) MANDATORY PREPAYMENT. Notwithstanding anything herein to the
contrary, the outstanding principal balance of the Loan and all accrued
interest thereon shall be immediately due and payable: (i) upon any sale or
disposition of any of the "Shares" or any exercise of any of the "Options"
(as such terms are defined in Section 1.4(a) hereof); or (ii) on the date
which is ninety (90) days following the date of any termination of Borrower's
employment with Lender for any reason.
<PAGE>
SECTION 1.3 APPLICABLE INTEREST RATE; PAYMENT TERMS.
(a) INTEREST RATE. The outstanding principal balance of the Loan shall
bear interest from the date of advance of the Loan at the rate of Five and
98/100 percent (5.98%) per annum, expressed in simple interest terms and
computed on a three hundred sixty-five (365)-day year.
(b) PAYMENT DATES. Interest on the Loan shall be payable: (i) annually
on December 31 of each year during the term of this Agreement, commencing
December 31, 1992, or on such earlier date(s) during any such year at the
time any "Excess Compensation" (as defined below) is paid to Borrower; and
(ii) at maturity of the Loan, whether by reason of acceleration, payment,
prepayment or otherwise (the "Maturity Date").
(c) PAYMENT OF INTEREST. Lender shall deduct all interest payments as
and when due under subsection (b) of this Section 1.3 from any cash
compensation paid to Borrower by Lender during any calendar year in excess of
his base salary, as reflected in Lender's books and records and as determined
by Lender, in its sole discretion, from time to time ("Excess Compensation");
provided, however, if in any calendar year Lender does not pay Borrower any
Excess Compensation, or if the amount of any such Excess Compensation is less
than the amount of the annual interest payment then due, Borrower shall
either: (i) pay such interest payment (or the unpaid portion thereof)
directly to Lender from his other available sources of income; or (ii) permit
such interest payment (or the unpaid portion thereof) to accrue in an
"Interest Deficit Account" with Lender. Any Excess Compensation subsequently
paid to Borrower must first be applied to the repayment of any then existing
deficit in the Interest Deficit Account before being applied to the offset of
any current interest payments. At the Maturity Date, Borrower shall be
responsible for the payment in full of any then existing deficit in the
Interest Deficit Account.
SECTION 1.4 SECURITY FOR THE LOAN.
(a) SECURITY DOCUMENTS. Borrower's obligations and indebtedness to Lender
under this Agreement and under the Note (collectively, the "Obligations") shall
be secured at all times by:
(i) that certain Stock Pledge Agreement of even date herewith (the
"Pledge Agreement") pursuant to which Borrower granted to Lender
a continuing first priority security interest in and to
Thirty-Three Thousand Three Hundred Thirty-Three (33,333) shares
(the "Shares") of Lender's One Cent ($.01) par value Class A
common stock (the "Common Stock"); and
2
<PAGE>
(ii) that certain Collateral Assignment and Agreement of even date
herewith (the "Assignment") pursuant to which Borrower
collaterally assigned and granted to Lender a continuing first
priority security interest in and to Borrower's rights to
purchase One Hundred Twelve Thousand Four Hundred Thirty
(112,430) shares of Common Stock (the "Options") under that
certain Nonqualified Stock Option Agreement, dated as of July 29,
1988, by and between Borrower and Lender.
The Pledge Agreement and the Assignment are sometimes hereinafter referred to
together as the "Security Documents," and the Shares and the Options are
sometimes hereinafter referred to collectively as the "Collateral."
(b) USE OF SECURITY BY BORROWER. At the Maturity Date, Borrower may, at
his option, transfer to Lender, in full satisfaction of the then outstanding
principal balance of the Loan, a portion of the Shares and/or the Options
equal in value to such outstanding principal balance of the Loan. The value
attributable to each Share shall be the per share price of Common Stock most
recently established for such purpose in good faith by Lender's board of
directors; provided, however, if at the Maturity Date the Common Stock is
publicly traded on an established market, then the value attributable to each
Share shall be the average reported market price per share of Common Stock
for the thirty (30) consecutive trading days ending on the trading day
immediately preceding the Maturity Date. The value attributable to each
Option shall be the per share value of Common Stock (determined in accordance
with the immediately preceding sentence) less the per share exercise price of
the Option. At such time, Borrower must pay in full any and all accrued
interest on the principal of the Loan, including any then existing deficit in
the Interest Deficit Account.
SECTION 1.5 DISBURSEMENT OF LOAN; CLOSING. The closing shall be held
on the date hereof at the office of Lender's counsel. At closing, the Loan
proceeds will be disbursed to Vinings Bank & Trust Company ("VBTC") on behalf
of Borrower to reduce certain indebtedness owed by Borrower to VBTC. At
closing, Borrower shall execute and deliver to Lender the Note and the
Security Documents, together with any other documents required or
contemplated by the terms thereof, including, without limitation, such
documents as Lender may reasonably request in order to create, perfect or
maintain a first priority security interest in the Collateral.
3
<PAGE>
II. REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender (which representations
and warranties shall survive the delivery of the Note and the making of the
Loan) that:
SECTION 2.1 INDIVIDUAL CAPACITY. Borrower has the power and capacity
to execute, deliver and perform his obligations under this Agreement, the
Note and the Security Documents.
SECTION 2.2 GOOD TITLE. Borrower is the lawful owner of full and
marketable title to the Shares and the Options, and the Shares and the
Options are free and clear from all liens, pledges, hypothecations, claims,
security interests and encumbrances of any kind whatsoever.
III. COVENANTS
SECTION 3.1 NOTICE OF DEFAULT. Borrower shall promptly notify Lender
in writing upon the occurrence of any Event of Default hereunder.
SECTION 3.2 FURTHER ASSURANCES. Borrower shall, from time to time
hereafter, execute and deliver such additional instruments, certificates and
documents, and take all such actions, as Lender shall reasonably request for
the purpose of implementing or effectuating the provisions of this Agreement,
the Note or the Security Documents.
SECTION 3.3 SALE AND LIENS. Borrower shall not, directly or
indirectly, without the prior written consent of Lender: (i) exercise,
transfer or assign any of the Options; (ii) sell, transfer or assign any of
the Shares; or (iii) create, assume or permit to exist any lien, pledge,
hypothecation, claim, security interest or encumbrance of any kind whatsoever
on the Shares or the Options.
SECTION 3.4 INDEBTEDNESS. Borrower shall not, directly or indirectly,
without the prior written consent of Lender, incur, create, assume, become or
be liable in any manner with respect to indebtedness for borrowed money in
excess of the aggregate amount of $575,000.00 at any time outstanding,
including the amount outstanding under the Note.
IV. DEFAULT
SECTION 4.1 EVENTS OF DEFAULT. The occurrence of any one or more of
the following shall constitute an "Event of Default" hereunder:
4
<PAGE>
(a) Borrower's failure to make any payment of principal or interest when
due under the Note or hereunder, subject to the provisions of Section
1.3(c) of this Agreement;
(b) a breach by Borrower of any provision of this Agreement;
(c) an "Event of Default" under the Pledge Agreement or the Assignment;
(d) the entry of a decree or order for relief by a court having
jurisdiction over Borrower in an involuntary case under federal
bankruptcy law, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
law, and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) consecutive days;
(e) the commencement by Borrower of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal or state bankruptcy, insolvency or other similar
law;
(f) Borrower becomes insolvent or admits in writing his inability to pay
his debts as they mature; or
(g) Ninety (90) days following the date of any termination of Borrower's
employment with Lender for any reason.
SECTION 4.2 REMEDIES ON DEFAULT. Upon the occurrence of an Event of
Default, Lender may: (i) terminate all obligations of Lender to Borrower;
(ii) declare the Note, including, without limitation, the outstanding
principal amount and all accrued interest thereon, to be immediately due and
payable; (iii) exercise any and all of the rights and remedies available to a
secured creditor under the Uniform Commercial Code or other applicable law,
including, without limitation, the right to sell or otherwise dispose of all
or any portion of the Collateral at a public or private sale upon ten (10)
days prior notice to Borrower as Lender may deem advisable; and (iv) pursue
any remedy available to it under this Agreement, the Note or the Security
Documents, or available at law or in equity, all of which shall be
cumulative. Notwithstanding anything to the contrary herein or in the Note
or the Security Documents, Lender hereby expressly agrees: (i) that Borrower
shall be liable for the outstanding principal balance of the Loan only to the
full extent of Borrower's interest in and to the Collateral; and (ii) that
Lender's remedies following a default in the payment of principal of the Loan
shall be limited to the preservation, enforcement and foreclosure of Lender's
security interests in the Collateral. With respect to a default in the
payment of any accrued interest
5
<PAGE>
on the principal of the Loan, Lender shall be entitled to seek and obtain all
available remedies and damages, whether existing in law, in equity, hereunder
or under the Note or the Security Documents.
V. MISCELLANEOUS
SECTION 5.1 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia.
SECTION 5.2 WAIVER. Neither the failure nor any delay on the part of
any party in exercising any right, power, or privilege granted pursuant to
this Agreement, the Note or the Security Documents shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise or the exercise of any other right, power or privilege.
SECTION 5.3 MODIFICATION. No modification, amendment or waiver of any
provision of this Agreement, the Note or the Security Documents shall be
effective unless in writing and signed by the party against whom enforcement
of such modification, amendment or waiver is sought.
SECTION 5.4 NOTICES. All notices and other communications required or
authorized to be given under this Agreement shall be in writing and shall be
deemed to have been given or submitted: (i) when delivered by hand; or (ii)
three (3) days after the date deposited in the mail in registered or
certified form, first class, postage prepaid, addressed to a party at the
following address, or at such other address as each party may hereafter
specify from time to time by notice to the other party.
If to Borrower: John W. Blend, III
1895 Monticello Court
Dunwoody, Georgia 30338
with a copy to: Lawrence M. Gold, Esquire
Gray, Gilliland & Gold, P.C.
Suite 1050 - North Terrace
400 Perimeter Center Terrace
Atlanta, Georgia 30346
If to Lender: The System Works, Inc.
1640 Powers Ferry Road
Building 11, Suite 100
Atlanta, Georgia 30067
Attention: President
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<PAGE>
with a copy to: Robert W. Grout, Esq.
Troutman Sanders
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
SECTION 5.5 CAPTIONS. The captions of the Sections and other
subdivisions of this Agreement are inserted only as a matter of convenience
for the parties and shall have no effect on the meaning of the provisions
hereof.
SECTION 5.6 ENTIRETY OF AGREEMENT. This Agreement comprises the entire
agreement between the parties hereto with respect to the subject matter
hereof, and there are no agreements, understandings, covenants, conditions or
undertakings, oral or written, express or implied, between the parties
concerning such subject matter that are not merged herein or superseded
hereby, other than the Note and the Security Documents.
SECTION 5.7 SEVERABILITY. If any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been included.
SECTION 5.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same agreement; and any signature page from any such
counterpart or any electronic facsimile thereof may be attached or appended
to any other counterpart to complete a fully executed counterpart of this
Agreement, and any telecopy or other facsimile transmission of any signature
shall be deemed an original and shall bind such party.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this Agreement under seal as of
the day and year first above written.
"Borrower"
/s/ John W. Blend, III (SEAL)
--------------------------
John W. Blend, III
"Lender"
THE SYSTEM WORKS, INC.
By: /s/ David P. Welden
--------------------------
Its: President
Attest: /s/ Alice K. Welden
--------------------------
Its: Secretary
[CORPORATE SEAL]
8
<PAGE>
EXHIBIT "A"
NONRECOURSE PROMISSORY NOTE
$230,000.00 September 16, 1992
Atlanta, Georgia
FOR VALUE RECEIVED, on or before December 31, 1998 (the "Maturity
Date"), the undersigned, JOHN W. BLEND, III, a Georgia resident ("Obligor"),
promises to pay to the order of THE SYSTEM WORKS, INC., a Georgia corporation
(together with any subsequent holder or transferee hereof, "Holder"), at 640
Powers Ferry Road, Building Eleven, Suite 100, Marietta, Georgia 30067, or at
such other place as Holder may from time to time designate in writing, the
principal sum of TWO HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS
($230,000.00), together with accrued interest on so much thereof as from time
to time shall be outstanding and unpaid, accruing on and after the date
hereof at the rate of Five and 98/100 percent (5.98%) per annum, expressed in
simple interest terms and computed on a three hundred sixty-five (365)-day
year.
Interest payments hereunder shall be due and payable annually on
December 31 of each year, commencing December 31, 1992, or on such earlier
date(s) during any such year as provided in Section 1.3(b) of that certain
Nonrecourse Loan Agreement of even date herewith by and between Obligor and
Holder (the "Loan Agreement"), in accordance with the terms and conditions
set forth in Section 1.3(c) of the Loan Agreement. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the outstanding principal
balance hereof and all accrued interest thereon must be paid in full no later
than the Maturity Date.
Obligor may be required to prepay the outstanding principal balance
hereof, together with all accrued interest thereon, in accordance with the
terms and conditions set forth in Section 1.2(c) of the Loan Agreement.
Obligor shall also be entitled, at any time and from time to time, without
the consent of Holder and without paying any penalty or premium therefor, to
prepay all or any portion of the outstanding principal balance hereof,
together with all accrued interest thereon.
As collateral security for its payment obligations hereunder and under
the Loan Agreement, Obligor has: (i) pledged Thirty-Three Thousand Three
Hundred Thirty-Three (33,333) shares (the "Shares") of Holder's One Cent
($.01) par value Class A common stock (the "Common Stock") pursuant to that
certain Stock Pledge Agreement of even date herewith by and between Obligor
and Holder, a copy of which is attached hereto as EXHIBIT "A" and
incorporated herein by reference (the "Pledge Agreement"); and (ii) assigned
his rights, arising under that certain Nonqualified Stock Option Agreement,
dated as of July 29, 1988, by and between Obligor and Holder, to acquire One
Hundred Twelve Thousand Four Hundred Thirty (112,430) shares of Common Stock
(the "Options") pursuant to that certain Collateral Assignment and Agreement
of even date herewith by and between Obligor and Holder, a copy of
<PAGE>
which is attached hereto as EXHIBIT "B" and incorporated herein by reference
(the "Assignment").
Upon the occurrence of an "Event of Default" under the Loan Agreement,
the Pledge Agreement or the Assignment, Holder shall have the right to
declare the entire outstanding principal balance hereof and all accrued
interest thereon to be immediately due and payable. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the Pledge Agreement or the
Assignment, Holder hereby expressly agrees: (i) that Obligor shall be liable
for the outstanding principal balance hereof only to the full extent of
Obligor's interest in and to the Shares and the Options; and (ii) that
Holder's remedies for a default in the payment of principal hereunder shall
be limited to the preservation, enforcement and foreclosure of Holder's
security interests in the Shares and the Options. With respect to a default
in the payment of any accrued interest hereunder, Holder shall be entitled to
seek and obtain all available remedies and damages, whether existing in law,
in equity, hereunder or under the Loan Agreement, the Pledge Agreement or the
Assignment.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under
this Note. Waiver of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
This Note shall be governed by and construed in accordance with the laws
of the State of Georgia and shall be binding upon Obligor, and inure to the
benefit of Holder, and their permitted heirs, successors and assignees.
Time is of the essence in the payment and performance of this Note.
Obligor waives presentment, demand for payment, notice of dishonor, notice of
protest, protest, and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Note.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the day and year first above written.
"Obligor"
(SEAL)
--------------------------
John W. Blend, III
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<PAGE>
EXHIBIT 10.9.2
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is made and entered into as
of the 16th day of September, 1992, by and between JOHN W. BLEND, III, a Georgia
resident ("Pledgor"), and THE SYSTEM WORKS, INC., a Georgia corporation
("Pledgee").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Nonrecourse Loan Agreement of even date
herewith by and between Pledgee and Pledgor (the "Loan Agreement"), Pledgee
has loaned Pledgor Two Hundred Thirty Thousand and No/100 Dollars
($230,000.00), as evidenced by that certain Nonrecourse Promissory Note of
even date herewith made by Pledgor payable to the order of Pledgee in the
principal amount of Two Hundred Thirty Thousand and No/100 Dollars
($230,000.00) (the "Note");
WHEREAS, as collateral security for Pledgor's obligations and
indebtedness to Pledgee under the Loan Agreement and the Note (collectively,
the "Obligations"), Pledgor has assigned his rights (the "Options"), arising
under that certain Nonqualified Stock Option Agreement, dated as of July 29,
1988, by and between Pledgee and Pledgor, to acquire One Hundred Twelve
Thousand Four Hundred Thirty (112,430) shares of Pledgee's One Cent ($.01)
par value Class A common stock (the "Common Stock") pursuant to that certain
Collateral Assignment and Agreement of even date herewith by and between
Pledgee and Pledgor (the "Assignment"); and
WHEREAS, Pledgor desires to pledge Thirty-Three Thousand Three Hundred
Thirty-Three (33,333) shares (the "Shares") of Common Stock, and Pledgee has
agreed to accept Pledgor's pledge of the Shares, as additional collateral and
security for the Obligations;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. OBLIGATIONS SECURED AND CREATION OF SECURITY INTEREST. Pledgor
hereby grants Pledgee a first priority security interest in the Shares as
collateral and security for the due and punctual payment of the Obligations.
Pledgor herewith deposits the stock certificate representing the Shares (the
"Certificate"), together with an executed stock power relating to the
Certificate in form and substance satisfactory to Pledgee (the "Stock
Power"), with Pledgee.
2. REPRESENTATION AND WARRANTY OF PLEDGOR. Pledgor hereby represents
and warrants to Pledgee that, as of the date hereof
<PAGE>
and at all times until the Obligations are paid in full, except as set forth
herein or as approved by Pledgee, Pledgor has not made and will not make any
pledge, assignment or transfer of any of the Shares and will not create or
permit to exist any lien, security interest or other charge or encumbrance
upon or with respect to the Shares.
3. DIVIDENDS. Pledgor and Pledgee hereby agree that, unless and until
an "Event of Default" (as defined in Section 4(a) hereof) shall occur,
Pledgee shall retain any and all rights with respect to the Shares; provided,
however, that all stock dividends issued on the Shares during the term of
this Agreement shall become additional collateral and security for the due
and punctual payment of the Obligations.
4. EVENTS OF DEFAULT.
(a) The occurrence of any one or more of the following shall
constitute an "Event of Default" hereunder:
(i) a breach by Pledgor of any provision of this Agreement;
(ii) the entry of a decree or order for relief by a court having
jurisdiction over Pledgor in an involuntary case under federal bankruptcy
law, as now constituted or hereafter amended, or any other applicable
federal or state bankruptcy, insolvency or other similar law, and the
continuance of any such decree or order unstayed and in effect for a period
of sixty (60) consecutive days;
(iii) the commencement by Pledgor of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any
other applicable federal or state bankruptcy, insolvency or other similar
law;
(iv) Pledgor becomes insolvent or admits in writing his inability
to pay his debts as they mature; or
(v) an "Event of Default" under the Loan Agreement or the
Assignment.
(b) Upon the occurrence of an Event of Default, and subject to the
terms and conditions set forth in Section 5.2 of the Loan Agreement, in
addition to those rights and remedies available at law, in equity, granted
herein or in any other agreement now or hereafter in effect between Pledgor
and Pledgee, Pledgee's rights and remedies with respect to the Shares shall,
in all respects, events and contingencies, be those of a secured party under
the Uniform Commercial Code and under any other applicable law, as the same
may from time to time be in effect.
(c) Pledgor agrees that any notice from Pledgee of any sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the Uniform Commercial
2
<PAGE>
Code or otherwise, shall constitute reasonable notice to Pledgor if such
notice is personally delivered or mailed by regular or certified mail,
postage prepaid, at least ten (10) days prior to such action, to Pledgor's
principal residence or to any address which Pledgor has specified in writing
to Pledgee as the address to which notices hereunder shall be given to
Pledgor.
(d) Pledgor agrees to pay all reasonable costs and expenses
(including, without limitation, all court costs and reasonable attorney's
fees) incurred by Pledgee in exercising any of its rights or remedies under
this Agreement following the occurrence of an Event of Default hereunder.
5. TERM. This Agreement shall remain in full force and effect until
the Obligations are satisfied. At that time, both this Agreement and the
pledge of the Shares hereunder shall terminate, and Pledgee shall immediately
transfer and deliver the Certificate and the Stock Power to Pledgor or to
whosoever shall be lawfully entitled to the same, with the Certificate marked
"Terminated --Underlying Obligations Satisfied" and dated and signed by
Pledgee.
6. NO WAIVER. Pledgee shall not be deemed to have waived any of its
rights or remedies arising hereunder or otherwise unless such waiver shall be
contained in a writing executed by Pledgee. No delay on the part of Pledgee
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any power or right hereunder
preclude any other or further exercise thereof or the exercise of any other
power or right.
7. MISCELLANEOUS. This Agreement shall not be modified or amended
except through a writing signed by Pledgee and Pledgor. This Agreement shall
in all respects be governed by and construed in accordance with the laws of
the State of Georgia. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. This Agreement
represents the full and complete understanding of the parties hereto with
respect to the pledge of the Shares hereunder. All of the terms, covenants
and conditions contained herein shall be binding upon and shall inure to the
benefit of each of the parties hereto and their permitted heirs, successors
and assignees.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their
duly authorized representatives to execute, this Agreement under seal as of
the day and year first above written.
"Pledgor"
/s/ John W. Blend, III (SEAL)
-----------------------------
John W. Blend, III
"Pledgee"
THE SYSTEM WORKS, INC.
By: /s/ David P. Welden
--------------------------
Its: President
Attest: /s/ Alice K. Welden
--------------------------
Its: Secretary
[CORPORATE SEAL]
4
<PAGE>
EXHIBIT 10.9.3
COLLATERAL ASSIGNMENT AND AGREEMENT
THIS COLLATERAL ASSIGNMENT AND AGREEMENT (the "Agreement") is made and
entered into as of the 16th day of September, 1992, by and between JOHN W.
BLEND, III, a Georgia resident ("Assignor"), and THE SYSTEM WORKS, INC., a
Georgia corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Nonrecourse Loan Agreement of even date
herewith by and between Pledgee and Pledgor (the "Loan Agreement"), Pledgee
has loaned Pledgor Two Hundred Thirty Thousand and No/100 Dollars
($230,000.00), as evidenced by that certain Nonrecourse Promissory Note of
even date herewith made by Pledgor payable to the order of Pledgee in the
principal amount of Two Hundred Thirty Thousand and No/100 Dollars
($230,000.00) (the "Note");
WHEREAS, as collateral security for Assignor's obligations and
indebtedness to Assignee under the Loan Agreement and the Note (collectively,
the "Obligations"), Assignor has pledged Thirty-Three Thousand Three Hundred
Thirty-Three (33,333) shares (the "Shares") of Assignee's One Cent ($.01) par
value Class A common stock (the "Common Stock") pursuant to that certain
Stock Pledge Agreement of even date herewith by and between Assignee and
Assignor (the "Pledge Agreement"); and
WHEREAS, Assignor desires to assign his rights (the "Options"), arising
under that certain Nonqualified Stock Option Agreement, dated as of July 29,
1988, by and between Assignee and Assignor, a copy of which is attached
hereto as EXHIBIT "A" and incorporated herein by reference (the "Option
Agreement"), to acquire One Hundred Twelve Thousand Four Hundred Thirty
(112,430) shares of Common Stock, and Assignee has agreed to accept
Assignor's assignment of the Options, as additional collateral and security
for the Obligations;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. OBLIGATIONS SECURED AND ASSIGNMENT. Subject to the terms and
conditions contained in this Agreement, Assignor hereby assigns, transfers
and sets over unto Assignee all of Assignor's existing rights, powers and
privileges with respect to the Options under the Option Agreement as
collateral and security for the due and punctual payment of the Obligations.
Assignor hereby deposits the Option Agreement with Assignee.
<PAGE>
2. REPRESENTATION AND WARRANTY OF ASSIGNOR. Assignor hereby represents
and warrants to Assignee that, as of the date hereof and at all times until
the Obligations are paid in full, except as set forth herein or as approved
by Assignee, Assignor: (i) has not made and will not make any pledge,
assignment or transfer of any of the Options; (ii) will not create or permit
to exist any lien, security interest or other charge or encumbrance upon or
with respect to the Options; and (iii) will not exercise any rights, powers
or privileges with respect to the Options under the Option Agreement.
3. FURTHER ASSURANCE. Assignor shall, from time to time hereafter,
execute and deliver such additional instruments, certificates and documents,
and take all such actions, as Assignee shall reasonably request for the
purpose of implementing or effectuating the provisions of this Agreement.
4. EVENTS OF DEFAULT.
(a) The occurrence of any one or more of the following shall
constitute an "Event of Default" hereunder:
(i) a breach by Assignor of any provision of this Agreement;
(ii) the entry of a decree or order for relief by a court having
jurisdiction over Assignor in an involuntary case under federal bankruptcy
law, as now constituted or hereafter amended, or any other applicable
federal or state bankruptcy, insolvency or other similar law, and the
continuance of any such decree or order unstayed and in effect for a period
of sixty (60) consecutive days;
(iii) the commencement by Assignor of a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or any
other applicable federal or state bankruptcy, insolvency or other similar
law;
(iv) Assignor becomes insolvent or admits in writing his inability
to pay his debts as they mature; or
(v) an "Event of Default" under the Loan Agreement or the Pledge
Agreement
(b) Upon the occurrence of an Event of Default, and subject to the
terms and conditions set forth in Section 5.2 of the Loan Agreement, in
addition to those rights and remedies available at law, in equity, granted
herein or in any other agreement now or hereafter in effect between Assignor
and Assignee, Assignee's rights and remedies with respect to the Options
shall, in all respects, events and contingencies, be those of a secured party
under the Uniform Commercial Code and
2
<PAGE>
under any other applicable law, as the same may from time to time be in effect.
(c) Assignee and Assignor hereby agree that, unless and until an
Event of Default shall occur, Assignee shall not exercise or seek to exercise
any of the rights, powers or privileges with respect to the Options under the
Option Agreement.
(d) Pledgor agrees that any notice from Assignee of any sale,
disposition or other intended action hereunder or in connection herewith,
whether required by the Uniform Commercial Code or otherwise, shall
constitute reasonable notice to Assignor if such notice is personally
delivered or mailed by regular or certified mail, postage prepaid, at least
ten (10) days prior to such action, to Assignor's principal residence or to
any address which Assignor has specified in writing to Assignee as the
address to which notices hereunder shall be given to Assignor.
(e) Assignor agrees to pay all reasonable costs and expenses
(including, without limitation, all court costs and reasonable attorney's
fees) incurred by Assignee in exercising any of its rights or remedies under
this Agreement following the occurrence of an Event of Default hereunder.
5. TERM. This Agreement shall remain in full force and effect until
the Obligations are satisfied. At that time, both this Agreement and all
rights herein assigned shall terminate, and all rights, powers and
privileges with respect to the Options under the Option Agreement shall
revert to Assignor. Assignee shall then return the Option Agreement to
Assignor.
6. MISCELLANEOUS. This Agreement shall not be modified or amended
except through a writing signed by Assignor and Assignee. This Agreement
shall in all respects be governed by and construed in accordance with the
laws of the State of Georgia. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement. This Agreement
represents the full and complete understanding of the parties hereto relating
to the assignment of the rights, powers and privileges associated with the
Options under the Option Agreement. All of the terms, covenants and
conditions contained herein shall be binding upon and shall inure to the
benefit of each of the parties hereto and their permitted heirs, successors
and assignees.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed, or caused their duly
authorized representatives to execute, this Agreement under seal as of the day
and year first above written.
"Assignor"
/s/ J. W. Blend (SEAL)
--------------------------
John W. Blend, III
"Assignee"
THE SYSTEM WORKS, INC.
By: David P. Welden
-----------------------
Its: President
Attest: Alice K. Welden
-------------------
Its: Secretary
[CORPORATE SEAL]
4
<PAGE>
NONRECOURSE PROMISSORY NOTE
$230,000.00 September 16, 1992
Atlanta, Georgia
FOR VALUE RECEIVED, on or before December 31, 1998 (the "Maturity Date"),
the undersigned, JOHN W. BLEND, III, a Georgia resident ("Obligor"), promises
to pay to the order of THE SYSTEM WORKS, INC., a Georgia corporation
(together with any subsequent holder or transferee hereof, "Holder"), at 640
Powers Ferry Road, Building Eleven, Suite 100, Marietta, Georgia 30067, or at
such other place as Holder may from time to time designate in writing, the
principal sum of TWO HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS
($230,000.00), together with accrued interest on so much thereof as from time
to time shall be outstanding and unpaid, accruing on and after the date
hereof at the rate of Five and 98/100 percent (5.98%) per annum, expressed in
simple interest terms and computed on a three hundred sixty-five (365)-day
year.
Interest payments hereunder shall be due and payable annually on December
31 of each year, commencing December 31, 1992, or on such earlier date(s)
during any such year as provided in Section 1.3(b) of that certain
Nonrecourse Loan Agreement of even date herewith by and between Obligor and
Holder (the "Loan Agreement"), in accordance with the terms and conditions
set forth in Section 1.3(c) of the Loan Agreement. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the outstanding principal
balance hereof and all accrued interest thereon must be paid in full no later
than the Maturity Date.
Obligor may be required to prepay the outstanding principal balance
hereof, together with all accrued interest thereon, in accordance with the
terms and conditions set forth in Section 1.2(c) of the Loan Agreement.
Obligor shall also be entitled, at any time and from time to time, without
the consent of Holder and without paying any penalty or premium therefor, to
prepay all or any portion of the outstanding principal balance hereof,
together with all accrued interest thereon.
As collateral security for its payment obligations hereunder and under
the Loan Agreement, Obligor has: (i) pledged Thirty-Three Thousand Three
Hundred Thirty-Three (33,333) shares (the "Shares") of Holder's One Cent
($.01) par value Class A common stock (the "Common Stock") pursuant to that
certain Stock Pledge Agreement of even date herewith by and between Obligor
and Holder, a copy of which is attached hereto as EXHIBIT "A" and
incorporated herein by reference (the "Pledge Agreement"); and (ii) assigned
his rights, arising under that certain Nonqualified Stock Option Agreement,
dated as of July 29, 1988, by and between Obligor and Holder, to acquire One
Hundred Twelve Thousand Four Hundred Thirty (112,430) shares of Common Stock
(the "Options") pursuant to that certain Collateral Assignment and Agreement
of even date herewith by and between Obligor and Holder, a copy of
<PAGE>
which is attached hereto as EXHIBIT "B" and incorporated herein by reference
(the "Assignment").
Upon the occurrence of an "Event of Default" under the Loan Agreement,
the Pledge Agreement or the Assignment, Holder shall have the right to
declare the entire outstanding principal balance hereof and all accrued
interest thereon to be immediately due and payable. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the Pledge Agreement or the
Assignment, Holder hereby expressly agrees: (i) that Obligor shall be liable
for the outstanding principal balance hereof only to the full extent of
Obligor's interest in and to the Shares and the Options; and (ii) that
Holder's remedies for a default in the payment of principal hereunder shall
be limited to the preservation, enforcement and foreclosure of Holder's
security interests in the Shares and the Options. With respect to a default
in the payment of any accrued interest hereunder, Holder shall be entitled to
seek and obtain all available remedies and damages, whether existing in law,
in equity, hereunder or under the Loan Agreement, the Pledge Agreement or the
Assignment.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under
this Note. Waiver of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
This Note shall be governed by and construed in accordance with the laws
of the State of Georgia and shall be binding upon Obligor, and inure to the
benefit of Holder, and their permitted heirs, successors and assignees.
Time is of the essence in the payment and performance of this Note.
Obligor waives presentment, demand for payment, notice of dishonor, notice of
protest, protest, and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Note.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the day and year first above written.
"Obligor"
(SEAL)
--------------------------
John W. Blend, III
<PAGE>
EXHIBIT 10.9.4
NONRECOURSE PROMISSORY NOTE
$230,000.00 September 16, 1992
Atlanta, Georgia
FOR VALUE RECEIVED, on or before December 31, 1998 (the "Maturity Date"),
the undersigned, JOHN W. BLEND, III, a Georgia resident ("Obligor"), promises
to pay to the order of THE SYSTEM WORKS, INC., a Georgia corporation
(together with any subsequent holder or transferee hereof, "Holder"), at 640
Powers Ferry Road, Building Eleven, Suite 100, Marietta, Georgia 30067, or at
such other place as Holder may from time to time designate in writing, the
principal sum of TWO HUNDRED THIRTY THOUSAND AND NO/100 DOLLARS
($230,000.00), together with accrued interest on so much thereof as from time
to time shall be outstanding and unpaid, accruing on and after the date
hereof at the rate of Five and 98/100 percent (5.98%) per annum, expressed in
simple interest terms and computed on a three hundred sixty-five (365)-day
year.
Interest payments hereunder shall be due and payable annually on December
31 of each year, commencing December 31, 1992, or on such earlier date(s)
during any such year as provided in Section 1.3(b) of that certain
Nonrecourse Loan Agreement of even date herewith by and between Obligor and
Holder (the "Loan Agreement"), in accordance with the terms and conditions
set forth in Section 1.3(c) of the Loan Agreement. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the outstanding principal
balance hereof and all accrued interest thereon must be paid in full no later
than the Maturity Date.
Obligor may be required to prepay the outstanding principal balance
hereof, together with all accrued interest thereon, in accordance with the
terms and conditions set forth in Section 1.2(c) of the Loan Agreement.
Obligor shall also be entitled, at any time and from time to time, without
the consent of Holder and without paying any penalty or premium therefor, to
prepay all or any portion of the outstanding principal balance hereof,
together with all accrued interest thereon.
As collateral security for its payment obligations hereunder and under
the Loan Agreement, Obligor has: (i) pledged Thirty-Three Thousand Three
Hundred Thirty-Three (33,333) shares (the "Shares") of Holder's One Cent
($.01) par value Class A common stock (the "Common Stock") pursuant to that
certain Stock Pledge Agreement of even date herewith by and between Obligor
and Holder, a copy of which is attached hereto as EXHIBIT "A" and
incorporated herein by reference (the "Pledge Agreement"); and (ii) assigned
his rights, arising under that certain Nonqualified Stock Option Agreement,
dated as of July 29, 1988, by and between Obligor and Holder, to acquire One
Hundred Twelve Thousand Four Hundred Thirty (112,430) shares of Common Stock
(the "Options") pursuant to that certain Collateral Assignment and Agreement
of even date herewith by and between Obligor and Holder, a copy of
<PAGE>
which is attached hereto as EXHIBIT "B" and incorporated herein by reference
(the "Assignment").
Upon the occurrence of an "Event of Default" under the Loan Agreement,
the Pledge Agreement or the Assignment, Holder shall have the right to
declare the entire outstanding principal balance hereof and all accrued
interest thereon to be immediately due and payable. Notwithstanding anything
to the contrary herein or in the Loan Agreement, the Pledge Agreement or the
Assignment, Holder hereby expressly agrees: (i) that Obligor shall be liable
for the outstanding principal balance hereof only to the full extent of
Obligor's interest in and to the Shares and the Options; and (ii) that
Holder's remedies for a default in the payment of principal hereunder shall
be limited to the preservation, enforcement and foreclosure of Holder's
security interests in the Shares and the Options. With respect to a default
in the payment of any accrued interest hereunder, Holder shall be entitled to
seek and obtain all available remedies and damages, whether existing in law,
in equity, hereunder or under the Loan Agreement, the Pledge Agreement or the
Assignment.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right under
this Note. Waiver of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
This Note shall be governed by and construed in accordance with the laws
of the State of Georgia and shall be binding upon Obligor, and inure to the
benefit of Holder, and their permitted heirs, successors and assignees.
Time is of the essence in the payment and performance of this Note.
Obligor waives presentment, demand for payment, notice of dishonor, notice of
protest, protest, and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Note.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the day and year first above written.
"Obligor"
/s/ John W. Blend, III (SEAL)
--------------------------
John W. Blend, III
2
<PAGE>
EXHIBIT 10.10
THE SYSTEM WORKS, INC.
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and between THE SYSTEM
WORKS, INC. (the "Company") and the party identified below as the "EMPLOYEE."
The effective date of this Agreement (the "Effective Date") is the date set
forth below. In consideration of their respective rights and obligations
under this Agreement and other valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, and intending to
be legally bound by this Agreement, the Company and Employee (collectively,
the "Parties," individually a "Party") have fully reviewed and agree to all
of the terms and conditions of this Agreement.
THE SYSTEM WORKS, INC. ADDRESS:
Authorized Signature: 3301 Windy Ridge Parkway
-----------------
Marietta, GA 30067
Printed Name:
------------------------- Telephone No.: (404) 952-8444
Position:
-----------------------------
EMPLOYEE PERMANENT RESIDENCE ADDRESS:
Signature: /s/ Kenneth C. Colby, Jr. 7355 Dunraven Place NW
---------------------------- -----------------------------------
Printed Name: Kenneth C. Colby, Jr. Atlanta, GA 30328
------------------------- -----------------------------------
-----------------------------------
-----------------------------------
Home Telephone No.: (404) 901-9755
----------------
EFFECTIVE DATE: 2/11/94
---------------------
ADDITIONAL TERMS AND CONDITIONS OF THIS AGREEMENT BEGIN ON THE FOLLOWING PAGE.
THIS AGREEMENT ALSO CONTAINS SEVERAL ATTACHED SCHEDULES, THE PAGES OF WHICH ARE
NOT NUMBERED.
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Page 1 of 5
<PAGE>
TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
BACKGROUND
In consideration of the employment of Employee by the Company and the
agreements of Employee and the Company (collectively, the "Parties") in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, the Parties,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
This Section sets forth the definition of certain capitalized terms used
in this Agreement. Other terms are defined elsewhere in this Agreement.
(a) "BUSINESS" shall mean, to the extent engaged in by the Company
during the term of this Agreement, (i) the business described in Part One of
ADDENDUM A (as amended from time to time) and (ii) any other kinds of
business engaged in by the Company during the term of this Agreement.
(b) "COMPETITIVE POSITION" shall mean: (i) Employee's direct or
indirect equity ownership (excluding equity ownership of less than one
percent (1%)) or control of all or any portion of any entity (other than the
Company or any affiliated entity) engaged, wholly or partly, in the Business;
(ii) any employment, consulting, partnership, advisory, directorship, agency,
promotional or independent contractor arrangement between Employee and any
entity (other than the Company or any affiliated entity) engaged, wholly or
partly, in the Business whereby Employee is required to or does perform
services substantially similar to the Services on behalf of or for the
benefit of such an entity; (iii) Employee's performance of services
substantially similar to the Services for Employee's own account and benefit
(and not at the direction of or for the benefit of the Company); or (iv)
Employee's referral of business opportunities to a party that is in a
business that competes with the Company's business.
(c) "CONFIDENTIAL INFORMATION" shall mean valuable, non-public
competitively sensitive data and information relating to the Company's
business other than Trade Secrets (as defined in Section 1(g)) that is not
generally known by or readily available to competitors of the Company.
(d) "CLIENTS" shall mean actual Clients or actively sought prospective
clients of the Company during the term of Employee's employment by the
Company.
(e) "SERVICES" shall mean the employment related responsibilities of
Employee to the Company set forth in Part Three of ADDENDUM A (as amended
from time to time) together with any additional or different services
Employee is required to perform, from time to time, during Employee's
employment with the Company. For purposes of interpreting Employee's
obligations under this Agreement, "Services" shall include all
responsibilities set forth in Part Three of ADDENDUM A at any point during
the eighteen (18) months prior to the last day of the Employment Term.
(f) "TERRITORY" shall mean the locations described in Part Two of
ADDENDUM A (as amended from time to time). For purposes of interpreting
Employee's obligations under this Agreement, "Territory" shall refer to all
locations set forth in Part Two of ADDENDUM A at any point during the
eighteen (18) months prior to the last day of the Employment Term.
(g) "TRADE SECRETS" shall mean information or data of or about the
Company, including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, products plans, or
lists of actual or potential customers or suppliers, that: (i) derive
economic value, actual or potential, from not being generally known to, and
not being readily ascertainable by proper means by, other persons who can
obtain economic value from their disclosure or use; and (ii) are the subject
of efforts that are reasonable under the circumstances to maintain their
secrecy. To the extent that the foregoing definition is inconsistent with a
definition of "trade secret" mandated under applicable law, the foregoing
definition shall be deemed amended to the degree necessary to render it
consistent with applicable law.
(h) "WORK PRODUCT" shall mean work product, property, data,
documentation or information or materials prepared, conceived, discovered,
developed or created by Employee in connection with performing the Services.
2. LIMITATION ON COMPETITION Employee agrees that during the period of
time Employee is employed by the Company (the "Employment Term") Employee
will not, either directly or indirectly, alone or in conjunction with any
other party, accept, enter into or take any action in conjunction with or in
furtherance of a Competitive Position. Employee agrees that for eighteen
(18) months after the last day of the Employment Term, Employee will not, in
the Territory, either directly or indirectly, alone or in conjunction with
any other party, accept, enter into or take any action in conjunction with or
in furtherance of a Competitive Position (other than action to reject an
offer of a Competitive Position or to notify the Company of the offer
pursuant to the requirements of the next sentence). Employee shall notify
the Company promptly in writing if Employee receives an offer of a
Competitive Position within eighteen (18) months after the last day of the
Employment Term, and this notice shall describe all terms of the offer.
3. LIMITATION ON SOLICITING CLIENTS Employee agrees that during the
Employment Term, Employee will not, either directly or indirectly, alone or
in conjunction with any other party, solicit, divert or appropriate or
attempt to solicit, divert or appropriate any Client for the purpose of
providing the Client with services or products competitive with those offered
by the Company during the Employment Term. Employee agrees that for eighteen
(18) months after the last day of the
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Page 2 of 5
<PAGE>
- --------------------------------------------------------------------------------
Employment Term, Employee will not, either directly or indirectly, alone or
in conjunction with any other party, solicit, divert or appropriate or
attempt to solicit, divert or appropriate any Client of the Company for the
purpose of providing the Client with services or products competitive with
those offered by the Company during the Employment Term; provided that the
covenant in this sentence shall limit Employee's conduct only with respect to
those Clients with whom Employee had substantial contact (through direct or
supervisory interaction with the Client or the Client's account) during a
period of time up to but no greater than two (2) years prior to the last day
of the Employment Term. Employee shall notify the Company promptly in writing
if: (a) during the eighteen (18) months after the last day of the Employment
Term, Employee is contacted by any Client with a request that Employee
provide the Client with any services or products to the Client; and (b)
provision of such services or products, as requested, would constitute a
violation of Employee's covenants in this Section or Section 2 or 5. This
notice shall include all salient information associated with the Client's
request including, among other things, the identity of the Client, the exact
services or products requested and the party or parties on behalf of the
Client who contacted Employee.
4. NON-SOLICITATION OF COMPANY PERSONNEL Employee agrees that, except to
the extent that Employee is required to do so in connection with Employee's
employment responsibilities on behalf of the Company, during the Employment
Term, Employee will not, either directly or indirectly, alone or in
conjunction with any other party, solicit or attempt to solicit any employee,
consultant, contractor or other personnel of the Company to terminate, alter
or lessen that party's affiliation with the Company or to violate the terms
of any agreement or understanding between such employee, consultant,
contractor or other person and the Company. Employee agrees that for
eighteen (18) months after the last day of the Employment Term, Employee will
not, either directly or indirectly, alone or in conjunction with any other
party, solicit or attempt to solicit any "key" (as that term is defined in
the next sentence) employee, consultant, contractor or other personnel of the
Company residing at the time of the solicitation in the Territory to
terminate, alter or lessen that party's affiliation with the Company or to
violate the terms of any agreement or understanding between such employee,
consultant, contractor or other person and the Company. For purposes of the
preceding sentence, "key" employees, consultants, contractors or other
personnel of the Company are those with knowledge of or access to the
Company's Trade Secrets and Confidential Information.
5. TRADE SECRETS AND CONFIDENTIAL INFORMATION
(a) RIGHTS TO WORK PRODUCT To the greatest extent possible, any Work
Product shall be deemed to be "work made for hire" (as defined in the
Copyright Act, 17 U.S.C.A. Section 101 ET SEQ., as amended) and owned
exclusively by the Company. Employee hereby unconditionally and irrevocably
transfers and assigns to the Company all rights, title and interest Employee
may currently have (or in the future may have) by operation of law or
otherwise in or to any Work Product, including, without limitation, all
patents, copyrights, trademarks, service marks and other intellectual
property rights. Employee agrees to execute and deliver to the Company any
transfers, assignments, documents or other instruments which the Company may
deem necessary or appropriate to vest complete title and ownership of any
Work Product, and all associated rights, exclusively in the Company.
(b) NON-DISCLOSURE COVENANT Through exercise of Employee's rights and
performance of Employee's obligations under this Agreement Employee will be
exposed to Trade Secrets and Confidential Information. Employee acknowledges
and agrees that the Company's Trade Secrets and Confidential Information
represent a substantial investment by the Company. Employee also
acknowledges and agrees that any unauthorized disclosure or use of any of the
Company's Trade Secrets or Confidential Information would be wrongful and
would likely result in immediate and irreparable injury to the Company.
Except as required in order to perform Employee's obligations under this
Agreement, Employee shall not, without the express prior written consent of
the Company, redistribute, market, publish, disclose or divulge to any other
person or entity, or use or modify for use, directly or indirectly in any way
for any person or entity: (i) any Confidential Information during the
Employment Term and for a period of three (3) years after the final date of
the Employment Term; and (ii) any Trade Secrets at any time (during or after
the Employment Term) during which such information or data shall continue to
constitute a "trade secret" under applicable law. Employee further agrees to
cooperate with any reasonable confidentiality requirements of the Company.
Employee shall immediately notify the Company of any unauthorized disclosure
or use of any of the Trade Secrets or Confidential Information of the Company
of which Employee becomes aware.
6. ACKNOWLEDGEMENT Employee and the Company acknowledge and agree that the
covenants of Employee in Sections 2, 3, 4 and 5 (collectively, the
"Protective Covenants") are reasonable as to time, scope and territory given
(a) that Employee will be performing the Services throughout (and perhaps
beyond) the entire Territory, (b) that the Company needs to protect its Trade
Secrets, Confidential Information and the Company's substantial investment in
its Client relationships, particularly given the complexity and competitive
nature of the Business, and (c) that Employee has sufficient skills to find
alternative, commensurate employment or consulting work in Employee's field
of expertise that would not entail a violation of the Protective Covenants.
The Parties further acknowledge and agree that if the nature of Employee's
responsibilities for or on behalf of the Company or the geographical areas in
which Employee must fulfill them materially change, the Parties will execute
appropriate amendments to the scope of ADDENDUM A by initialling a revised
version of ADDENDUM A reflecting such changes. The Parties also acknowledge
that the Company shall have the discretion at any point to waive, in writing,
Employee's full or partial compliance with any one or more of the Protective
Covenants. The Company agrees to make appropriate executive officers
available (before and after the Employment Term) to review and discuss the
Protective Covenants with Employee. The Company and Employee acknowledge
that a breach by Employee of a covenant of Employee in Section 2,
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Page 3 of 5
<PAGE>
3, or 4 shall presumptively constitute a breach of Employee's covenants in
Section 5(b) as well.
7. TERMINATION OF EMPLOYEE Employee agrees that immediately upon the
termination of Employee's employment, Employee shall: (i) no longer represent
to Clients or any third party that Employee has any affiliation with the
Company; (ii) return to the Company any information or materials constituting
or containing Confidential Information or Trade Secrets of the Company; (iii)
pay the Company all amounts it owes the Company or is holding for the
Company; (iv) return all Work Product in Employee's control or possession to
the Company; and (v) comply fully with all obligations under this Agreement
that survive the Employment Term.
8. CONTINUED COMPLIANCE WITH AGREEMENT The Parties agree that termination
of Employee's employment shall not terminate this Agreement and that the
Parties shall continue to be bound by all provisions of this Agreement
(including, but not limited to, Sections 2, 3, 4, and 5) other than those
that expressly apply only during the Employment Term. This Agreement will
terminate when neither Party has any further obligation under this Agreement.
9. TOLLING The running of the applicable time period of any Protective
Covenant shall be tolled: during the continuation of any breach by Employee
of the Protective Covenant; and during the pendency of any litigation
involving a good faith claim by the Company that Employee has breached the
Protective Covenant. The running of the time period of any such Protective
Covenant tolled in accordance with the preceding sentence shall recommence
only upon either compliance by Employee with the terms of the breached
Protective Covenant or a final judgment in the litigation, whichever occurs
first.
10. REMEDIES In the event of a breach by Employee of any provision of this
Agreement, the Company shall have the right to set-off against any sums the
Company owes Employee the amount of any damages incurred or suffered by the
Company as a result of the breach. Any such set-off of any such terms
against the damages incurred by the Company as a result of any such breach by
Employee shall not be presumed to be in full satisfaction of or as liquidated
damages for or as a release of any claim for damages against Employee that
may accrue to the Company as a result of the breach. The Parties further
agree that any breach or threatened breach of a Protective Covenant by
Employee would result in irreparable injury to the Company, and therefore, in
addition to all of the remedies provided at law or in equity, Employee agrees
and consents that the Company shall be entitled to a temporary restraining
order and a permanent injunction to prevent a breach or contemplated breach
of the Protective Covenant. In the event the Company seeks such an
injunction, Employee waives any requirement that the Company post a bond or
any other security. The existence of any claim, demand, action or cause of
action of Employee against the Company, whether predicated upon this
Agreement or otherwise, shall not constitute a defense to the enforcement by
the Company of any of Employee's obligations under this Agreement.
11. SEVERABILITY All provisions of this Agreement are severable from one
another, and the unenforceability or invalidity of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement, but such remaining provisions shall be
interpreted and construed in such a manner as to carry out fully the
intention of the Parties, provided, however, that should any judicial body
interpreting this Agreement deem any provision of this Agreement to be
unreasonably broad in time, territory, scope or otherwise, it is the intent
and desire of the Parties that such judicial body, to the greatest extent
possible, reduce the breadth of such provision to the maximum legally
allowable parameters rather than deeming such provision totally unenforceable
or invalid.
12. ASSIGNMENT The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon any
subsidiary, affiliate, successor or assign of or to the business of the
Company. Neither this Agreement nor any rights or obligations of Employee
under this Agreement shall be transferable or assignable by Employee without
the prior written consent of the Company, and any attempted transfer or
assignment of this Agreement by Employee not in accordance with this Section
shall be null and void.
13. WAIVER The waiver by either Party to this Agreement of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any prior or subsequent breach of the same provision by the other Party or a
waiver of a breach of another provision of this Agreement by the other Party.
No waiver or modification of this Agreement or of any covenant, condition,
or limitation contained in this Agreement shall be valid unless in writing
and duly executed by the Party to be charged with the waiver or modification.
14. INTERPRETATION Should any provision of this Agreement require judicial
interpretation, the Parties agree that the judicial body interpreting or
construing the provision shall not apply the assumption that the terms of
this Agreement shall be more strictly construed against either one or the
other Party. The Parties acknowledge and agree that both Parties and/or
their agents have participated in the negotiation of the terms of this
Agreement.
15. CAPTIONS, COUNTERPARTS; SCHEDULES References to "Sections" and
"Addenda" in this Agreement are to sections and schedules in this Agreement.
The contents of all Addenda to this Agreement are hereby incorporated by
reference into the body of this Agreement. The Section headings in this
Agreement are for convenience of reference only and shall not affect the
meaning or interpretation of this Agreement. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an
original, but all of which shall together constitute one and the same
instrument.
16. NOTICES Any notice, authorization, consent or other communication
required or permitted under this Agreement shall be made in writing and shall
be deemed effective when delivered (except as may be expressly provided
otherwise in this Agreement) to the addresses set forth under the Parties'
names on the signature page to this Agreement. Any written communication
shall be deemed delivered: (a) in the case of a communication sent by first
class mail, three (3) days after the communication is mailed; and (b) in the
case of a
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<PAGE>
communication sent by courier, as of the date and time indicated on the records
of the courier that the communication was delivered and signed for.
17. MISCELLANEOUS This Agreement contains the complete agreement concerning
the arrangement between Employee and the Company regarding its subject matter
and supersedes all other similar agreements or understandings between the
Parties, whether oral or written, consistent or inconsistent, with this
Agreement. Both Parties agree that they intend for any entities affiliated
with the Company to be the beneficiaries of all of the Company's rights under
this Agreement. This Agreement may not be amended by the Parties except by a
writing executed by both Parties. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Georgia, U.S.A.
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Page 5 of 5
<PAGE>
THE SYSTEM WORKS-REGISTERED TRADEMARK-, INC. AGREEMENT
ADDENDUM A
FOR: KEN COLBY
PART I.
NATURE OF BUSINESS
The "Business" is the business of developing and supplying computer software and
services designed to help organizations implement, manage and improve their
maintenance practices.
PART II.
TERRITORY
[ ] Cobb County, Georgia
[ ] State of Georgia
[ ] Continental United States
[ ] -----------------------------------
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PART III.
SERVICES
The following services and, if Employee is employed in a management position,
any additional services noted on an additional attached page:
Manages developing of the company's software products.
Date: 2/11/94
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Employee Initial [illegible]
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TSW Initial
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PART III.
SERVICES continued...
[ ] 1. Performs supervisory duties of a department and/or group. These duties
include, but are not limited to: interviewing, hiring and training
employees; planning, assigning and directing work; appraising
performance and rewarding and disciplining.
[ ] 2. Includes number 1, above, and the following: Performs managerial
duties including the supervision of supervisory and other employees in
one or more departments and/or groups. Is primarily responsible for
the overall direction, coordination and evaluation of a department
and/or group.
[ ] 3. Includes numbers 1, and 2, above and the following: Directs and
coordinates the activities of one or more departments and/or groups.
Aids the Chief Executive Officer in the formulation and administration
of organizational policies; participates in the development of long
range plans and goals.
[ ] 4. Performs the Services set forth in this Part III, as an officer of the
Company.
[ ] 5. Serves on the Board of Directors of the Company.
Date: 2/11/94
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Employee Initial [illegible]
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TSW Initial
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SCHEDULE TO EXHIBIT 10.10
SCHEDULE OF TERMS OF
NONDISCLOSURE AND NON-COMPETE AGREEMENTS
BETWEEN TSW INTERNATIONAL, INC. AND
ITS EXECUTIVE OFFICERS
DATE OF AGREEMENT EXECUTIVE OFFICER
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2/11/94 Kenneth C. Colby
2/16/94 John W. Blend, III
<PAGE>
EXHIBIT 10.11
TWO INTERNATIONAL, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into effective as of December
11, 1996, between TSW INTERNATIONAL, INC., a Georgia corporation ("TSW") and
JRO CONSULTING, INC. ("Grantee").
In consideration of the agreements herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
1. OPTION GRANT. TSW hereby grants to Grantee the option (the "Option")
to purchase from TSW up to 10,800 shares of TSW's Common Stock (the "Option
Shares") at a purchase price of $9.23 per share, in the manner and subject to
the conditions provided in this Agreement.
2. EXERCISE OF OPTION.
a. EXERCISE AGREEMENT. Grantee may exercise the Option at any time on
or after the date on which the Option has vested in accordance with Section
2(c) and on or before August 8, 2006 (the "Option Period"). Grantee must
exercise the Option by delivering to TSW an executed written exercise
agreement in form reasonably acceptable to TSW, which sets forth Grantee's
election to exercise some or all of this Option, the number of Option Shares
and such other representations and agreements as may be reasonably required
by TSW to comply with applicable securities laws.
b. PAYMENT OF EXERCISE PRICE. The Exercise Agreement must be
accompanied by full payment of the exercise price for the Option Shares being
purchased. Payment for the Option Shares must be made in U.S. dollars by wire
transfer or by check. Prior to the transfer of the Option Shares, Grantee must
pay or make adequate provision for any applicable federal or state
withholding obligations of TSW resulting from the exercise of this Option.
c. VESTING OF OPTION. The Option will vest as follows: (1) 1/3 of
the Option Shares shall vest as of February 8, 1997, (2) an additional 1/3 of
the Option Shares will vest as of August 8, 1997, and (3) the remaining 1/3
of the Option Shares will vest on December 31, 1997, if the Grantee continues
to provide the services of an individual (the "Designee") acceptable to TSW
as Chairman of the TSW Board of Directors to TSW through that date.
Vesting will accelerate, and the Option will be fully vested, if a
Liquidity Event occurs prior to December 31, 1997, and Grantee is providing
the services of Designee as Chairman of the Board of Directors when the
Liquidity Event occurs. For these purposes, the
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term "Liquidity Event" means (1) an initial public offering (IPO) of TSW's
common stock, (2) a sale of all or substantially all of the assets of TSW, or
(3) a merger (other than a merger in which TSW is the acquiror), or a
combination of TSW into another corporation.
d. RESTRICTIONS ON EXERCISE. The Option may not be exercised
unless such exercise is in compliance with the Securities Act of 1933 and all
applicable state securities laws, as they are in effect on the date of
exercise, and the requirements of any stock exchange or national market
system on which TSW's Common Stock may be listed at the time of exercise,
Grantee understands that TSW is not under any obligation to register, qualify
or list the TSW Common Stock with the Securities and Exchange Commission
("SEC"), any state securities commission or any stock exchange to effect such
compliance.
e. DELIVERY OF SHARE CERTIFICATE. Upon receipt of the Exercise
Agreement and payment of the option exercise price, TSW will deliver to
Grantee a stock certificate representing the number of TSW shares as to which
Grantee has exercised the Option.
3. TERMINATION OF OPTION. This Option will terminate as of 5:00 pm EDT on
August 8, 2006 (to the extent not exercised prior to that time).
4. ADJUSTMENT OF OPTION SHARES AND EXERCISE PRICE. If the outstanding
shares of Common Stock of TSW are changed into or exchanged for a different
number or kind of shares or other securities of TSW by reason of any
recapitalization, reclassification, stock split, stock dividend, merger,
combination, or subdivision, appropriate adjustments shall be made in the
number and kind of shares available under this Option, and to the option
exercise price provided for in Section 1.
5. RIGHTS PRIOR TO EXERCISE. This Option is nontransferable. This Option
shall confer no rights to Grantee to act as a shareholder with respect to any
of the Option Shares until payment of the option price and delivery of the
share certificate representing the Option Shares has been made.
6. PREEMPTIVE RIGHTS. Grantee will have the preemptive right to
participate in any offerings of stock by TSW after the date of this Agreement
and prior to the earlier of December 31, 1997 or an initial public offering
of TSW common stock, other than issuances of stock in connection with normal
employee and director stock option plans, on the same terms and conditions as
the proposed offering by TSW. Grantee will have the right to purchase a
number of shares required to maintain Grantee's relative percentage
ownership of TSW's fully-diluted common stock. Any such right must be
exercised within thirty days following receipt of written notice of a
proposed offering of stock by TSW.
7. REPRESENTATIONS OF GRANTEE. By execution of this Agreement, Grantee
represents and warrants to TSW as follows:
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a. Grantee is acquiring this Option and the Option Shares solely for
its own account for investment purposes and not with a view or interest of
participating, directly or indirectly, in the resale or distribution of all
or any part thereof.
b. Grantee is an Illinois corporation, all of the outstanding shares
of which are owned by John R. Oltman.
c. Grantee acknowledges that this Option and the Option Shares
acquired by Grantee are to be issued and sold to the Grantee without
registration and in reliance upon certain exemptions under the Federal
Securities Act of 1933, as amended, and in reliance upon certain exemptions
from registration requirements under applicable state securities laws.
d. Grantee will make no transfer or assignment of any of the Option
Shares except in compliance with the Securities Act of 1933, as amended, and
any other applicable securities laws. Grantee consents and agrees that a
legend to such effect may be affixed to the certificate or certificates
presenting the Option Shares transferred to Grantee. Grantee shall not permit
any transfer or assignment of the shares of Grantee.
e. Grantee is aware that no federal or state agency has made any
recommendation or endorsement of the Option Shares or any finding or
determination as to the fairness of the investment in such Option Shares.
f. Grantee acknowledges that no public or secondary market exists or
may ever exist for the Option Shares and, accordingly, Grantee may not be
able to readily liquidate its investment in the Option Shares.
g. Grantee here by acknowledges that TSW has made available to it the
opportunity to ask questions, to receive answers, and to obtain information
necessary to evaluate the merits and risks of this investment. Grantee
further acknowledges that TSW makes no warranties or representations
regarding the impact that the Option or the exercise of the Option will have
on Grantee's federal or state income tax liabilities.
h. Grantee hereby acknowledges that the Option and underlying Option
Shares are a speculative investment. Grantee represents that it can bear the
economic risks of such an investment for an indefinite period of time.
i. Grantee has full legal power and authority to execute and deliver,
and to perform its obligations under this Agreement and such execution,
delivery and performance will not violate any agreement, contract, law, rule,
decree or other legal restriction by which Grantee is bound.
j. Grantee recognizes and understands that the Option Shares may be
restricted securities within the meaning of Rule 144 promulgated under the
Securities Act of 1933; that the exemption from registration under Rule 144
may not be available under certain
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circumstances; and the Grantee's opportunity to utilize Rule 144 to sell the
Option Shares may be limited or denied.
8. REPRESENTATIONS AND WARRANTIES OF TSW. TSW represents and warrants to
Grantee as follows:
a. Upon exercise of the Option, TSW will transfer to Grantee good
title to the Option Shares subject to the option exercise, free and clear of
any liens, claims or encumbrances.
b. TSW has full legal power and authority to execute and deliver, and
to perform its obligations under this Agreement and such execution, delivery
and performance will not violate any agreement, contract, law, rule, decree
or other legal restriction by which TSW is bound.
9. ENTIRE AGREEMENT. This Stock Option Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof.
10. MISCELLANEOUS. This Agreement shall be governed and construed under
the laws the laws of the State of New York. If any term or provision hereof
shall be held invalid or unenforceable, the remaining terms and provisions
hereof shall continue in full force and effect. Any modification to this
Agreement shall not be effective unless it is in writing and signed by both
of the Parties to this Agreement.
"TSW"
TSW INTERNATIONAL, INC.
By: /s/ John Bartels
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Title: CFO
-------------------------
ACCEPTANCE
Grantee hereby accepts this Option subject to all the terms and conditions
of this Stock Option Agreement. Grantee acknowledges that there may be
adverse tax consequences upon exercise of this Option or disposition of the
Option Shares and that Grantee should consult a tax adviser prior to such
exercise or disposition.
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"GRANTEE":
JRO CONSULTING INC.
By: /s/ J.R. Oltman
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Title: President
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SCHEDULE TO EXHIBIT 10.11
SCHEDULE OF TERMS OF
STOCK OPTION AGREEMENTS
BETWEEN TSW INTERNATIONAL, INC. AND JRO CONSULTING, INC.
DATE OF TYPE OF NUMBER OF EXERCISE EXPIRATION
AGREEMENT OPTION SHARES (1) PRICE DATE
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8/8/96 Non-qualified 54,200 $9.23 8/8/06
12/11/96 Non-qualified 10,800 $9.23 8/8/06
(1) Each option vests in three equal annual installments on February 8,
1997, August 8, 1997 and December 31, 1997, respectively.
<PAGE>
EXHIBIT 10.12.1
THE SYSTEM WORKS, INC.
STOCK OPTION PLAN
SECTION 1. PURPOSE AND TYPES OF OPTIONS TO BE GRANTED HEREUNDER. The
purpose of The System Works, Inc. Stock Option Plan (the "Plan") is to provide a
means whereby The System Works, Inc. (the "Company") will, through the grant of
options to purchase common stock of the Company, attract and retain highly
qualified and competent employees and motivate such employees to exert their
best efforts on behalf of the Company and any "Subsidiary" (as hereinafter
defined) of the Company. As used herein, the term "Subsidiary" means any
subsidiary of the Company within the definition of "subsidiary corporation" in
Section 425(f) of the Internal Revenue Code of 1954, as amended (the "Code").
Subject to compliance with the provisions of the Plan and the Code, Incentive
Stock Options as defined in Section 422A of the Code ("ISOs") and options
outside of Section 422A of the Code ("Nonqualified Options") may be authorized
and made available under the Plan (any of such ISOs and Nonqualified Options may
hereinafter sometimes be collectively referred to as "Options" or singularly as
an "Option").
SECTION 2. ELIGIBILITY; NUMBER OF SHARES AVAILABLE UNDER PLAN.
(a) The persons eligible to participate in the Plan as recipients of ISOs
and Nonqualified Options, or either of them (hereinafter referred to as
"employees"), shall include only the employees of the Company or of any
Subsidiary who hold executive or other responsible positions in the management
of the affairs of the Company or such Subsidiary. The word "employees" does not
include directors of the Company as such, but does include directors of the
Company who are otherwise employed by the Company.
(b) The Company hereby allocates and reserves an aggregate number of
400,000 shares of the $.01 par value common stock of the Company (the "Shares")
for the grant of Options hereunder by the Company to the employees of the
Company or of a Subsidiary thereof and the Company shall reserve and set aside
in accordance with the Georgia Business Corporation Code, an equal number of
authorized but unissued Shares of same to be issued only on the exercise of any
Options granted under the Plan. In the event an ISO is granted by the Company
hereunder, the aggregate fair market value (determined as of the time the ISO is
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granted) of Shares subject to each such ISO shall not exceed in any calendar
year $100,000 plus any "unused carryover" to such year determined under Section
422A(c)(4) of the Code. If any Option granted under the Plan shall terminate,
expire or, with the consent of the optionee, be cancelled as to any Shares, new
Options may thereafter be granted covering such Shares.
SECTION 3. ADMINISTRATION OF THE PLAN.
(a) ESTABLISHMENT OF COMMITTEE. The Plan shall be administered by a Stock
Option Committee (the "Committee") as established and appointed by the Board of
Directors of the Company from time to time.
(b) RESPONSIBILITIES OF COMMITTEE. Subject to the terms hereof, the
Committee shall from time to time (a) determine and designate those employees of
the Company or of any Subsidiary thereof to whom an Option or Options shall be
granted; (b) authorize the grant of various ISOs (within the meaning of Section
422A(b) of the Code) or other Nonqualified Options, and the price, term of
payment and other terms thereof; (c) determine the number of Shares subject to
each such Option; and (d) determine the time or times when and the manner in
which each such Option shall be exercisable and the duration of such exercise
period. The Committee shall designate each such Option as either an ISO or
Nonqualified Option at the time of the grant thereof and such designation shall
remain unchanged thereafter.
(c) INTERPRETATION OF THE PLAN. The Committee shall interpret the Plan,
prescribe, amend or rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and take all such other action as it deems
necessary or advisable to fully implement the terms and the spirit hereof,
except as otherwise expressly provided herein. Any interpretation,
determination, or other action made or taken by the Committee shall be final,
binding and conclusive upon optionee, unless otherwise provided herein.
SECTION 4. TERMS AND CONDITIONS. Each Option granted hereunder shall be
evidenced by a written agreement (the "Agreement") in form and substance
satisfactory to the Committee and in accordance with the following express terms
and conditions and such other terms and conditions as the Committee may deem
appropriate:
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(a) OPTION PERIOD. Except as otherwise provided herein, each Agreement
shall specify the period for which the Option thereunder is granted (which shall
in no event exceed ten years from the earlier to occur of the date the Plan is
adopted by the Board of Directors of the Company or is approved by the
stockholders of same) and shall provide that the exercise of such Option is
prohibited by its terms after the expiration of ten (10) years from the date
such Option is granted. Each Agreement for the grant of an ISO hereunder to any
employee who at the time of such grant, owns stock possessing more than 10% of
the total combined voting power of all class of Shares of the Company or any
Subsidiary shall specify that the exercise of such ISO is prohibited by its
terms after the expiration of five (5) years from the date such ISO is granted.
(b) OPTION PRICE.
(1) ISO PRICE. Upon the grant of an ISO hereunder, the option price
per Share shall be determined by the Committee at the time of such grant, and
shall not be less than the fair market value (but in no event less than the par
value) of each Share on the date the ISO is granted. However, the option price
per Share shall not be less than 110% of the fair market value of the Shares
subject to the ISO if the optionee, at the time the ISO is granted, owns an
aggregate number of Shares possessing more than 10% of the total combined voting
power of all classes of Shares of the Company or any Subsidiary.
(2) NONQUALIFIED OPTION PRICE. In the event a Nonqualified Option is
granted hereunder, the option price per Share shall be determined by the
Committee at the time any such nonqualified Option is granted and may be more or
less than the fair market value (but in no event less than the par value) of a
Share at the time such Nonqualified Option is granted.
(c) EXERCISE OF OPTION. Subject to the provisions of this Plan, any
Option granted hereunder shall be exercised only at such time or times as
determined by the Committee at the time of the grant thereof and as set forth in
the Agreement.
(d) OUTSTANDING ISOS. No ISO granted hereunder shall be exercisable while
any ISO previously granted by the Company or any corporation which at the time
of grant was a parent or subsidiary corporation of the Company or a predecessor
of any such corporations is "outstanding," as such word is defined in Section
422A(c)(7) of the Code.
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For purposes of this provision, an ISO shall be treated as outstanding until
exercised in full hereunder or upon the expiration of the term thereof.
(e) PAYMENT OF PURCHASE PRICE UPON EXERCISE. The purchase price of the
Shares subject to any Option hereunder shall be paid to the Company at the time
of exercise in cash, with Shares of the Company or a combination thereof.
(f) EXERCISE UPON TERMINATION OF EMPLOYMENT.
(1) Upon the termination of an optionee's employment by reason of
optionee's death or "permanent disability" (as hereinafter defined), optionee or
his successor-in-interest, as the case may be, may exercise his Option to the
extent of the total number of Shares that have become purchasable by optionee at
the time of the optionee's termination of employment; provided, however, such
right to exercise the Option shall cease upon the earlier to occur of one year
from the date of termination of employment or the expiration date specified in
subparagraph (a) of this Section 4. For purposes hereof, "permanent disability"
shall be determined and defined in accordance with Section 105(d)(4) of the
Code.
(2) If optionee 5 employment with the Company or a subsidiary shall
terminate with the consent of the Committee or involuntarily for any reason
other than for "cause" (as hereinafter defined), all rights to exercise the
Option shall terminate upon the earlier to occur of three months after
termination of employment or the expiration date specified in subparagraph (a)
of this Section 4.
(3) Upon the termination of an optionee's employment for any reason
other than as set forth herein-above in subparagraphs (1) or (2); voluntarily;
or involuntarily for "cause" (as hereinafter defined), all rights to exercise
the Option shall cease at the date of such termination of employment. For
purposes hereof, "cause" means termination of employment by reason of optionee's
commission of a felony, fraud, or gross or willful misconduct, all as the
Committee may determine in its sole discretion. Notwithstanding anything herein
to the contrary, the Committee may include such other terms and provisions in an
Agreement which it, in its sole discretion, deems necessary or appropriate.
(g) SURRENDER RIGHTS. The Committee may grant any optionee the right
to surrender all or any portion of the
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Option at any time prior to the exercise thereof to the extent that the same is
then exercisable and to receive in exchange therefor, in cash, Shares valued at
the then fair market value, or a combination thereof, as determined by the
Committee, an amount equal to the difference between the then fair market value
of the Shares issuable upon the exercise of the Option or portion thereof
surrendered and the Option price payable upon the exercise of the Option or
portion thereof surrendered. Any such surrender right granted in connection
with an ISO shall be exercisable only when the fair market value of the Shares
issuable upon the exercise of the ISO exceeds the exercise price of the Shares
subject to the ISO and only if the property received in surrender of the ISO is
includable in the income of the optionee upon exercise in accordance with
Sections 61 and 83 of the Code. To the extent that an ISO is surrendered in
exchange for cash and/or Shares hereunder, the ISO will be considered exercised
in full under Section 4(d) hereof. No surrender right granted in any ISO shall
expire later than the expiration of the underlying ISO. Any surrender right
issued in connection with the grant of an Option shall be subject to the same
terms, conditions and restrictions applicable to the underlying Option.
(h) NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable by optionee other than by will or the laws of descent and
distribution, and an Option is exercisable during the optionee's lifetime only
by the optionee named therein.
(i) INVESTMENT REPRESENTATION. Each Agreement shall contain the
requirement that, upon demand by the Committee and prior to the delivery of any
Shares to be acquired thereunder, the optionee shall deliver to the Committee a
written representation in form and substance satisfactory to the Committee,
affirming that the Shares to be acquired by optionee thereby, if not registered
pursuant to applicable state and/or federal securities laws, shall be acquired
for investment purposes only and not for resale or with a view to the
distribution thereof.
(j) ADJUSTMENTS. In the event of any change in the capital of the Company
by reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of Shares, any rights offering
to purchase Shares at a price substantially below fair market value, or of any
similar change affecting the Shares, then, in any such event, the number and
kind of Shares subject to an Option and the purchase price per
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Share shall be appropriately adjusted consistent therewith; however, in the case
of a merger or consolidation, the Committee may determine that adjustments are
not appropriate under the circumstances. Any adjustment(s) so made shall be
final and binding upon optionee.
(k) QUALIFIED ISOS. Each Agreement for the grant of an ISO thereby shall
contain such terms and provisions as the Committee deems necessary or desirable
to qualify such Option as an ISO within the meaning of Section 422A of the Code,
provided, however, that in no event shall the Company be liable to an optionee
or his beneficiary for any income tax, gift tax or other consequences to same
should such Option fail to qualify as an ISO.
(l) NO RIGHTS AS SHAREHOLDER. No optionee shall have any rights as a
shareholder of the Company or any Subsidiary thereof prior to the date of
issuance of a certificate or certificates representing all or any portion of the
Shares purchased pursuant to such Option.
(m) NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Option granted
hereunder shall not affect in any way whatsoever the employment of such optionee
with the Company or any Subsidiary nor the right of the Company or the
Subsidiary, as the case may be, to terminate optionee's employment with same.
SECTION 5. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the
grant and exercise of Options thereunder, and the obligation of the Company to
sell and deliver Shares under such Options, shall be subject to all applicable
laws, rules, and regulations, including, but not limited to, those of the United
States and its states, and to such approvals by any government or regulatory
agency as may be required.
SECTION 6. AMENDMENT AND DISCONTINUANCE. The Board of Directors of the
Company may from time to time amend, suspend or discontinue the Plan; provided,
however, that, unless otherwise approved by a majority of the issued and
outstanding shares of the Company and subject to the provisions of Paragraph
4(h) hereof, the Board of Directors or the Committee may not (a) increase the
number of Shares reserved for Options pursuant to Section 2; (b) permit the
granting of any Option at the option price less than that determined in
accordance with Section 4(b); (c) shorten the period provided for in Section
4(c) that must elapse
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between the date of granting an Option and the date on which any part of an
Option may be exercised; (d) permit the granting of Options which expire beyond
the period provided for in Section 4(a); or (e) change the class of employees
eligible to receive Options hereunder. Without the written consent of an
optionee, no amendment or suspension of the Plan shall alter or impair any
Option previously granted to same under the Plan.
SECTION 7. EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board of Directors of the Company, so long as the approval of
the holders of a majority of the outstanding shares of stock of the Company
entitled to vote thereon (or such larger number if required by applicable law,
the Articles of Incorporation of the Company, or the bylaws of same) is secured
within twelve months before or after the Plan is or was adopted by such Board.
The Plan shall, unless sooner terminated in accordance with Section 6 hereof,
continue for a term of ten years from the earlier to occur of the date of its
adoption by the Board of Directors or the date of such stockholder approval.
SECTION 8. GOVERNING LAW. This Plan shall be construed and interpreted in
accordance with Georgia law, to the extent such construction and interpretation
does not adversely affect the treatment of any Option intended to qualify as an
ISO under the Code.
SECTION 9. NAME. The Plan shall be known as the "The System Works, Inc.
Stock Option Plan."
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EXHIBIT 10.12.2
STOCK OPTION AGREEMENT
Number of Shares subject to option: 63,251. Option No.: __________.
This STOCK OPTION AGREEMENT (the "Agreement") is made and entered into
this 7th day of January, 1986, between The System Works, Inc., a Georgia
corporation (the "Company") and John W. Blend, an individual residing at
_______________ Atlanta, Georgia (the "Optionee").
W I T N E S S E T H:
SECTION 1. GRANT OF OPTION. Pursuant to the terms and conditions of
The System Works, Inc. Stock Option Plan (the "Plan") and this Agreement, the
Company hereby grants to the Optionee a Stock Option (the "Option") to purchase
from the Company, for cash and/or with stock of the Company, all or any part of
an aggregate of 63,251 shares of the $.01 par value common stock (collectively,
the "Shares" and singularly, a "Share") of the Company at the purchase price of
$2.7211 per share.
Section 2. TERMS AND CONDITIONS. It is understood and agreed that the
Option evidenced hereby is subject to the following terms and conditions:
(a) EXPIRATION DATE. The Option shall expire ten years after the date
hereof, on January 7, 1996.
(b) EXERCISE OF OPTION. Subject to earlier termination as set forth in
Section 2(c) hereof, this Option may be exercised only as set forth herein,
provided, however, that the Company may, in its absolute discretion and upon
such terms and conditions as it deems appropriate, permit this Option to be
exercised in whole or in part at any time in the event of a merger or a
consolidation of the Company into another corporation, the acquisition by any
person, corporation or other entity of more than 50% of the Company's then
outstanding common stock or the liquidation or dissolution of the Company.
Subject to the provisions of this Agreement, on or after the first anniversary
date of this Agreement and during the term of this Option, Optionee may
purchase 33,333 of the Shares subject to this Option; and on or after the
second anniversary date of this Agreement and during the term of this Option the
Optionee may purchase the remaining 29,918 Shares subject to this Option. Such
right shall be cumulative from year to year, that is, any Shares not purchased
during one year may be purchased in any subsequent year during the term of the
Option. Fractional Shares
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will not be issued. This Option may be exercised in whole or in part only by
the delivery by the Optionee (or his legal representative) of written notice to
the Company at its office at 1640 Powers Ferry Road Building 11, Suite 100,
Marietta, Georgia 30067, personally or by certified mail. Each such notice
shall state the number of Shares with respect to which this Option is being
exercised and shall specify a date, not less than five days nor more than
fifteen days after the date of the delivery of such notice on which the Shares
shall be taken and payment made. Payment for such Shares shall be in any manner
the Company deems acceptable, including, in the discretion of the Company, cash,
certified or cashier's check or personal check, or shares in the Company. The
Option shall not be deemed exercised in whole or in part until payment in the
manner described above has been made, provided, however, in the event of
failure of the Optionee to take and pay for the number of Shares specified in
the notice of election to the date stated therein, the Option shall become
inoperative as to such number of Shares but shall continue with respect to any
remaining Shares subject to the Option as to which exercise has not been made.
(c) EXERCISE UPON DEATH OR TERMINATION OF EMPLOYMENT. In the event of the
death of Optionee while an employee of the Company or of a Subsidiary, that
number of Shares that may be purchasable pursuant to this option, subject to the
limitations of Section 2 (b), for which Optionee has not exercised his right to
purchase at the time of Optionee's death shall be purchasable after such death
by the person or persons to whom Optionee's rights under this Option pass by
will or applicable law, or if no such person has such right by his executors or
administrators, at any time, or from time to time within six months after the
date of Optionee's death, but in no event later than the expiration date
specified in subparagraph (a) of this Section 2. (2) If Optionee's employment
shall terminate for any reason other than death, all rights to exercise this
Option shall immediately terminate.
(d) NONTRANSFERABILITY. This Option is not transferable other than by
will or by the laws of descent and distribution. During the lifetime of the
Optionee this Option is exercisable only by him.
(e) ADJUSTMENTS. In the event of any change in the outstanding Shares by
reason of a stock dividend, recapitalization, split-up, merger, consolidation,
combination or exchange of Shares or the like, the aggregate number and kind of
Shares subject to each outstanding option and the option prices shall be
appropriately adjusted by the Committee (but, in the case of a merger or
consolidation the Committee may determine that adjust-
2
<PAGE>
ments are not appropriate under the circumstances). Any adjustment(s) so made
shall be final and binding upon Optionee.
(f) NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder of the Company prior to the issuance by the Company of a certificate
or certificates representing Shares acquired hereunder.
(g) NO RIGHT TO CONTINUED EMPLOYMENT. This Option shall not affect in any
way whatsoever the employment of Optionee by the Company or any Subsidiary
thereof, nor the right of the Company or a Subsidiary, as the case may be, to
terminate Optionee's employment with same.
(h) COMPLIANCE WITH LAW AND REGULATIONS. This Option and the obligation
of the Company to sell and deliver Shares hereunder shall be subject to all
applicable laws, rules and regulations, including, but not limited to, those of
the United States and its states, and to such approvals by any government or
regulatory agency as may be required.
SECTION 3. INVESTMENT REPRESENTATION. Optionee shall furnish the
Company prior to the issuance of any Shares hereunder an agreement, in form and
substance satisfactory to the Company, to the effect that the Shares to be
acquired thereby if not registered pursuant to applicable state or federal
securities laws will be acquired for investment and not with a view to the sale
or distribution thereof.
SECTION 4. OPTIONEE BOUND BY PLAN. Optionee hereby acknowledges
receipt of a copy of the Plan and agrees to be bound by all the terms and
provisions thereof. The provisions of the Plan are incorporated herein by this
reference.
SECTION 5. NOTICES. Any notice hereunder to the Company shall be
addressed to it at its office, 1640 Powers Ferry Road, Building 11, Suite 100,
Marietta, Georgia, 30067; Attention: Treasurer, and any notice hereunder to
Optionee shall be addressed to him at ____________________, Atlanta, Georgia
________; subject to the right of either party to designate at any time
hereafter in writing some other address.
SECTION 6. GOVERNING LAW. This Agreement shall be construed and
interpreted in accordance with Georgia law, to the extent such construction and
interpretation does not adversely affect the treatment of any option intended to
qualify as an Option under the Code.
3
<PAGE>
SECTION 7. COUNTERPARTS. This Agreement has been executed in two
counterparts each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its Chief Executive Officer or a Vice President and Optionee has executed this
Agreement, both as of the day and year first above written.
[CORPORATE SEAL] THE SYSTEM WORKS, INC.
By: /s/ David P. Welden
-------------------------------
Title: Pres.
----------------------------
/s/ John W. Blend
-----------------------------------
John W. Blend, Optionee
4
<PAGE>
EXHIBIT 10.12.3
THE SYSTEM WORKS, INC.
STOCK OPTION PLAN
-----------------
SECTION 1. PURPOSE AND TYPES OF OPTIONS TO BE GRANTED HEREUNDER. The
purpose of The System Works, Inc. Stock Option Plan (the "Plan") is to provide a
means whereby The System Works, Inc. (the "Company") will, through the grant of
options to purchase common stock of the Company, attract and retain highly
qualified and competent employees and motivate such employees to exert their
best efforts on behalf of the Company and any "Subsidiary" (as hereinafter
defined) of the Company. As used herein, the term "Subsidiary" means any
subsidiary of the Company within the definition of "subsidiary corporation" in
Section 425(f) of the Internal Revenue Code of 1986, as hereafter amended (the
"Code"). Subject to compliance with the provisions of the Plan and the Code,
Incentive Stock Options as defined in Section 422A of the Code ("ISOs") and
options outside of Section 422A of the Code ("Nonqualified Options") may be
authorized and made available under the Plan (any of such ISOs and Nonqualified
Options may hereinafter sometimes be collectively referred to as "Options" or
singularly as an "Option").
SECTION 2. ELIGIBILITY; NUMBER OF SHARES AVAILABLE UNDER PLAN.
(a) The persons eligible to participate in the Plan as recipients of ISOs
and Nonqualified Options, or either of them (hereinafter referred to as
"employees"), shall include key employees of the Company or of any Subsidiary.
The word "employees" does not include directors of the Company as such, but does
include directors of the Company who are otherwise employed by the Company.
(b) The Company hereby allocates and reserves an aggregate number of
750,000 shares of the $.0l par value common stock of the Company (the "Shares")
for the grant of Options hereunder by the Company to the employees of the
Company or of a Subsidiary thereof and the Company shall reserve and set aside
in accordance with the Georgia Business Corporation Code, an equal number of
authorized but unissued Shares of same to be issued only on the exercise of any
Options granted under the Plan.
For those Options granted prior to December 31, 1986, the aggregate fair
market value (determined as of the time
<PAGE>
an ISO was granted) of Shares for which any employee may be granted ISOs in any
calendar year shall not exceed $100,000 plus any unused carryover to such year
as determined under Section 422A(c)(4) of the Code. If any Option granted prior
to December 31, 1986 under the Plan shall terminate, expire or, with the consent
of the optionee, be cancelled as to any Shares, new Options may thereafter be
granted covering such Shares.
For those options granted after December 31, l986, the aggregate fair
market value (determined at the time the option is granted) of Shares with
respect to which ISOs are exercisable for the first time by such individual
during any calendar year (under all such plans of the Company and any
subsidiary) shall not exceed $100,000, however the aggregate value of Shares
(determined at the time an ISO is granted) under an ISO granted after
December 31, 1986 can exceed $100,000.
SECTION 3. ADMINISTRATION OF THE PLAN.
(a) ESTABLISHMENT OF COMMITTEE. The Plan shall be administered by a Stock
Option Committee (the "Committee") as established and appointed by the Board of
Directors of the Company from time to time.
(b) RESPONSIBILITIES OF COMMITTEE. Subject to the terms hereof, the
Committee shall from time to time (a) determine and designate those employees of
the Company or of any Subsidiary thereof to whom an Option or Options shall be
granted; (b) authorize the grant of various ISOs (within the meaning of
Section 422A(b) of the code) or other Nonqualified Options, and the price, term
of payment and other terms thereof; (c) determine the number of Shares subject
to each such Option; and (d) determine the time or times when and the manner in
which each such Option shall be exercisable and the duration of such exercise
period. The Committee shall designate each such Option as either an ISO or
Nonqualified Option at the time of the grant thereof and such designation shall
remain unchanged thereafter.
(c) INTERPRETATION OF THE PLAN. The Committee shall interpret the Plan,
prescribe, amend or rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and take all such other action as it deems
necessary or advisable to fully implement the terms and the spirit hereof,
except as otherwise expressly provided herein. Any interpretation,
determination, or other
-2-
<PAGE>
action made or taken by the Committee shall be final, binding and conclusive
upon optionee, unless otherwise provided herein.
SECTION 4. TERMS AND CONDITIONS. Each Option granted hereunder shall
be evidenced by a written agreement (the "Agreement") in form and substance
satisfactory to the Committee and in accordance with the following express terms
and conditions and such other terms and conditions as the Committee may deem
appropriate:
(a) OPTION PERIOD. Except as otherwise provided herein, each Agreement
shall specify the period for which the Option thereunder is granted (which shall
in no event exceed ten years from the earlier to occur of the date the Plan is
adopted by the Board of Directors of the Company or is approved by the
stockholders of same) and shall provide that the exercise of such Option is
prohibited by its terms after the expiration of ten (10) years from the date
such Option is granted. An Agreement for the grant of an ISO to any employee
who at the time of such grant owns stock possessing more than 10% of the total
combined voting power of all classes of shares of the Company or any Subsidiary
shall only be made in accordance with the Code and the regulations promulgated
thereunder which are in effect at such time.
(b) OPTION PRICE.
(1) ISO PRICE. Upon the grant of an ISO hereunder, the option price
per Share shall be determined by the Committee at the time of such grant, and
shall not be less than the fair market value (but in no event less than the par
value) of each Share on the date the ISO is granted. The option price per share
for an ISO granted to an optionee who owns an aggregate number of shares
possessing more than 10% of the total combined voting power of all classes of
shares of the Company or any Subsidiary shall be determined in accordance with
the Code and the regulations promulgated thereunder which are in effect at such
time.
(2) NONQUALIFIED OPTION PRICE. In the event a Nonqualified Option is
granted hereunder, the option price per Share shall be determined by the
Committee at the time any such Nonqualified Option is granted and may be more or
less than the fair market value (but in no event less than the par value) of a
Share at the time such Nonqualified Option is granted.
-3-
<PAGE>
(c) EXERCISE OF OPTION. Subject to the provisions of this Plan, any
Option granted hereunder shall be exercised only at such time or times as
determined by the Committee at the time of the grant thereof and as set forth in
the Agreement.
(d) OUTSTANDING ISOs. No ISO granted prior to December 31, 1986 shall be
exercisable unless every previously granted ISO has been exercised in full or
expired by reason of lapse of time. ISOs granted after December 31, 1986 shall
be exercisable whether or not any previously granted ISO has been exercised in
full or expired by reason of lapse of time or otherwise.
(e) PAYMENT OF PURCHASE PRICE UPON EXERCISE. The purchase price of the
Shares subject to any Option hereunder shall be paid to the Company at the time
of exercise (i) in cash, (ii) with Shares of the Company, (iii) with a
promissory note, (iv) any combination of cash, Shares of the Company or
promissory notes, or (v) in such other consideration as the Committee deems
appropriate at the time of grant of such Option.
(f) EXERCISE UPON TERMINATION OF EMPLOYMENT Upon the termination of an
optionee's employment for any reason, all rights to exercise the option shall be
upon such terms and conditions which the Committee establishes and sets forth in
the Agreement evidencing such Option; provided, that in the event of the grant
of an ISO, all such rights shall be limited to the extent provided in the Code
and the regulations promulgated thereunder which are in effect at the time of
the grant of such Option.
(g) NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable by optionee other than by will or the laws of descent and
distribution, and an Option is exercisable during the optionee's lifetime only
by the optionee named therein.
(h) INVESTMENT REPRESENTATION. Each Agreement shall contain the
requirement that, upon demand by the Committee and prior to the delivery of any
Shares to be acquired thereunder, the optionee shall deliver to the Committee a
written representation in form and substance satisfactory to the Committee,
affirming that the Shares to be acquired by optionee thereby, if not registered
pursuant to applicable state and/or federal securities laws, shall be acquired
for investment purposes only and not for resale or with a view to the
distribution thereof.
-4-
<PAGE>
(i) ADJUSTMENTS. In the event of any change in the capital of the Company
by reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of Shares, any rights offering
to purchase Shares at a price substantially below fair market value, or of any
similar change affecting the Shares, then, in any such event, the number and
kind of Shares subject to an Option and the purchase price per Share shall be
appropriately adjusted consistent therewith; however, in the case of a merger or
consolidation, the Committee may determine that adjustments are not appropriate
under the circumstances. Any adjustment(s) so made shall be final and binding
upon optionee.
(j) QUALIFIED ISOs. Each Agreement for the grant of an ISO thereby shall
contain such terms and provisions as the Committee deems necessary or desirable
to qualify such Option as an ISO within the meaning of Section 422A of the Code,
provided, however, that in no event shall the Company be liable to an optionee
or his beneficiary for any income tax, gift tax or other consequences to same
should such Option fail to qualify as an ISO.
(k) NO RIGHTS AS SHAREHOLDER. No optionee shall have any rights as a
shareholder of the Company or any Subsidiary thereof prior to the date of
issuance of a certificate or certificates representing all or any portion of the
Shares purchased pursuant to such Option.
(l) NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Option granted
hereunder shall not affect in any way whatsoever the employment of such optionee
with the Company or any Subsidiary nor the right of the Company or the
Subsidiary, as the case may be, to terminate optionee's employment with same.
SECTION 5. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the
grant and exercise of Options thereunder, and the obligation of the Company to
sell and deliver Shares under such Options, shall be subject to all applicable
laws, rules, and regulations, including, but not limited to, those of the United
States and its states, and to such approvals by any government or regulatory
agency as may be required.
SECTION 6. AMENDMENT AND DISCONTINUANCE. The Board of Directors of the
Company may from time to time amend, suspend or discontinue the Plan; provided,
however, that,
-5-
<PAGE>
unless otherwise approved by a majority of the issued and outstanding shares of
the Company and subject to the provisions of Paragraph 4(i) hereof, the Board of
Directors or the Committee may not (a) increase the number of Shares reserved
for Options pursuant to Section 2; (b) permit the granting of any Option at the
option price less than that determined in accordance with Section 4(b); (c)
shorten the period provided for in Section 4(c) that must elapse between the
date of granting an Option and the date on which any part of an Option may be
exercised; (d) permit the granting of Options which expire beyond the period
provided for in Section 4(a); or (e) change the class of employees eligible to
receive Options hereunder. Without the written consent of an optionee, no
amendment or suspension of the Plan shall alter or impair any Option previously
granted to same under the Plan.
SECTION 7. EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board of Directors of the Company, so long as the approval of
the holders of a majority of the outstanding shares of stock of the Company
entitled to vote thereon is secured within twelve months before or after the
Plan is or was adopted by such Board. The Plan shall continue in effect until
June 26, 1994, unless sooner terminated in accordance with Section 6 hereof.
SECTION 8. GOVERNING LAW. This Plan shall be construed and interpreted
in accordance with Georgia law, to the extent such construction and
interpretation does not adversely affect the treatment of any Option intended to
qualify as an ISO under the Code.
SECTION 9. NAME. The Plan shall be known as the "The System Works,
Inc. Stock Option Plan."
-6-
<PAGE>
EXHIBIT 10.12.4
THE SYSTEM WORKS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
No. of Shares subject to option: 112,430. Option No. ___________.
This THE SYSTEM WORKS, INC. NONQUALIFIED STOCK OPTION AGREEMENT (the
"Agreement") is made and entered into this 29th day of July, 1988, between THE
SYSTEM WORKS, INC., a Georgia corporation (the "Company"), and JOHN W.
BLEND, III (the "Optionee").
W I T N E S S E T H:
SECTION 1. GRANT OF OPTION. Pursuant to the provisions of The System
Works, Inc. Stock Option Plan (the "Plan"), the Company hereby grants to the
Optionee, a non-qualified stock option (the "Option"), subject to the terms and
conditions of the Plan and subject further to the terms and conditions herein
set forth, giving the Optionee the right to purchase from the Company all or any
part of an aggregate 112,430 shares (the "Shares") of the $.01 par value common
stock of the Company at the purchase price of $2.7211 per Share, such Option to
be exercised as hereinafter provided.
SECTION 2. TERMS AND CONDITIONS. It is understood and agreed that the
Option evidenced hereby is subject to the following terms and conditions:
(a) EXPIRATION DATE. Subject to the terms and conditions hereof, this
Option shall be exercisable until, and shall expire on, December 31, 1998.
(b) EXERCISE OF OPTION. This Option may be exercised, to the extent
exercisable by its terms, in whole or in part at any time on and after the date
hereof to the expiration date set forth hereinabove. Any exercise shall be
accompanied by a written notice to the Company, in the form as attached hereto,
appropriately completed, specifying the number of Shares as to which the Option
is being exercised. Any partial exercise must be for at least 100 shares unless
the remaining number of shares available for purchase hereunder is less than
100. Notation of any partial exercise shall be made by the Company on Schedule
A hereto.
(c) PAYMENT OF PURCHASE PRICE UPON EXERCISE. At the time of any exercise,
the purchase price of the Shares as to which this Option shall be exercised
shall be paid to the Company in cash or with shares of the Company owned by the
Optionee for a period of at least six (6) months before such tender or with a
Promissory Note substantially in the form attached hereto as Exhibit A, or a
<PAGE>
combination of cash, shares of the Company or a Promissory Note. The use of a
Promissory Note to pay all or a portion of the total purchase price may be
solely at the Optionee's election if he is employed by the Company on a full-
time basis on the date of exercise, but shall require the Company's written
consent if Optionee is not employed on the date of exercise on such full-time
basis. Shares of the Company tendered in payment for such Shares shall be
valued at an amount equal to (i) the closing bid price for the Company's common
stock quoted on the over-the-counter market for the most recent date prior to
the date of such tender, or (ii) the closing transaction price for the Company's
common stock quoted on a national securities market for the most recent date
prior to the date of such tender, or (iii) in the absence of any such public
quotation, the per Share value determined by the Board of Directors of the
Company.
(d) EXERCISE UPON DEATH OR TERMINATION OF EMPLOYMENT. (1) In the event
of the death of the Optionee, this Option may be exercised by the person or
persons to whom the Optionee's rights under this Option pass by will or
applicable law, or if no such person has such right, by his executors or
administrators, at any time, or from time to time, within the expiration date
specified in subparagraph (a) of this Section 2. (2) If Optionee's employment
with the Company or a Subsidiary shall terminate for any reason, Optionee may
exercise the Option at any time, or from time to time, within the expiration
date specified in subparagraph (a) of this Section 2.
(e) NONTRANSFERABILITY. This Option shall not be transferable other than
by will or by the laws of descent and distribution. During the lifetime of
Optionee, this Option shall be exercisable only by him.
(f) ADJUSTMENTS. In the event of any change in the capital of the Company
by reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any rights
offering to purchase Shares at a price substantially below fair market value, or
of any similar change affecting the Shares, then in any event the number and
kind of shares subject to this Option and their purchase price per share shall
be appropriately adjusted consistent with such change. Any such change shall be
made in accordance with Treasury Regulation Section 1.425-(1)(a) or its
successor regulation or ruling such that the change will not cause a reissuance
of the Option. Any adjustment so made shall be final and binding upon Optionee.
(g) TAX IMPACT ON OPTIONEE. The Optionee shall be responsible for all
federal and state income taxes which he incurs as the result of the exercise of
this Option and the subsequent sale of the Shares acquired thereby. As long as
the Optionee is employed by the Company on a full-time basis, however, the
Company will assist him in paying the tax liability from the exercise of
-2-
<PAGE>
this Option, or any part hereof, by (1) lending the Optionee an amount equal to
such tax liability, up to $250,000 in the aggregate, to be repaid within twelve
(12) months after the date of any such loan or loans, or (2) otherwise providing
indirect assistance, up to $250,000 in the aggregate, to Optionee so that he can
fully discharge such tax liability. While the maximum loan amount or indirect
assistance, or combination thereof, shall not exceed an aggregate of $250,000 at
any one time, there shall be no limit to the number of times that Optionee may
obtain such assistance within the time period specified in Section 2(a).
Indirect assistance shall include, but not be limited to guaranteeing or
co-signing the indebtedness of the Optionee incurred to pay any such tax
liability. The Company shall have the right, in its sole discretion, to provide
a loan or indirect assistance to the Optionee, however the form and terms of
such indirect assistance shall be acceptable to the Optionee. Any such loan or
loans to Optionee shall be evidenced by a promissory note, substantially in the
form as attached hereto, appropriately changed and completed.
(h) NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to any Shares subject to this Option prior to the date
of issuance to him of a certificate or certificates for such Shares.
(i) NO RIGHT TO CONTINUED EMPLOYMENT. This Option shall not confer upon
Optionee any right with respect to continuance of employment by the Company or
any Subsidiary, nor shall it interfere in any way with the right of his employer
to terminate his employment at any time.
(j) COMPLIANCE WITH LAW AND REGULATIONS. This Option and the obligation
of the Company to sell and deliver Shares hereunder shall be subject to all
applicable laws, rules and regulations, including, but not limited to, those of
the United States and its states, and to such approvals by any governmental or
regulatory agency as may be required.
SECTION 3. INVESTMENT REPRESENTATION. The Committee appointed pursuant to
Section 3 of the Plan may require Optionee to furnish the Company, prior to the
issuance of any Shares upon the exercise of all or any part of this Option, an
agreement (in such form as such Committee may specify) in which Optionee
represents that the Shares acquired by him upon exercise, if the Shares are not
registered pursuant to applicable state and/or federal securities laws, are
being acquired for investment and not with a view to the sale or distribution
thereof.
SECTION 4. OPTIONEE BOUND BY PLAN. Optionee hereby acknowledges receipt
of a copy of the Plan and agrees to be bound by all the terms and provisions
thereof.
-3-
<PAGE>
SECTION 5. NOTICES. Any notice hereunder to the Company shall be
addressed to it at its administrative office at 1640 Powers Ferry Road, Building
Eleven, Marietta, Georgia 30067; Attention: Treasurer, and any notice hereunder
to Optionee shall be addressed to same at 1895 Monticello Court, Dunwoody,
Georgia 30350; subject to the right of either party to hereafter designate in
writing some other address.
SECTION 6. GOVERNING LAW. This Agreement shall be construed and
interpreted in accordance with Georgia law, to the extent such construction and
interpretation does not adversely affect the treatment of any option intended to
qualify as an Option under the Code.
SECTION 7. COUNTERPARTS. This Agreement has been executed in two
counterparts, each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, The System Works, Inc. has caused this Agreement to be
executed by its President or a Vice President and Optionee has executed this
Agreement as of the date first above written.
[CORPORATE SEAL] THE SYSTEM WORKS, INC.
Attest: /s/ Alice K. Welden By: /s/ David P. Welden
---------------------- ------------------------------------
Title: Secretary Title: President
/s/ John W. Blend, III
----------------------------------------
John W. Blend, III, Optionee
-4-
<PAGE>
SCHEDULE A
RECORD OF PARTIAL EXERCISE
- --------------------------------------------------------------------------------
Number of Balance of
Date of Shares Shares Authorized Notation
Exercise Purchased on Option Signature Date
- --------------------------------------------------------------------------------
<PAGE>
STOCK OPTION EXERCISE FORM
__________________________
Date
Attention: Treasurer of The System Works, Inc.
Dear Sir:
The undersigned elects to exercise that certain Option to purchase
__________________ Shares, $.01 par value, of The System Works, Inc. under and
pursuant to a grant of an option on __________________________, under The System
Works, Inc. Stock Option Plan (the "Plan").
In consideration of the total price of $_____________________ for the
shares purchased hereby, the undersigned herewith delivers (1) a certified check
of the Optionee, or bank cashier's or teller's check, in the amount of
$__________________ in payment of the total purchase price, or (ii)
___________________ shares of the $.01 par value common stock of The System
Works, Inc. which have been owned by the undersigned for at least six (6) months
and have a fair market value (as established by the Plan) on the date hereof of
$_________________ per share, or (iii) a Promissory Note in the amount of
$_______________________, or (iv) a combination of (i), (ii) or (iii) equal to
the total purchase price.
The full legal name, current address and social security number of the
undersigned are as follows:
Name: ___________________________________________________________
Address: ________________________________________________________
Social Security Number: _________________________________________
The undersigned acknowledges that the shares being purchased hereby are not
registered under the Securities Act of 1933, as amended (the "Act") or under any
applicable state securities law. The undersigned represents and warrants to the
Company, and to each of its directors, officers, and control persons as follows:
that all of the Shares being purchased hereunder are being acquired for
investment purposes only and not with a view to the further sale or distribution
thereof; that such shares may not be sold, transferred, pledged, hypothecated,
alienated or otherwise assigned or disposed of by the undersigned or the heirs
and successors of the undersigned without either (i) registration under the Act
and any applicable state securities law, (ii) qualification under an exemption
promulgated pursuant to the Act and/or law, or (iii) an
<PAGE>
opinion of counsel, which opinion is satisfactory to The System Works, Inc., and
its counsel, to the effect that such registration or qualification is not
required.
Very truly yours,
___________________________________
John W. Blend, III
Optionee
-2-
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$____________________ Atlanta, Georgia
Date:___________
FOR VALUE RECEIVED, the undersigned _____________________________, a
resident __________________________________ (hereinafter the "Obligor"),
promises to pay to the order of THE SYSTEM WORKS, INC., a Georgia corporation
(hereinafter, together with any subsequent holder or transferee hereof, the
"Holder"), at 1640 Powers Ferry Road, Building Eleven, Marietta, Georgia 30067,
or at such other address as the Holder shall specify, the principal sum of
_______________________________ ($______________), together with simple interest
on the unpaid balance of such principal amount outstanding from time to time at
the rate of ____________ percent (______) per annum.
This Promissory Note (hereinafter the "Note"), and all interest thereon,
shall be payable one year from the date hereof.
Any payment of principal not paid to the Holder when due as set forth above
shall bear interest at the rate of fifteen percent (15%) per annum until paid.
The Obligor shall be entitled, at any time and from time to time, without
the consent of the Holder and without paying any penalty or premium therefor, to
prepay all or any portion or portions of the outstanding principal amount hereof
and any interest accrued thereon.
The indebtedness payable under this Note is secured by a pledge of the
common stock of The System Works, Inc. being purchased hereby and other personal
collateral of the Obligor as
follows:________________________________________________________________________
___________________________________________________________________________.
Should any default be made in the payment of principal as stipulated above,
the principal indebtedness evidenced hereby, and all interest accrued thereon
shall, without notice to the Obligor, at once become due and payable and may be
collected forthwith.
Time is of the essence in this Note, and in the event this Note is
collected by law or through an attorney at law, the Obligor agrees to pay all
reasonable costs of collection, including all court costs and attorneys' fees.
This Note shall be governed by the laws and decisions of the State of Georgia.
No delay or omission on the part of the Holder in exercising any right
hereunder shall operate as a waiver of any such right or of
<PAGE>
any other right under this Note. A waiver of any right or remedy on any one
occasion shall not be construed as a bar to or waiver of any right of remedy on
any future occasion.
IN WITNESS WHEREOF, the undersigned has caused these presents to be duly
executed under seal as of the date and year first above written.
OBLIGOR:
__________________________________(Seal)
________________________________________
(Print Name)
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<PAGE>
SCHEDULE TO EXHIBIT 10.12.4
SCHEDULE OF TERMS OF
STOCK OPTION AGREEMENTS
GRANTED PURSUANT TO THE 1984 STOCK OPTION PLAN, AS AMENDED,
TO JOHN W. BLEND, III
DATE OF TYPE OF NUMBER OF EXERCISE EXPIRATION
AGREEMENT OPTION SHARES PRICE DATE
---------- -------------- ----------- --------- -----------
7/29/88 Non-qualified 54,237 $2.7211 12/31/98
7/29/88 Non-qualified 112,430 2.7211 12/31/98
<PAGE>
EXHIBIT 10.13.1
TSW INTERNATIONAL, INC.
1994 STOCK OPTION PLAN
Section 1. PURPOSE AND TYPES OF OPTIONS TO BE GRANTED HEREUNDER. The
purpose of TSW International, Inc. Stock Option Plan (the "Plan") is to
provide a means whereby TSW International, Inc. (the "Company") will, through
the grant of options to purchase common stock of the Company, attract and
retain highly qualified and competent employees and motivate such employees
to exert their best efforts on behalf of the Company and any "Subsidiary" (as
hereinafter defined) of the Company. As used herein, the term "Subsidiary"
means any subsidiary of the Company within the definition of "subsidiary
corporation" in Section 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the term "Parent" shall mean any corporation within
the definition of "parent corporation" in Section 424(e) of the Code.
Subject to compliance with the provisions of the Plan and the Code, Incentive
Stock Options as defined in Section 422(b) of the Code ("ISOs") and options
not satisfying the definition of ISOs in the Code ("Nonqualified Options")
may be authorized and made available under the Plan (any of such ISOs and
Nonqualified Options may hereinafter sometimes be collectively referred to as
"Options" or singularly as an "Option").
Section 2. ELIGIBILITY; NUMBER OF SHARES AVAILABLE UNDER PLAN.
(a) The persons eligible to participate in the Plan as recipients of
ISOs and Nonqualified Options, or either of them (hereinafter referred to as
"employees"), shall be determined by the Committee (as hereinafter defined)
in its absolute discretion and shall include key employees of the Company or
of any Subsidiary. The word "employees" does not include directors of the
Company as such, but does include directors of the Company who are otherwise
employed by the Company.
(b) The Company hereby allocates and reserves an aggregate number of
458,489 shares of the $.01 par value common stock of the Company (the
"Shares") for the grant of Options hereunder by the Company to employees of
the Company or of a Subsidiary thereof and the Company shall reserve and set
aside in accordance with the Georgia Business Corporation Code, the number of
authorized but unissued, or reacquired, Shares to be issued only on the
exercise of any Options granted under the Plan. If any Option granted under
the Plan shall terminate, expire, be reacquired by the Company or, with
<PAGE>
the consent of the optionee, be canceled as to any Shares, now Options may
thereafter be granted with respect to such Shares. In addition, any Shares
surrendered as consideration upon exercise of any Option shall be included in
the number of Shares thereafter available to be granted as Options.
In no event shall the aggregate fair market value (determined as of
the time the option is granted) of Shares with respect to which an ISO is
initially exercisable by the holder thereof in any calendar year under all
such plans of the Company, its Parent (if any) and any Subsidiary exceed
$100,000.
Section 3. ADMINISTRATION OF THE PLAN.
(a) ESTABLISHMENT OF COMMITTEE. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors as
established and appointed by the Board of Directors of the Company from time
to time. In the event the Board of Directors elects not to constitute the
Committee from time to time or wishes to grant Options or otherwise exercise
the functions of the Committee, then the Board of Directors shall have the
rights, powers and responsibilities of the Committee hereunder as if the
Board were the "Committee" referred to in this Agreement.
(b) RESPONSIBILITIES OF COMMITTEE. Subject to the terms hereof, the
Committee shall have the plenary authority in its discretion to (i) determine
and designate those employees of the Company or of any Subsidiary thereof to
whom an Option or Options shall be granted; (ii) authorize the grant of ISOs
or Nonqualified Options, and the price, term of payment and other terms
thereof; (iii) determine the number of Shares subject to each such Option;
(iv) determine the time or times when and the manner in which each such
Option shall be exercisable, whether in full or in installments, and the
duration of such exercise period; and (v) determine the terms and provisions
(and amendments thereof) of each option Agreement (as hereinafter defined)
(which need not be identical), including such terms, provisions and
amendments as shall be required by the Committee in its discretion to conform
to any law or regulation or any change thereof. The Committee shall
designate each such Option as either an ISO or Nonqualified Option at the
time of the grant thereof and such designation shall remain unchanged
thereafter.
<PAGE>
(c) INTERPRETATION OF THE PLAN. The Committee shall have the plenary
authority in its discretion to interpret the Plan, prescribe, amend or
rescind any rules and regulations necessary or appropriate for the
administration of the Plan, and take such other actions as it deems necessary
or advisable to fully implement the terms and the spirit hereof, except as
otherwise expressly provided herein. Any interpretation, determination or
other action made or taken by the Committee shall be final, binding and
conclusive upon any optionee, unless otherwise provided herein.
Section 4. TERMS AND CONDITIONS. Each Option hereunder shall be
evidenced by a written agreement (the "Option Agreement"), which need not be
identical with other Option Agreements, in form and substance satisfactory to
the Committee and in accordance with the following express terms and
conditions and such other terms and conditions as the Committee may deem
appropriate:
(a) OPTION PERIOD. The term of each Option shall be fixed by the
committee, but no Option will be exercisable more more than 10 years after
the date the Option is granted; provided, however that for any ISO granted to
any employee who at the time of such grant owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company, its Parent (if any) or Subsidiaries, such ISO shall not be
exercisable more than five (5) years after the date of grant.
(b) OPTION PRICE.
(i) ISO PRICE. Upon the grant of an ISO hereunder, the option
price per Share shall be determined by the Committee at the time of such
grant, and shall not be less than the fair market value (but in no event less
than the par value) of each Share on the date the ISO is granted. The option
price per share for an ISO granted to an optionee who owns an aggregate
number of shares possessing more than 10% of the total combined voting power
of all classes of shares of the Company, its Parent (if any) or any
Subsidiary shall be at least 110 percent of the fair market value of each
Share.
(ii) NONQUALIFIED OPTION PRICE. For any Nonqualified Options
granted hereunder, the option price per Share shall be determined by the
Committee at the time any such Nonqualified Option is granted and may be
greater than, equal to but not less than
<PAGE>
the fair market value (but in no event less than the par value) of a Share at
the time such Nonqualified Option is granted.
(c) EXERCISE OF OPTION. Subject to the provisions of this Plan, any
Option granted hereunder shall be exercised only at such time or times as
determined by the Committee at the time of the grant thereof and as set forth
in the Option Agreement.
(d) OUTSTANDING ISOs. ISOs shall be exercisable whether or not any
previously granted ISO has been exercised in full or expired by reason of
lapse of time or otherwise.
(e) PAYMENT OF PURCHASE PRICE UPON EXERCISE. The purchase price of the
Shares subject to any Option hereunder shall be paid to the Company at the
time of exercise (i) in cash, or (ii) in such other consideration as the
Committee deems appropriate at the time of grant of such option.
(f) EXERCISE UPON TERMINATION OF EMPLOYMENT. Upon the termination of an
optionee's employment (i) for any reason of disability, all rights to
exercise the option shall expire ninety (90) days following termination, (ii)
for reason of death, all rights to exercise the option shall expire
one-hundred and twenty (120) days following the date of death, or (iii) for
any other reason, all rights to exercise the option shall expire (30) days
following termination.
(g) NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable by any optionee other than by will or the laws of decent and
distribution, and an Option is exercisable during the optionee's lifetime
only by such optionee.
(h) NOTICE OF DISQUALIFYING DISPOSITION. Each ISO granted under the
Plan shall provide that the employee receiving such ISO will notify the
Company, in writing to the attention of its Secretary, in the event that,
prior to the later of two years after the grant of such ISO or one year after
the issuance of any Shares to him upon exercise of such ISO, he shall dispose
of such Shares, such notice to state the date of disposition, the nature of
the disposition and the price, if any, received for the Shares.
(i) INVESTMENT REPRESENTATION. Each option Agreement shall contain the
requirement that, upon demand by the Committee and prior to the delivery of
any Shares to be acquired thereunder, the
<PAGE>
optionee shall deliver to the Committee a written representation in form and
substance satisfactory to the Committee, affirming that the Shares to be
acquired by optionee thereby, if not registered pursuant to applicable state
and/or federal securities laws, shall be acquired for investment purposes
only and not for resale or with a view to the distribution thereof.
(j) ADJUSTMENTS. In the event of any change in the capital of the
Company by reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of Shares, any
rights offering to purchase Shares at a price substantially below fair market
value, or of any similar change affecting the Shares, then, in any such
event, the number and kind of Shares subject to an Option and the purchase
price per Share shall be appropriately adjusted consistent therewith in
accordance with Treasury Regulation Section 1.425-1(a); however, in the case
of a merger or consolidation, the Committee may determine that adjustments
are not appropriate under the circumstances. Any adjustment(s) so made shall
be final and binding upon optionee.
(k) ISOS. Each Option Agreement for the grant of an ISO thereby shall
contain such terms and provisions as the Committee deems necessary or
desirable to qualify such Option as an ISO within the meaning of Section 422
of the Code, provided, however, that in no event shall the Company be liable
to an optionee or his beneficiary for any income tax, gift tax or other
consequences to same should such Option fail to qualify as an ISO.
(l) NO RIGHTS AS SHAREHOLDER. No optionee shall have any rights as a
shareholder of the Company thereof prior to the date of issuance of a
certificate or certificates representing all or any portion of the Shares
purchased pursuant to such Option.
(m) NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Option granted
hereunder shall not affect in any way whatsoever the employment of such
optionee with the Company or any Subsidiary nor the right of the Company or
the Subsidiary, as the case may be, to terminate optionee's employment with
same.
Section 5. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the
grant and exercise of Options thereunder, and the obligation of the Company
to sell and deliver Shares under such Options, shall be subject to all
applicable laws, rules and regulations, including, but
<PAGE>
not limited to, those of the United States and its states, and to such
approvals by any government or regulatory agency as may be required.
Section 6. AMENDMENT AND DISCONTINUANCE. The Board of Directors of
the Company may from time to time amend, suspend or discontinue the Plan;
provided, however, that, unless otherwise approved by a majority of the
issued and outstanding shares of the Company and subject to the provisions of
Section 4(k) hereof, the Board of Directors or the Committee may not (a)
increase the number of Shares reserved for Options pursuant to Section 2; or
(b) change the class of employees eligible to receive options hereunder. The
Board of Directors of the Company or the Committee, except as provided for in
Section 4(k), may not adjust the pricing for any Options. Without the
written consent of an optionee, no amendment or suspension of the Plan shall
alter or impair any Option previously granted to same under the Plan.
Section 7. EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board of Directors of the Company, provided that the approval
of the holders of a majority of the outstanding shares of stock of the
Company entitled to vote thereon is secured within twelve months before or
after the Plan is or was adopted by such Board. The Plan shall continue in
effect until June 29, 2004, unless sooner terminated in accordance with
Section 6 hereof. No options shall be granted on or after June 29, 2004
unless the Plan is sooner terminated in accordance with Section 6 hereof, but
Options granted while the Plan is in effect may extend beyond the effective
date of the Plan.
Section 8. WITHHOLDING ON EXERCISE OF OPTIONS. If upon the exercise
of any Option granted under this Plan the Company or any Subsidiary is
required to withhold or pay any amount under applicable federal and state
law, either the employee exercising the Option shall pay such amount to the
Company or Subsidiary, as applicable, or the amount of Shares delivered by
the Company upon exercise of the Option shall be appropriately reduced, to
reimburse the Company or the Subsidiary for such payment.
Section 9. TIME OF GRANTING OPTIONS. Nothing contained in the
Plan or in any resolution adopted or to be adopted by the Committee, the
Board or the shareholders of the Company shall constitute the granting of any
Option hereunder. The granting of an Option
<PAGE>
pursuant to the Plan shall take place only when a written Agreement shall
have been duly executed and delivered by or on behalf of the Company and the
individual (or his duly authorized attorney-in-fact) to whom such Option is
to be granted.
Section 10. CHANGE IN CONTROL
(a) DEFINITION OF "CHANGE IN CONTROL". For purposes of Section 10(b), a
"Change in Control" means the occurrence of either of the following:
(i) Any "person", as such term is used in Section 13(d) and 14(d)
of the Exchange Act (other than the Company, a subsidiary, an affiliate, or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended from time to time, and any
successor law (the "Exchange Act")), directly or indirectly, of securities of
the Company (or a successor to the Company) representing 50% or more of the
combined voting power of the then outstanding securities of the Company or
such successor;
(ii) at any time that the Company has registered shares under the
Exchange Act, at least 40% of the directors of the Company constitute persons
who were not at the time of their first election to the Board, candidates
proposed by a majority of the Board in office prior to the time of such first
election; or
(iii) (A) the dissolution of the Company or liquidation of more than
50% in value of the Company or a sale of assets involving 50% or more in
value of the assets of the Company, (B) any merger or reorganization of the
Company whether or not another entity is the survivor, (C) a transaction
pursuant to which the holders, as a group, of all of the shares of the
Company outstanding prior to the transaction hold, as a group, less than 50%
of the combined voting power of the Company or any successor company
outstanding after the transaction, or (D) any other event which the Board
determines, in its discretion, would materially alter the structure of the
Company or its ownership.
(b) IMPACT OF EVENT. In the event of a "Change in Control" as defined
in Section 10(a), the following provision shall apply:
<PAGE>
(i) Any Stock Options outstanding as of the date such Change in
Control is determined to have occurred and not then exercisable and vested
shall become fully exercisable and vested; and
(ii) the value (net of any exercise price and required tax
withholdings) of all outstanding Options, unless otherwise determined by the
Committee at or after grant and subject to Rule 16b-3, shall be cashed out on
the basis of the "Change in Control Price", as defined in Section 10(c), as
of the date such Change in Control is determined to have occurred or such
other date as the Board may determine prior to the Change in Control.
provided, however, that the foregoing provisions shall only apply, with
respect to the events described in Section 10(a)(i) and 10(a)(iii), to the
extent so specifically determined by the Board in the exercise of the Board's
discretion, which determination may be amended or reversed only by the
affirmative vote of a majority of the persons who were directors at the time
such determination was made.
(c) CHANGE IN CONTROL PRICE. For purposes of this Section 10, "Change
in Control Price" means the highest price per share paid in any transaction
reported on any established stock exchange, national market system or other
established market for the Stock, or paid or offered in any bona fide
transaction related to a potential or actual Change in Control of the Company
at any time during the preceding 60-day period as determined by the Board,
except that, in the case of Incentive Stock Options and Stock Appreciation
Rights relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the Board decides to cash out
such Options.
Section 11. GOVERNING LAW. This Plan shall be construed and
interpreted in accordance with Georgia law, to the extent such construction
and interpretation does not adversely affect the treatment of any Option
intended to qualify as an ISO under the Code.
Section 12. NAME. The Plan shall be known as the "The System Works,
Inc. 1994 Stock Option Plan."
<PAGE>
TSW INTERNATIONAL, INC.
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Agreement"), is made and
entered into as of 12/11/96, between TSW INTERNATIONAL, INC., a Georgia
corporation (the "Company"), and Chris Lane ("Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. GRANT OF OPTION AND EFFECTIVE DATE
1.1 GRANT. The Company hereby grants to Optionee pursuant to the
Company's 1994 Stock Option Plan (the "Plan"), a copy of which is attached to
this Agreement as Exhibit 1, an incentive stock option (the "ISO") to purchase
all or any part of the aggregate of 76,000 shares (the "ISO Shares") of the
Company's common stock ("Common Stock") on the terms and conditions set forth
herein and in the Plan, the terms and conditions of the Plan being hereby
incorporated into this Agreement by reference.
1.2 EFFECTIVE DATE. The grant date effective date of this ISO is
12/11/96 ("Effective Date").
2. EXERCISE PRICE. The exercise price for the purchase of the shares of
Common Stock covered by this ISO shall be $9.23 per share.
3. TERM. Unless otherwise specified on Exhibit 3 attached hereto, if any
(the absence of such exhibit indicating that no exhibit was intended), this ISO
shall expire as provided in Section 4(a) of the Plan.
4. ADJUSTMENT OF ISOs. The Company shall adjust the number and kind of
shares and the exercise price thereof in certain circumstances in accordance
with the provisions of the Plan.
5. EXERCISE OF OPTIONS.
5.1 TIME OF EXERCISE. Unless otherwise specified on Exhibit 5.1
attached hereto, if any (the absence of such Exhibit indicating that no
exhibit was intended) the ISO shall be exercisable in whole or in part with
respect to 20 percent of the total number of ISO Shares to which an option to
acquire was granted to the Optionee on the first anniversary of the Effective
Date. Thereafter, the right to exercise the ISO shall increase by an
additional 20 percent of the total number of ISO Shares at the end of each of
the immediately following anniversaries of the Effective Date.
<PAGE>
5.2 EXERCISE AFTER TERMINATION OF EMPLOYMENT. This ISO may be
exercised after termination of the Optionee's employment only in accordance with
the provisions of Section 4(f) of the Plan.
5.3 MANNER OF EXERCISE. Optionee may exercise this ISO, or any portion
of this ISO, by giving written notice to the Company at its principal executive
office, to the attention of the Secretary of the Company, accompanied by a copy
of the 1994 Stock Option Plan Stock Purchase Agreement in substantially the form
attached hereto as Exhibit 5.3 executed by Optionee (or at the option of the
Company such other form of stock purchase agreement as shall then be acceptable
to the Company), payment of the exercise price and payment of any applicable
withholding or employment taxes. The date the Company receives written notice
of an exercise hereunder accompanied by payment will be considered as the date
this ISO was exercised.
Promptly after receipt of written notice of exercise of the ISO, the
Company shall, without stock issue or transfer taxes to the Optionee or other
person entitled to exercise, instruct its transfer agent to deliver to the
Optionee or other person a certificate or certificates for the requisite number
of ISO Shares. An Optionee or transferee of an Optionee shall not have any
privileges as a shareholder with respect to any ISO Shares covered by the option
until the date of issuance of a stock certificate.
5.4 PAYMENT. Except as provided in Exhibit 5.4 attached hereto, if
any (the absence of such exhibit indicating that no exhibit was intended),
payment in full, in cash, shall be made for all ISO Shares purchased at the time
written notice of exercise of the ISO is given to the Company, and proceeds of
any payment shall constitute general funds of the Company.
6. NONASSIGNABILITY OF ISO. This ISO is not assignable or transferable by
Optionee except by will or by the laws of descent and distribution. During the
life of Optionee, the ISO is exercisable only by the Optionee. Any attempt to
assign, pledge, transfer, hypothecate or otherwise dispose of this ISO in a
manner not herein permitted, and any levy of execution, attachment, or similar
process on this ISO, shall be null and void.
7. RESTRICTION OF ISSUANCE OF SHARES.
7.1 LEGALITY OF ISSUANCE. The Company shall not be obligated to sell
or issue any Exercised Shares pursuant to this Agreement if such sale or
issuance, in the opinion of the Company and the Company's counsel, might
constitute a violation by the Company of any provision of law, including without
limitation the provisions of the Securities Act of 1933, as amended (the "Act").
7.2 REGISTRATION OR QUALIFICATION OF SECURITIES. The Company may, but
shall not be required to, register or qualify the sale of this ISO or any
Exercised Shares under the Act or any other applicable law. The Company shall
not be obligated to take any affirmative action in order to cause the grant or
exercise of this option or the issuance or sale of any Exercised Shares pursuant
thereto to comply with any law.
<PAGE>
8. RESTRICTION ON TRANSFER. Regardless whether the sale of the Exercised
Shares has been registered under the Act or has been registered or qualified
under the securities laws of any state, the Company may impose restrictions upon
the sale, pledge or other transfer of Exercised Shares (including the placement
of appropriate legends on stock certificates) if, in the judgement of the
Company and the Company's counsel, such restrictions are necessary or desirable
in order to achieve compliance with the provisions of the Act, the securities
laws of any state, or any other law.
9. STOCK CERTIFICATE RESTRICTIVE LEGENDS. Stock certificates evidencing
Exercised Shares may bear such restrictive legends as the Company and the
Company's counsel deem necessary or advisable under applicable law or pursuant
to this Agreement.
10. DISQUALIFYING DISPOSITIONS. If stock acquired by exercise of this
ISO is disposed of within two years from the Effective Date or within one
year after the purchase of stock under this ISO, the Optionee immediately
prior to the disposition shall promptly notify the Company in writing of the
date and terms of the disposition and shall provide such other information
regarding the disposition as the Company may reasonably require.
11. REPRESENTATIONS, WARRANTIES, COVENANTS AND ACKNOWLEDGEMENTS OF
OPTIONEE UPON EXERCISE OF ISO. Optionee hereby agrees that in the event that
the Company and the Company's counsel deem it necessary or advisable in the
exercise of their discretion, the issuance of Exercised Shares may be
conditioned upon certain representations, warranties, and acknowledgements by
the person exercising the ISO (the "Purchaser"), including, without
limitation, those set forth in Section 11.1 through 11.7 inclusive:
11.1 INVESTMENT. Purchaser is acquiring the Exercised Shares for
Purchaser's own account, and not for the account of any other person.
Purchaser is acquiring the Exercised Shares for investment and not with a
view to distribution or resale thereof except in compliance with applicable
laws regulating securities.
11.2 BUSINESS EXPERIENCE. Purchaser is capable of evaluating the merits
and risks of Purchaser's investment in the Company evidenced by purchase of
Exercised Shares.
11.3 RELATION TO COMPANY. Purchaser is presently an officer, director,
or other employee of the Company and in such capacity has become personally
familiar with the business, affairs, financial condition and results of
operations of the Company.
11.4 ACCESS TO INFORMATION. Purchaser has had the opportunity to ask
questions of, and to receive answers from, appropriate executive officers of the
Company with respect to the terms and conditions of the transaction contemplated
hereby and with respect to the business, affairs, financial conditions, and
results of operations of the Company. Purchaser has had access to such
financial and other information as is necessary in order for Purchaser to make a
fully-informed decision as to investment in the Company by way of purchase of
the Exercised Shares, and has had the opportunity to obtain any additional
information necessary to verify any of such information to which Purchaser has
had access.
<PAGE>
11.5 SPECULATIVE INVESTMENT. Purchaser's investment in the company
represented by the Exercised Shares is highly speculative in nature and is
subject to a high degree of risk of loss in whole or in part. The amount of
such investment is within Purchaser's risk capital means and is not so great in
relation to Purchaser's total financial resources as would jeopardize the
personal financial needs of Purchaser or Purchaser's family in the event such
investment were lost in whole or in part.
11.6 REGISTRATION. The Company may register the Exercised Shares
under the Act. If the Exercised Shares are not so registered, Purchaser must
bear the economic risk of investment for an indefinite period of time because
the Exercised Shares cannot be transferred by Purchaser unless such transfer is
registered under the Act or an exemption from such registration is available.
The Company has made no agreements, covenants or undertakings whatsoever to
register the transfer of any of the Exercised Shares under the Act. The Company
has made no representation, warranties, or covenants whatsoever as to whether
any exemption for limited sales in routine brokers' transactions pursuant to
Rule 144, will be available; if the exemption under Rule 144 is available at
all, it may not be available until at least two years after payment of cash for
the Exercised Shares and not then unless: (i) a public trading market then
exists in the Company's common stock; (ii) adequate information as to the
Company's financial and other affairs and operations is then available to the
public; and (iii) all other terms and conditions of Rule 144 have been
satisfied.
11.7 TAX ADVICE. The Company has made no warranties or
representations to Purchaser with respect to the income tax consequences of the
transactions contemplated by the option agreement pursuant to which the
Exercised Shares will be purchased and Purchaser is in no manner relying on the
Company or the Company's representatives for an assessment of such tax
consequences.
12. ASSIGNMENT; BINDING EFFECT. Subject to the limitations set forth in
this Agreement, this Agreement shall be binding upon and inure to the benefit of
the executors, administrators, heirs, legal representatives, and successors of
the parties hereto; provided, however, that optionee may not assign any of
Optionee's rights under this Agreement.
13. DAMAGES. Optionee shall be liable to the Company for all costs and
damages, including incidental and consequential damages, resulting from a
disposition of shares which is not in conformity with the provisions of this
Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia applicable to contracts entered
into and wholly to be performed within the State of Georgia by Georgia
residents. The parties agree that the exclusive jurisdiction and venue of any
action with respect to this Agreement shall in the Superior Court of Fulton
County Georgia or the United States District Court for the Northern District of
Georgia, and each of the parties hereby submits to the exclusive jurisdiction
and venue of such courts for the purpose of such action. The parties agree that
service of process in any such action may be effected by delivery of the summons
to the parties in the manner provided for delivery of notices set forth in
Section 15.
<PAGE>
16. NOTICES. All notices and other communications under this Agreement
shall be in writing. Unless and until the Optionee is notified in writing to
the contrary, all notices, communications and documents directed to the Company
and related to the Agreement, if not delivered by hand, shall be mailed,
addressed as follows:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, GA 30339
Attn: Chief Financial Officer
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for the Optionee and related to
this Agreement, if not delivered by hand, shall be mailed to Optionee's last
known address as shown on the Company's books. Notices and communications shall
be mailed by first class mail, postage prepaid; documents shall be mailed by
registered mail, return receipt requested, postage prepaid. All mailings and
deliveries related to this Agreement shall be deemed received only when actually
received.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
TSW INTERNATIONAL, INC.
BY: /s/ JOHN BARTELS
------------------------------------
TITLE: Chief Financial Officer
The Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of this Agreement and the Plan.
BY: /s/ Chris Lane
------------------------------------
Chris Lane
DATE:
----------------------------------
EXHIBITS AND SCHEDULES
Exhibit 1 1994 Stock Option Plan
Exhibit 5.1 Time of Exercise
Exhibit 5.1 Time of Exercise
Exhibit 5.3 1994 Stock Option Plan Stock Purchase Agreement
<PAGE>
EXHIBIT 5.1 TIME OF EXERCISE
The ISO shall be exercisable in whole or in part with respect to 25 percent
of the total number of ISO Shares to which an option to acquire was granted to
the Optionee on the first anniversary of the Effective Date. Thereafter, the
right to exercise the ISO shall increase by an additional 25 percent of the
total number of ISO Shares at the end of each of the immediately following
anniversaries of the Effective Date.
Acknowledged and Agreed:
Company: The SYSTEM WORKS, INC.
By: /s/ JOHN BARTELS
--------------------------------
Title: Chief Financial Officer
Purchaser: /s/ Chris Lane
-----------------------------------
[Signature]
Chris Lane
<PAGE>
SCHEDULE TO EXHIBIT 10.13.2
SCHEDULE OF TERMS OF
INCENTIVE STOCK OPTION AGREEMENTS
GRANTED PURSUANT TO THE 1994 STOCK OPTION PLAN
NUMBER EXERCISE
OPTIONEE DATE OF SHARES PRICE
- ---------------------- -------- ----------- ---------
Christopher R. Lane 8/17/94 88,888 $4.50
Christopher R. Lane 8/17/94 81,412 4.50
Christopher R. Lane 5/4/95 60,634 9.23
Christopher R. Lane 11/4/96 21,875 9.23
Christopher R. Lane 12/11/96 76,000 9.23
John F. Bartels 8/8/96 10,834 9.23
John F. Bartels 11/4/96 15,400 9.23
John W. Blend, III 11/4/96 14,000 9.23
Kenneth C. Colby, Jr. 2/11/93 50,000 4.50
Kenneth C. Colby, Jr. 11/4/96 10,500 9.23
<PAGE>
EXHIBIT 10.13.3
TSW INTERNATIONAL, INC.
1994 STOCK OPTION PLAN
Amended and Restated Effective April 29, 1997
Section 1. PURPOSE AND TYPES OF OPTIONS TO BE GRANTED HEREUNDER. The
purpose of the TSW International, Inc. 1994 Stock Option Plan (the "Plan") is to
provide a means whereby TSW International, Inc. (the "Company") will, through
the grant of options to purchase common stock of the Company, attract and retain
highly qualified and competent employees and directors and motivate such
employees and directors to exert their best efforts on behalf of the Company and
any "Subsidiary" (as hereinafter defined) of the Company. As used herein, the
term "Subsidiary" means any subsidiary of the Company within the definition of
"subsidiary corporation" in Section 424(f) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the term "Parent" shall mean any corporation within
the definition of "parent corporation" in Section 424(e) of the Code. Subject to
compliance with the provisions of the Plan and the Code, Incentive Stock Options
as defined in Section 422(b) of the Code ("ISOs") and options not satisfying the
definition of ISOs in the Code ("Nonqualified Options") may be authorized and
made available under the Plan (any of such ISOs and Nonqualified Options may
hereinafter sometimes be collectively referred to as "Options" or singularly as
an "Option").
Section 2. ELIGIBILITY: NUMBER OF SHARES AVAILABLE UNDER PLAN.
(a) The persons eligible to participate in the Plan as recipients of ISOs
and Nonqualified Options, or either of them (hereinafter referred to as
"employees"), shall be determined by the Committee (as hereinafter defined) in
its absolute discretion and shall include directors of the Company (for
Nonqualified Options only) and key employees of the Company or of any
Subsidiary.
(b) The Company hereby allocates and reserves an aggregate number of
1,808,489 shares of the $.O1 par value common stock of the Company (the
"Shares") for the grant of Options hereunder by the Company to directors of the
Company and employees of the Company or of a Subsidiary thereof and the Company
shall reserve and set aside in accordance with the Georgia Business Corporation
Code, the number of authorized but unissued, or reacquired, Shares to be issued
only on the exercise of any Options granted under the Plan. If any Option
granted under the Plan shall terminate, expire, be reacquired by the Company or,
with the consent of the optionee, be canceled as to any Shares, new Options may
thereafter be granted with respect to such Shares. In addition, any Shares
surrendered as consideration upon exercise of any Option shall be included in
the number of Shares thereafter available to be granted as Options. The maximum
number of Shares covered by Options granted under the Plan to any eligible
optionee during any calendar year shall be 500,000.
In no event shall the aggregate fair market value (determined as of the
time the option is granted) of Shares with respect to which an ISO is initially
exercisable by the holder thereof in any calendar year under all such plans of
the Company, its Parent (if any) and any Subsidiary exceed $100,000.
<PAGE>
Section 3. ADMINISTRATION OF THE PLAN.
(a) ESTABLISHMENT OF COMMITTEE. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors as
established and appointed by the Board of Directors of the Company from time to
time. In the event the Board of Directors elects not to constitute the
Committee from time to time or wishes to grant Options or otherwise exercise the
functions of the Committee, then the Board of Directors shall have the rights,
power and responsibilities of the Committee hereunder as if the Board were the
"Committee" referred to in this Agreement.
(b) RESPONSIBILITIES OF COMMITTEE. Subject to the terms hereof, the
Committee shall have the plenary authority in its discretion to (i) determine
and designate those individuals to whom an Option or Options shall be granted;
(ii) authorize and grant of ISOs or Nonqualified Options, and the price, term of
payment and other terms thereof; (iii) determine the number of Shares subject to
each such Option; (iv) determine the time or times when and the manner in which
each such Option shall be exercisable, whether in full or in installments, and
the duration of such exercise period; and (v) determine the terms and provisions
(and amendments thereof) of each Option Agreement (as hereinafter defined)
(which need not be identical), including such terms, provisions and amendments
as shall be required by the Committee in its discretion to conform to any law or
regulation or any change thereof. The Committee shall designate each such
Option as either an ISO or Nonqualified Option at the time of the grant thereof
and such designation shall remain unchanged thereafter.
(c) INTERPRETATION OF THE PLAN. The Committee shall have the plenary
authority in its discretion to interpret the Plan, prescribe, amend or rescind
any rules and regulations necessary or appropriate for the administration of the
Plan, and take such other actions as it deems necessary or advisable to fully
implement the terms and the spirit hereof, except as otherwise expressly
provided herein. Any interpretation, determination or other action made or
taken by the Committee shall be final, binding and conclusive upon any optionee,
unless otherwise provided herein.
Section 4. TERMS AND CONDITIONS. Each Option hereunder shall be evidenced
by a written agreement (the "Option Agreement"), which need not be identical
with other Option Agreements, in form and substance satisfactory to the
Committee and in accordance with the following express terms and conditions and
such other terms and conditions as the Committee may deem appropriate:
(a) OPTION PERIOD. The term of each Option shall be fixed by the
Committee, but no ISO shall be exercisable more than 10 years after the date the
ISO is granted; provided, however that for any ISO granted to any employee who
at the time of such grant owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, its Parent (if
any) or Subsidiaries, such ISO shall not be exercisable more than five (5) years
after the date of grant.
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(b) OPTION PRICE.
(i) ISO PRICE. Upon the grant of an ISO hereunder, the option price
per Share shall be determined by the Committee at the time of such grant, and
shall not be less than the fair market value (and in no event less than the par
value) of each Share on the date the ISO is granted. The option price per share
for an ISO granted to an optionee who owns an aggregate number of shares
possessing more than 10% of the total combined voting power of all classes of
shares of the Company, its Parent (if any) or any Subsidiary shall be at least
110 percent of the fair market value of each Share.
(ii) NONQUALIFIED OPTION PRICE. For any Nonqualified Options granted
hereunder, the option price per Share shall be determined by the Committee at
the time any such Nonqualified Option is granted and may be greater than, equal
to or less than the fair market value (but in no event less than the par value)
of a Share at the time such Nonqualified Option is granted.
(c) EXERCISE OF OPTION. Subject to the provisions of this Plan, any Option
granted hereunder shall be exercised only at such time or times as determined by
the Committee at the time of the grant thereof and as set forth in the Option
Agreement.
(d) OUTSTANDING ISOS. ISOs shall be exercisable whether or not any
previously granted ISO has been exercised in full or expired by reason of lapse
of time or otherwise.
(e) PAYMENT OF PURCHASE PRICE UPON EXERCISE. The purchase price of the
Shares subject to any Option hereunder shall be paid to the Company at the time
of exercise (i) in cash, or (ii) in such other consideration as the Committee
deems appropriate at the time of grant of such Option or subsequent thereto.
(f) EXERCISE UPON TERMINATION OF EMPLOYMENT. Unless otherwise determined
by the Committee, in its sole discretion, upon the termination of an optionee's
employment (i) for reason of disability, all rights to exercise the Option shall
expire ninety (90) days following termination, (ii) for reason of death, all
rights to exercise the Option shall expire one-hundred and eighty (180) days
following the date of death, or (iii) for any other reason, all rights to
exercise the Option shall expire sixty (60) days following termination. In
determining whether to exercise its discretion under the first sentence of this
Section 4(f) with respect to an ISO, the Committee may consider the provisions
of Section 422 of the Code.
(g) NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable by any optionee other than by will or the laws of decent and
distribution, and an Option is exercisable during the optionee's lifetime only
by such optionee.
(h) NOTICE OF DISQUALIFYING DISPOSITION. Each ISO granted under the Plan
shall provide that the employee receiving such ISO will notify the Company, in
writing to the attention of its Secretary, in the event that, prior to the later
of two years after the grant of such ISO or one year after the issuance of any
Shares to him upon exercise of such ISO, he shall
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dispose of such Shares, such notice to state the date of disposition, the nature
of the disposition and the price, if any, received for the Shares.
(i) INVESTMENT REPRESENTATION. Each Option Agreement shall contain the
requirement that, upon demand by the Committee and prior to the delivery of any
Shares to be acquired thereunder, the optionee shall deliver to the Committee a
written representation in form and substance satisfactory to the Committee,
affirming that the Shares to be acquired by optionee thereby, if not registered
pursuant to applicable state and/or federal securities laws, shall be acquired
for investment purposes only and not for resale or with a view to the
distribution thereof.
(j) ADJUSTMENTS. In the event of any change in the capital of the Company
by reason of any stock dividend, recaptialization, reorganization, merger,
consolidation, split-up, combination or exchange of Shares, any rights offering
to purchase Shares at a price substantially below fair market value, or of any
similar change affecting the Shares, then, in any such event, the number and
kind of Shares subject to an Option and the purchase price per Share shall be
appropriately adjusted consistent therewith in accordance with Treasury
Regulation Section 1.425-1(a); however, in the case of a merger or
consolidation, the Committee may determine that adjustments are not appropriate
under the circumstances. Any adjustment(s) so made shall be final and binding
upon optionee.
(k) ISOS. Each Option Agreement for the grant of an ISO thereby shall
contain such terms and provisions as the Committee deems necessary or desirable
to qualify such Option as an ISO within the meaning of Section 422 of the Code,
provided, however, that in no event shall the Company be liable to an optionee
or his beneficiary for any income tax, gift tax or other consequences to same
should such Option fail to qualify as an ISO.
(l) NO RIGHTS AS SHAREHOLDER. No optionee shall have any rights as a
shareholder of the Company thereof prior to the date of issuance of a
certificate or certificates representing all or any portion of the Shares
purchased pursuant to such Option.
(m) NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Option granted
hereunder shall not affect in any way whatsoever the employment or service of
such optionee with the Company or any Subsidiary nor the right of the Company or
the Subsidiary, as the case may be, to terminate optionee's employment or
service with same.
Section 5. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant
and exercise of Options thereunder, and the obligation of the Company to sell
and deliver Shares under such Options, shall be subject to all applicable laws,
rules and regulations, including, but not limited to, those of the United States
and its states, and to such approvals by any government or regulatory agency as
may be required.
Section 6. AMENDMENT AND DISCONTINUANCE. The Board of Directors of the
Company may from time to time amend, suspend or discontinue the Plan, provided,
however, that, unless otherwise approved by a majority of the issued and
outstanding shares of the Company and subject to the provisions of Section 4(j)
hereof, the Board of Directors or the Committee may not
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(a) increase the number of Shares reserved for Options pursuant to Section 2; or
(b) change the class of employees eligible to receive options hereunder. The
Board of Directors of the Company or the Committee, except as provided for in
Section 4(k), may not adjust the pricing for any Options. Without the written
consent of an optionee, no amendment or suspension of the Plan shall alter or
impair any Option previously granted to same under the Plan.
Section 7. EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board of Directors of the Company, provided that the approval of
the holders of a majority of the outstanding shares of stock of the Company
entitled to vote thereon is secured within twelve months before or after the
Plan is or was adopted by such Board. The Plan shall continue in effect until
June 29, 2004, unless sooner terminated in accordance with Section 6 hereof. No
Options shall be granted on or after June 29, 2004 unless the Plan is sooner
terminated in accordance with Section 6 hereof, but Options granted while the
Plan is in effect may extend beyond the effective date of the Plan.
Section 8. WITHHOLDING ON EXERCISE OF OPTIONS. If upon the exercise of any
Option granted under this Plan the Company or any Subsidiary is required to
withhold or pay any amount under applicable federal and state law, either the
optionee exercising the Option shall pay such amount to the Company or
Subsidiary, as applicable, or the amount to Shares delivered by the Company upon
exercise of the Option shall be appropriately reduced, to reimburse the Company
or the Subsidiary for such payment.
Section 9. TIME OF GRANTING OPTIONS. Nothing contained in the Plan or in
any resolution adopted or to be adopted by the Committee, the Board or the
shareholders of the Company shall constitute the granting of any Option
hereunder. The granting of an Option pursuant to the Plan shall take place only
when a written Option Agreement shall have been duly executed and delivered by
or on behalf of the Company and the individual (or his duly authorized
attorney-in-fact) to whom such Option is to be granted.
Section 10. CHANGE IN CONTROL.
(a) DEFINITION OF "CHANGE IN CONTROL." Unless otherwise determined by the
Committee and set forth in each applicable Option Agreement, for purposes of
Section 10(b), a "Change in Control" means the occurrence of either of the
following:
(i) any "person", as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than
the Company, a subsidiary, an affiliate, or a Company employee benefit plan,
including any trustee of such plan acting as trustee) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of securities of the Company (or a successor to the Company)
representing 50% or more of the combined voting power of the then outstanding
securities of the Company or such successor;
(ii) at any time that the Company has registered shares under the
Exchange Act, at least 40% of the directors of the Company constitute persons
who were not at the time of their first election to the Board, candidates
proposed by a majority of the Board in office prior
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<PAGE>
to the time of such first election; or
(iii) (A) the dissolution of the Company or liquidation of more
than 50% in value of the Company or a sale of assets involving 50% or more in
value of the assets of the Company, (B) any merger or reorganization of the
Company whether or not another entity is the survivor, (C) a transaction
pursuant to which the holders, as a group, of all of the shares of the Company
outstanding prior to the transaction hold, as a group, less than 50% of the
combined voting power of the Company or any successor company outstanding after
the transaction, or (D) any other event which the Board determines, in its
discretion, would materially alter the structure of the Company or its
ownership.
(b) IMPACT OF EVENT. In the event of a "Change in Control" as defined in
Section 10(a), and except as the Committee (as constituted immediately prior to
such Change in Control) may otherwise determine in its sole discretion, the
following provisions shall apply:
(i) any Options outstanding as of the date such Change in Control is
determined to have occurred and not then exercisable and vested shall become
fully exercisable and vested; and
(ii) the value (net of any exercise price and required tax
withholdings) of all outstanding Options, unless otherwise determined by
the Committee at or after grant and subject to Rule 16b-3, shall be cashed out
on the basis of the "Change in Control Price", as defined in Section 10(c), as
of the date such Change in Control is determined to have occurred or such other
date as the Board may determine prior to the Change in Control, provided,
however, that the foregoing provisions shall only apply, with respect to the
events described in Section l0(a)(i) and l0(a)(iii), to the extent so
specifically determined by the Board in the exercise of the Board's discretion,
which determination may be amended or reversed only by the affirmative vote of a
majority of the persons who were directors at the time such determination was
made.
(c) CHANGE IN CONTROL PRICE. For purposes of this Section 10, "Change in
Control Price" means the highest price per share paid in any transaction
reported on any established stock exchange, national market system or other
established market for the stock, or paid or offered in any bona fide
transaction related to a potential or actual Change in Control of the Company at
any time during the preceding 60-day period as determined by the Board, except
that, in the case of Incentive Stock Options and Stock Appreciation Rights
relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the Board decides to cash out such
Options.
Section 11. GOVERNING LAW. This Plan shall be construed and interpreted
in accordance with Georgia law, to the extent such construction and
interpretation does not adversely affect the treatment of any Option intended to
qualify as an ISO under the Code.
Section 12. NAME. The Plan shall be know as the "TSW International, Inc.
1994 Stock Option Plan."
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EXHIBIT 10.14.1
TSW INTERNATIONAL, INC.
1995 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
TSW INTERNATIONAL, INC., a Georgia corporation (the "Company"), hereby adopts
this TSW International, Inc. Stock Option Plan for Outside Directors. The
purpose of this stock option plan is to obtain, motivate and retain experienced
Outside Directors by offering them an opportunity to become owners of the Common
Stock of the Company.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the meaning
specified below unless the context clearly indicates to the contrary. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, where the context so indicates.
SECTION 1.1 - BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.2 - CHIEF FINANCIAL OFFICER
"Chief Financial Officer" shall mean the chief financial officer of the Company.
SECTION 1.3 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.4 - COMMON STOCK
"Common Stock" shall mean the Company's common stock, $0.01 par value.
SECTION 1.5 - COMPANY
"Company" shall mean The System Works, Inc.
SECTION 1.6 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
SECTION 1.7 - FAIR MARKET VALUE
"Fair Market Value" of a share of the Company's stock as of a given date shall
be: (i) the closing price of a share of the Company's stock on the principal
exchange on which shares of the Company's stock are then trading, if any, on
such date, or, if shares were not traded on such date, then on the next
preceding trading day during which a sale occurred; or (ii) if such stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation system,
(1) the last sales price (if the stock is then listed as a National Market Issue
under the NASDAQ National Market System) or (2) the mean between the
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closing representative bid and asked prices (in all other cases) for the stock
on such date as reported by NASDAQ or such successor quotation system; or
(iii) if such stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the mean between the closing bid and
asked prices for the stock, on such date, as determined in good faith by the
Chief Financial Officer; or (iv) if the Company's stock is not publicly
traded, the fair market value established by the members of the Board not
participating in this Plan acting in good faith.
SECTION 1.8 - OPTION
"Option" shall mean a non-qualified option to purchase Common Stock of the
Company, granted under the Plan.
SECTION 1.9 - OPTIONEE
"Optionee" shall mean an Outside Director to whom an Option is granted under the
Plan.
SECTION 1.10 - OUTSIDE DIRECTOR
"Outside Director" shall mean a member of the Board who is not an employee of
the Company, a Parent Corporation or a Subsidiary under Section 3401(c) of the
Code and who is not legally or contractually prohibited from receiving and
holding personally an Option.
SECTION 1.11 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.12 - PLAN
"Plan" shall mean this 1994 The System Works, Inc. Stock Option Plan for Outside
Directors.
SECTION 1.13 - RETIREMENT
"Retirement" shall mean acceptance by the Board of an Outside Director's
resignation from the Board by reason of retirement as determined by the Chief
Financial Officer.
SECTION 1.14 - RULE 16B-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such
Rule may be amended in the future.
SECTION 1.15 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.16 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
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SECTION 1.17 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. "Subsidiary" shall also mean any partnership in
which the Company and/or any Subsidiary owns more than 50% of the capital or
profits interests.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 - SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of the Common Stock. The
aggregate number of such shares which may be issued upon exercise of Options
shall not exceed 100,000.
SECTION 2.2 - UNEXERCISED OPTIONS
If any Option expires or is canceled without having been fully exercised, the
number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation may not again be granted
hereunder, subject to the limitations of Section 2.1.
SECTION 2.3 - CHANGES IN COMPANY'S SHARES
In the event that the outstanding shares of Common Stock of the Company are
hereafter changed into or exchanged for a different number or kind of shares or
other securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, or
the number of shares is increased or decreased by reason of a stock split-up,
stock dividend, combination of shares or any other increase or decrease in the
number of such shares of Common Stock effected without receipt of consideration
by the Company (provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been effected without receipt of
consideration), the Chief Financial Officer acting in good faith shall make
appropriate adjustments in the number and kind of shares for the purchase of
which Options may be granted, including adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued on
exercise of Options.
ARTICLE III
GRANTING OF OPTIONS
SECTION 3.1 - ELIGIBILITY
Any Outside Director of the Company shall be eligible to be granted Options.
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SECTION 3.2 - GRANTING OF OPTIONS
3.2.1 - INITIAL GRANT
Each person who is an Outside Director shall at the time the Plan is adopted by
the Board of Directors of the Company, provided that the approval of the holders
of a majority of the outstanding shares of stock of the Company entitled to vote
thereon is secured within twelve months before or after the Plan is or was
adopted by such Board shall immediately upon such approval be granted an Option
to purchase 7,500 shares of Common Stock. Any person who is not an Outside
Director at such time, but who later becomes an Outside Director, shall be
granted on the date of his election or appointment as an Outside Director an
Option to purchase 7,500 shares of Common Stock.
3.2.2 - YEARLY GRANT
Each Outside Director who has received a grant pursuant to Section 3.2.1 and who
has served at least one year as an Outside Director (or in the case of persons
who are Outside Directors at the time of the adoption of the Plan by the Board
of Directors, persons who serve until the next Annual Meeting of Shareholders)
shall be granted on the date of each annual meeting of the shareholders (so long
as he is an Outside Director at the close of business on such date) an Option to
purchase 2,000 shares of Common Stock.
3.2.3- NO OPTION GRANT WHERE PROHIBITED
No person shall be granted an Option under this Plan if at the time of such
grant, the grant is prohibited by applicable law or by the policies of the
employer of such person or of any other company of which such person is a member
of the board of directors or a general partner.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 - OPTION AGREEMENT
As soon as practicable after an Outside Director becomes entitled to the grant
of an Option under Section 3.2 above, the Secretary shall cause to be executed a
written Stock Option Agreement, which shall be executed by the Outside Director
and an authorized officer of the Company and which shall contain such terms and
conditions as approved by the Chief Financial Officer consistent with the Plan.
SECTION 4.2 - OPTION PRICE
The exercise price per share subject to each Option granted pursuant to Section
3.2.1 shall be the Fair Market Value on the date such Option is granted and the
exercise price per share subject to each Option granted pursuant to Section
3.2.2 shall be Fair Market Value on the date such Option is granted; provided,
however, that in no event shall the exercise price of an Option be less than
$.01.
SECTION 4.3 - TERM
The term of each Option shall be ten years and one day from date of grant
subject to earlier termination in accordance with Sections 4.5 or 4.6.
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SECTION 4.4 - EXERCISE SCHEDULE
An Option shall be exercisable on the following schedule: Beginning on the first
anniversary of the date of grant, for up to 25% of the shares covered by the
Option; beginning on the second anniversary of the date of grant, for up to 50%
of such shares; beginning on the third anniversary of the date of grant, for up
to 75% of such shares; and beginning on the fourth anniversary of the date of
grant, and thereafter until the earlier of expiration of the Option's term or
termination of the Option in accordance with Sections 4.5 or 4.6, for up to 100%
of such shares. Notwithstanding the foregoing, an Option held by an Outside
Director shall become immediately exercisable in full upon the death or
disability of such Outside Director, upon Retirement of such Outside Director
from the Board, upon an unsuccessful attempt by such Outside Director to win
reelection to the Board after nomination for election at the recommendation of
the Board, or upon the adoption by the Company of a plan for a liquidation,
dissolution, merger, consolidation or reorganization as described in clause
(x), (y) or (z) of Section 4.6.
SECTION 4.5 - TERMINATION OF MEMBERSHIP ON THE BOARD
Except in the case of death, disability, Retirement from the Board, or an
unsuccessful attempt to win reelection to the Board after nomination for
election at the recommendation of the Board, if an Outside Director's membership
on the Board terminates for any reason, an Option held at the date of
termination (but only to the extent exercisable at the time of such termination
in accordance with Section 4.4) may be exercised in whole or in part at any time
within one year after the date of such termination (but in no event after the
term of the Option expires) and shall thereafter terminate. If an Outside
Director's membership terminates because of death, disability. Retirement from
the Board, or an unsuccessful attempt to win reelection to the Board after
nomination for election at the recommendation of the Board, an Option held at
the date of such termination may be exercised for up to 100% of the shares
covered by such Options at any time within three years after the date of such
termination (but in no event after the term of the Option expires) and shall
thereafter terminate.
SECTION 4.6 - CHANGE OF CONTROL
In the event of (x) a dissolution or liquidation of the Company, (y) a merger or
consolidation in which the Company is not the surviving corporation, or (z) any
other capital reorganization in which more than fifty percent (50%) of the
shares the Company entitled to vote are exchanged, the Company shall give to the
Outside Director, at the time of adoption of the plan for liquidation,
dissolution, merger, consolidation or reorganization, either (i) a reasonable
time thereafter within which to exercise each Option, prior to the effectiveness
of such liquidation, dissolution, merger, consolidation or reorganization, at
the end of which time such Option shall terminate, or (ii) the right to exercise
such Option as to an equivalent number of shares of stock of the corporation
succeeding the Company or acquiring its business by reason of such liquidation,
dissolution, merger, consolidation or reorganization.
SECTION 4.7 - ADJUSTMENTS IN OUTSTANDING OPTIONS
In the event that the outstanding shares of Common Stock subject to Options are
changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, or the number of shares is increased or
decreased by reason of a stock split-up, stock dividend, combination of shares
or any other increase or decrease in the
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number of such shares of Common Stock effected without receipt of consideration
by the Company (provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been effected without receipt of
consideration), the Chief Financial Officer acting in good faith shall make
appropriate adjustments in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be exercisable,
to the end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in an
outstanding Option shall be made without change in the total price applicable to
the Option or the unexercised portion of the Option (except for any change in
the aggregate price resulting from rounding-off of share quantities or prices)
and with any necessary corresponding adjustment in Option price per share. Any
such adjustment made by the Chief Financial Officer shall be final and binding
upon all Optionees, the Company and all other interested persons. This
Section 4.7 shall be subject to Section 4.6.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only the Optionee may exercise an Option
(or any portion thereof) granted to the Optionee. After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by the Optionee's personal representative or by any
person empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
SECTION 5.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when any exercisable Option
or exercisable portion thereof becomes unexercisable under the Plan or the
applicable Stock Option Agreement, such Option or portion thereof may be
exercised in whole or in part; provided, however, that the Company shall not be
required to issue fractional shares and any partial exercise of the Option shall
be with respect to no less than 100 shares (or such lesser remaining number of
shares subject to the Option).
SECTION 5.3 - MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary of all of the following prior to the time
when such Option or such portion becomes unexercisable under the Plan or the
applicable Stock Option Agreement:
5.3.1 - NOTICE
Notice in writing signed by the Optionee or other person then entitled to
exercise such Option or portion, stating that such Option or portion is
exercised, such notice complying with all applicable rules established by the
Chief Financial Officer; and
5.3.2 - PAYMENT
(a) Full payment (in cash or by check) for the shares with respect to which such
Option or portion is thereby exercised; or
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(b) With the consent of the Chief Financial Officer, shares of the Company's
Common Stock owned by the Optionee duly endorsed for transfer to the Company; or
(c) With the consent of two Outside Directors, each of whom is a "disinterested
person" as defined in Rule 16b-3, and subject to the timing requirements of
Section 5.4, shares of the Company's Common Stock issuable to the Optionee upon
exercise of the Option, with a Fair Market Value on the date of Option exercise
equal to the aggregate Option price of the shares with respect to which such
Option or portion is thereby exercised; or
(d) With the consent of the Chief Financial Officer, a full recourse promissory
note bearing interest (at least such rate as shall then preclude the imputation
of interest under the Code or any successor provision) and payable upon such
terms as may be prescribed by the Chief Financial Officer. The Chief Financial
Officer may also prescribe the form of such note and the security to be given
for such note. No Option may, however, be exercised by delivery of a promissory
note or by a loan from the Company when or where such loan or other extension of
credit is prohibited by law; or
(e) With the consent of the Chief Financial Officer, any combination of the
consideration provided in the foregoing subsections (a), (b), (c) and (d).
5.3.3 - TAX WITHHOLDING
The payment to the Company of all amounts, if any, which it is required to
withhold under federal, state or local law in connection with the exercise of
the Option; with the consent of (i) the Chief Financial Officer, shares of the
Company's Common Stock owned by the Optionee duly endorsed for transfer, or,
(ii) two Outside Directors, each of whom is a "disinterested person" as defined
in Rule 16b-3, and subject to the timing requirements of Section 5.4, shares of
the Company's Common Stock issuable to the Optionee upon exercise of the Option,
valued at Fair Market Value as of the date of Option exercise, may be used to
make all or part of such payment.
5.3.4 - SECURITIES REPRESENTATIONS
Such representations and documents as the Chief Financial Officer deems
necessary or advisable to effect compliance with all applicable provisions of
the Securities Act and any other federal or state securities laws or
regulations. The Chief Financial Officer may also take whatever additional
actions he deems appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing stop-transfer
orders to transfer agents and registrars; and
5.3.5 - PROOF OF THIRD PARTY RIGHT TO EXERCISE
In the event that the Option or portion thereof shall be exercised pursuant to
Section 5.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option or portion
thereof.
SECTION 5.4 - CERTAIN TIMING REQUIREMENTS
Shares of the Company's Common Stock issuable to the Optionee upon exercise of
the Option may be used to satisfy the Option price or the tax withholding
consequences of such exercise only (i) during the period beginning on the third
business day following the date of release of the quarterly or annual summary
statement of sales and earnings of the Company and ending on the twelfth
business day following such date or (ii) pursuant to
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an irrevocable written election by the Optionee to use shares of the Company's
Common Stock issuable to the Optionee upon exercise of the Option to pay all or
part of the Option price or the withholding taxes (subject to the approval
required under Sections 5.3.2 and 5.3.3) made at least six months prior to the
payment of such Option price or withholding taxes.
SECTION 5.5 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of an Option, or
any portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which such
class of stock is then listed;
(b) The completion of any registration or other qualification of such shares
under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Chief Financial Officer shall deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal
governmental agency which the Chief Financial Officer shall determine to be
necessary or advisable;
(d) The payment to the Company (or other employer corporation) of all amounts
which it is required to withhold under federal, state or local law in connection
with the exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of the
Option as the Chief Financial Officer may establish from time to time for
reasons of administrative convenience.
SECTION 5.6 - RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or privileges
of, shareholders of the Company in respect to any shares purchasable upon the
exercise of any part of an Option unless and until certificates representing
such shares have been issued by the Company to such holders.
SECTION 5.7 - TRANSFER RESTRICTIONS
Unless otherwise approved in writing by the Board, no shares acquired upon
exercise of any Option by any Outside Director may be sold, assigned, pledged,
encumbered or otherwise transferred until at least six months have elapsed from
(but excluding) the date that such Option was granted.
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ARTICLE VI
ADMINISTRATION
SECTION 6.1 - DUTIES AND POWERS OF THE CHIEF FINANCIAL OFFICER
It shall be the duty of the Chief Financial Officer to conduct the general
administration of the Plan in accordance with its provisions. The Chief
Financial Officer shall have the power to interpret the Plan and the Options and
to adopt such rules for the administration, interpretation and application of
the Plan as are consistent therewith and to interpret, amend or revoke any such
rules.
SECTION 6.2 - COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
All expenses and liabilities incurred by the Chief Financial Officer in
connection with the administration of the Plan shall be borne by the Company.
The Chief Financial Officer may employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Chief Financial Officer, the Company
and its officers and directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Chief Financial Officer in good
faith shall be final and binding upon all Optionees, the Company and all other
interested persons. The Chief Financial Officer shall not be personally liable
for any action, determination or interpretation made in good faith with respect
to the Plan or the Options, and the Chief Financial Officer shall be fully
protected by the Company in respect to any such action, determination or
interpretation.
ARTICLE VII
OTHER PROVISIONS
SECTION 7.1 - OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of the Optionee or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that nothing in this Section 7.1 shall prevent transfers by will or by
the applicable laws of descent and distribution.
SECTION 7.2 - AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified (generally not
more frequently than once every six months), suspended or terminated at any time
or from time to time by the Board. However, without approval of the Company's
shareholders given within twelve months before or after the action by the Board,
no action of the Board may: (i) except as provided in Section 2.3, increase any
limit imposed in Section 2.1 on the maximum number of shares which may be issued
on exercise of Options; (ii) materially modify the eligibility requirements of
Section 3.1; (iii) reduce the minimum Option price requirements of Section 4.2;
(iv) extend the limit imposed in this Section 7.2 on the period during which
Options may be granted; or (v) amend or modify the Plan in a manner requiring
shareholder approval under Rule 16b-3. Notwithstanding anything to
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the contrary contained herein, the Board, with respect to the Plan or any
Option, shall not (y) amend or modify any provision concerning the amount, price
and timing of any Option (including, without limitation, the provisions of
Sections 3.2 and 4.2 of the Plan) more than once every six months, other than)
to comport with changes in the Code, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder; or (z) otherwise amend or modify
the Plan or any Option in any manner inconsistent with the requirements of
Rule 16b-3(c)(2)(ii). Neither the amendment, suspension nor termination of the
Plan shall, without the consent of the holder of the Option, alter or impair any
rights or obligations under any Option theretofore granted. No Option may be
granted during any period of suspension nor after termination of the Plan, and
in no event may any Option be granted under this Plan after the expiration of
ten years from the date the Plan is adopted by the Board.
SECTION 7.3 - APPROVAL OF PLAN BY SHAREHOLDERS
This Plan will be submitted for the approval of the Company's shareholders
within twelve months after the date of the Board's initial adoption of the Plan.
Options may not be granted prior to such shareholder approval. The Company shall
take such actions with respect to the Plan as may be necessary to satisfy the
requirements of Rule l6b-3(b).
SECTION 7.4 - EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or incentive
plans in effect for the Company, any Parent Corporation or any Subsidiary.
Nothing in this Plan shall be construed to limit the right of the Company, any
Parent Corporation or any Subsidiary (a) to establish any other forms of
incentives or compensation for directors of the Company or (b) to grant or
assume options otherwise than under this Plan in connection with any proper
corporate purpose, including, but not by way of limitation, the grant or
assumption of options in connection with the acquisition by purchase, lease,
merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.
SECTION 7.5 - NO RIGHT TO CONTINUED MEMBERSHIP ON THE BOARD
Nothing in this Plan or in any Stock Option Agreement shall confer upon any
Outside Director any right to continue as a director of the Company or shall
interfere with or restrict in any way the rights of the Company and its
shareholders, which are hereby expressly reserved, to remove any Outside
Director at any time for any reason whatsoever, with or without cause.
SECTION 7.6 - TITLES
Titles are provided herein for convenience only and are not to serve as a basis
for interpretation or construction of the Plan.
SECTION 7.7 - CONFORMITY TO SECURITIES LAWS
The Plan is intended to conform to the extent necessary with all provisions of
the Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, including
without limitation Rule 16b-3. Without limiting the generality of the foregoing,
this Plan is intended to comply with the formula award plan provisions set forth
in Rule 16b-3(c)(2)(ii). Notwithstanding anything herein to the contrary, the
Plan shall be administered, and Options shall be granted and may be exercised,
only in such a manner as to conform to
10
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such laws, rules and regulations. To the extent permitted by applicable law,
the Plan and Options granted hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
* * *
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EXHIBIT 10.14.2
THE SYSTEM WORKS, INC.
1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of January 4, 1995, is made by and between THE SYSTEM
WORKS, INC., a Georgia corporation, hereinafter referred to as "Company," and
George Busbee, an Outside Director of the Company, hereinafter referred to as
"Optionee":
WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase
shares of its $.01 par value Common Stock (as defined hereunder); and
WHEREAS, the Company wishes to carry out The System Works, Inc. 1995 Stock
Option Plan for Outside Directors (the terms of which are hereby incorporated by
reference and made a part of this Agreement).
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter, and the singular
the plural, where the context so indicates.
SECTION 1.1 - BOARD
"Board" shall mean the Board of Directors of the Company.
SECTION 1.2 - CHIEF FINANCIAL OFFICER
"Chief Financial Officer" shall mean the chief financial officer of the
Company.
SECTION 1.3 - CODE
"Code" shall mean the Internal Revenue Code of 1986, as amended.
SECTION 1.4 - COMMON STOCK
"Common Stock" shall mean the Company's common stock, $.01 par value.
SECTION 1.5 - COMPANY
"Company" shall mean The System Works, Inc.
<PAGE>
SECTION 1.6 - EXCHANGE ACT
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
SECTION 1.7 - FAIR MARKET VALUE
"Fair Market Value" of a share of the Company's stock as of a given date
shall be: (i) the closing price of a share of the Company's stock on the
principal exchange on which shares of the Company's stock are then trading, if
any, on the day previous to such date, or, if shares were not traded on the day
previous to such date, then on the next preceding trading day during which a
sale occurred; (ii) if such stock is not traded on an exchange but is quoted on
NASDAQ or a successor quotation system, (1) the last sales price (if the stock
is then listed as a National Market Issue under the NASD National Market System)
or (2) the mean between the closing representative bid and asked prices (in all
other cases) for the stock on the day previous to such date as reported by
NASDAQ or such successor quotation system; (iii) if such stock is not publicly
traded on an exchange and not quoted on NASDAQ or a successor quotation system,
the mean between the closing bid and asked prices for the stock, on such date,
as determined in good faith by the Chief Financial Officer: or (iv) if the
Company's stock is not publicly traded, the fair market value established by the
members of the Board who do not participate in the Plan acting in good faith.
SECTION 1.8 - OPTION
"Option" shall mean a non-qualified option to purchase Common Stock of the
Company granted under this Agreement pursuant to the Plan.
SECTION 1.9 - OPTIONEE
"Optionee" shall mean the Outside Director to whom this Option is granted
under the Plan.
SECTION 1.10 - OUTSIDE DIRECTOR
"Outside Director" shall mean a member of the Board who is not an employee
of the Company, a Parent Corporation or a Subsidiary under Section 3401(c) of
the Code and who is not legally or contractually prohibited from receiving and
holding personally the Option.
SECTION 1.11 - PARENT CORPORATION
"Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
SECTION 1.12 - PLAN
"Plan" shall mean this 1994 The System Works, Inc. Stock Option Plan for
Outside Directors.
<PAGE>
SECTION 1.13 - RETIREMENT
"Retirement" shall mean acceptance by the Board of an Outside Director's
resignation from the Board by reason of retirement as determined by the Chief
Financial Officer.
SECTION 1.14 - RULE 16b-3
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such rule may be amended in the future.
SECTION 1.15 - SECRETARY
"Secretary" shall mean the Secretary of the Company.
SECTION 1.16 - SECURITIES ACT
"Securities Act" shall mean the Securities Act of 1933, as amended.
SECTION 1.17 - SUBSIDIARY
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. "Subsidiary" shall also mean any partnership
in which the Company and/or any Subsidiary owns more than 50% of the capital or
profits interests.
ARTICLE II
GRANT OF OPTION
SECTION 2.1 - GRANT OF OPTION
On the date hereof the Company irrevocably grants to the Optionee the
Option to purchase any part or all of an aggregate of 7,500 shares of its $.01
par value Common Stock upon the terms and conditions set forth in this Agreement
and the Plan.
SECTION 2.2 - PURCHASE PRICE
The purchase price of the shares of Common Stock covered by the Option
shall be $4.51 per share without commission or other charge.
SECTION 2.3 - ADJUSTMENTS IN OPTION
Subject to Section 3.4, in the event that the outstanding shares of Common
Stock subject to the Option are changed into or exchanged for a different number
or kind of shares of the Company or other securities of the Company, or of
another corporation, by reason of merger, consolidation, recapitalization or
reclassification, or the number of shares is increased or decreased by reason of
a stock split-up, stock dividend, combination of shares or any other increase or
decrease in the number of such shares of Common Stock effected without receipt
of consideration by the Company (provided, however, that conversion of any
convertible securities of the Company shall not be
<PAGE>
deemed to have been "effected without receipt of consideration") the Chief
Financial Officer acting in good faith shall make appropriate adjustments in the
number and kind of shares as to which any unexercised portion of the Option
shall be exercisable, to the end that after such event the Optionee's
proportionate interest shall be maintained as before the occurrence of such
event. Such adjustment in the Option shall be made without change in the total
price applicable to the unexercised portion of the Option (except for any change
in the aggregate price resulting from rounding-off of share quantities or
prices) and with any necessary corresponding adjustment in the Option price per
share. Any such adjustment made by the Chief Financial Officer shall be final
and binding upon the Optionee, the Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - TERM OF OPTION
The term of the Option shall be ten years and one day from the date hereof
subject to earlier termination in accordance with Sections 3.3 or 3.4.
SECTION 3.2 - EXERCISE SCHEDULE
The Option shall be exercisable on the following schedule: Beginning on
the first anniversary of the date of grant, for up to 25% of the shares covered
by the Option; beginning on the second anniversary of the date of grant, for up
to 50% of such shares; beginning on the third anniversary of the date of grant,
for up to 75% of such shares; and beginning on the fourth anniversary of the
date of grant, and thereafter until the earlier of expiration of the Option's
term or termination of the Option in accordance with Section 3.3 and Section
3.4, for up to 100% of such shares. Notwithstanding the foregoing, an Option
held by an Outside Director shall become immediately exercisable in full upon
the death or disability of such Outside Director, upon Retirement of such
Outside Director from the Board, upon an unsuccessful attempt by such Outside
Director to win reelection to the Board after nomination for election at the
recommendation of the Board, or upon adoption by the Company of a plan for a
liquidation, dissolution, merger, consolidation or reorganization as described
in clause (x), (y) or (z) of Section 3.4.
SECTION 3.3 - TERMINATION OF MEMBERSHIP ON THE BOARD
If the Optionee's membership on the Board terminates for any reason other
than death, disability, Retirement or an unsuccessful attempt to win reelection
to the Board after nomination for election at the recommendation of the Board,
the Option, or any remaining portion thereof, to the extent otherwise
exercisable pursuant to Section 3.2, may be exercised in whole or in part at
anytime within one year after the date of such termination (to the extent the
Option has not otherwise terminated) and shall thereafter terminate. If the
Optionee's membership on the Board terminates due to death, disability,
Retirement or an unsuccessful attempt to win reelection to the Board after
nomination for election at the recommendation of the Board, any remaining
portion of the Option held at the date of such termination may be exercised for
up to 100% of the shares covered hereby any anytime within three years after the
date of such termination (but in no event after the term of the Option expires)
and shall thereafter terminate.
<PAGE>
SECTION 3.4 - CHANGE OF CONTROL
In the event of (x) a dissolution or liquidation of the Company, (y) a
merger or consolidation in which the Company is not the surviving corporation,
or (z) any other capital reorganization in which more than fifty percent (50%)
of the shares of the Company entitled to vote are exchanged, the Company shall
give to the Optionee, at the time of adoption of the plan for liquidation,
dissolution, merger, consolidation or reorganization, either (i) a reasonable
time thereafter within which to exercise any remaining portion of the Option,
prior to the effectiveness of such liquidation, dissolution, merger,
consolidation or reorganization, at the end of which time the Option shall
terminate, or (ii) the right to exercise the remaining portion of the Option as
to an equivalent number of shares of stock of the corporation succeeding the
Company or acquiring its business by reason of such liquidation, dissolution,
merger, consolidation or reorganization.
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only the Optionee may exercise the
Option or any portion thereof. After the death of the Optionee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under the Plan or this Agreement, be exercised by the Optionee's
personal representative or by any person empowered to do so under the Optionee's
will or under the then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
At any time and from time to time prior to the time when the Option or
exercisable portion thereof becomes unexercisable under this Agreement, such
Option or portion thereof may be exercised in whole or in part; provided,
however, that the Company shall not be required to issue fractional shares and
any partial exercise of the Option shall be with respect to no less than 100
shares (or such lesser remaining number of shares subject to the Option).
SECTION 4.3 - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary of all of the following prior to the time when the
Option or such portion becomes unexercisable under the Plan or this Agreement:
(a) Notice in writing signed by the Optionee or the other person then
entitled to exercise the Option or portion, stating that the Option or portion
is thereby exercised, such notice complying with all applicable rules
established by the Chief Financial Officer;
(b) (i) Full payment (in cash or by check) for the shares with
respect to which the Option or portion of the Option is exercised;
<PAGE>
(ii) With the consent of the Chief Financial Officer, shares of
the Company's Common Stock owned by the Optionee duly endorsed for transfer to
the Company;
(iii) With the consent of two Outside Directors, each of whom is
a "disinterested person" as defined in Rule 16b-3 and subject to the timing
requirements of Section 4.4, shares of the Company's Common Stock issuable to
the Optionee upon exercise of the Option, with a Fair Market Value on the date
of Option exercise equal to the aggregate Option price of the shares with
respect to which such Option or portion is exercised;
(iv) With the consent of the Chief Financial Officer, a full
recourse promissory note bearing interest (as least such rate as shall then
preclude the imputation of interest under the Code or successor provision) and
payable upon such terms as may be prescribed by the Chief Financial Officer.
The Chief Financial Officer may also prescribe the form of such note and the
security to be given for such note. The Option may not be exercised, however,
by delivery of a promissory note or by a loan from the Company when or where
such loan or other extension of credit is prohibited by law; or
(v) With the consent of the Chief Financial Officer, any
combination of the consideration provided in the foregoing subparagraphs (i),
(ii), (iii) and (iv); and
(c) A bona fide written representation and agreement, in a form
satisfactory to the Chief Financial Officer, signed by the Optionee or other
person then entitled to exercise such Option or portion, stating that the shares
of stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act and then applicable rules and
regulations thereunder, and that the Optionee or other person then entitled to
exercise such Option or portion will indemnify the Company against and hold it
free and harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the shares by such person is contrary to
the representation and agreement referred to above. The Chief Financial Officer
may also take whatever additional actions he or she deems appropriate to insure
the observance and performance of such representation and agreement and to
effect compliance with the Securities Act and any other federal or state
securities laws or regulations. Without limiting the generality of the
foregoing, the Chief Financial Officer may require an opinion of counsel
acceptable to it to the effect that any subsequent transfer of shares acquired
on an Option exercise does not violate the Securities Act, and may issue stop-
transfer orders covering such shares. Share certificates evidencing stock
issued on exercise of the Option shall bear an appropriate legend referring to
the provisions of this subsection (c) and the agreements herein. The written
representation and agreement referred to in the first sentence of this
subsection (c) shall, however, not be required if the shares to be issued
pursuant to such exercise have been registered under the Securities Act, and
such registration is then effective in respect of such shares; and
(d) Full payment to the Company of all amounts, if any, which, under
federal, state or local tax law, it is required to withhold upon exercise of the
Option; with the consent of (i) the Chief Financial Officer, shares of the
Company's Common Stock owned by the Optionee duly endorsed for transfers, or
(ii) two Outside Directors, each of whom is a "disinterested person" as defined
in Rule 16b-3 and subject to the timing requirements of Section 4.4, shares of
the Company's Common Stock issuable to the
<PAGE>
Optionee upon exercise of the Option, valued at Fair Market Value as of the date
of Option exercise, may be used to make all or part of such payment; and
(e) In the event the Option or portion shall be exercised pursuant to
Section 4.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option.
SECTION 4.4 - CERTAIN TIMING REQUIREMENTS
Shares of the Company's Common Stock issuable to the Optionee upon exercise
of the Option may be used to satisfy the Option price of the tax withholding
consequences of such exercise only (i) during the period beginning on the third
business day following the date of release of the quarterly or annual summary
statement of sales and earnings of the Company and ending on the twelfth
business day following such date or (ii) pursuant to an irrevocable written
election by the Optionee to use shares of the Company's Common Stock issuable to
the Optionee upon exercise of the Option to pay all or part of the Option price
or the withholding taxes (subject to the approval required by Section 4.3(b) and
(d)) made at least six months prior to the payment of such withholding taxes.
SECTION 4.5 - CONDITIONS OF ISSUANCE OF STOCK CERTIFICATES
The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issues shares which have been reacquired by the Company. Such shares shall be
fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Chief Financial Officer shall deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Chief Financial Officer shall determine
to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts, which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise of
the Option as the Chief Financial Officer may from time to time establish for
reasons of administrative convenience.
SECTION 4.6 - RIGHTS AS STOCKHOLDER
The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect to any shares purchasable
upon the exercise of any
<PAGE>
part of the Option unless and until certificates representing such shares shall
have been issued by the Company to such holder.
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Chief Financial Officer shall have the power to interpret the Plan,
this Agreement and all other documents relating to the Option and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules. All actions
taken and all interpretations and determinations made by the Chief Financial
Officer in good faith shall be final and binding upon the Optionee, the Company
and all other interested persons. The Chief Financial Officer shall not be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Option and the Chief Financial Officer
shall be fully protected by the Company in respect to any such action,
determination or interpretation.
SECTION 5.2 - OPTION NOT TRANSFERABLE
Unless otherwise approved in writing by the Board, no shares acquired upon
exercise of the Option by any Outside Director may be sold, assigned, pledged,
encumbered or otherwise transferred until at least six months have elapsed from
(but excluding) the date the Option was granted.
Neither the Option nor any interest or right therein or part thereof shall
be liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws or descent and
distribution.
SECTION 5.3 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.
SECTION 5.4 - NOTICES
Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Optionee shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to it or
him. Any notice which is required to be given to the Optionee shall, if the
Optionee is then deceased, be given to the Optionee's personal representative if
such representative has previously informed the Company of his status and
address by written notice under this Section 5.4. Any notice shall be deemed
duly given when enclosed in a properly sealed envelope addressed as aforesaid,
<PAGE>
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
SECTION 5.5 - TITLES
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.
SECTION 5.6 - CONFORMITY TO SECURITIES LAWS
This Agreement is intended to conform to the extent necessary with all
provisions of the Securities Act and the Exchange Act and any and all
regulations and rules promulgated by the Securities and Exchange Commission
thereunder, including without limitation Rule 16b-3. Without limiting the
generality of the foregoing, this Agreement is intended to comply with the
formula award plan provisions set forth in Rule 16(b)-3(c)(2)(ii).
Notwithstanding anything herein to the contrary, this Agreement shall be
administered, and the Option shall be granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, this Agreement and the Option granted hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.
SECTION 5.7 - AMENDMENT OF THIS AGREEMENT
This Agreement may be amended only by a writing executed by the parties
hereto which specifically states that it is amending this Agreement.
SECTION 5.8 - GOVERNING LAW
The laws of the State of Georgia shall govern the interpretation, validity,
administration, enforcement and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws. The parties agree that the exclusive jurisdiction and venue of any action
with respect to this Agreement shall be in the Superior Court of Cobb County
Georgia or the United States District Court for the Northern District of
Georgia, and each of the parties hereby submits to the exclusive jurisdiction
and venue of such courts for the purpose of such action. The parties agree that
service of process in any such action may be effected by delivery of the summons
to the parties in the manner provided for delivery of notices set forth in
Section 5.4.
SECTION 5.9 - NO RIGHT TO CONTINUED MEMBERSHIP ON THE BOARD
Nothing in this Agreement shall confer upon any Outside Director any right
to continue as a director of the Company or shall interfere with or restrict in
any way the rights of the Company and its stockholders, which are hereby
expressly reserved, to remove any Outside Director at any time for any reason
whatsoever with or without cause.
IN WITNESS HERETO this Agreement has been executed and delivered by the parties
hereto.
<PAGE>
THE SYSTEM WORKS, INC.
By: /s/ Craig J. Huffaker
--------------------------
Title: Chief Financial Officer
The Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of this Agreement and the Plan.
/s/ George Busbee
------------------------------
Optionee
###-##-####
------------------------------
Optionee's Social Security Number
Optionee's Address:
One Old Hudgens Trail
Duluth, GA 30136
<PAGE>
SCHEDULE TO EXHIBIT 10.14.2
SCHEDULE OF TERMS OF
STOCK OPTION AGREEMENTS
GRANTED PURSUANT TO THE 1995 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
TO GEORGE D. BUSBEE
DATE OF TYPE OF NUMBER OF EXERCISE
AGREEMENT OPTION SHARES (1) PRICE
---------- ------------- ----------- ---------
1/4/95 Non-qualified 7,500 $4.51
8/9/96 Non-qualified 2,000 9.23
9/6/96 Non-qualified 2,000 9.23
(1) Each option vests in four equal annual installments beginning on
the first anniversary date of the date of the agreement.
<PAGE>
EXHIBIT 10.15
TSW INTERNATIONAL, INC.
INVOLUNTARY SEVERANCE BENEFITS PLAN
Effective October 1, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 PURPOSE AND ADOPTION OF PLAN . . . . . . . . . . . . . . . . . .1
ARTICLE 2 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE 3 ELIGIBILITY FOR BENEFITS . . . . . . . . . . . . . . . . . . . .5
ARTICLE 4 SEVERANCE BENEFITS NOT SUBJECT TO EXECUTION OF ELECTION FORM
AND WAIVER AGREEMENT . . . . . . . . . . . . . . . . . . . . . .6
ARTICLE 5 SEVERANCE BENEFITS SUBJECT TO EXECUTION OF ELECTION FORM
AND WAIVER AGREEMENT . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE 6 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 7 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
TSW INTERNATIONAL, INC.
INVOLUNTARY SEVERANCE BENEFITS PLAN
ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN
1.1 ADOPTION OF PLAN. TSW International, Inc. (the "Employer or
"Company") hereby establishes the TSW International, Inc. Involuntary
Severance Benefits Plan (the "Plan") to be effective as of October 1, 1995.
The Plan shall be an unfunded severance pay plan that is a welfare plan as
such term is defined by the Employee Retirement Income Security Act of 1974
("ERISA"), the benefits of which shall be paid solely from the general assets
of the Company.
1.2 PURPOSE. The Plan is primarily designed to provide benefits to
certain employees of the Company who are involuntarily terminated by the
Company.
1.3 EFFECT ON OTHER PLANS SPONSORED BY THE COMPANY. The benefits
payable under the Plan are in addition to the coverage and benefits generally
afforded to employees terminating from the service of the Company by other
programs sponsored by the Company including, but not limited to, benefits
under the TSW International, Inc. 401(k) Retirement and Savings Plan.
However, nothing herein is intended to or shall be construed to require the
Company to institute or continue in effect any particular plan or benefit
sponsored by the Company and the Company hereby reserves the right to amend
or terminate any of its benefit programs at any time in accordance with the
procedures set forth in such plans.
<PAGE>
ARTICLE 2 - DEFINITIONS
The masculine pronoun shall be construed to include the feminine pronoun
and singular shall include the plural where the context so requires.
2.1 "ADMINISTRATOR" shall mean the Vice President of Human Resources of
the Company.
2.2 "BREAK IN EMPLOYMENT" shall mean any period in which a Participant
is not employed by the Company.
2.3 "COMPANY" or "EMPLOYER" shall mean TSW International, Inc.
2.4 "EFFECTIVE DATE" shall mean October 1, 1995.
2.5 "ELECTION FORM AND WAIVER AGREEMENT" shall mean the agreement
provided to the Employee by the Administrator as provided in Section 5.1
hereof upon which the Employee, in exchange for the benefits provided by
Article 5 of this Plan, (1) may elect to receive benefits under Article 5 of
the Plan, (2) agrees to waive all claims against the Company and other
affiliates of the Company that he may have, (3) agrees to return all Company
materials in his possession and ensure the continual confidentiality of all
trade secrets and confidential and proprietary information (as defined by
applicable law) of the Company that he has obtained during his employment
with the Company, (4) for a period of twelve (12) months following the
execution of the Election Form and Waiver Agreement, agrees not to apply for
or otherwise seek reemployment with the Company or any affiliate or
subsidiary of the Company, and (5) for
-2-
<PAGE>
a period of twelve (12) months following the execution of the Election Form and
Waiver Agreement, agrees not to solicit, divert, hire away or appropriate other
employees or existing or actively sought prospective customers of the Company
located within the United States.
2.6 "EMPLOYEE" shall mean an individual who is classified for payroll
purposes by the Company as an active full-time or regular part-time
employee of the Company and who is employed by the Company in the United
States.
2.7 "EMPLOYEE OUTPLACEMENT SERVICES" shall mean the services
established by the Company from time to time for the purpose of assisting
Employees covered by the Plan in finding employment outside of the Company.
A Participant shall be eligible to participate in the Employee Outplacement
Services, the nature and provisions of which services shall be determined at
the sole discretion of the Company, and will not exceed four (4) weeks
duration measured from the Participant's Notification Date.
2.8 "GROUP LIFE INSURANCE PLAN" shall mean the group life insurance
program covering the Participant, as such plan may be amended from time to
time.
2.9 "MONTH OF SERVICE" shall include any calendar month during which a
Participant has worked at least one (1) hour or was on approved leave of
absence while in the employ of the Company or any affiliate or subsidiary of
the Company, but shall not include (a) with respect to employment service
rendered to the Company or any affiliate or subsidiary of the Company, any
service rendered
-3-
<PAGE>
prior to a two (2) year Break in Employment; (b) any service for which a
Participant has previously received credit for purposes of calculating a
severance benefit of any type paid on account of termination of employment
with the Company or any affiliate or subsidiary of the Company; and (c) any
service rendered to the Company as an independent contractor.
2.10 "NOTIFICATION DATE" shall mean the date the Employee is formally
notified of his termination of employment with the Company and of his
benefits under the Plan.
2.11 "PARTICIPANT" shall mean an Employee who meets the eligibility
requirements of Article 3 of the Plan.
2.12 "PLAN" shall mean the TSW International, Inc. Involuntary
Severance Benefits Plan.
2.13 "STRAIGHT TIME PAY" for regular full-time Employees shall mean the
Employee's highest base salary during the calendar year in which his
Termination Date occurs. Base pay shall not include any premiums, incentive
or overtime pay. For part-time Employees, "Straight Time Pay" shall be the
actual average salary paid during the calendar year in which the Employee's
termination occurs.
2.14 "TERMINATION DATE" shall mean the date on which an Employee is
separated from the Employer's regular payroll.
2.15 "YEAR OF SERVICE" shall mean the total of an Employee's Months of
Service divided by twelve (12) rounded to the nearest whole year, rounding up
if the remaining number of months is seven (7) or greater and rounding down
if the remaining number of months is less than seven (7).
-4-
<PAGE>
ARTICLE 3 - ELIGIBILITY FOR BENEFITS
3.1 ELIGIBILITY TO RECEIVE BENEFITS. Subject to the exceptions set
forth below, any Employee of the Company whose employment is involuntarily
terminated shall be eligible to receive benefits under the Plan, the amount
and type of which shall be determined by Articles 4 and 5 below.
Except as provided above, an Employee of the Company is not eligible to
receive the benefits under the Plan if the Employee: (a) voluntarily
terminates his employment for any other reason; (b) is terminated by the
Company as a result of insubordination, violation of the Employer's rules, or
such other misconduct as may be determined by the Employer in its sole
discretion; (c) accepts the transfer of his employment to any subsidiary or
affiliate of the Company; (d) is offered continued employment with the
Company or any affiliate or subsidiary of the Company in a commensurate
position (as determined in the sole discretion of the Company) but refuses
such continued employment; (e) elects to receive the benefits of any other
voluntary or involuntary severance, separation or outplacement program
maintained by the Employer; or (f) accepts a position with similar
responsibilities and duties with any employer that succeeds to all or any
portion of the business of the Employer.
-5-
<PAGE>
ARTICLE 4 - SEVERANCE BENEFITS NOT SUBJECT TO
EXECUTION OF ELECTION FORM AND WAIVER AGREEMENT
4.1 ELIGIBILITY. An Employee who has met the requirements of Section
3.1 shall at the Company's discretion be entitled to receive the Outplacement
Benefits described in this Article 4.
4.2 EMPLOYEE OUTPLACEMENT SERVICES. A Participant who is eligible to
receive benefits under this Article 4 shall be eligible to participate
in the Employee Outplacement Services where he will continue to be
employed by the Company and continue to receive his current pay and
benefits for a period of two (2) weeks following the Participant's
Notification Date, including regular participation in any employee
benefits plans sponsored by the Company in which the Participant was
participating at the time such Participant became eligible to
participate in this Plan.
-6-
<PAGE>
ARTICLE 5 - SEVERANCE BENEFITS SUBJECT TO
EXECUTION OF ELECTION FORM AND WAIVER AGREEMENT
5.1 ELIGIBILITY. Any Employee who has met the eligibility
requirements of Section 3.1 may additionally elect to receive benefits under
this Article 5 if he files an Election Form and Waiver Agreement with the
Administrator not later than the deadline determined by the Administrator and
allows such Election Form and Waiver Agreement to become effective. In the
event such an Election Form and Waiver Agreement is not properly executed and
submitted by such deadline, the Administrator will interpret the failure as a
rejection of the benefits under Article 5 of the Plan. A properly executed
Election Form and Waiver Agreement is an indication of the Employee's
election to receive benefits under Article 5 of the Plan; an agreement to
waive all claims against the Employer and other affiliates of the Company; an
agreement to return all Company materials in the Employee's possession and
ensure the continual confidentiality of all trade secrets and confidential
and proprietary information (as defined by applicable law) of the Company
that the Employee has obtained knowledge of while an Employee of the
Employer; an agreement not to apply for or otherwise seek reemployment with
the Employer or any affiliate or subsidiary of the Company for a period of
twelve (12) months; and an agreement not to solicit, divert, hire away or
appropriate other employees or existing or actively sought prospective
customers of the Company located in the United States. Any benefits received
-7-
<PAGE>
under this Article 5 shall be in addition to and not in lieu of benefits
receivable under Article 4 hereof.
5.2 SEVERANCE BENEFIT. A Participant who elects to receive benefits
under this Article 5 shall be paid a total amount equal to the sum of
two (2) weeks' Straight Time Pay for each of the Participant's Years of
Service.
Notwithstanding anything to the contrary above, the benefits paid
pursuant to this Section 5.2 shall not be less than the following:
(a) two (2) weeks' Straight Time Pay for Non-Management Employees;
(b) four (4) weeks' Straight Time Pay for Management Employees;
(c) six (6) weeks' Straight Time Pay for Directors; and
(d) eight (8) weeks' Straight Time Pay for Vice-Presidents and
Executives.
The terms Non-Management Employees, Management Employees, Directors,
Vice-Presidents and Executives shall be given such meanings as the Company
may decide in its sole discretion.
5.3 MAXIMUM BENEFIT. Notwithstanding anything to the contrary above,
the maximum benefit available under Sections 5.2, when added to the
monetary benefits provided under Article 4 hereof shall be an amount equal
to such Participant's annual compensation. For purposes of this Section
5.3, annual compensation shall mean Straight Time Pay plus thirty percent
(30%). When necessary, the
-8-
<PAGE>
Administrator shall reduce the severance benefits described in Section 5.2 above
to comply with this Section 5.3.
5.4 PAYMENT OF BENEFITS. The benefits as set forth in Section 5.2
shall be payable in equal installments of two (2) weeks' Straight Time Pay to
be paid on each payroll date, beginning on the first payroll date following
the later to occur of (a) the expiration of any applicable revocation period
for the Election Form and Waiver Agreement, or (b) the Participant's
Termination Date, and ending on the payroll date on which all benefits due to
the Participant under the terms of the Plan are paid. However, at the
Company's sole discretion, the total amount payable under Section 5.2 may be
paid in a single lump sum payment within fifteen (15) working days of the
later to occur of (a) the expiration of any applicable revocation period for
the Election Form and Waiver Agreement, or (b) the Participant's Termination
Date.
Notwithstanding anything to the contrary above, all benefits due to a
Participant under the Plan shall be paid within twenty-four (24) months
following the Participant's Termination Date. If it is necessary to comply
with this provision, the Plan Administrator shall pay the balance of the
benefits due under the Plan to the Participant on the last payroll date to
occur prior to the expiration of twenty-four (24) months following the
Participant's Termination Date.
5.5 BENEFITS IN THE EVENT OF DEATH. If the Participant has completed
and allowed to become effective an Election Form and Waiver Agreement, in the
event of the Participant's death prior to
-9-
<PAGE>
the payment of all benefits due under this Article 5, the Participant's
spouse, or if no spouse exists, the Participant's beneficiary under the Group
Life Insurance Plan, shall be entitled to receive as due any benefits not yet
paid under this Plan.
-10-
<PAGE>
ARTICLE 6 - ADMINISTRATION
6.1 ADMINISTRATOR. The Administrator shall be responsible for the
general administration of the Plan and shall be a "named fiduciary" under
Section 402 of the Employee Retirement Income Security Act of 1974, as
amended.
6.2 DUTIES OF THE ADMINISTRATOR. The Administrator shall be
responsible for the daily administration of the Plan and may appoint other
persons or entities to perform or assist in the performance of any of its
fiduciary duties, subject to its review and approval. The Administrator
shall have the right to remove any such appointee from his position without
cause upon notice. Any person, group of persons, or entity may serve in more
than one fiduciary capacity.
The Administrator shall maintain permanent records and accounts of
Participants and of their rights under the Plan and of all receipts,
disbursements, transfers, and other transactions concerning the Plan. Such
accounts, books, and records relating thereto shall be open at all reasonable
times to inspection and audit by the Company and any persons designated
thereby.
The Administrator shall take all steps necessary to ensure that the Plan
complies with the law at all times, including the preparation and filing of
all documents and forms required by any governmental agency; maintenance of
adequate Participant records; recording and transmission of all notices
required to be given to Participants and their beneficiaries; receipt and
dissemination, if
-11-
<PAGE>
required, of all reports and information received from the Employer; securing
of such fidelity bonds as may be required by law; and doing such other acts
necessary for the proper administration of the Plan. The Administrator shall
keep a record of all of its proceedings and acts, and shall keep all such
books of accounts, records, and other data as may be necessary for proper
administration of the Plan. The Administrator shall notify the Employer upon
its request of any action taken by it, and when required, shall notify any
other interested person or persons.
6.3 POWERS. The Administrator shall administer the Plan in accordance
with its terms and shall have all powers necessary to carry out the
provisions of the Plan as more particularly set forth herein. The
Administrator shall have discretionary authority to interpret the Plan
(including any ambiguities herein) and to determine all questions arising in
the administration, interpretation, and application of the Plan. All such
determinations shall be conclusive and binding on all interested persons.
The Administrator shall adopt such procedures and regulations necessary
and/or desirable for the discharge of its duties hereunder and may appoint
such accountants, counsel, actuaries, specialists, and other agents as it
deems necessary and/or desirable in connection with the administration of
this Plan. The Administrator shall be the legal appointed agent for the
service of process.
-12-
<PAGE>
6.4 COMPENSATION OF THE ADMINISTRATOR. The Administrator shall not
receive any compensation from the Plan for his services.
6.5 PAYMENT OF EXPENSES. The Administrator shall be reimbursed by the
Employer for its reasonable expenses incurred in the discharge of its duties.
Such expenses shall include any expenses incident to its duties, including,
but not limited to, fees of accountants, counsel, actuaries, and other
specialists, and other costs of administering the Plan.
6.6 INDEMNIFICATION. The Employer shall indemnify the Administrator
against any and all claims, losses, damages, expenses, and liability arising
from its actions or omissions, except when the same is finally adjudicated to
be due to gross negligence or willful misconduct. The Employer may purchase
at its own expense sufficient liability insurance for the Administrator to
cover any and all claims, losses, damages, and expenses arising from any
action or omission in connection with the execution of the duties as the
Administrator.
-13-
<PAGE>
ARTICLE 7 - MISCELLANEOUS
7.1 FUNDING OF BENEFITS. The benefits payable to a Participant under
the Plan shall not be funded in any manner and shall be paid by the Employer
out of its general assets, which assets are subject to the claims of the
Employer's creditors.
7.2 SETTLEMENT OF ACCOUNTS. Except as prohibited by applicable law,
there shall be deducted from the payment of any benefit due under the Plan
the amount of any indebtedness, obligations, or liabilities owed by the
Participant to the Employer or any subsidiary or affiliate of the Company,
including, but not limited to, amounts owed for loans, and travel advances.
7.3 WITHHOLDING. There shall be deducted from the payment of any
benefit due under the Plan the amount of any tax required by any governmental
authority to be withheld and paid over by the Employer to such governmental
authority for the account of the Participant entitled to such payment.
7.4 ASSIGNMENT. Unless required by court order, no Participant or
beneficiary shall have any rights to sell, assign, transfer, encumber, or
otherwise convey the right to receive the payment of any benefit due
hereunder, which payment and the rights thereto are expressly declared to be
nonassignable and nontransferable. Any attempt to do so shall be null and
void and of no effect.
-14-
<PAGE>
7.5 AMENDMENT AND TERMINATION. The Plan may be amended or terminated
at any time by the Company, provided that neither any amendment nor
termination shall cause a forfeiture or reduction in any benefits accrued as
of the date of such amendment or termination.
7.6 NO GUARANTEE OF EMPLOYMENT. Participation hereunder shall not be
construed as creating any contract of employment between the Employer and any
Participant, nor shall it limit the right of the Employer to terminate the
Participant's employment at any time for any reason whatsoever.
7.7 CONSTRUCTION. This Plan shall be construed in accordance with and
governed by the laws of the State of Georgia, to the extent such laws are not
otherwise superseded by the laws of the United States.
-15-
<PAGE>
IN WITNESS WHEREOF, this Plan has been executed by duly authorized
officers of TSW International, Inc. this 28th day of September, 1995, to be
effective as of October 1, 1995.
PLAN SPONSOR:
Attest:
- -------------------------
By:
- ------------------------------ By: /s/ Allen Vaughn
-----------------------------------
Title: Title: Vice President, Human Resources
------------------------ -------------------------------
[CORPORATE SEAL)
-16-
<PAGE>
EXHIBIT 10.16
8/1/93
The CORPORATEplan for Retirement
THE PROFIT SHARING/4O1(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
<PAGE>
8/1/93
THE CORPORATE PLAN FOR RETIREMENT
PROFIT SHARING/401(K) PLAN
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Reemployment
3.03 - Cessation or Resumption of Participation Following a Change in Status
3.04 - Participation by Owner-Employee; Controlled Businesses
3.05 - Omission of Eligible Employee
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Additional Limit on Deferral Contributions
4.03 - Matching Contributions
4.04 - Limit on Matching Contributions and Employee Contributions
4.05 - Special Rules
4.06 - Fixed Discretionary Employer Contributions
4.07 - Time of Making Employer Contributions
4.08 - Return of Employer Contributions
4.09 - Employee Contributions
4.10 - Rollover Contributions
4.11 - Deductible Voluntary Employee Contributions
4.12 - Additional Rules for Paired Plans
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
5.02 - Valuation of Accounts
5.03 - Code Section 415 Limitations
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
6.03 - Participant Directions to Trustee
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Late Retirement
<PAGE>
8/1/93
7.03 - Disability Retirement
7.04 - Death
7.05 - Other Termination of Employment
7.06 - Separate Account
7.07 - Forfeitures
7.08 - Adjustment for Investment Experience
7.09 - Participant Loans
7.10 - In-Service Withdrawals
7.11 - Prior Plan In-Service Distribution Rules
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Annuity Distributions
8.03 - Joint and Survivor Annuities/Preretirement Survivor Annuities
8.04 - Installment Distributions
8.05 - Immediate Distributions
8.06 - Determination of Method of Distribution
8.07 - Notice to Trustee
8.08 - Time of Distribution
8.09 - Whereabouts of Participants and Beneficiaries
ARTICLE 9
TOP-HEAVY PROVISIONS
9.01 - Application
9.02 - Definitions
9.03 - Minimum Contribution
9.04 - Adjustment to the Limitation on Contributions and Benefits
9.05 - Minimum Vesting
ARTICLE 10
AMENDMENT AND TERMINATION
10.01 - Amendment by Employer
10.02 - Amendment by Prototype Sponsor
10.03 - Amendments Affecting Vested and/or Accrued Benefits
10.04 - Retroactive Amendments
10.05 - Termination
10.06 - Distribution Upon Termination of the Plan
10.07 - Merger or Consolidation of Plan; Transfer of Plan Assets
ARTICLE 11
AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS TO OR FROM
OTHER QUALIFIED PLANS
11.01 - Amendment and Continuation of Predecessor Plan
11.02 - Transfer of Funds from an Existing Plan
11.03 - Acceptance of Assets by Trustee
11.04 - Transfer of Assets from Trust
ARTICLE 12
MISCELLANEOUS
12.01 - Communication to Participants
<PAGE>
8/1/93
12.02 - Limitation of Rights
12.03 - Nonalienability of Benefits and Qualified Domestic Relations Orders
12.04 - Facility of Payment
12.05 - Information Between Employer and Trustee
12.06 - Effect of Failure to Qualify Under Code
12.07 - Notices
12.08 - Governing Law
ARTICLE 13
PLAN ADMINISTRATION
13.01 - Powers and Responsibilities of the Administrator
13.02 - Nondiscriminatory Exercise of Authority
13.03 - Claims and Review Procedures
13.04 - Named Fiduciary
13.05 - Costs of Administration
ARTICLE 14
TRUST AGREEMENT
14.01 - Acceptance of Trust Responsibilities
14.02 - Establishment of Trust Fund
14.03 - Exclusive Benefit
14.04 - Powers of Trustee
14.05 - Accounts
14.06 - Approving of Accounts
14.07 - Distribution from Trust Fund
14.08 - Transfer of Amounts from Qualified Plan
14.09 - Transfer of Assets from Trust
14.10 - Separate Trust or Fund for Existing Plan Assets
14.11 - Voting; Delivery of Information
14.12 - Compensation and Expenses of Trustee
14.13 - Reliance by Trustee on other Persons
14.14 - Indemnification by Employer
14.15 - Consultation by Trustee with Counsel
14.16 - Persons Dealing with the Trustee
14.17 - Resignation or Removal of Trustee
14.18 - Fiscal Year of the Trust
14.19 - Discharge of Duties by Fiduciaries
14.20 - Amendment
14.21 - Plan Termination
14.22 - Permitted Reversion of Funds to Employer
14.23 - Governing Law
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ARTICLE 1. ADOPTION AGREEMENT.
ARTICLE 2. DEFINITIONS.
2.01. DEFINITIONS.
(a) Wherever used herein, the following terms have the meanings met forth
below, unless a different meaning is clearly required by the context:
(1) "Account" means an account established on the books of the Trust
for the purpose of recording contributions made on behalf of a
Participant and any income, expenses, gains or losses incurred
thereon.
(2) "Administrator" means the Employer adopting this Plan, or other
person designated by the Employer in Section 1.01(c).
(3) "Adoption Agreement" means Article 1, under which the Employer
establishes and adopts, or amends, the Plan and Trust and designates
the optional provisions selected by the Employer, and the Trustee
accepts its responsibilities under Article 14. The provisions of the
Adoption Agreement shall be an integral part of the Plan.
(4) "Annuity Starting Date" means the first day of the first period
for which an amount is payable as an annuity or in any other form.
(5) "Beneficiary" means the person or persons entitled under Section
7.04 to receive benefits under the Plan upon the death of a
Participant, provided that for purposes of Section 7.04 such term
shall be applied in accordance with Section 401(a)(9) of the Code and
the regulations thereunder.
(6) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(7) "Compensation" shall mean
(A) for purposes of Article 4 (Contributions), compensation as
defined in Section 5.03(e)(2) excluding any items elected by the
Employer in Section 1.04(a), reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving expenses,
deferred compensation and welfare benefits, but including amounts
that are not includable in the gross income of the Participant
under a salary reduction agreement by reason of the application
of Sections 125, 402(a)(8), 402(h), or 403(b) of the Code; and
(B) for purposes of Section 2.01(a)(16) (Highly Compensated
Employees), Section 5.03 (Code Section 415 Limitations), and
Section 9.03 (Top-Heavy Plan Minimum Contribution), compensation
as defined in Section 5.03(e)(2).
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Compensation shall generally be based on the amount actually paid
to the Participant during the Plan Year or, for purposes of Article 4
if so elected by the Employer in Section 1.04(b), during that portion
of the Plan Year during which the Employee is eligible to participate.
Notwithstanding the preceding sentence, compensation for purposes of
Section 5.03 (Code Section 415 Limitations) shall be based on the
amount actually paid or made available to the Participant during the
Limitation Year. Compensation for the initial Plan Year for a new
plan shall be based upon eligible Participant Compensation, subject to
Section 1.04(b), from the Effective Date listed in Section l.01(g)(l)
through the end of the first Plan Year.
In the case of any Self-Employed Individual, Compensation shall
mean the Individual's Earned Income.
For years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account for determining
all benefits provided under the plan for any determination period
shall not exceed $200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under Section
415(d) of the Code, except that the dollar increase in effect on
January 1 of any calendar year is effective for years beginning in
such calendar year and the first adjustment to the $200,000 limitation
is effected on January 1, 1990. If a plan determines Compensation on
a period of time that contains fewer than 12 calendar months, then the
annual Compensation limit is the amount equal to the annual
Compensation limit for the calendar year in which the Compensation
period begins multiplied by the ratio obtained by dividing the number
of full months in the period by 12.
If Compensation for any prior determination period is taken into
account in determining an Employee's allocations or benefits for the
current determination period, the Compensation for such prior year is
subject to the applicable annual compensation limit in effect for that
prior year. For this purpose, for years beginning before January 1,
1990, the applicable annual compensation limit is $200,000.
In determining the Compensation of a Participant for purposes of
this limitation, the rules of Section 414(q)(6) of the Code shall
apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the close of
the year. If the $200,000 limitation is exceeded as a result of the
application of these rules, then the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application
of this limitation.
(8) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to which
the Plan is established and for which the personal
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services of such individual are a material income-providing factor,
excluding any items not included in gross income and the deductions
allocated to such items, except that for taxable years beginning after
December 31, 1989 net earnings shall be determined with regard to the
deduction allowed under Section 164(f) of the Code, to the extent
applicable to the Employer. Net earnings shall be reduced by
contributions of the Employer to any qualified plan, to the extent a
deduction is allowed to the Employer for such contributions under
Section 404 of the Code.
(9) "Eligibility Computation Period" means each 12-consecutive month
period beginning with the Employment Commencement Date and each
anniversary thereof or, in the case of an Employee who, before
completing the eligibility requirements set forth in Section
l.03(a)(1), incurs a break in service for participation purposes and
thereafter returns to the employ of the Employer or Related Employer,
each 12-consecutive month period beginning with the first day of
reemployment and each anniversary thereof.
A "break in service for participation purposes" shall mean an
Eligibility Computation Period during which the participant does not
complete more than 500 Hours of Service with the Employer.
(10) "Employee" means any employee of the Employer, any Self-Employed
Individual or Owner-Employee. The Employer must specify in Section
1.03(a)(3) any Employee or class of Employees not eligible to
participate in the Plan. If the Employer elects to exclude collective
bargaining employees, the exclusion applies to any employee of the
Employer included in a unit of employees covered by an agreement which
the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one or more employers unless the
collective bargaining agreement requires the employee to be included
within the Plan. The term "employee representatives" does not include
any organization more than half the members of which are owners,
officers, or executives of the Employer.
For purposes of the Plan, an individual shall be considered to
become an Employee on the date on which he first completes an Hour of
Service and he shall be considered to have ceased to be an Employee on
the date on which he last completes an Hour of Service. The term also
includes a Leased Employee, such that contributions or benefits
provided by the leasing organization which are attributable to
services performed for the Employer shall be treated as provided by
the Employer. Notwithstanding the above, a Leased Employee shall not
be considered an Employee if Leased Employees do not constitute more
than 20 percent of the Employer's non-highly compensated work-force
(taking into account all Related Employers) and the Leased Employee is
covered by a money purchase pension plan maintained by the leasing
organization and providing (A) a nonintegrated employer contribution
rate of at least 10 percent of compensation, as defined for purposes
of Section 415(c)(3) of the Code, but including amounts contributed
pursuant to a salary reduction
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agreement which are excludable from gross income under Section 125,
Section 402(a)(8), Section 402(h) or Section 403(b) of the Code, (B)
full and immediate vesting, and (C) immediate participation by each
employee of the leasing organization.
(11) "Employer" means the employer named in Section 1.02(a) and any
Related Employers required by this Section 2.01(a)(11). If Article 1
of the Employer's Plan is the Standardized Adoption Agreement, the
term "Employer" includes all Related Employers. If Article 1 of the
Employer's Plan is the Non-standardized Adoption Agreement, the term
"Employer" includes those Related Employers designated in Section
1.02(b).
(12) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(13) "ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
(14) "Fidelity Fund" means any Registered Investment Company or
Managed Income Portfolio of the Fidelity Group Trust for Employee
Benefit Plans which is made available to plans utilizing the
CORPORATEplan for Retirement.
(15) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
(16) "Highly Compensated Employee" means both highly compensated
active Employees and highly compensated former Employees.
A highly compensated active Employee includes any Employee who
performs service for the Employer during the determination year and
who, during the "look-back year," (A) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code), (B) received compensation from the Employer in excess of
$50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a
member of the top-paid group for such year, or (C) was an officer of
the Employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code. The term "Highly Compensated
Employee" also includes (i) Employees who are both described in the
preceding sentence if the term "determination year" is substituted for
the term "look-back year" and the Employee is one of the 100 Employees
who received the most compensation from the Employer during the
determination year, and (ii) Employees who are 5-percent owners at any
time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (C)
above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a highly
compensated Employee.
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For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the twelve-month period immediately
preceding the determination year. The Employer may elect to make the
look-back year calculation for a determination on the basis of the
calendar year ending with or within the applicable determination year,
as prescribed by Section 414(q) of the Code and the regulations issued
thereunder.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active Employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year,
a family member of either a 5-percent owner who is an active or former
Employee or a highly compensated Employee who is one of the 10 most
highly compensated Employees ranked on the basis of compensation paid
by the Employer during such year, then the family member and the 5-
percent owner or top-ten highly compensated Employee shall be
aggregated. In such case, the family member and 5-percent owner or
top-ten highly compensated Employee shall be treated as a single
Employee receiving compensation and plan contributions or benefits
equal to the sum of such compensation and contributions or benefits of
the family member and 5-percent owner or top-ten highly compensated
Employee. For purposes of this Section, family member includes the
spouse, lineal ascendants and descendants of the Employee or former
Employee and the spouses of such lineal ascendants and descendants.
The determination of who is a highly compensated Employee,
including the determinations of the number and identity of Employees
in the top-paid group, the top 100 Employees, the number of Employees
treated as officers, and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
(17) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties for
the Employer or a Related Employer, each such hour to be credited
to the Employee for the Eligibility Computation Period in which
the duties were performed;
(B) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer or Related Employer
(including payments made or due from a trust fund or insurer to
which the Employer contributes or pays premiums) on account of a
period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to
vacation,
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holiday, illness, incapacity, disability, layoff, jury duty,
military duty, or leave of absence, each such hour to be credited
to the Employee for the Eligibility Computation Period in which
such period of time occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited
under this paragraph (B) on account of any single continuous
period during which the Employee performs no duties;
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is made or
due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws; and
(iii) If the period during which the Employee performs no
duties falls within two or more Eligibility Computation
Periods and if the payment made on account of such period is
not calculated on the basis of units of time, the Hours of
Service credited with respect to such period shall be
allocated between not more than the first two such
Eligibility Computation Periods on any reasonable basis
consistently applied with respect to similarly situated
Employees; and
(C) Each hour not counted under paragraph (A) or (B) for which
back pay, irrespective of mitigation of damages, has been either
awarded or agreed to be paid by the Employer or a Related
Employer, shall be credited to the Employee for the Eligibility
Computation Period to which the award or agreement pertains
rather than the Eligibility Computation Period in which the award
agreement or payment is made.
For purposes of determining Hours of Service, Employees of
the Employer and of all Related Employers will be treated as
employed by a single employer. For purposes of paragraphs (B)
and (C) above, Hours of Service will be calculated in accordance
with the provisions of Section 2530.200b-2(b) of the Department
of Labor regulations, which are incorporated herein by reference.
Solely for purposes of determining whether a break in
service for participation purposes has occurred in a
computation period, an individual who is absent from work for
maternity or paternity reasons shall receive credit for the
hours of service which would otherwise have been credited to
such individual but for such absence, or in any case in which
such hours cannot be determined, 8 hours of service per day of
such absence. For purposes of this paragraph, an absence from
work for maternity or paternity reasons means an absence (i)
by reason of the pregnancy of the individual, (ii) by reason
of a birth of a child of the individual, (iii) by reason of
the placement of a child with
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the individual in connection with the adoption of such child by
such individual, or (iv) for purposes of caring for such child
for a period beginning immediately following such birth or
placement. The hours of service credited under this paragraph
shall be credited (a) in the computation period in which the
absence begins if the crediting is necessary to prevent a break
in service in that period, or (b) in all other cases, in the
following computation period.
(18) "Leased Employee" means any individual who provides services to
the Employer or a Related Employer (the "recipient") but is not
otherwise an employee of the recipient if (A) such services are
provided pursuant to an agreement between the recipient and any other
person (the "leasing organization"), (B) such individual has performed
services for the recipient (or for the recipient and any related
persons within the meaning of Section 414(n)(6) of the Code) on a
substantially full-time basis for at least one year, and (C) such
services are of a type historically performed by employees in the
business field of the recipient.
(19) "Normal Retirement Age" means the normal retirement age specified
in Section 1.06(a) of the Adoption Agreement. If the Employer
enforces a mandatory retirement age, the Normal Retirement Age is the
lesser of that mandatory age or the age specified in Section 1.06(a).
(20) "Owner-Employee" means, if the Employer is a sole proprietorship,
the individual who is the sole proprietor, or if the Employer is a
partnership, a partner who owns more than 10 percent of either the
capital interest or the profits interest of the partnership.
(21) "Participant" means any Employee who participates in the Plan in
accordance with Article 3 hereof.
(22) "Plan" means the plan established by the Employer in the form of
the prototype plan, as set forth herein as a new plan or as an
amendment to an existing plan, by executing the Adoption Agreement,
together with any and all amendments hereto.
(23) "Plan Year" means the 12-consecutive-month period ending on the
date designated by the Employer in Section 1.01(f).
(24) "Prototype Sponsor" means Fidelity Management and Research
Company or its successor.
(25) "Registered Investment Company" means any one or more
corporations, partnerships or trusts registered under the Investment
Company Act of 1940 for which Fidelity Management and Research Company
serves as investment advisor.
(26) "Related Employer" means any employer other than the Employer
named in Section 1.02(a) if the Employer and such other employer are
members of a controlled group of corporations (as defined in Section
414(b) of the Code) or an affiliated service group (as
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defined in Section 414(m)), or are trades or businesses (whether or
not incorporated) which are under common control (as defined in
Section 414(c)), or such other employer is required to be aggregated
with the Employer pursuant to regulations issued under Section 414(o).
(27) "Self-Employed Individual" means an individual who has Earned
Income for the taxable year from the Employer or who would have had
Earned Income but for the fact that the trade or business had no net
profits for the taxable year.
(28) "Trust" means the trust created by the Employer in accordance
with the provisions of Section 14.01.
(29) "Trust Agreement" means the agreement between the Employer and
the Trustee, as set forth in Article 14, under which the assets of the
Plan are held, administered, and managed.
(30) "Trust Fund" means the property held in Trust by the Trustee for
the Accounts of the Participants and their Beneficiaries.
(31) "Trustee" means the Fidelity Management Trust Company, or its
successor.
(32) "Year of Service for Participation." means, with respect to any
Employee, an Eligibility Computation Period during which the Employee
has been credited with at least 1,000 Hours of Service. If the Plan
maintained by the Employer is the plan of a predecessor employer, an
Employee's Years of Service for Participation shall include years of
service with such predecessor employer. In any case in which the Plan
maintained by the Employer is not the plan maintained by a predecessor
employer, service for such predecessor shall be treated as service for
the Employer, to the extent provided in Section 1.08.
(33) "Years of Service for Vesting" means, with respect to any
Employee, the number of whole years of his periods of service with the
Employer or a Related Employer (the elapsed time method to compute
vesting service), subject to any exclusions elected by the Employer in
Section 1.07(b). An Employee will receive credit for the aggregate of
all time period(s) commencing with the Employee's Employment
Commencement Date and ending on the date a break in service begins,
unless any such years are excluded by Section 1.07(b). An Employee
will also receive credit for any period of severance of less than 12
consecutive months. Fractional periods of a year will be expressed in
terms of days.
In the case of a Participant who has 5 consecutive 1-year breaks
in service, all years of service after such breaks in service will be
disregarded for the purpose of vesting the Employer-derived account
balance that accrued before such breaks, but both pre-break and post-
break service will count for the purposes of vesting the Employer-
derived account balance that accrues after such breaks. Both accounts
will share in the earnings and losses of the fund.
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In the case of a Participant who does not have 5 consecutive 1-
year breaks in service, both the pre-break and post-break service will
count in vesting both the pre-break and post-break employer-derived
account balance.
A break in service is a period of severance of at least 12
consecutive months. Period of severance is a continuous period of
time during which the Employee is not employed by the Employer. Such
period begins on the date the Employee retires, quits or is
discharged, or if earlier, the 12-month anniversary of the date on
which the Employee was otherwise first absent from service.
In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month period
beginning on the first anniversary of the first date of such absence
shall not constitute a break in service. For purposes of this
paragraph, an absence from work for maternity or paternity reasons
means an absence (A) by reason of the pregnancy of the individual, (B)
by reason of the birth of a child of the individual, (C) by reason of
the placement of a child with the individual in connection with the
adoption of such child by such individual, or (D) for purposes of
caring for such child for a period beginning immediately following
such birth or placement.
If the Plan maintained by the Employer is the plan of a
predecessor employer, an Employee's Years of Service for Vesting shall
include years of service with such predecessor employer. In any case
in which the Plan maintained by the Employer is not the plan
maintained by a predecessor employer, service for such predecessor
shall be treated as service for the Employer to the extent provided in
Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include the
feminine gender unless the context clearly indicates otherwise.
ARTICLE 3. PARTICIPATION.
3.01. DATE OF PARTICIPATION. All Employees in the eligible class (as defined in
Section 1.03(a)(3)) who are in the service of the Employer on the Effective Date
will become Participants on the date elected by the Employer in Section 1.03(c).
Any other Employee will become a Participant in the Plan as of the first Entry
Date on which he first satisfies the eligibility requirements set forth in
Section 1.03(a). In the event that an Employee who is not a member of an
eligible class (as defined in Section 1.03(a)(3)) becomes a member of an
eligible class, the individual shall participate immediately if such individual
had already satisfied the eligibility requirements and would have otherwise
previously become a Participant.
If an eligibility requirement other than one Year of Service is elected in
1.03(a)(1), an Employee may not be required to complete a minimum number of
Hours of Service before becoming a Participant. An otherwise eligible Employee
subject to a minimum months of service requirement
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shall become a Participant on the first Entry Date following his completion of
the required number of consecutive months of employment measured from his
Employment Commencement Date to the coinciding date in the applicable following
month. For purposes of determining consecutive months of service, the Related
Employer and predecessor employer rules contained in Sections 2.01(a)(17) and
2.01(a)(32) shall apply.
3.02. RESUMPTION OF PARTICIPATION FOLLOWING REEMPLOYMENT. If a Participant
ceases to be an Employee and thereafter returns to the employ of the Employer he
will be treated as follows:
(a) he will again become a Participant on the first date on which he
completes an Hour of Service for the Employer following his reemployment
and is in the eligible class of Employees as defined in Section 1.03(a)(3),
and
(b) any distribution which he is receiving under the Plan will cease
except as otherwise required under Section 8.08.
3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be a member of an eligible class as defined in Section 1.03(a)(3), the
individual shall continue to be a Participant for most purposes until the entire
amount of his benefit is distributed; however, the individual shall not be
entitled to receive an allocation of contributions or forfeitures during the
period that he is not a member of the eligible class. Such Participant shall
continue to receive credit for service completed during the period for purposes
of determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes a member of an eligible class of
Employees, the individual shall resume full participation immediately upon the
date of such change in status.
3.04. PARTICIPATION BY OWNER-EMPLOYEE: CONTROLLED BUSINESSES. If the Plan
provides contributions or benefits for one or more Owner-Employees who control
both the trade or business with respect to which the Plan is established and one
or more other trades or businesses, the Plan and any plan established with
respect to such other trades or businesses must, when looked at as a single
plan, satisfy Sections 401(a) and 401(d) of the Code with respect to the
employees of this and all such other trades or businesses. If the Plan provides
contributions or benefits for one or more Owner-Employees who control one or
more other trades or businesses, the Employees of each such other trade or
business must be included in a plan which satisfies Sections 401(a) and 401(d)
of the Code and which provides contributions and benefits not less favorable
than provided for Owner-Employees under the Plan.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the Employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
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For purposes of this Section, an Owner-Employee, or two or more Owner-
Employees, shall be considered to control a trade or business if such Owner-
Employee, or such Owner-Employees together, (a) own the entire interest in an
unincorporated trade or business or (b) in the case of a partnership, own more
than 50 percent of either the capital interest or the profits interest in such
partnership. For this purpose, an Owner-Employee, or two or more Owner-
Employees, shall be treated as owning any interest in a partnership which is
owned, directly or indirectly, by a partnership controlled by such Owner-
Employee or such Owner-Employees.
3.05. OMISSION OF ELIGIBLE EMPLOYEE. If any Employee who should be included as
a Participant in the Plan is erroneously omitted and discovery of such omission
is not made until after a contribution by his Employer for the year has been
made, the Employer shall make a subsequent contribution, if necessary, so that
the omitted Employee receives the total amount which the said Employee would
have received had he not been omitted. For purposes of this Section 3.05, the
term "contribution" shall not include Deferral Contributions and Matching
Contributions made pursuant to Sections 4.01 and 4.03, respectively.
ARTICLE 4. CONTRIBUTIONS.
4.01. DEFERRAL CONTRIBUTIONS.
(a) 4.01. If so provided by the Employer in Section 1.05(b), each
Participant may elect to execute a salary reduction agreement with the
Employer to reduce his Compensation by a specified percentage not exceeding
15% per payroll period, subject to any exceptions elected by the Employer
in Section 1.05(b)(2) and 1.05(b)(3) and equal to a whole number multiple
of one (1) percent. Such agreement shall become effective on the first day
of the first payroll period for which the Employer can reasonably process
the request. The Employer shall make a Deferral Contribution on behalf of
the Participant corresponding to the amount of said reduction, subject to
the restrictions set forth below. Under no circumstances may a salary
reduction agreement be adopted retroactively.
(b) A Participant may elect to change or discontinue the percentage by
which his Compensation is reduced by notice to the Employer as provided in
Section 1.05(b)(1).
(c) No Participant shall be permitted to have Deferral Contributions made
under the Plan, or any other qualified plan maintained by the Employer,
during the taxable year, in excess of the dollar limitation contained in
Section 402(g) of the Code in effect at the beginning of such taxable year.
A Participant may assign to the Plan any Excess Deferrals made during
the taxable year of the Participant by notifying the Plan Administrator on
or before March 15 following the taxable year of the amount of the Excess
Deferrals to be assigned to the Plan. A Participant is deemed to notify
the Administrator of any Excess
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Deferrals that arise by taking into account only those Deferral
Contributions made to the Plan and any other plan of the Employer.
Notwithstanding any other provision of the Plan, Excess Deferrals, plus any
income and minus any loss allocable thereto, shall be distributed no later
than April 15 to any Participant to whose Account Excess Deferrals were so
assigned for the preceding year and who claims Excess Deferrals for such
taxable year.
"Excess Deferrals" shall mean those Deferral Contributions that are
includable in a Participant's gross income under Section 402(g) of the Code
to the extent such Participant's Deferral Contributions for a taxable year
exceed the dollar limitation under such Code section. For purposes of
determining Excess Deferrals, the term "Deferral Contributions" shall
include the sum of all Employer Contributions made on behalf of such
Participant pursuant to an election to defer under any qualified CODA as
described in Section 401(k) of the Code, any simplified employee pension
cash or deferred arrangement as described in Section 402(h)(l)(B) of the
Code, any eligible deferred compensation plan under Section 457 of the
Code, any plan as described under Section 501(c)(18) of the Code, and any
Employer Contributions made on the behalf of a Participant for the purchase
of an annuity contract under Section 403(b) of the Code pursuant to a
salary reduction agreement. Deferral Contributions shall not include any
deferrals properly distributed as excess annual additions. Excess
Deferrals shall be treated as annual additions under the Plan, unless such
amounts are distributed no later than the first April 15 following the
close of the Participant's taxable year.
Excess Deferrals shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Deferrals is
(1) income or loss allocable to the Participant's Deferral Contributions
Account for the taxable year multiplied by a fraction, the numerator of
which is such Participant's Excess Deferrals for the year and the
denominator is the Participant's Account balance attributable to Deferral
Contributions without regard to any income or loss occurring during such
taxable year, or (2) such other amount determined under any reasonable
method, provided that such method is used consistently for all Participants
in calculating the distributions required under this Section 4.01(c) and
Sections 4.02(d) and 4.04(d) for the Plan Year, and is used by the Plan in
allocating income or loss to Participants' Accounts. Income or loss
allocable to the period between the end of the Plan Year and the date of
distribution shall be disregarded in determining income or loss.
(d) In order for the Plan to comply with the requirements of Sections
401(k), 402(g) and 415 of the Code and the regulations promulgated
thereunder, at any time in a Plan Year the Administrator may reduce the
rate of Deferral Contributions to be made on behalf of any Participant, or
class of Participants, for the remainder of that Plan Year, or the
Administrator may require that all Deferral Contributions to be made on
behalf of a Participant be discontinued for the remainder of that Plan
Year. Upon the close of the Plan Year or such earlier date as the
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Administrator may determine, any reduction or discontinuance in Deferral
Contribution shall automatically cease until the Administrator again
determines that such a reduction or discontinuance of Deferral
Contributions is required.
4.02. ADDITIONAL LIMIT ON DEFERRAL CONTRIBUTIONS
(a) The Actual Deferral Percentage (hereinafter "ADP") for Participants
who are Highly Compensated Employees for each Plan Year and the ADP for
participants who are Non-highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
(1) The ADP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ADP for Participants who are Non-
highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(2) The ADP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ADP for Participants who are Non-
highly Compensated Employees for the same Plan Year multiplied by 2.0,
provided that the ADP for Participants who are Highly Compensated
Employees does not exceed the ADP for Participants who are Non-highly
Compensated Employees by more than two (2) percentage points.
(b) The following special rules apply for the purposes of this Section:
(1) The ADP for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to have Deferral Contributions
(and Qualified Discretionary Contributions if treated as Deferral
Contributions for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Section 401(k) of
the Code that are maintained by the Employer, shall be determined as
if such Deferral Contributions (and, if applicable, such Qualified
Discretionary Contributions) were made under a single arrangement. If
a Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(k) of the Code.
(2) In the event that this Plan satisfies the requirements of
Sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy
the requirements. of such Sections of the Code only if aggregated with
this plan, then this Section shall be applied by determining the ADP
of Employees as if all such plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated in order to
satisfy section 401(k) of the Code only if they have the same Plan
Year.
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(3) For purposes of determining the ADP of a Participant who is a 5-
percent owner or one of the ten most highly-paid Highly Compensated
Employees, the Deferral Contributions (and Qualified Discretionary
Contributions if treated as Deferral Contributions for purposes of the
ADP test) and Compensation of such Participant shall include the
Deferral Contributions (and, if applicable, Qualified Discretionary
Contributions) and Compensation for the Plan Year of Family Members
(as defined in Section 414(q)(6) of the Code). Family Members, with
respect to between the end of the Plan Year and the date of
distribution shall be disregarded in determining income or loss.
Excess Contributions shall be distributed from the Participant's
Qualified Discretionary Contribution account only to the extent that such
Excess Contributions exceed the balance in the Participant's Deferral
Contributions account.
(4) For purposes of determining the ADP test, Deferral Contributions
and Qualified Discretionary Contributions must be made before the last
day of the twelve-month period immediately following the Plan Year to
which contributions relate.
(5) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Discretionary
Contributions used in such test.
(6) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Actual Deferral Percentage" shall mean, for a specified group of
Participants for a Plan Year, the average of the ratios (calculated
separately for each Participant in such group) of (A) the amount of
Employer contributions actually paid over to the Trust on behalf of
such Participant for the Plan Year to (B) the Participant's
Compensation for such Plan Year. Employer contributions on behalf of
any Participant shall include (i) any Deferral Contributions made
pursuant to the Participant's deferral election, including Excess
Deferrals of Highly Compensated Employees, but excluding (a) Excess
Deferrals of Non-highly Compensated Employees that arise solely from
Deferral Contributions made under the Plan or plans of the Employer
and (b) Deferral Contributions that are taken into account in the
Contribution Percentage test (provided the ADP test is satisfied both
with and without exclusion of these Deferral Contributions) and (ii)
at the election of the Employer, Qualified Discretionary
Contributions. Matching Contributions, whether or not non-forfeitable
when made, shall not be considered as Employer Contributions for
purposes of this paragraph. For purposes of computing Actual Deferral
Percentages, an Employee
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who would be a Participant but for the failure to make Deferral
Contributions shall be treated as a Participant on whose behalf no
Deferral Contributions are made.
(2) "Excess Contributions" shall mean, with respect to any Plan Year,
the excess of
(a) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
(b) The maximum amount of such contributions permitted by the
ADP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of the ADPs, beginning with
the highest of such percentages).
(3) "Qualified Discretionary Contributions" shall mean contributions
made by the Employer as elected in Section l.05(b)(4) and allocated to
Participant Accounts of Non-highly Compensated Employees that such
Participants may not elect to receive in cash until distributed from
the Plan, that are nonforfeitable when made, and that are
distributable only in accordance with the distribution provisions that
are applicable to Deferral Contributions. Participants shall not be
required to satisfy any hours of service or employment requirement in
order to receive an allocation of such contributions.
(d) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Excess Contributions were allocated
for the preceding Plan Year. If such excess amounts are distributed
more than 2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, a ten- (10-) percent excise tax will be imposed on
the Employer maintaining the Plan with respect to such amounts. Such
distributions shall be made to Highly Compensated Employees on the basis
of the respective portions of the Excess Contributions attributable to
each of such employees. Excess Contributions of Participants who are
subject to the family member aggregation rules of Section 414(q)(6) of
the Code shall be allocated among the family members in proportion to
the Deferral Contributions (and amounts treated as Deferral
Contributions) of each family member that is combined to determine the
combined ADP.
Excess Contributions shall be treated as annual additions under the Plan.
Excess Contributions shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Contributions
is (1) income or loss allocable to the Participant's Deferral Contribution
Account (and if applicable, the Qualified Discretionary Contribution
Account) for the Plan Year multiplied by a fraction, the numerator of which
is such Participant's Excess Contributions for the year and the denominator
is the Participant's
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Account balance attributable to Deferral Contributions without regard to
any income or loss occurring during such Plan Year, or (2) an amount
determined under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions required
under Section 4.02(d) and Sections 4.01(c) and 4.04(d) for the Plan Year,
and is used by the Plan in allocating income or loss to the Participants'
Accounts. Income or loss allocable to the period between the end of the
Plan Year and the date of distribution shall be disregarded in determining
income or loss.
Excess Contributions shall be distributed from the Participant's Qualified
Discretionary Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Deferral
Contributions Account.
4.03 MATCHING CONTRIBUTIONS: If so provided by the Employer in Section
1.05(c), the Employer shall make a Matching Contribution on behalf of each
Participant who had Deferral Contributions made on his behalf during the year
and who meets the requirement, if any, of Section 1.05(c)(4). The amount of the
Matching Contribution shall be determined in accordance with Section 1.05(c),
subject to the limitations set forth in Section 4.04 and Section 404 of the
Code. Matching Contributions will not be allowed to be made by the Employer on
any voluntary non-deductible Employee Contributions.
4.04 LIMIT ON MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS:
(a) The Average Contribution Percentage (hereinafter "ACP") for
Participants who are Highly Compensated Employees for each Plan Year and
the ACP for Participants who are Non-highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
(1) The ACP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ACP for Participants who are Non-
highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(2) The ACP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ACP for Participants who are Non-
highly Compensated Employees for the same Plan Year multiplied by two
(2), provided that the ACP for Participants who are Highly Compensated
Employees does not exceed the ACP for Participants who are Non-highly
Compensated Employees by more than two (2) percentage points.
(b) The following special rules apply for purposes of this section:
(1) If one or more Highly Compensated Employees participate in both a
qualified cash or deferred arrangement described in Section 401(k) of
the Code (hereafter "CODA") and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to
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either or both tests exceeds the Aggregate Limit, then the ACP of
those Highly Compensated Employees who also participate in a CODA will
be reduced (beginning with such Highly Compensated Employee whose ACP
is the highest) so that the limit is not exceeded. The amount by which
each Highly Compensated Employee's Contribution Percentage Amounts is
reduced shall be treated as an Excess Aggregate Contribution. The ADP
and ACP of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does
not occur if either the ADP or ACP of the Highly Compensated Employees
does not exceed 1.25 multiplied by the ADP and ACP of the Non-highly
Compensated Employees.
(2) For purposes of this section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his or her
account under two or more plans described in section 401(a) of the
Code, or arrangements described in section 401(k) of the Code that are
maintained by the Employer, shall be determined as if the total of
such Contribution Percentage Amounts was made under each plan. If a
Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different plan years, all cash or
deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(m) of the Code.
(3) In the event that this Plan satisfies the requirements of
Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy
the requirements of such sections of the Code only if aggregated with
this Plan, then this section shall be applied by determining the
Contribution Percentage of Employees as if all such plans were a
single plan. For plan years beginning after December 31, 1989, plans
may be aggregated in order to satisfy Section 401(m) of the Code only
if they have the same Plan Year.
(4) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most highly-
paid Highly Compensated Employees, the Contribution Percentage Amounts
and Compensation of such Participant shall include the Contribution
Percentage Amounts and Compensation for the Plan Year of family
members (as defined in Section 414(q)(6) of the Code). Family members,
with respect to Highly Compensated Employees, shall be disregarded as
separate Employees in determining the Contribution Percentage both for
Participants who are Non-highly Compensated Employees and for
Participants who are Highly Compensated Employees.
(5) For purpose of determining the Contribution Percentage test,
Employee Contributions made pursuant to Section 1.05(d)(l) are
considered to have been made in the Plan Year in which
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contributed to the Trust. Matching Contributions and Qualified
Discretionary Contributions will be considered made for a Plan Year if
made no later than the end of the twelve-month period beginning on the
day after the close of the Plan Year.
(6) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Discretionary
Contributions used in such test.
(7) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Aggregate Limit" shall mean the greater of (A) or (B) where (A)
is the sum of (i) 125 percent of the greater of the ADP of the Non-
highly Compensated Employees for the Plan Year or the ACP of Non-
highly Compensated Employees under the Plan subject to Section 401(m)
of the Code for the Plan Year beginning with or within the Plan Year
of the CODA and (ii) the lesser of 200% or two plus the lesser of such
ADP or ACP and where (B) is the sum of (i) 125 percent of the lesser
of the ADP of the Non-highly Compensated Employees for the Plan Year
or the ACP of Non-highly Compensated Employees under the Plan subject
to Section 401(m) of the Code for the Plan Year beginning with or
within the Plan Year of the CODA and (ii) the lesser of 200% or two
plus the greater of such ADP or ACP.
(2) "Average Contribution Percentage" or "ACP" shall mean the average
of the Contribution Percentages of the Eligible Participants in a
group.
(3) "Contribution Percentage" shall mean the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to
the Participant's Compensation for the Plan Year.
(4) "Contribution Percentage Amounts" shall mean the sum of the
Employee Contributions and Matching Contributions made under the plan
on behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall not include Matching Contributions that are
forfeited either to correct Excess Aggregate Contributions or because
the contributions to which they relate are Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions. If so elected by the
Employer in Section 1.05(b)(4), the Employer may include Qualified
Discretionary Contributions in the Contribution Percentage Amounts.
The Employer also may elect to use Deferral Contributions in the
Contribution Percentage Amounts so long as the ADP test is met before
the Deferral Contributions are used in the ACP test and continues to
be met following the exclusion of those Deferral Contributions that
are used to meet the ACP test.
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(5) "Deferral Contribution" shall mean any contribution made at the
election of the Participant pursuant to a salary reduction agreement
in accordance with Section 4.01(a).
(6) "Eligible Participant" shall mean any Employee who is eligible to
make an Employee Contribution, or a Deferral Contribution (if the
Employer takes such contributions into account in the calculation of
the Contribution Percentage), or to receive a Matching Contribution.
(7) "Employee Contribution" shall mean any voluntary nondeductible
contribution made to the plan by or on behalf of a Participant that is
included in the Participant's gross income in the year in which made
and that is maintained in a separate Account to which earnings and
losses are allocated.
(8) "Matching Contribution" shall mean an Employer contribution made
to this or any other defined contribution plan on behalf of a
Participant on account of a Participant's Deferral Contribution.
(9) "Excess Aggregate Contributions" shall mean, with respect to any
Plan Year, the excess of
(A) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage
actually made on behalf of Highly Compensated Employees for such
Plan Year, over
(B) The maximum Contribution Percentage Amounts permitted by the
ACP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in the order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining
Excess Deferrals pursuant to Section 4.01 and then determining
Excess Contributions pursuant to Section 4.02.
(d) Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto, shall
be forfeited, if forfeitable, or if not forfeitable, distributed no later
than the last day of each Plan Year to Participants to whose Accounts such
Excess Aggregate Contributions were allocated for the preceding Plan Year.
Excess Aggregate Contributions of Participants who are subject to the
family member aggregation rules of Section 414(q)(6) of the Code shall be
allocated among the family members in proportion to the Employee and
Matching Contributions of each family member that is combined to determine
the combined ACP. If such Excess Aggregate Contributions are distributed
more than 2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, a ten (10) percent excise tax will be imposed on the
employer maintaining the Plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as annual additions under the
Plan.
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Excess Aggregate Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to Excess
Aggregate Contributions is (1) income or loss allocable to the
Participant's Employee Contribution Account, Matching Contribution Account
(if any, and if all amounts therein are not used in the ADP test) and if
applicable, Qualified Non-elective Contribution Account for the Plan Year
multiplied by a fraction, the numerator of which is such Participant's
Excess Aggregate Contributions for the year and the denominator is the
Participant's Account balance(s) attributable to Contribution Percentage
Amounts without regard to income or loss occurring during such Plan Year,
or (2) such other amount determined under any reasonable method, provided
that such method is used consistently for all Participants in calculating
any distributions required under Section 4.04(d) and Sections 4.01(c) and
4.02(d) for the Plan Year, and is used by the Plan in allocating income or
loss to the Participants' Accounts. Income or loss allocable to the period
between the end of the Plan Year and the date of distribution shall be
disregarded in determining income or loss.
Forfeitures of Excess Aggregate Contributions shall be applied to
reduce Employer contributions, the forfeitures shall be held in the money
market fund, if any, listed in Section 1.14(b) pending such application.
Excess Aggregate Contributions shall be forfeited, if forfeitable, or
distributed on a PRORATA basis from the Participant's Employee Contribution
Account, Matching Contribution Account and if applicable, the Participant's
Deferral Contributions Account or Qualified Discretionary Contribution
Account or both.
4.05. SPECIAL RULES. Deferral Contributions and Qualified Discretionary
Contributions and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or beneficiary's or beneficiaries' election, earlier than upon
separation from service, death, or disability, except as otherwise provided in
Section 7.10, 7.11 or 10.06. Such amounts may also be distributed, but after
March 31, 1988, in the form of a lump sum only, upon
(a) Termination of the Plan without establishment of another defined
contribution plan, other than an employee stock ownership plan (as defined
in Section 4975(e) or Section 409 of the Code) or a simplified employee
pension plan as defined in Section 408(k) of the Code.
(b) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Section 409(d)(2) of
the Code) used in a trade or business of such corporation if such
corporation continues to maintain this Plan after the disposition, but only
with respect to Employees who continue employment with the corporation
acquiring such assets.
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(c) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of Section
409(d)(2) of the Code) if such corporation continues to maintain this Plan,
but only with respect to Employees who continue employment with such
subsidiary.
The Participant's accrued benefit derived from Deferral Contributions,
Qualified Discretionary Contributions and Employee Contributions (as defined in
Section 4.09) is nonforfeitable. Separate Accounts for Deferral Contributions,
Qualified Discretionary Contributions, Employee Contributions and Matching
Contributions will be maintained for each Participant. Each Account will be
credited with the applicable contributions and earnings thereon.
4.06. FIXED DISCRETIONARY EMPLOYER CONTRIBUTIONS. If so provided by the
Employer in Sections 1.05(a)(1) or 1.05(a)(2), for the Plan Year in which the
Plan is adopted and for each Plan Year thereafter, the Employer will make Fixed
or Discretionary Employer contributions to the Trust in accordance with Section
1.05 to be allocated as follows:
(a) Fixed Employer contributions shall be allocated among eligible
Participants (as determined in accordance with Section 1.05(a)(3)) in the
manner specified in Section 1.05(a).
(b) Discretionary Employer contributions shall be allocated among
eligible Participants, as determined in accordance with Section 1.05(a)(3),
as follows:
(1) If the Non-Integrated Formula is elected in Section
1.05(a)(2)(A), such contributions shall be allocated to eligible
Participants in the ratio that each Participant's Compensation
bears to the total Compensation paid to all eligible Participants
for the Plan Year; or
(2) If the Integrated Formula is elected in Section
1.05(a)(2)(B), such contributions shall be allocated in the
following steps:
(A) First, to each eligible Participant in the same ratio
that the sum of the Participant's Compensation and Excess
Compensation for the Plan Year bears to the sum of the
Compensation and Excess Compensation of all Participants for
the Plan Year. This allocation as a percentage of the sum of
each Participant's Compensation, and Excess Compensation
shall not exceed 5.7%.
(B) Any remaining Discretionary Employer Contribution shall
be allocated to each eligible Participant in the same ratio
that each Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan
Year.
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For purposes of this Section, "Excess Compensation" means
Compensation in excess of the taxable wage base, as
determined under Section 230 of the Social Security Act, in
effect on the first day of the Plan Year. Further, this
Section 4.06(b)(2) shall be modified as provided in Section
9.03 for years in which the Plan is top heavy under Article
9.
4.07. TIME OF MAKING EMPLOYER CONTRIBUTIONS. The Employer will pay its
contribution for each Plan Year not later than the time prescribed by law for
filing the Employer's federal income tax return for the fiscal (or taxable) year
with or within which such Plan Year ends (including extensions thereof). The
Trustee will have no authority to inquire into the correctness of the amounts
contributed and paid over to the Trustee, to determine whether any contribution
is payable under this Article 4, or to enforce, by suit or otherwise, the
Employer's obligation, if any, to make a contribution to the Trustee.
4.08. RETURN OF EMPLOYER CONTRIBUTIONS. The Trustee shall, upon request by the
Employer, return to the Employer the amount (if any) determined under Section
14.22. Such amount shall be reduced by amounts attributable thereto which have
been credited to the Accounts of Participants who have since received
distributions from the Trust, except to the extent such amounts continue to be
credited to such Participants' Accounts at the time the amount is returned to
the Employer. Such amount shall also be reduced by the losses of the Trust
attributable thereto, if and to the extent such losses exceed the gains and
income attributable thereto, but will not be increased by the gains and income
of the Trust attributable thereto, if and to the extent such gains and income
exceed the losses attributable thereto. In no event will the return of a
contribution hereunder cause the balance of the individual Account of any
Participant to be reduced to less than the balance which would have been
credited to the Account had the mistaken amount not been contributed.
4.09. EMPLOYEE CONTRIBUTIONS. If the Employer elected to permit Deferral
Contributions in Section 1.05(b) and if so provided by the Employer in Section
1.05(d), each Participant may elect to make Employee Contributions to the Plan
in accordance with the rules and procedures established by the Employer and in
an amount not less than one percent (1%) and not greater than ten percent (10%)
of such Participant's Compensation for the Plan Year. Such contributions and
all Employee Contributions for Plan Years beginning after December 31, 1986,
shall be subject to the nondiscrimination requirements of Section 401(m) of the
Code as set forth in Section 4.04.
For purposes of this Plan, "Employee Contributions" shall mean any
voluntary non-deductible contribution made to a plan by or on behalf of a
Participant that is or was included in the Participant's gross income in the
year in which made and that is maintained under a separate account to which
applicable earnings and losses are allocated. Excess Contributions may not be
recharacterized as Employee Contributions.
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Employee Contributions shall be paid over to the Trustee not later than
thirty (30) days following the end of the month in which the Participant makes
the contribution. A Participant shall have a fully vested 100% nonforfeitable
right to his Employee Contributions and the earnings or losses allocated
thereon. Distributions of Employee Contributions shall be made in accordance
with Section 7.10.
4.10. ROLLOVER CONTRIBUTIONS.
(a) ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS
(1) An Employee who is or was a distributee of an "eligible rollover
distribution"(as defined in Section 402(c)(4) of the Code and the
regulations issued thereunder) from a qualified plan may directly
transfer all or any portion of such distribution to the Trust or
transfer all or any portion of such distribution to the Trust within
sixty (60) days of payment. The transfer shall be made in the form of
cash or allowable Fund Shares only.
(2) The Employer may refuse to accept rollover contributions or
instruct the Trustee not to accept rollover contributions under the
Plan.
(b) TREATMENT OF ROLLOVER AMOUNT.
(1) An account will be established for the transferring Employee
under Article 5, the rollover amount will be credited to the account
and such amount will be subject to the terms of the Plan, including
Section 8.01, except as otherwise provided in this Section 4.10.
(2) The rollover account will at all times be fully vested in and
nonforfeitable by the Employee.
(c) ENTRY INTO PLAN BY TRANSFERRING EMPLOYEE. Although an amount may be
transferred to the Trust Fund under this Section 4.10 by an Employee who
has not yet become a Participant in accordance with Article 3, and such
amount is subject to the terms of the Plan as described in paragraph (b)
above, the Employee will not become a Participant entitled to share in
Employer contributions until he has satisfied such requirements.
(d) MONITORING OF ROLLOVERS
(1) The Administrator shall develop such procedures and require such
information from transferring Employees as it deems necessary to
insure that amounts transferred under this Section 4.10 meet the
requirements for tax-free rollovers established by such Section and by
Section 402(c) of the Code. No such amount may be transferred until
approved by the Administrator.
(2) If a transfer made under this Section 4.10 is later determined by
the Administrator not to have met the requirements of this Section or
of the Code or Treasury regulations, the
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Trustee shall, within a reasonable time after such determination is
made, and on instructions from the Administrator, distribute to the
Employee the amounts then held in the Trust attributable to the
transferred amount.
4.11. DEDUCTIBLE VOLUNTARY EMPLOYEE CONTRIBUTIONS. The Administrator will not
accept deductible Employee Contributions which are made for a taxable year
beginning after December 31, 1996. Contributions made prior to that date will
be maintained in a separate Account which will be nonforfeitable at all times
and which will share in the gains and losses of the trust in the same manner as
described in Section 5.02. No part of the deductible voluntary contribution
Account will be used to purchase life insurance. Subject to Article 8, the
participant may withdraw any part of the deductible voluntary contribution
Account upon request.
4.12. ADDITIONAL RULES FOR PAIRED PLANS. If the Employer has adopted a
qualified plan under Fidelity Basic Plan Document No. 09 which is to be
considered as a paired plan with this Plan, the elections in Section 1.03 must
be identical to the Employer's corresponding elections for the other plan. When
the paired plans are top-heavy or are deemed to be top-heavy as provided in
Section 9.01, the plan paired with this Plan will provide a minimum contribution
to each non-key Employee which is equal to 3 percent (or such other percent
elected by the Employer in Section 1.12(c)) of such Employee's Compensation.
Notwithstanding the preceding sentence, the minimum contribution shall be
provided by this Plan if contributions under the other plan paired with this
Plan are frozen.
ARTICLE 5. PARTICIPANTS' ACCOUNTS.
5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant which will reflect Employer and Employee
Contributions made on behalf of the Participant and earnings, expenses, gains
and losses attributable thereto, and investments made with amounts in the
Participant's Account. The Administrator will establish and maintain such other
accounts and records as it decides in its discretion to be reasonably required
or appropriate in order to discharge its duties under the Plan.
5.02. VALUATION OF ACCOUNTS. Participant Accounts will be valued at their fair
market value at least annually as of a date specified by the Administrator in
accordance with a method consistently followed and uniformly applied, and on
such date earnings, expenses, gains and losses on investments made with amounts
in each Participant's Account will be allocated to such Account. Participants
will be furnished statements of their Account values at least once each Plan
Year.
5.03. CODE SECTION 415 LIMITATIONS. Notwithstanding any other provisions of
the Plan:
Subsections (a)(1) through (a)(4)--(THESE SUBSECTIONS APPLY TO EMPLOYERS
WHO DO NOT MAINTAIN ANY QUALIFIED PLAN, INCLUDING A WELFARE
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BENEFIT FUND, AN INDIVIDUAL MEDICAL ACCOUNT, OR A SIMPLIFIED EMPLOYEE PENSION IN
ADDITION TO THIS PLAN.)
(a)(1) If the Participant does not participate in, and has never
participated in any other qualified plan, Welfare Benefit Fund, Individual
Medical Account, or a simplified employee pension, as defined in section
408(k) of the Code, maintained by the Employer, which provides an annual
addition as defined in Section 5.03(e)(l), the amount of Annual Additions
to a Participant's Account for a Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation contained
in this Plan. If the Employer contribution that would otherwise be
contributed or allocated to the Participant's Account would cause the
Annual Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the amount contributed or allocated will be reduced so that the
Annual Additions for the Limitation Year will equal the Maximum Permissible
Amount.
(a)(2) Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Maximum Permissible Amount may be determined on
the basis of a reasonable estimation of the Participant's compensation for
such Limitation Year, uniformly determined for all Participants similarly
situated. Any Employer contributions based on estimated annual compensation
shall be reduced by any Excess Amounts carried over from prior years.
(a) (3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation Year
shall be determined on the basis of the Participant' s actual Compensation
for such Limitation Year.
(a)(4) If, pursuant to subsection (a)(3) or as a result of the allocation
of forfeitures or a reasonable error in determining the total Elective
Deferrals there is an Excess Amount with respect to a Participant for a
Limitation Year, such Excess Amount shall be disposed of as follows:
(A) Any nondeductible voluntary employee contributions ("employee
contributions") or Elective Deferrals, to the extent they would reduce the
Excess Amount, will be returned to the Participant. Any gains attributable
to returned employee contributions will also be returned or will be treated
as additional employee contributions for the Limitation Year in which the
employee contributions were made.
(B) If after the application of paragraph (A) an Excess amount still
exists and the Participant is in the service of the Employer which is
covered by the Plan at the end of the Limitation Year, then such Excess
Amount shall be reapplied to reduce future Employer contributions under
this Plan for the next Limitation Year (and for each succeeding year, as
necessary) for such Participant, so that in each such Year the sum of
actual Employer contributions plus the reapplied amount shall equal the
amount of Employer contributions which would otherwise be made to such
Participant's Account.
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(C) If after the application of paragraph (A) an Excess Amount still
exists and the Participant is not in the service of the Employer which is
covered by the Plan at the end of a Limitation Year, then such Excess
Amount will be held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer contributions for all
remaining Participants in the next Limitation Year and each succeeding
Limitation Year if necessary.
(D) If a suspense account is in existence at any time during the
Limitation Year pursuant to this subsection, it will not participate in the
allocation of the Trust Fund's investment gains and losses. All amounts in
the suspense account must be allocated to the Accounts of Participants
before any Employer contribution may be made for the Limitation Year.
Except as provided in paragraph (A), Excess Amounts may not be distributed
to Participants or former Participants.
Subsections (b)(1) through (b)(6)--(THESE SUBSECTIONS APPLY TO EMPLOYERS
WHO, IN ADDITION TO THIS PLAN, MAINTAIN ONE OR MORE PLANS ALL OF WHICH ARE
QUALIFIED MASTER OR PROTOTYPE DEFINED CONTRIBUTION PLANS, ANY WELFARE BENEFIT
FUND, ANY INDIVIDUAL MEDICAL ACCOUNT OR ANY SIMPLIFIED EMPLOYEE PENSION.)
(b)(1) If, in addition to this Plan, the Participant is covered under any
other qualified defined contribution plans (all of which are qualified
Master or Prototype Plans), Welfare Benefit Funds, Individual Medical
Accounts, or simplified employee pension Plans, maintained by the Employer,
that provide an annual addition as defined in Section 5.03(e)(1), the
amount of Annual Additions to a Participant's Account for a Limitation Year
shall not exceed the lesser of
(A) the Maximum Permissible Amount, reduced by the sum of any Annual
Additions to the Participant's accounts for the same Limitation Year under
such other qualified Master or Prototype defined contribution plans, and
Welfare Benefit Funds, Individual Medical Accounts, and simplified employee
pensions, or
(B) any other limitation contained in this Plan.
If the annual additions with respect to the Participant under other
qualified Master or Prototype defined contribution Plans, Welfare Benefit
Funds, Individual Medical Accounts, and simplified employee pensions
maintained by the Employer are less than the maximum permissible amount and
the Employer contribution that would otherwise be contributed or allocated
to the Participant's account under this plan would cause the annual
additions for the limitation year to exceed this limitation, the amount
contributed or allocated will be reduced so that the annual additions under
all such plans and funds for the limitation year will equal the maximum
permissible amount. If the annual additions with respect to the
Participant under such other qualified Master or Prototype defined
contribution Plans, Welfare Benefit Funds, Individual Medical
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Accounts, and simplified employee pensions in the aggregate are equal to or
greater than the maximum permissible amount, no amount will be contributed
or allocated to the Participant's account under this plan for the
limitation year.
(b)(2) Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the amounts referred to in (b)(1) (A) above may be
determined on the basis of a reasonable estimation of the Participant's
compensation for such Limitation Year, uniformly determined for all
Participants similarly situated. Any Employer contribution based on
estimated annual compensation shall be reduced by any Excess Amounts
carried over from prior years.
(b)(3) As soon as is administratively feasible after the end of the
Limitation Year, the amounts referred to in (b) (1) (A) shall be determined
on the basis of the Participant's actual Compensation for such Limitation
Year.
(b)(4) If a Participant's Annual Additions under this Plan and all such
other plans result in an Excess Amount, such Excess Amount shall be deemed
to consist of the Annual Additions last allocated, except that Annual
Additions attributable to a simplified employee pension will be deemed to
have been allocated first, followed by Annual Additions to a Welfare
Benefit Fund or Individual Medical Account regardless of the actual
allocation date.
(b)(5) If an Excess Amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of another plan,
the Excess Amount attributed to this Plan will be the product of
(A) the total Excess Amount allocated as of such date (including any
amount which would have been allocated but for the limitations of
Section 415 of the Code), and
(B) the ratio of (i) the Annual Additions allocated to the
Participant as of such date under this Plan, and (ii) the Annual
Additions allocated as of such date under all qualified defined
contribution plans (determined without regard to the limitations of
Section 415 of the Code).
(b)(6) Any Excess Amounts attributed to this Plan shall be disposed of as
provided in subsection (a) (4).
Subsection (c)--(THIS SUBSECTION APPLIES ONLY TO EMPLOYERS WHO, IN ADDITION
TO THIS PLAN, MAINTAIN ONE OR MORE QUALIFIED PLANS WHICH ARE QUALIFIED DEFINED
CONTRIBUTION PLANS OTHER THAN MASTER OR PROTOTYPE PLANS.)
(c) If the Employer also maintains another plan which is a qualified
defined contribution plan other than a Master or Prototype Plan, Annual
Additions allocated under this Plan on behalf of any Participant shall be
limited in accordance with the provisions of (b)(1) through (b)(6), as
though the other plan were
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a Master or Prototype Plan, unless the Employer provides other limitations
in the Adoption Agreement.
Subsection (d)--(THIS SUBSECTION APPLIES ONLY TO EMPLOYERS WHO, IN ADDITION
TO THIS PLAN, MAINTAIN OR AT ANY TIME MAINTAINED A QUALIFIED DEFINED BENEFIT
PLAN.)
(d) If the Employer maintains, or at any time maintained, a qualified
defined benefit plan, the sum of any Participant's Defined Benefit Fraction
and Defined Contribution Fraction shall not exceed the combined plan
limitation of 1.0 in any Limitation Year. The combined plan limitation will
be met as provided by the Employer in the Adoption Agreement.
SUBSECTIONS (e)(1) THROUGH (e)(11)--(DEFINITIONS.)
(e)(1) "Annual Additions" means the sum of the following amounts credited
to a Participant for a Limitation Year:
(A) all Employer contributions,
(B) all Employee Contributions,
(C) all forfeitures,
(D) amounts allocated, after March 31, 1984, to an Individual Medical
Account which is part of a pension or annuity plan maintained by the
Employer are treated as Annual Additions to a defined contribution plan.
Also, amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a Welfare
Benefit Fund maintained by the Employer are treated as Annual Additions to
a defined contribution plan, and
(E) allocations under a simplified employee pension.
For purposes of this Section 5.03, amounts reapplied to reduce Employer
contributions under subsection (a) (4) shall also be included as Annual
Additions.
(e)(2) "Compensation" means wages as defined in Section 3401(a) of the
Code and all other payments of compensation to an employee by the employer
(in the course of the employer's trade or business) for which the employer
is required to furnish the employee a written statement under Sections
6041(d) and 6051(a)(3) of the Code. Compensation must be determined without
regard to any rules under Section 3401(a) of the Code that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2) of the Code.)
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For any Self-Employed Individual compensation will mean Earned Income.
For limitation years beginning after December 31, 1991, for purposes of
applying the limitations of this article, compensation for a limitation
year is the compensation actually paid or made available during such
limitation year.
(e)(3) "Defined Benefit Fraction" means a fraction, the numerator of which
is the sum of the Participant's annual benefits (adjusted to an actuarially
equivalent straight life annuity if such benefit is expressed in a form
other than a straight life annuity or qualified joint and survivor annuity)
under all the defined benefit plans (whether or not terminated) maintained
by the Employer, each such annual benefit computed on the assumptions that
the Participant will remain in employment until the normal retirement age
under each such plan (or the Participant's current age, if later) and that
all other factors used to determine benefits under such plan will remain
constant for all future Limitation Years, and the denominator of which is
the lesser of 125 percent of the dollar limitation determined for the
Limitation Year under Sections 415(b)(1)(A) and 415(d) of the Code or 140
percent of the Participant's highest average Compensation for 3 consecutive
calendar years of service during which the Participant was active in each
such plan, including any adjustments under Section 415(b) of the Code.
However, if the Participant was a participant as of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Employer which were in existence on
May 6, 1986 then the denominator of the Defined Benefit Fraction shall not
be less than 125 percent of the Participant's total accrued benefit as of
the close of the last Limitation Year beginning before January 1, 1987
disregarding any changes in the terms and conditions of the plan after May
5, 1986, under all such defined benefit plans that met, individually and in
the aggregate, the requirements of Section 415 of the Code for all
Limitation Years beginning before January 1, 1987.
(e)(4) "Defined Contribution Fraction" means a fraction, the numerator of
which is the sum for the current and all prior Limitation Years of (A) all
Annual Additions (if any) to the Participant's accounts under each defined
contribution plan (whether or not terminated) maintained by the Employer
and (B) all Annual Additions attributable to the Participant's
nondeductible Employee Contributions to all defined benefit plans (whether
or not terminated) maintained by the Employer, and the Participant's Annual
Additions attributable to all Welfare Benefit Funds, Individual Medical
Accounts, and simplified employee pensions, maintained by the Employer, and
the denominator of which is the sum of the maximum aggregate amounts for
the current and all prior Limitation Years during which the Participant was
an Employee (regardless of whether the Employer maintained a defined
contribution plan in any such year).
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The maximum aggregate amount in any Limitation Year is the lesser of
125 percent of the dollar limitation in effect under Section 415(c)(1)(A)
of the Code for each such year or 35 percent of the Participant's
Compensation for each such year.
If the Participant was a participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer which were in existence on
May 6, 1986, then the numerator of the Defined Contribution Fraction shall
be adjusted if the sum of this fraction and the Defined Benefit Fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment an amount equal to the product of (i) the excess of the sum of
the fractions over 1.0 and (ii) the denominator of this fraction will be
permanently subtracted from the numerator of this fraction. The adjustment
is calculated using the fractions as they would be computed as of the end
of the last Limitation Year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the plan made after
May 6, 1986, but using the Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning before
January 1, 1987 shall not be recomputed to treat all employee contributions
as annual additions.
(e)(5) "Employer" means the Employer and any Related Employer that adopts
this Plan. In the case of a group of employers which constitutes a
controlled group of corporations (as defined in Section 414(b) of the Code
as modified by Section 415(h)) or which constitutes trades or businesses
(whether or not incorporated) which are under common control (as defined in
Section 414(c) of the Code as modified by Section 415(h) of the Code) or
which constitutes an affiliated service group (as defined in Section
414(m)of the Code) and any other entity required to be aggregated with the
Employer pursuant to regulations issued under Section 414(o) of the Code,
all such employers shall be considered a single employer for purposes of
applying the limitations of this Section 5.03.
(e)(6) "Excess Amount" means the excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(e)(7) "Individual Medical Account" means an individual medical account as
defined in Section 415(l)(2) of the Code.
(e)(8) "Limitation Year" means the Plan Year. All qualified plans of the
Employer must use the same Limitation Year. If the Limitation Year is
amended to a different 12-consecutive month period, the new Limitation Year
must begin on a date within the Limitation Year in which the amendment is
made.
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(e)(9) "Master or Prototype Plan" means a plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(e)(10) "Maximum Permissible Amount" means for a Limitation Year with
respect to any Participant the lesser of (A) $30,000 or, if greater, 25
percent of the dollar limitation set forth in Section 415(b)(1) of the
Code, as in effect for the Limitation Year, or (B) 25 percent of the
Participant's Compensation for the Limitation Year. If a short Limitation
Year is created because of an amendment changing the Limitation Year to a
different 12-consecutive-month period, the Maximum Permissible Amount will
not exceed the limitation in (e)(10)(A) multiplied a fraction whose
numerator is the number of months in the short Limitation Year and whose
denominator is 12.
The compensation limitation referred to in subsection (e)(10) (B)
shall not apply to any contribution for medical benefits within the meaning
of Section 401(h) or Section 419A(f)(2) of the Code after separation from
service which is otherwise treated as an Annual Addition under Section
419A(d)(2) or Section 415(1)(1) of the Code.
(e)(11) "Welfare Benefit Fund" means a welfare benefit fund as defined in
Section 419(e) of the Code.
Article 6. INVESTMENT OF CONTRIBUTIONS.
6.01. MANNER OF INVESTMENT. All contributions made to the Accounts of
Participants shall be held for investment by the Trustee. The Accounts of
Participants shall be invested and reinvested only in eligible investments
selected by the Employer in Section 1.14(b), subject to Section 14.10.
6.02. INVESTMENT DECISIONS. Investments shall be directed by the Employer or by
each Participant or both, in accordance with the Employer's election in Section
1.14(a). Pursuant to Section 14.04, the Trustee shall have no discretion or
authority with respect to the investment of the Trust Fund.
(a) With respect to those Participant Accounts for which Employer
investment direction is elected, the Employer has the right to direct the
Trustee in writing with respect to the investment and reinvestment of
assets comprising the Trust Fund in the Fidelity Fund(s) designated in
Section 1.14(b) and as allowed by the Trustee.
(b) If Participant investment direction is elected, each Participant shall
direct the investment of his Account among the Fidelity Funds listed in
Section 1.14(b). The Participant shall file initial investment
instructions with the Administrator, on such form as the Administrator may
provide, selecting the Funds in which amounts credited to his Account will
be invested.
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(1) Except as provided in this Section 6.02, only authorized Plan
contacts and the Participant shall have access to a Participant's
Account. While any balance remains in the Account of a Participant
after his death, the Beneficiary of the Participant shall make
decisions as to the investment of the Account as though the
Beneficiary were the Participant. To the extent required by a
qualified domestic relations order as defined in Section 414(p) of the
Code, an alternate payee shall make investment decisions with respect
to a Participant's Account as though such alternate payee were the
Participant.
(2) If the Trustee receives any contribution under the Plan as to
which investment instructions have not been provided, the Trustee
shall promptly notify the Administrator and the Administrator shall
take steps to elicit instructions from the Participant. The Trustee
shall credit any such contribution to the Participant's Account and
such amount shall be invested in the Fidelity Fund selected by the
Employer for such purposes or, absent Employer selection, in the most
conservative Fidelity Fund listed in Section 1.14(b), until investment
instructions have been received by the Trustee.
(c) All dividends, interest, gains and distributions of any nature
received in respect of Fund Shares shall be reinvested in additional shares
of that Fidelity Fund.
(d) Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment is
made.
6.03. PARTICIPANT DIRECTIONS TO TRUSTEE. All Participant initial investment
instructions filed with the Administrator pursuant to the provisions of Section
6.02 shall be promptly transmitted by the Administrator to the Trustee. A
Participant shall transmit subsequent investment instructions directly to the
Trustee by means of the telephone exchange system maintained by the Trustee for
such purposes. The method and frequency for change of investments will be
determined under the (a) rules applicable to the investments selected by the
Employer in Section 1.14(b) and (b) the additional rules of the Employer, if
any, limiting the frequency of investment changes, which are included in a
separate written administrative procedure adopted by the Employer and accepted
by the Trustee. The Trustee shall have no duty to inquire into the investment
decisions of a Participant or to advise him regarding the purchase, retention or
sale of assets credited to his Account.
Article 7. RIGHT TO BENEFITS.
7.01. NORMAL OR EARLY RETIREMENT. Each Participant who attains his Normal
Retirement Age or, if so provided by the Employer in Section 1.06(b), Early
Retirement Age, will have a 100-percent nonforfeitable interest in his Account
regardless of any vesting schedule elected in
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Section 1.07. If a Participant retires upon the attainment of Normal or Early
Retirement Age, such retirement is referred to as a normal retirement. Upon his
normal retirement the balance of the Participant's Account, plus any amounts
thereafter credited to his Account, subject to the provisions of Section 7.08,
will be distributed to him in accordance with Article 8.
If a Participant separates from service before satisfying the age
requirements for early retirement, but has satisfied the service requirement,
the Participant will be entitled to elect an early retirement distribution upon
satisfaction of such age requirement.
7.02. LATE RETIREMENT. If a Participant continues in the service of the
Employer after attainment of Normal Retirement Age, he will continue to have a
100-percent nonforfeitable interest in his Account and will continue to
participate in the Plan until the date he establishes with the Employer for his
late retirement. Until he retires, he has a continuing election to receive all
or any portion of his Account. Upon the earlier of his late retirement or the
distribution date required under Section 8.08, the balance of his Account, plus
any amounts thereafter credited to his Account, subject to the provisions of
Section 7.08, will be distributed to him in accordance with Article 8 below.
7.03. DISABILITY RETIREMENT. If so provided by the Employer in Section
1.06(c), a Participant who becomes disabled will have a 100-percent
nonforfeitable interest in his Account, the balance of which Account, plus any
amounts thereafter credited to his Account, subject to the provisions of Section
7.08, will be distributed to him in accordance with Article 8 below. A
Participant is considered disabled if he cannot engage in any substantial,
gainful activity because of a medically determinable physical or mental
impairment likely to result in death or to be of a continuous period of not less
than 12 months, and terminates his employment with the Employer. Such
termination of employment is referred to as a disability retirement.
Determinations with respect to disability shall be made by the Administrator who
may rely on the criteria set forth in Section 1.06(c) as evidence that the
Participant is disabled.
7.04. DEATH. Subject, if applicable, to Section 8.04, if a Participant dies
before the distribution of his Account has commenced, or before such
distribution has been completed, his Account shall become 100 percent vested and
his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.08. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change any
prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form. In the case of a married Participant, the
Participant's spouse shall be deemed to be the designated Beneficiary unless the
Participant's spouse
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has consented to another designation in the manner described in Section 8.03(d)
A copy of the death notice or other sufficient documentation must be filed
with and approved by the Administrator. If upon the death of the Participant
there is, in the opinion of the Administrator, no designated Beneficiary for
part or all of the Participant's Account, such amount will be paid to his
surviving spouse or, if none, to his estate (such spouse or estate shall be
deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies
after benefits to such Beneficiary have commenced, but before they have been
completed, and, in the opinion of the Administrator, no person has been
designated to receive such remaining benefits, then such benefit shall be paid
in a lump sum to the deceased Beneficiary's estate.
7.05. OTHER TERMINATION OF EMPLOYMENT. If a Participant terminates his
employment for any reason other than death or normal, late, or disability
retirement, he will be entitled to a termination benefit equal to the sum of (a)
the vested percentage(s) of the value of the Matching and/or Fixed/Discretionary
Contributions to his Account, as adjusted for income, expense, gain, or loss,
such percentage(s) determined in accordance with the vesting schedule(s)
selected by the Employer in Section 1.07, and (b) the value of the Deferral,
Employee, Qualified Discretionary and Rollover Contributions to his Account as
adjusted for income, expense, gain or loss. The amount payable under this
Section 7.05 will be subject to the provisions of Section 7.08 and will be
distributed in accordance with Article 8 below.
7.06. SEPARATE ACCOUNT. If a distribution from a Participant's Account has
been made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Employer contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.07, a Participant's nonforfeitable interest in his Account held in a
separate account described in the preceding paragraph will be equal to P(AB +
(RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time
determined under Section 7.05; AB is the account balance of the separate account
at the relevant time; D is the amount of the distribution; and R is the ratio of
the account balance at the relevant time to the account balance after
distribution. Following a forfeiture of any portion of such separate account
under Section 7.07 below, any balance in the Participant's separate account will
remain fully vested and nonforfeitable.
7.07. FORFEITURES. If a Participant terminates his employment, any portion of
his Account (including any amounts credited after his termination of employment)
not payable to him under Section 7.05 will be forfeited by him upon the complete
distribution to him of the vested portion of his Account, if any, subject to the
possibility of
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reinstatement as described in the following paragraph. For purposes of this
paragraph, if the value of an Employee's vested Account balance is zero, the
Employee shall be deemed to have received a distribution of his vested interest
immediately following termination of employment. Such forfeitures will be
applied to reduce the contributions of the Employer next payable under the Plan
(or administrative expenses of the Plan); the forfeitures shall be held in a
money market fund pending such application.
If a Participant forfeits any portion of his Account under the preceding
paragraph but again becomes an Employee after such date, then the amount so
forfeited, without any adjustment for the earnings, expenses, or losses or gains
of the assets credited to his Account since the date forfeited, will be
recredited to his Account (or to a separate account as described in Section
7.06, if applicable) but only if he repays to the Plan before the earlier of
five years after the date of his reemployment or the date he incurs 5
consecutive 1-year breaks in service following the date of the distribution the
amount previously distributed to him, without interest, under Section 7.05. If
an Employee is deemed to receive a distribution pursuant to this Section 7.07,
and the Employee resumes employment before 5 consecutive 1-year breaks in
service, the Employee shall be deemed to have repaid such distribution on the
date of his reemployment. Upon such an actual or deemed repayment, the
provisions of the Plan (including Section 7.06) will thereafter apply as if no
forfeiture had occurred. The amount to be recredited pursuant to this paragraph
will be derived first from the forfeitures, if any, which as of the date of
recrediting have yet to be applied as provided in the preceding paragraph and,
to the extent such forfeitures are insufficient, from a special Employer
contribution to be made by the Employer.
If a Participant elects not to receive the nonforfeitable portion of his
Account following his termination of employment, the non-vested portion of his
Account shall be forfeited after the Participant has incurred five consecutive
1-year breaks in service as defined in Section 2.01(a) (33).
No forfeitures will occur solely as a result of a Participant's withdrawal
of Employee contributions.
7.08. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
Article 7 is not made in a single payment, the amount retained by the Trustee
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
invested and any expenses properly charged under the Plan and Trust to such
amounts.
7.09. PARTICIPANT LOANS. If permitted under Section 1.09, the Administrator
shall allow Participants to apply for a loan from the Plan, subject to the
following:
(a) Loan Application. All Plan loans shall be administered by the
Administrator. Applications for loans shall be made to the Administrator
on forms available from the Administrator. Loans shall be made available to
all Participants on a reasonably
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equivalent basis. For this purpose, the term "Participant" means any
Participant or Beneficiary, including an alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the Code, who is
a party-in-interest (as determined under ERISA Section 3(14)) with respect
to the Plan except no loans will be made to (1) an Employee who makes a
rollover contribution in accordance with Section 4.10 who has not satisfied
the requirements of Section 3.01 or (2) a shareholder-employee or Owner-
Employee. For purposes of this requirement, a shareholder-employee means an
employee or officer of an electing small business (Subchapter S)
corporation who owns (or is considered as owning within the meaning of
Section 318(a)(1) of the Code), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of the corporation.
A Participant with an existing loan may not apply for another loan
until the existing loan is paid in full and may not refinance an
existing loan or attain a second loan for the purpose of paying off the
existing loan. A Participant may not apply for more than one loan during
each Plan Year.
(b) Location of Loan Amount/Purpose of Loan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the
amount made available to other Employees. No loan to any Participant or
Beneficiary can be made to the extent that such loan when added to the
outstanding balance of all other loans to the Participant or Beneficiary
would exceed the lesser of (1) $50,000 reduced by the excess (if any) of
the highest outstanding balance of loans during the one-year period ending
on the day before the loan is made over the outstanding balance of loans
from the plan on the date the loan is made, or (2) one-half the present
value of the nonforfeitable Account of the Participant. For the purpose of
the above limitation, all loans from all plans of the Employer and Related
Employers are aggregated. A Participant may not request a loan for less
than $1,000. The Employer may provide that loans only be made from certain
contribution sources within Participant Account(s) by notifying the Trustee
in writing of the restricted source.
Loans may be made for any purpose or if elected by the Employer in
Section 1.09(a), on account of hardship only. A loan will be considered
to be made on account of hardship only if made on account of an
immediate and heavy financial need described in Section 7.l0(b)(1).
(c) Terms of Loan. All loans shall bear a reasonable rate of interest as
determined by the Administrator based on the prevailing interest rates
charged by persons in the business of lending money for loans which would
be made under similar circumstances. The determination of a reasonable rate
of interest must be based on appropriate regional factors unless the Plan
is administered on a national basis in which case the Administrator may
establish a uniform reasonable rate of interest applicable to all regions.
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All loans shall by their terms require that repayment (principal and
interest) be amortized in level payments, not less than quarterly, over a
period not extending beyond five years from the date of the loan unless
such loan is for the purchase of a Participant's primary residence, in
which case the repayment period may not extend beyond ten years from the
date of the loan. A Participant may prepay the outstanding loan balance
prior to maturity without penalty.
(d) Security. Loans must be secured by the Participant's Accounts not to
exceed 50 percent of the Participant's vested Account. A Participant must
obtain the consent of his or her spouse, if any, to use a Participant
Account as security for the loan, if the provisions of Section 8.03 apply
to the Participant. Spousal consent shall be obtained no earlier than the
beginning of the 90-day period that ends on the date on which the loan is
to be so secured. The consent must be in writing, must acknowledge the
effect of the loan, and must be witnessed by a Plan representative or
notary public. Such consent shall thereafter be binding with respect to
the consenting spouse or any subsequent spouse with respect to that loan.
(e) Default. The Administrator shall treat a loan in default if
(1) any scheduled repayment remains unpaid more than 90 days or
(2) there is an outstanding principal balance existing on a loan
after the last scheduled repayment date.
Upon default or termination of employment, the entire outstanding
principal and accrued interest shall be immediately due and payable. If a
distributable event (as defined by the Code) has occurred, the
Administrator shall direct the Trustee to foreclose on the promissory note
and offset the Participant's vested Account by the outstanding balance of
the loan. If a distributable event has not occurred, the Administrator
shall direct the Trustee to foreclose on the promissory note and offset the
Participant's vested Account as soon as a distributable event occurs.
(f) Pre-existing loans. The provision in paragraph (a) of this Section
7.09 limiting a Participant to one outstanding loan shall not apply to
loans made before the Employer adopted this prototype plan document. A
Participant may not apply for a new loan until all outstanding loans made
before the Employer adopted this prototype plan have been paid in full. The
Trustee may accept any loans made before the Employer adopted this
prototype plan document except such loans which require the Trustee to hold
as security for the loan property other than the Participant's vested
Account.
As of the effective date of amendment of this Plan in Section
1.01(g)(2), the Trustee shall have the right to reamortize the outstanding
principal balance of any Participant loan that is delinquent. Such
reamortization shall be based upon the remaining
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life of the loan and the original maturity date may not be extended.
Notwithstanding any other provision of this Plan, the portion of the
Participant's vested Account used as a security interest held by the plan
by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the Account payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested
Account (determined without regard to the preceding sentence) is payable to
the surviving spouse, then the Account shall be adjusted by first reducing
the vested Account by the amount of the security used as repayment of the
loan, and then determining the benefit payable to the surviving spouse.
No loan to any Participant or Beneficiary can be made to the extent
that such loan when added to the outstanding balance of all other loans to
the Participant or Beneficiary would exceed the lesser of (1) $50,000
reduced by the excess (if any) of the highest outstanding balance of loans
during the one-year period ending on the day before the loan is made over
the outstanding balance of loans from the plan on the date the loan is made
or (2) one-half the present value of the nonforfeitable Account of the
Participant. For the purpose of the above limitation, all loans from all
plans of the Employer and Related Employers are aggregated.
7.10. IN-SERVICE /HARDSHIP WITHDRAWALS. Subject to the provisions of Article
8, a Participant shall not be permitted to withdraw any Employer or Employee
Contributions (and earnings thereon) prior to retirement or termination of
employment, except as follows:
(a) Age 59 1/2. If permitted under Section 1.11(b), a Participant who
has attained the age of 59 1/2 is permitted to withdraw upon request all or any
portion of the Accounts specified by the Employer in 1.11(b).
(b) Hardship. If permitted under Section 1.10, a Participant may apply to
the Administrator to withdraw some or all of his Deferral Contributions (and
earnings thereon accrued as of December 31, 1988) and, if applicable, Rollover
Contributions and such other amounts allowed by a predecessor plan, if such
withdrawal is made on account of a hardship. For purposes of this Section, a
distribution is made on account of hardship if made on account of an immediate
and heavy financial need of the Employee where such Employee lacks other
available resources. Determinations with respect to hardship shall be made by
the Administrator and shall be conclusive for purposes of the Plan, and shall be
based on the following special rules:
(1) The following are the only financial needs considered immediate
and heavy: expenses incurred or necessary for medical care (within
the meaning of Section 213(d) of the Code) of the Employee, the
Employee's spouse, children, or dependents; the purchase (excluding
mortgage payments) of a principal residence for the Employee; payment
of tuition and related educational fees
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for the next twelve (12) months of post-secondary education for the
Employee, the Employee's spouse, children or dependents; or the need
to prevent the eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
(2) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than the
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(ii) The Employee suspends Deferral Contributions and Employee
Contributions to the Plan for the 12-month period following the
date of his hardship distribution. The suspension must also apply
to all elective contributions and Employee Contributions to all
other qualified plans and non-qualified plans maintained by the
Employer, other than any mandatory employer contribution portion
of a defined benefit plan, including stock option, stock purchase
and other similar plans, but not including health and welfare
benefit plans (other than the cash or deferred arrangement
portion of a cafeteria plan);
(iii) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts necessary
to pay any Federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution); and
(iv) The Employee agrees to limit Deferral Contributions
(elective contributions) to the Plan and any other qualified plan
maintained by the Employer for the Employee's taxable year
immediately following the taxable year of the hardship
distribution to the applicable limit under Section 402(g) of the
Code for such taxable year less the amount of such Employee's
Deferral Contributions for the taxable year of the hardship
distribution.
(3) A Participant must obtain the consent of his or her spouse, if
any, to obtain a hardship withdrawal, if the provisions of Section
8.03 apply to the Participant.
(c) Employee Contributions. A Participant may elect to withdraw, in cash,
up to one hundred percent of the amount then credited to his Employee
Contribution Account. Such withdrawals shall be limited to one (1) per
Plan Year unless this prototype plan document is an amendment of a prior
plan document, in which case the rules and restrictions governing Employee
Contribution withdrawals, if any, are incorporated herein by reference.
7.11. PRIOR PLAN IN-SERVICE DISTRIBUTION RULES. If designated by the Employer
in Section 1.11(b), a Participant shall be entitled to withdraw
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at anytime prior to his termination of employment, subject to the provisions of
Article 8 and the prior plan, any vested Employer Contributions maintained in a
Participant's Account for the specified period of time.
ARTICLE 8. DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE.
8.01. DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES.
(a) Distributions from the Trust to a Participant or to the Beneficiary of
the Participant shall be made in a lump sum in cash or, if elected by the
Employer in Section 1.11, under a systematic withdrawal plan
(installment(s)) upon retirement, death, disability, or other termination
of employment, unless another form of distribution is required or permitted
in accordance with paragraph (d) of this Section 8.01 or Sections 1.11(c),
8.02, 8.03, 8.04 or 11.02. A distribution may be made in Fund Shares, at
the election of the Participant, pursuant to the qualifying rollover of
such distribution to a Fidelity Investments individual retirement account.
(b) Distributions under a systematic withdrawal plan must be made in
substantially equal annual, or more frequent, installments, in cash, over a
period certain which does not extend beyond the life expectancy of the
Participant or the joint life expectancies of the Participant and his
Beneficiary, or, if the Participant dies prior to the commencement of his
benefits the life expectancy of the Participant's Beneficiary, as further
described in Section 8.04.
(c) Notwithstanding the provisions of Section 8.01(b) above, if a
Participant's Account is, and at the time of any prior distribution(s) was,
$3,500 or less, the balance of such Account shall be distributed in a lump
sum as soon as practicable following retirement, disability, death or other
termination of employment.
(d) This paragraph (d) applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this Article 8, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover. The following definitions shall apply for purposes
of this paragraph (d):
(1) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint
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lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with
respect to employer securities).
(2) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the Code,
an individual retirement annuity described in Section 408(b) of the
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust describe in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the case
of an eligible rollover distribution to a surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
(3) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former spouse
who is the alternate payee under a qualified domestic relations order,
as defined in Section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
(4) Direct rollover: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
8.02. ANNUITY DISTRIBUTIONS. If so provided in Section 1.11(c), a Participant
may elect distributions made in whole or in part in the form of an annuity
contract subject to the provisions of Section 8.03.
(a) An annuity contract distributed under the Plan must be purchased from
an insurance company and must be nontransferable. The terms of an annuity
contract shall comply with the requirements of the Plan and distributions
under such contract shall be made in accordance with Section 401(a)(9) of
the Code and the regulations thereunder.
(b) The payment period of an annuity contract distributed to the
Participant pursuant to this Section may be as long as the Participant
lives. If the annuity is payable to the Participant and his spouse or
designated Beneficiary, the payment period of an annuity contract may be
for as long as either the Participant or his spouse or designated
Beneficiary lives. Such an annuity may provide for an annuity certain
feature for a period not exceeding the life expectancy of the Participant.
If the annuity is payable to the Participant and his spouse such period may
not exceed the joint life and last survivor expectancy of the Participant
and his spouse, or, if the annuity is payable to the Participant and a
designated Beneficiary, the joint life and last survivor expectancy of the
Participant and such Beneficiary. If the Participant dies
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prior to the commencement of his benefits, the payment period of an annuity
contract distributed to the Beneficiary of the Participant may be as long
as the Participant's Beneficiary lives, and may provide for an annuity
certain feature for a period not exceeding the life expectancy of the
Beneficiary. Any annuity contract distributed under the Plan must provide
for nonincreasing payments.
8.03. JOINT AND SURVIVOR ANNUITIES/PRERETIREMENT SURVIVOR ANNUITIES.
(a) APPLICATION. The provisions of this Section supersede any conflicting
provisions of the Plan; however, paragraph (b) of this Section shall not
apply if the Participant's Account does not exceed or at the time of any
prior distribution did not exceed $3,500. A Participant is described in
this Section only if (i) the Participant has elected distribution of his
Account in the form of an Annuity Contract in accordance with Section 8.02,
or (ii) the Trustee has directly or indirectly received a transfer of
assets from another plan (including a predecessor plan) to which Section
401(a)(11) of the Code applies with respect to such Participant.
(b) RETIREMENT ANNUITY. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below, to the extent applicable to the Participant, within
the 90-day period preceding his Annuity Starting Date (which election may
be revoked, and if revoked, remade, at any time in such period), the vested
Account due any Participant to whom this subsection (b) applies will be
paid to him by the purchase and delivery to him of an annuity contract
described in Section 8.02 providing a life annuity only form of benefit or,
if the Participant is married as of his Annuity Starting Date, providing an
immediate annuity for the life of the Participant with a survivor annuity
for the life of the Participant's spouse (determined as of the date of
distribution of the contract) which is 50 percent of the amount of the
annuity which is payable during the joint lives of the Participant and such
spouse. The Participant may elect to receive distribution of his benefits
in the form of such annuity as of the earliest date on which he could elect
to receive retirement benefits under the Plan. Within the period beginning
90 days prior to the Participant's Annuity Starting Date and ending 30 days
prior to such Date, the Administrator will provide such Participant with a
written explanation of (1) the terms and conditions of the annuity contract
described herein, (2) the Participant's to make, and the effect of, an
election to waive application of this subsection, (3) the rights of the
Participant's spouse under subsection (d), and (4) the right to revoke and
the period of time necessary to revoke the election to waive application of
this subsection.
(c) ANNUITY DEATH BENEFIT. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below at any time within the applicable election period
(which election may be revoked, and if revoked, remade, at any time in such
period), if a married Participant to whom this Section applies dies before
his Annuity
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Starting Date, then notwithstanding any designation of a Beneficiary to the
contrary, 50 percent of his vested Account will be applied to purchase an
annuity contract described in Section 8.02 providing an annuity for the
life of the Participant's surviving spouse, which contract will then be
promptly distributed to such spouse. In lieu of the purchase of such an
annuity contract, the spouse may elect in writing to receive distributions
under the Plan as if he or she had been designated by the Participant as
his Beneficiary with respect to 50 percent of his Account. For purposes of
this subsection, the applicable election period will commence on the first
day of the Plan Year in which the Participant attains age 35 and will end
on the date of the Participant's death, provided that in the case of a
Participant who terminates his employment the applicable election period
with respect to benefits accrued prior to the date of such termination will
in no event commence later than the date of his termination of employment.
A Participant may elect to waive the application of this subsection prior
to the Plan Year in which he attains age 35, provided that any such waiver
will cease to be effective as of the first day of the Plan Year in which
the Participant attains age 35.
The Administrator will provide a Participant to whom this subsection
applies with a written explanation with respect to the annuity death
benefit described in this subsection (c) comparable to that required under
subsection (b) above. Such explanation shall be furnished within whichever
of the following periods ends last: (1) the period beginning with the
first day of the Plan Year in which the Participant reaches age 32 and
ending with the end of the Plan Year preceding the Plan Year in which he
reaches age 35, (2) a reasonable period ending after the Employee becomes a
Participant, (3) a reasonable period ending after this Section 8.04 first
becomes applicable to the Participant in accordance with Section 8.04(a),
(4) in the case of a Participant who separates from service before age 35,
a reasonable period of time ending after separation from service. For
purposes of the preceding sentence, the two-year period beginning one year
prior to the date of the event described in clause (2), (3) or (4),
whichever is applicable, and ending one year after such date shall be
considered reasonable, provided, that in the case of a Participant who
separates from service under (4) above and subsequently recommences
employment with the Employer, the applicable period for such Participant
shall be redetermined in accordance with this subsection.
(d) REQUIREMENTS OF ELECTIONS. This subsection will be satisfied with
respect to a waiver or designation which is required to satisfy this
subsection if such waiver or designation is in writing and either
(1) the Participant's spouse consents thereto in writing, which
consent must acknowledge the effect of such waiver or designation and
be witnessed by a notary public or Plan representative, or
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(2) the Participant establishes to the satisfaction of the
Administrator that the consent of the Participant's spouse cannot be
obtained because there is no spouse, because the spouse cannot be
located, or because of such other circumstances as the Secretary of
Treasury may prescribe.
Any consent by a spouse, or establishment that the consent of a
spouse may not be obtained, will be effective only with respect to a
specific Beneficiary (including any class of Beneficiaries or any
contingent Beneficiaries) or form of benefits identified in the
Participant's waiver or designation, unless the consent of the spouse
expressly permits designations by the Participant without any
requirement of further consent by the spouse. A consent which permits
such designations by the Participant shall acknowledge that the spouse
has the right to limit consent to a specific Beneficiary and form of
benefits and that the spouse voluntarily elects to relinquish both
such rights. A consent by a spouse shall be irrevocable once made.
Any such consent, or establishment that such consent may not be
obtained, will be effective only with respect to such spouse. For
purposes of subsections (b) and (c) above, no consent of a spouse
shall be valid unless the notice required by whichever subsection is
applicable has been provided to the Participant.
(e) FORMER SPOUSE. For purposes of this Section 8.03, a former spouse of
a Participant will be treated as the spouse or surviving spouse of the
Participant, and a current spouse will not be so treated, to the extent
required under a qualified domestic relations order, as defined in Section
414(p) of the Code.
(f) VESTED ACCOUNT BALANCE. For purposes of this Section, vested Account
shall include the aggregate value of the Participant's vested Account
derived from Employer and Employee Contributions (including rollovers),
whether vested before or upon death. The provisions of this Section shall
apply to a Participant who is vested in amounts attributable to Employer
contributions, Employee Contributions, or both, upon death or at the time
of distribution.
8.04 INSTALLMENT DISTRIBUTIONS. This Section shall be interpreted and applied
in accordance with the regulations under Section 401(a)(9) of the Code,
including the minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the Proposed Treasury Regulations, or any successor regulations
of similar import.
(a) IN GENERAL. If a Participant's benefit may be distributed in
accordance with Section 8.01(b), the amount to be distributed for each
calendar year for which a minimum distribution is required shall be at
least an amount equal to the quotient obtained by dividing the
Participant's interest in his Account by the life expectancy of the
Participant or Beneficiary or the joint life and last survivor expectancy
of the Participant and his Beneficiary, whichever is applicable. For
calendar years beginning before January 1, 1989, if a Participant's
Beneficiary is not his spouse, the method of distribution selected must
insure that at least 50 percent of the present value of the amount
available for
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distribution is paid within the life expectancy of the Participant. For
calendar years beginning after December 31, 1988, the amount to be
distributed for each calendar year shall not be less than an amount equal
to the quotient obtained by dividing the Participant's interest in his
Account by the lesser of (1) the applicable life expectancy under Section
8.01(b), or (2) if a Participant's Beneficiary is not his spouse, the
applicable divisor determined under Section 1.401(a)(9)-2, Q&A 4 of the
Proposed Treasury Regulations, or any successor regulations of similar
import. Distributions after the death of the Participant shall be made
using the applicable life expectancy under (1) above, without regard to
Section 1.401(a)(9)-2 of such regulations.
The minimum distribution required under this subsection (a) for the
calendar year immediately preceding the calendar year in which the
Participant's required beginning date, as determined under Section 8.08(b),
occurs shall be made on or before the Participant's required beginning
date, as so determined. Minimum distributions for other calendar years
shall be made on or before the close of such calendar year.
(b) ADDITIONAL REQUIREMENTS FOR DISTRIBUTIONS AFTER DEATH OF PARTICIPANT.
(1) DISTRIBUTION BEGINNING BEFORE DEATH. If the Participant dies
before distribution of his benefits has begun, distributions shall be
made in accordance with the provisions of this paragraph.
Distributions under Section 8.01(a) shall be completed by the close of
the calendar year in which the fifth anniversary of the death of the
Participant occurs. Distributions under Section 8.01(b) shall
commence, if the Beneficiary is not the Participant's spouse, not
later than the close of the calendar year immediately following the
calendar year in which the death of the Participant occurs.
Distributions under Section 8.01(b) to a Beneficiary who is the
Participant's surviving spouse shall commence not later than the close
of the calendar year in which the Participant would have attained age
70 1/2 or, if later, the close of the calendar year immediately
following the calendar year in which the death of the Participant
occurs. In the event such spouse dies prior to the date distribution
to him or her commences, he or she will be treated for purposes of
this subsection (other than the preceding sentence) as if he or she
were the Participant. If the Participant has not designated a
Beneficiary, or the Participant or Beneficiary has not effectively
selected a method of distribution, distribution of the Participant's
benefit shall be completed by the close of the calendar year in which
the fifth anniversary of the death of the Participant occurs.
Any amount paid to a child of the Participant will be treated as if it
had been paid to the surviving spouse if the amount becomes payable to
the surviving spouse when the child reaches the age of majority.
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For purposes of this subsection (b)(1), the life expectancy of a
Beneficiary who is the Participant's surviving spouse shall be
recalculated annually unless the Participant's spouse irrevocably
elects otherwise prior to the time distributions are required to
begin. Life expectancy shall be computed in accordance with the
provisions of subsection (a) above.
(2) DISTRIBUTION BEGINNING AFTER DEATH. If the Participant dies
after distribution of his benefits has begun, distributions to the
Participant's Beneficiary will be made at least as rapidly as under
the method of distribution being used as of the date of the
Participant's death.
For purposes of this Section 8.04(b), distribution of a Participant's
interest in his Account will be considered to begin as of the
Participant's required beginning date, as determined under Section 8.08(b).
If distribution in the form of an annuity irrevocably commences prior to
such date, distribution will be considered to begin as of the actual date
distribution commences.
(c) LIFE EXPECTANCY. For purposes of this Section, life expectancy shall
be recalculated annually in the case of the Participant or a Beneficiary
who is the Participant's spouse unless the Participant or Beneficiary
irrevocably elects otherwise prior to the time distributions are required
to begin. If not recalculated in accordance with the foregoing, life
expectancy shall be calculated using the attained age of the Participant or
Beneficiary, whichever is applicable, as of such individual's birth date in
the first year for which a minimum distribution is required reduced by one
for each elapsed calendar year since the date life expectancy was first
calculated. For purposes of this Section, life expectancy and joint life
and last survivor expectancy shall be computed by use of the expected
return multiples in Table V and VI of section 1.72-9 of the income tax
Regulations.
A Participant's interest in his Account for purposes of this Section
8.04 shall be determined as of the last valuation date in the calendar year
immediately preceding the calendar year for which a minimum distribution is
required, increased by the amount of any contributions allocated to, and
decreased by any distributions from, such Account after the valuation date.
Any distribution for the first year for which a minimum distribution is
required made after the close of such year shall be treated as if made
prior to the close of such year.
8.05. IMMEDIATE DISTRIBUTIONS. If the Account distributable to a Participant
exceeds, or at the time of any prior distribution exceeded, $3,500, no
distribution will be made to the Participant before he reaches his Normal
Retirement Age (or age 62, if later), unless the written consent of the
Participant has been obtained. Such consent shall be made in writing within the
90-day period ending on the Participant's Annuity Starting Date. Within the
period beginning 90 days before the Participant's Annuity Starting Date and
ending 30 days before such Date, the Administrator will provide such Participant
with written notice comparable to the notice described in Section 8.03(b)
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containing a general description of the material features and an explanation of
the relative values of the optional forms of benefit available under the Plan
and informing the Participant of his right to defer receipt of the distribution
until his Normal Retirement Age (or age 62, if later).
The consent of the Participant's spouse must also be obtained if the
Participant is subject to the provisions of Section 8.03(a), unless the
distribution will be made in the form of the applicable retirement annuity
contract described in Section 8.03(b). A spouse's consent to early
distribution, if required, must satisfy the requirements of Section 8.03(d).
Neither the consent of the Participant nor the Participant's spouse shall
be required to the extent that a distribution is required to satisfy Section
401(a)(9) or Section 415 of the Code. In addition, upon termination of the Plan
if it does not offer an annuity option (purchased from a commercial provider)
and if the Employer or any Related Employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7)) the Participant's Account will, without the
Participant's consent, be distributed to the Participant. However, if any
Related Employer maintains another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code) then
the Participant's Account will be transferred, without the Participant's
consent, to the other plan if the Participant does not consent to an immediate
distribution.
8.06. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine
the method of distribution of benefits to himself and may determine the method
of distribution to his Beneficiary. Such determination will be made prior to
the time benefits become payable under the Plan. If the Participant does not
determine the method of distribution to his Beneficiary or if the Participant
permits his Beneficiary to override his determination, the Beneficiary, in the
event of the Participant's death, will determine the method of distribution of
benefits to himself as if he were the Participant. A determination by the
Beneficiary must be made no later than the close of the calendar year in which
distribution would be required to begin under Section 8.04(b) or, if earlier,
the close of the calendar year in which the fifth anniversary of the death of
the Participant occurs.
8.07. NOTICE TO TRUSTEE. The Administrator will notify the Trustee in writing
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form of benefits that
such Participant or Beneficiary shall receive and (in the case of distributions
to a Participant) the name of any designated Beneficiary or Beneficiaries.
8.08. TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made latest than the earlier of the dates described in (a) and (b) below:
(a) Absent the consent of the Participant (and his spouse, if
appropriate), the 60th day after the close of the Plan Year in
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which occurs the later of the date on which the Participant attains age 65,
the date on which the Participant ceases to be employed by the Employer, or
the 10th anniversary of the year in which the Participant commenced
participation in the Plan; and
(b) April 1 of the calendar year first following the calendar year in
which the Participant attains age 70 1/2 or, in the case of a Participant
who had attained age 70 1/2 before January 1, 1988, the required beginning
date determined in accordance with (1) or (2) below:
(1) The required beginning date of a Participant who is not a 5-
percent owner is the first day of April of the calendar year following
the calendar year in which the later of retirement or attainment of
age 70 1/2 occurs.
(2) The required beginning date of a Participant who is a 5-percent
owner during any year beginning after December 31, 1979, is the first
day of April following the later of
(A) the calendar year in which the Participant attains age
70 1/2, or
(B) the earlier of the calendar year with or within which ends
the Plan Year in which the Participant becomes a 5-percent owner,
or the calendar year in which the Participant retires.
Notwithstanding the foregoing, in the case of a Participant who attained
age 70 1/2 during 1988 and who had not retired prior to January 1, 1989, the
required beginning date described in this paragraph shall be April 1, 1990.
Notwithstanding (a) above, the failure of a Participant (and spouse) to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 8.05, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy (a) above.
Once distributions have begun to a 5-percent owner under (b) above, they
must continue to be distributed, even if the Participant ceases to be a 5-
percent owner in a subsequent year.
For purposes of (b) above, a Participant is treated as a 5-percent owner if
such Participant is a 5-percent owner as defined in Section 416(i) of the Code
(determined in accordance with Section 416 but without regard to whether the
Plan is top-heavy) at any time during the Plan Year ending with or within the
calendar year in which such owner attains age 66 1/2 or any subsequent Plan
Year.
The Administrator shall notify the Trustee in writing whenever a
distribution is necessary in order to comply with the minimum distribution rules
set forth in this Section.
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8.09. WHEREABOUTS OF PARTICIPANTS AND BENEFICIARIES. The Administrator will at
all times be responsible for determining the whereabouts of each Participant or
Beneficiary who may be entitled to benefits under the Plan and will at all times
be responsible for instructing the Trustee in writing as to the current address
of each such Participant or Beneficiary. The Trustee will be entitled to rely
on the latest written statement received from the Administrator as to such
addresses. The Trustee will be under no duty to make any distributions under
the Plan unless and until it has received written instructions from the
Administrator satisfactory to the Trustee containing the name and address of the
distributee, the time when the distribution is to occur, and the form which the
distribution will take. Notwithstanding the foregoing, if the Trustee attempts
to make a distribution in accordance with the Administrator's instructions but
is unable to make such distribution because the whereabouts of the distributee
is unknown, the Trustee will notify the Administrator of such situation and
thereafter the Trustee will be under no duty to make any further distributions
to such distributee until it receives further written instructions from the
Administrator. If a benefit is forfeited because the Administrator determines
that the Participant or Beneficiary cannot be found, such benefit will be
reinstated by the Sponsor if a claim is filed by the Participant or Beneficiary
with the Administrator and the Administrator confirms the claim to the Sponsor.
Article 9. TOP-HEAVY PROVISIONS.
9.01 APPLICATION. If the Plan is or becomes a Top-Heavy Plan in any Plan Year
or is automatically deemed to be Top-Heavy in accordance with the Employer's
election in Section 1.12(a)(1) of the Adoption Agreement, the provisions of this
Article 9 shall supersede any conflicting provision in the Plan.
9.02 DEFINITIONS. For purposes of this Article 9, the following terms have the
meanings set forth below:
(a) KEY EMPLOYEE. Any Employee or former Employee (and the Beneficiary of
any such Employee) who at any time during the determination period was (1)
an officer of the Employer whose annual Compensation exceeds 50 percent of
the dollar limitation under Section 415(b)(1)(A) of the Code, (2) an owner
(or considered an owner under Section 318 of the Code) of one of the ten
largest interests in the Employer if such individual's annual Compensation
exceeds the dollar limitation under Section 415(c)(1)(A) of the Code, (3) a
5-percent owner of the Employer, or (4) a 1-percent owner of the Employer
who has annual Compensation of more than $150,000. For purposes of this
paragraph, the determination period is the Plan Year containing the
Determination Date and the four preceding Plan Years. The determination of
who is a Key Employee shall be made in accordance with Section 416(i)(1) of
the Code and the regulations thereunder. Annual Compensation means
compensation as defined in Section 5.03(e)(2), but including amounts
contributed by the Employer pursuant to a salary reduction agreement which
are excludable from the employee's gross income under Section 125, Section
402(a)(8), and Section 403(b) of the Code.
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(b) TOP-HEAVY PLAN. The Plan is a Top-Heavy Plan if any of the following
conditions exists:
(1) the Top-Heavy Ratio for the Plan exceeds 60 percent and the Plan
is not part of any Required Aggregation Group or Permissive
Aggregation Group,
(2) the Plan is a part of a Required Aggregation Group but not part
of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Required Aggregation Group exceeds 60 percent, or
(3) the Plan is a part of a Required Aggregation Group and a
Permissive Aggregation Group and the Top-Heavy Ratio for both Groups
exceeds 60 percent.
(c) TOP-HEAVY RATIO.
(1) With respect to this Plan, or with respect to any Required
Aggregation Group or Permissive Aggregation Group that consists solely
of defined contribution plans (including any simplified employee
pension plans) and the Employer has not maintained any defined benefit
plan which during the 5-year period ending on the determination
date(s) has or has had accrued benefits, the Top-Heavy Ratio is a
fraction, the numerator of which is the sum of the account balances of
all Key Employees under the plans as of the Determination Date
(including any part of any account balance distributed in the 5-year
period ending on the Determination Date), and the denominator of which
is the sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the Determination
Date) of all participants under the plans as of the Determination
Date. Both the numerator and denominator of the Top-Heavy Ratio shall
be increased, to the extent required by Section 416 of the Code, to
reflect any contribution which is due but unpaid as of the
Determination Date.
(2) With respect to any Required Aggregation Group or Permissive
Aggregation Group that includes one or more defined benefit plans
which, during the 5-year period ending on the Determination Date, has
covered or could cover a Participant in this Plan, the Top-Heavy Ratio
is a fraction, the numerator of which is the sum of the account
balances under the defined contribution plans for all Key Employees
and the present value of accrued benefits under the defined benefit
plans for all Key Employees, and the denominator of which is the sum
of the account balances under the defined contribution plans for all
participants and the present value of accrued benefits under the
defined benefit plans for all participants. Both the numerator and
denominator of the Top-Heavy Ratio shall be increased for any
distribution of an account balance or an accrued benefit made in the
5-year period ending on the Determination Date and any contribution
due but unpaid as of the Determination Date.
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(3) For purposes of (1) and (2) above, the value of Accounts and the
present value of accrued benefits will be determined as of the most
recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in Section
416 of the Code and the regulations thereunder for the first and
second plan years of a defined benefit plan. The Account and accrued
benefits of a Participant (A) who is not a Key Employee but who was a
Key Employee in a prior year, or (B) who has not been credited with at
least one Hour of Service with the Employer at any time during the 5-
year period ending on the Determination Date, will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account, shall
be made in accordance with Section 416 of the Code and the regulations
thereunder. Deductible employee contributions shall not be taken into
account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of Accounts and accrued benefits shall be
calculated with reference to the Determination Dates that fall within
the same calendar year.
For purposes of determining if the Plan, or any other plan
included in a Required Aggregation Group of which this Plan is a part,
is a Top-Heavy Plan, the accrued benefit in a defined benefit plan of
an Employee other than a Key Employee shall be determined under (i)
the method, if any, that uniformly applies for accrual purposes under
all plans maintained by the Employer, or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional accrual rate of Section
411(b)(1)(C) of the Code.
(d) PERMISSIVE AGGREGATION GROUP. The Required Aggregation Group plus any
other qualified plans of the Employer or a Related Employer which, when
considered as a group with the Required Aggregation Group, would continue
to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(e) REQUIRED AGGREGATION GROUP.
(1) Each qualified plan of the Employer or Related Employer in which
at least one Key Employee participates, or has participated at any
time during the determination period (regardless of whether the plan
has terminated), and
(2) any other qualified plan of the Employer or Related Employer
which enables a plan described in (1) above to met the requirements of
Sections 401(a)(4) or 410 of the Code.
(f) DETERMINATION DATE. For any Plan Year of the Plan subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first
Plan Year of the Plan, the last day of that Plan Year.
(g) VALUATION DATE. The Determination Date.
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(h) PRESENT VALUE. Present value shall be based only on the interest rate
and mortality table specified in the Adoption Agreement.
9.03. MINIMUM CONTRIBUTION.
(a) Except as otherwise provided in (b) and (c) below, the
Fixed/Discretionary Contributions made on behalf of any Participant who is
not a Key Employee shall not be less than the lesser of 3 percent (or such
other percent elected by the Employer in Section 1.12(c)) of such
Participant's Compensation or, in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy Section 401 of
the Code, the largest percentage of Employer contributions, as a percentage
of the first $200,000 of the Key Employee's Compensation, made on behalf of
any Key Employee for that year. If the Employer selected the Integrated
Formula in Section 1.05(a)(2), the minimum contribution shall be determined
under paragraph (e) of this Section 9.03. Further, the minimum
contribution under this Section 9.03 shall be made even though, under other
Plan provisions, the Participant would not otherwise be entitled to receive
a contribution, or would have received a lesser contribution for the year,
because (1) the Participant failed to complete 1,000 Hours of Service or
any equivalent service requirement provided in the Adoption Agreement; or
(2) the Participant's Compensation was less than a stated amount.
(b) The provisions of (a) above shall not apply to any Participant who was
not employed by the Employer on the last day of the Plan Year.
(c) The Employer contributions for the Plan Year made on behalf of each
Participant who is not a Key Employee and who is a participant in a defined
benefit plan maintained by the Employer shall not be less than 5 percent of
such Participant's Compensation, unless the Employer has provided in
Section 1.12(c) that the minimum contribution requirement will be met in
the other plan or plans of the Employer.
(d) The minimum contribution required under (a) above (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
(e) If the Employer elected an Integrated Formula in Section 1.05(a)(2),
the allocation steps in Section 4.06(b)(2) shall be preceded by the
following steps:
(1) The Discretionary Employer Contributions will be allocated to
each eligible Participant (as determined under this Section 9.03) in
the ratio that the Participant's Compensation bears to all
Participants' Compensation, but not in excess of 3% (or such other
percent elected by the Employer in Section 1.12(c).
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(2) Any Discretionary Employer Contributions remaining after (e)(1)
above will be allocated to each eligible Participant in the ratio that the
Participant's Excess compensation for the Plan Year bears to the Excess
Compensation of all eligible Participants, but not in excess of 3% (or such
other percent elected by the Employer in Section 1.12(c)).
9.04. ADJUSTMENT TO THE LIMITATION ON CONTRIBUTIONS AND BENEFITS. If this Plan
is in Top-Heavy status, the number 100 shall be substituted for the number 125
in subsections (e)(3) and (e)(4) of Section 5.03. However, this substitution
shall not take effect with respect to this Plan in any Plan Year in which the
following requirements are satisfied:
(a) The Employer contributions for such Plan Year made on behalf of each
Participant who is not a Key Employee and who is a participant in a defined
benefit plan maintained by the Employer is not less than 7 1/2 percent of
such Participant's Compensation.
(b) The sum of the present value as of the Determination Date of (1) the
aggregate accounts of all Key Employees under all defined contribution
plans of the Employer and (2) the cumulative accrued benefits of all Key
Employees under all defined benefit plans of the Employer does not exceed
90 percent of the same amounts determined for all Participants under all
plans of the Employer that are Top-Heavy Plans, excluding Accounts and
accrued benefits for Employees who formerly were but are no longer Key
Employees.
The substitutions of the number 100 for 125 shall not take effect in
any Limitation Year with respect to any Participant for whom no benefits
are accrued or contributions made for such Year.
9.05. MINIMUM VESTING. For any Plan Year in which the Plan is a Top-Heavy Plan
and all Plan Years thereafter, the Top-Heavy vesting schedule elected in Section
1.12(d) will automatically apply to the Plan. The Top-Heavy vesting schedule
applies to all benefits within the meaning of Section 411(a)(7) of the Code
except those attributable to Employee Contributions or those already subject to
a vesting schedule which vests at least as rapidly in all cases as the schedule
elected in Section 1.12(d), including benefits accrued before the Plan becomes a
Top-Heavy Plan. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a Top-Heavy Plan changes
for any Plan Year. However, this Section 9.05 does not apply to the Account of
any Employee who does not have an Hour of Service after the Plan has initially
become a Top-Heavy Plan and such Employee's Account attributable to Employer
Contributions will be determined without regard to this Section 9.05.
Article 10. AMENDMENT AND TERMINATION.
10.01 AMENDMENT BY EMPLOYER. The Employer reserves the authority, subject to
the provisions of Article 1 and Section 10.03, to amend the Plan:
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(a) CHANGES TO ELECTIONS CONTAINED IN THE ADOPTION AGREEMENT. By filing
with the Trustee an amended Adoption Agreement, executed by the Employer
only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on
the effective date of such amended Adoption Agreement except that
retroactive changes to a previous election or elections pursuant to the
regulations issued under Section 401(a)(4) of the Code shall be permitted.
Any such change notwithstanding, no Participant's Account shall be reduced
by such change below the amount to which the Participant would have been
entitled if he had voluntarily left the employ of the Employer immediately
prior to the date of the change. The Employer may from time to time make
any amendment to the Plan that may be necessary to satisfy Sections 415 or
416 of the Code because of the required aggregation of multiple plans by
completing overriding plan language in the Adoption Agreement. The Employer
may also add certain model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not cause the
Plan to be treated as an individually designed plan; or
(b) OTHER CHANGES. By amending any provision of the Plan for any reason
other than those specified in (a) above. However, upon making such
amendment, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, the Employer may no longer participate in this
prototype plan arrangement and will be deemed to have an individually
designed plan. Following such amendment, the Trustee may transfer the
assets of the Trust to the trust forming part of such newly adopted plan
upon receipt of sufficient evidence (such as a determination letter or
opinion letter from the Internal Revenue Service or an opinion of counsel
satisfactory to the Trustee) that such trust will be a qualified trust
under the Code.
10.02. AMENDMENT BY PROTOTYPE SPONSOR. The Prototype Sponsor may in its
discretion amend the Plan or the Adoption Agreement at any time, subject to the
provisions of Article 1 and Section 10.03, and provided that the Prototype
Sponsor mails a copy of such amendment to the Employer at its last known address
as shown on the books of the Prototype Sponsor.
10.03. AMENDMENTS AFFECTING VESTED AND/OR ACCRUED BENEFITS.
(a) Except as permitted by Section 10.04, no amendment to the Plan shall
be effective to the extent that it has the effect of decreasing a
Participant's Account or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment.
Furthermore, if the vesting schedule of the Plan is amended, the
nonforfeitable interest of a Participant in his Account, determined as of
the later of the date the amendment is adopted or the date it becomes
effective, will not be less than the Participant's nonforfeitable interest
in his Account determined without regard to such amendment.
(b) If the Plan's vesting schedule is amended, including any amendment
resulting from a change to or from Top-Heavy Plan status,
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or the Plan is amended in any way that directly or indirectly affects the
computation of a Participant's nonforfeitable interest in his Account, each
Participant with at least three (3) Years of Service for Vesting with the
Employer may elect, within a reasonable period after the adoption of the
amendment, to have the nonforfeitable percentage of his Account computed
under the Plan without regard to such amendment. The Participant's
election may be made within 60 days from the latest of (1) the date the
amendment is adopted, (2) the date the amendment becomes effective, or (3)
the date the Participant is issued written notice of the amendment by the
Employer or the Administrator.
10.04. RETROACTIVE AMENDMENTS. An amendment made by the Prototype Sponsor in
accordance with Section 10.02 may be made effective on a date prior to the first
day of the Plan Year in which it is adopted if such amendment is necessary or
appropriate to enable the Plan and Trust to satisfy the applicable requirements
of the Code or to conform the Plan to any change in federal law, or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 10.01.
10.05. TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
10.06. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination or partial
termination of the Plan or complete discontinuance of contributions thereunder,
each Participant (including a terminated Participant with respect to amounts not
previously forfeited by him) who is affected by such termination or partial
termination or discontinuance will have a fully vested interest in his Account,
and, subject to Section 4.05 and Article 8, the Trustee will distribute to each
Participant or other person entitled to distribution the balance of the
Participant's Account in a single lump sum payment. In the absence of such
instructions, the Trustee will notify the Administrator of such situation and
the Trustee will be under no duty to make any distributions under the Plan until
it receives written instructions from the Administrator. Upon the completion of
such distributions, the Trust will terminate, the Trustee will be relieved from
all liability under the Trust, and no Participant or other person will have any
claims thereunder, except as required by applicable law.
10.07. MERGER OR CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS. In case of
any merger or consolidation of the Plan with, or transfer of assets and
liabilities of the Plan to, any other plan, provision must be made so that each
Participant would, if the Plan then terminated, receive a benefit immediately
after the merger, consolidation or transfer which is equal to or greater than
the benefit he would have been entitled to receive immediately before the
merger, consolidation or transfer if the Plan had then terminated.
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Article 11. AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS
TO OR FROM OTHER QUALIFIED PLANS.
11.01. AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN In the event the
Employer has previously established a plan (the "predecessor plan") which is a
defined contribution plan under the Code and which on the date of adoption of
the Plan meets the applicable requirements of section 401(a) of the Code, the
Employer may, in accordance with the provisions of the predecessor plan, amend
and continue the predecessor plan in the form of the Plan and become the
Employer hereunder, subject to the following:
(a) Subject to the provisions of the Plan, each individual who was a
Participant or former Participant in the predecessor plan immediately prior
to the effective date of such amendment and continuation will become a
Participant or former Participant in the Plan;
(b) No election may be made under the vesting provisions of the Adoption
Agreement if such election would reduce the benefits of a Participant under
the Plan to less than the benefits to which he would have been entitled if
he voluntarily separated from the service of the Employer immediately prior
to such amendment and continuation;
(c) No amendment to the Plan shall decrease a Participant's accrued
benefit or eliminate an optional form of benefit and if the amendment of
the predecessor plan in the form of the Plan results in a change in the
method of crediting service for vesting purposes between the general method
set forth in Section 2530.200b-2 of the Department of Labor Regulations and
the elapsed-time method in Section 2.01(a)(33) of the Plan, each
Participant with respect to whom the method of crediting vesting service is
changed shall be treated in the manner set forth by the provisions of
Section 1.410(a)-7(f)(1) of the Treasury Regulations which are incorporated
herein by reference;
(d) The amounts standing to the credit of a Participant's Account
immediately prior to such amendment and continuation which represent the
amounts properly attributable to (1) contributions by the Participant and
(2) contributions by the Employer and forfeitures will constitute the
opening balance of his Account or Accounts under the Plan;
(e) Amounts being paid to a former Participant or to a Beneficiary in
accordance with the provisions of the predecessor plan will continue to be
paid in accordance with such provisions;
(f) Any election and waiver of the qualified pre-retirement annuity in
effect after August 23, 1984, under the predecessor plan immediately before
such amendment and continuation will be deemed a valid election and waiver
of Beneficiary under Section 8.04 if such designation satisfies the
requirements of Section 8.04(d), unless
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and until the Participant revokes such election and waiver under the Plan;
and
(g) Unless the Employer and the Trustee agree otherwise, all assets of the
predecessor trust will be deemed to be assets of the Trust as of the
effective date of such amendment. Such assets will be invested by the
Trustee as soon as reasonably practicable pursuant to Article 6. The
Employer agrees to assist the Trustee in any way requested by the Trustee
in order to facilitate the transfer of assets from the predecessor trust to
the Trust Fund.
11.02. TRANSFER OF FUNDS FROM AN EXISTING PLAN. The Employer may from time to
time direct the Trustee, in accordance with such rules as the Trustee may
establish, to accept cash, allowable Fund Shares or participant loan promissory
notes transferred for the benefit of Participants from a trust forming part of
another qualified plan under the Code, provided such plan is a defined
contribution plan. Such transferred assets will become assets of the Trust as
of the date they are received by the Trustee. Such transferred assets will be
credited to Participants' Accounts in accordance with their respective interests
immediately upon receipt by the Trustee. A Participant's interest under the Plan
in transferred assets which were fully vested and nonforfeitable under the
transferring plan will be fully vested and nonforfeitable at all times. Such
transferred assets will be invested by the Trustee in accordance with the
provisions of paragraph (g) of Section 11.01 as if such assets were transferred
from a predecessor plan. No transfer of assets in accordance with this Section
may cause a loss of an accrued or optional form of benefit protected by Section
411(d)(6) of the Code.
11.03. ACCEPTANCE OF ASSETS BY TRUSTEE. The Trustee will not accept assets
which are not either in a medium proper for investment under the Plan, as set
forth in Section 1.14(b), or in cash. Such assets shall be accompanied by
written instructions showing separately the respective contributions by the
prior employer and by the Employee, and identifying the assets attributable to
such contributions. The Trustee shall establish such accounts as may be
necessary or appropriate to reflect such contributions under the Plan. The
Trustee shall hold such assets for investment in accordance with the provisions
of Article 6, and shall in accordance with the written instructions of the
Employer make appropriate credits to the Accounts of the Participants for whose
benefit assets have been transferred.
11.04. TRANSFER OF ASSETS FROM TRUST. The Employer may direct the Trustee to
transfer all or a specified portion of the Trust assets to any other plan or
plans maintained by the Employer or the employer or employers of a former
Participant or Participants, provided that the Trustee has received evidence
satisfactory to it that such other plan meets all applicable requirements of the
Code. The assets so transferred shall be accompanied by written instructions
from the Employer naming the persons for whose benefit such assets have been
transferred, showing separately the respective contributions by the Employer and
by each Participant, if any, and identifying the assets attributable to the
various contributions. The Trustee shall have no further liabilities with
respect to assets so transferred.
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ARTICLE 12. MISCELLANEOUS.
12.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
12.02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby. It is
a condition of the Plan, and each Participant expressly agrees by his
participation herein, that each Participant will look solely to the assets held
in the Trust for the payment of any benefit to which he is entitled under the
Plan.
12.03. NONALIENABILITY OF BENEFITS AND QUALIFIED DOMESTIC RELATIONS ORDERS. The
benefits provided hereunder will not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind, either voluntarily or
involuntarily, and any attempt to cause such benefits to be so subjected will
not be recognized, except to such extent as may be required by law. The
preceding sentence shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined by the Plan
Administrator to be a qualified domestic relations order, as defined in Section
414(p) of the Code; or any domestic relations order entered before January 1,
1985. The Administrator must establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Administrator will promptly notify the Participant and any
alternate payee named in the order, in writing, of the receipt of the order and
the Plan's procedures for determining the qualified status of the order. Within
a reasonable period of time after receiving the domestic relations order, the
Administrator must determine the qualified status of the order and must notify
the Participant and each alternate payee, in writing, of its determination. The
Administrator must provide notice under this paragraph by mailing to the
individual's address specified in the domestic relations order, or in a manner
consistent with the Department of Labor regulations.
If any portion of the Participant's Account is payable during the period
the Administrator is making its determination of the qualified status of the
domestic relations order, the Administrator must make a separate accounting of
the amounts payable. If the Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first are payable
following receipt of the order, the Administrator will direct the Trustee to
distribute the payable amounts in accordance with the order. If the
Administrator does not make his determination of the qualified status of the
order within the 18-month determination period, the Administrator will direct
the Trustee to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
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8/1/93
prospectively if the Administrator later determines the order is a qualified
domestic relations order.
A domestic relations order will not fail to be deemed a qualified domestic
relations order merely because it requires the distribution or segregation of
all or part of a Participant's Account with respect to an alternate payee prior
to the Participant's earliest retirement age (as defined in Section 414(p) of
the Code) under the Plan. A distribution to an alternate payee prior to the
Participant's attainment of the earliest retirement age is available only if (a)
the order specifies distribution at that time and (b) if the present value of
the alternate payee's benefits under the Plan exceeds $3,500, and the order
requires, and the alternate payee consents to, a distribution occurring prior to
the Participant's attainment of earliest retirement age.
12.04. FACILITY OF PAYMENT. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under state law for the care and control of such recipient. The receipt by such
person or institution of any such payments shall be complete acquittance
therefore, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.
12.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to
furnish the Trustee, and the Trustee agrees to furnish the Employer, with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code and any regulations issued or
forms adopted by the Treasury Department thereunder or under the provisions of
ERISA and any regulations issued or forms adopted by the Labor Department
thereunder.
l2.06. EFFECT OF FAILURE TO QUALIFY UNDER CODE. Notwithstanding any other
provision contained herein, if the Employer fails to obtain or retain approval
of the Plan by the Internal Revenue Service as a qualified Plan under the Code,
the Employer may no longer participate in this prototype Plan arrangement and
will be deemed to have an individually designed plan.
12.07. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:
(a) If to the Employer or Administrator, to it at the address set forth in
the Adoption Agreement, to the attention of the person specified to receive
notice in the Adoption Agreement;
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8/1/93
(b) If to the Trustee, to it at the address set forth in the Adoption
Agreement;
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
12.08. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts.
ARTICLE 13. PLAN ADMINISTRATION.
13.01. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the requirements of ERISA. The Administrator's
powers and responsibilities include, but are not limited to, the following:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good to be final
and conclusive on all persons claiming benefits under the Plan;
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan;
(d) To administer the claims and review procedures specified in Section
13.03;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be paid;
(g) To authorize the payment of benefits and provide for the distribution
of Code Section 402(f) notices;
(h) To comply with the reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA;
(i) To appoint such agents, counsel, accountants, and consultants as may
be required to assist in administering the Plan;
(j) By written instrument, to allocate and delegate its fiduciary
responsibilities in accordance with Section 405 of ERISA including the
formation of an Administrative Committee to administer the Plan;
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(k) To provide bonding coverage as required under Section 412 of ERISA.
13.02. NONDISCRIMINATORV EXERCISE OF AUTHORITY. Whenever, in the
administration of the Plan, any discretionary action by the Administrator is
required, the Administrator shall exercise its authority in a nondiscriminatory
manner so that all persons similarly situated will receive substantially the
same treatment.
13.03. CLAIMS AND REVIEW PROCEDURES.
(a) CLAIMS PROCEDURE. If any person believes he is being denied any
rights or benefits under the Plan, such person may file a claim in writing
with the Administrator. If any such claim is wholly or partially denied,
the Administrator will notify such person of its decision in writing. Such
notification will contain (1) specific reasons for the denial, (2) specific
reference to pertinent Plan provisions, (3) a description of any additional
material or information necessary for such person to perfect such claim and
an explanation of why such material or information is necessary, and (4)
information as to the steps to be taken if the person wishes to submit a
request for review. Such notification will be given within 90 days after
the claim is received by the Administrator (or within 180 days, if special
circumstances require an extension of time for processing the claim, and if
written notice of such extension and circumstances is given to such person
within the initial 90-day period). If such notification is not given within
such period, the claim will be considered denied as of the last day of such
period and such person may request a review of his claim.
(b) REVIEW PROCEDURE. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60
days after the date on which such denial is considered to have occurred),
such person (or his duly authorized representative) may (1) file a written
request with the Administrator for a review of his denied claim and of
pertinent documents and (2) submit written issues and comments to the
Administrator. The Administrator will notify such person of its decision
in writing. Such notification will be written in a manner calculated to be
understood by such person and will contain specific reasons for the
decision as well as specific references to pertinent Plan provisions. The
decision on review will be made within 60 days after the request for review
is received by the Administrator (or within 120 days, if special
circumstances require an extension of time for processing the request, such
as an election by the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given to such person within
the initial 60-day period). If the decision on review is not made within
such period, the claim will be considered denied.
13.04. NAMED FIDUCIARY. The Administrator is a "named fiduciary" for purposes
of Section 402(a)(1) of ERISA and has the powers and responsibilities with
respect to the management and operation of the Plan described herein.
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13.05. COSTS OF ADMINISTRATION. Unless some or all are paid by the Employer,
all reasonable costs and expenses (including legal, accounting, and employee
communication fees) incurred by the Administrator and the Trustee in
administering the Plan and Trust will be paid first from the forfeitures (if
any) resulting under Section 7.07, then from the remaining Trust Fund. All such
costs and expenses paid from the Trust Fund will, unless allocable to the
Accounts of particular Participants, be charged against the Accounts of all
Participants on a PRORATA basis or in such other reasonable manner as may be
directed by the Employer.
ARTICLE 14. TRUST AGREEMENT.
14.01. ACCEPTANCE OF TRUST RESPONSIBILITIES. By executing the Adoption
Agreement, the Employer establishes a trust to hold the assets of the Plan. By
executing the Adoption Agreement, the Trustee agrees to accept the rights,
duties and responsibilities set forth in this Article 14.
14.02. ESTABLISHMENT OF TRUST FUND. A trust is hereby established under the
Plan and the Trustee will open and maintain a trust account for the Plan and, as
part thereof, Participants' Accounts for such individuals as the Employer shall
from time to time give written notice to the Trustee are Participants in the
Plan. The Trustee will accept and hold in the Trust Fund such contributions on
behalf of Participants as it may receive from time to time from the Employer.
The Trust Fund shall be fully invested and reinvested in accordance with the
applicable provisions of the Plan in Fund Shares or as otherwise provided in
Section 14.10.
14.03. EXCLUSIVE BENEFIT. The Trustee shall hold the assets of the Trust Fund
for the exclusive purpose of providing benefits to Participants and
Beneficiaries and defraying the reasonable expenses of administering the Plan.
No assets of the Plan shall revert to the Employer except as specifically
permitted by the terms of the Plan.
14.04. POWERS OF TRUSTEE. The Trustee shall have no discretion or authority
with respect to the investment of the Trust Fund but shall act solely as a
directed trustee of the funds contributed to it. In addition to and not in
limitation of such powers as the Trustee has by law or under any other
provisions of the Plan, the Trustee will have the following powers, each of
which the Trustee exercises solely as directed Trustee in accordance with the
written direction of the Employer except to the extent a Plan asset is subject
to Participant direction of investment and provided that no such power shall be
exercised in any manner inconsistent with the provisions of ERISA:
(a) to deal with all or any part of the Trust Fund and to invest all or a
part of the Trust Fund in investments available under the Plan, without regard
to the law of any state regarding proper investment;
(b) to retain uninvested such cash as it may deem necessary or advisable,
without liability for interest thereon, for the administration of the Trust;
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8/1/93
(c) to sell, convert, redeem, exchange, or otherwise dispose of all or any
part of the assets constituting the Trust Fund;
(d) to enforce by suit or otherwise, or to waive, its rights on behalf of
the Trust, and to defend claims asserted against it or the Trust, provided that
the Trustee is indemnified to its satisfaction against liability and expenses;
(e) to employ such agents and counsel as may be reasonably necessary in
collecting, managing, administering, investing, distributing and protecting the
Trust Fund or the assets thereof and to pay them reasonable compensation;
(f) to compromise, adjust and settle any and all claims against or in
favor of it or the Trust;
(g) to oppose, or participate in and consent to the reorganization,
merger, consolidation, or readjustment of the finances of any enterprise, to pay
assessments and expenses in connection therewith, and to deposit securities
under deposit agreements;
(h) to apply for or purchase annuity contracts in accordance with Section
8.02;
(i) to hold securities unregistered, or to register them in its own name
or in the name of nominees;
(j) to appoint custodians to hold investments within the jurisdiction of
the district courts of the United States and to deposit securities with stock
clearing corporations or depositories or similar organizations;
(k) to make, execute, acknowledge and deliver any and all instruments that
it deems necessary or appropriate to carry out the powers herein granted; and
(l) generally to exercise any of the powers of an owner with respect to
all or any part of the Trust Fund.
The Employer specifically acknowledges and authorizes that affiliates of
the Trustee may act as its agent in the performance of ministerial, non
fiduciary duties under the Trust. The expenses and compensation of such agent
shall be paid by the Trustee.
The Trustee shall provide the Employer with reasonable notice of any claim
filed against the Plan or Trust or with regard to any related matter, or of any
claim filed by the Trustee on behalf of the Plan or Trust or with regard to any
related matter.
14.05. ACCOUNTS. The Trustee will keep full accounts of all receipts and
disbursements and other transactions hereunder. Within 60 days after the close
of each Plan Year, within 60 days after termination of the Trust, and at such
other times as may be appropriate, the Trustee will determine the then net fair
market value of the Trust Fund as of
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8/1/93
the close of the Plan Year, as of the termination of the Trust, or as of such
other time, whichever is applicable, and will render to the Employer and
Administrator an account of its administration of the Trust during the period
since the last such accounting, including all allocations made by it during such
period.
14.06. APPROVING OF ACCOUNTS. To the extent permitted by law, the written
approval of any account by the Employer or Administrator will be final and
binding, as to all matters and transactions stated or shown therein, upon the
Employer, Administrator, Participants and all persons who then are or thereafter
become interested in the Trust. The failure of the Employer or Administrator to
notify the Trustee within six (6) months after the receipt of any account of its
objection to the account will, to the extent permitted by law, be the equivalent
of written approval. If the Employer or Administrator files any objections
within such six (6) month period with respect to any matters or transactions
stated or shown in the account, and the Employer or Administrator and the
Trustee cannot amicably settle the question raised by such objections, the
Trustee will have the right to have such questions settled by judicial
proceedings. Nothing herein contained will be construed so as to deprive the
Trustee of the right to have judicial settlement of its accounts. In any
proceeding for a judicial settlement of any account or for instructions, the
only necessary parties will be the Trustee, the Employer and the Administrator.
14.07. DISTRIBUTION FROM TRUST FUND. The Trustee shall make such distribution
from the Trust Fund as the Employer or Administrator may in writing direct, as
provided by the terms of the Plan, upon certification by the Employer or
Administrator that the same is for the exclusive benefit of Participants or
their Beneficiaries, or for the payment of expenses of administering the Plan.
14.08. TRANSFER OF AMOUNTS FROM QUALIFIED PLAN. If the Plan provides that
amounts may be transferred to the Plan from another qualified plan or trust
under Section 401(a) of the Code, such transfer shall be made in accordance with
the provisions of the Plan and with such rules as may be established by the
Trustee. The Trustee will only accept assets which are in a medium proper for
investment under this agreement or in cash. Such amounts shall be accompanied
by written instructions showing separately the respective contributions by the
prior employer and the transferring Employee, and identifying the assets
attributable to such contributions. The Trustee shall hold such assets for
investment in accordance with the provisions of this agreement.
14.09. TRANSFER OF ASSETS FROM TRUST. Subject to the provisions of the Plan,
the Employer may direct the Trustee to transfer all or a specified portion of
the Trust assets to any other plan or plans maintained by the Employer or the
employer or employers of a former Participant or Participants, provided that the
Trustee has received evidence satisfactory to it that such other plan meets all
applicable requirements of the Code. The assets so transferred shall be
accompanied by written instructions from the Employer naming the persons for
whose benefit such assets have been transferred, showing separately the
respective contributions by the Employer and by each Participant, if any, and
identifying the assets attributable to the various
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contributions. The Trustee shall have no further liabilities with respect to
assets so transferred.
14.10. SEPARATE TRUST OR FUND FOR EXISTING PLAN ASSETS. With the consent of
the Trustee, the Employer may maintain a trust or fund (including a group
annuity contract) under this prototype plan document separate from the Trust
Fund for Plan assets purchased prior to the adoption of this prototype plan
document which are not Fidelity Funds listed in Section 1.14(b). The Trustee
shall have no authority and no responsibility for the Plan assets held in such
separate trust or fund. The duties and responsibilities of the trustee of a
separate trust shall be provided by a separate trust agreement, between the
Employer and the trustee.
Notwithstanding the preceding paragraph, the Trustee or an affiliate of the
Trustee may agree in writing to provide ministerial recordkeeping services for
guaranteed investment contracts held in the separate trust or fund. The
guaranteed investment contract(s) shall be valued as directed by the Employer or
the Trustee of the separate trust.
The trustee of the separate trust (hereafter referred to as "trustee") will
be the owner of any insurance contract purchased prior to the adoption of this
prototype plan document. The insurance contract(s) must provide that proceeds
will be payable to the trustee; however the trustee shall be required to pay
over all proceeds of the contract(s) to the Participant's designated Beneficiary
in accordance with the distribution provisions of this plan. A Participant's
spouse will be the designated Beneficiary of the proceeds in all circumstances
unless a qualified election has been made in accordance with Article 8. Under no
circumstances shall the trust retain any part of the proceeds. In the event of
any conflict between the terms of this plan and the terms of any insurance
contract purchased hereunder, the plan provision. shall control.
Any life insurance contracts held in the Trust Fund or in the separate
trust are subject to the following limits:
(a) Ordinary life - For purposes of these incidental insurance provisions,
ordinary life insurance contracts are contracts with both nondecreasing
death benefits and nonincreasing premiums. If such contracts are held,
less than 1/2 of the aggregate employer contributions allocated to any
Participant will be used to pay the premiums attributable to them.
(b) Term and universal life - No more than 1/4 of the aggregate employer
contributions allocated to any participant will be used to pay the premiums
on term life insurance contracts, universal life insurance contracts, and
all other life insurance contracts which are not ordinary life.
(c) Combination - The sum of 1/2 of the ordinary life insurance premiums
and all other life insurance premiums will not exceed 1/4 of the aggregate
employer contributions allocated to any Participant.
<PAGE>
8/1/93
14.11. VOTING; DELIVERY OF INFORMATION. The Trustee shall deliver, or cause to
be executed and delivered, to the Employer or Plan Administrator all notices,
prospectuses, financial statements, proxies and proxy soliciting materials
received by the Trustee relating to securities held by the Trust or, if
applicable, deliver these materials to the appropriate Participant or the
Beneficiary of a deceased Participant. The Trustee shall not vote any
securities held by the Trust except in accordance with the written instructions
of the Employer, Participant or the Beneficiary of the Participant, if the
Participant is deceased; however, the Trustee may, in the absence of
instructions, vote "present" for the sole purpose of allowing such shares to be
counted for establishment of a quorum at a shareholders' meeting. The Trustee
shall have no duty to solicit instructions from Participants, Beneficiaries, or
the Employer.
14.12. COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee's fee for performing
its duties hereunder will be such reasonable amounts as the Trustee may from
time to time specify by written agreement with the Employer. Such fee, any
taxes of any kind which may be levied or assessed upon or with respect to the
Trust Fund, and any and all expenses, including without limitation legal fees
and expenses of administrative and judicial proceedings, reasonably incurred by
the Trustee in connection with its duties and responsibilities hereunder will,
unless some or all have been paid by said Employer, be paid first from
forfeitures resulting under Section 7.07, then from the remaining Trust Fund and
will, unless allocable to the Accounts of particular Participants, be charged
against the respective Accounts of all Participants, in such reasonable manner
as the Trustee may determine.
14.13. RELIANCE BY TRUSTEE ON OTHER PERSONS. The Trustee may rely upon and act
upon any writing from any person authorized by the Employer or Administrator to
give instructions concerning the Plan and may conclusively rely upon and be
protected in acting upon any written order from the Employer or Administrator or
upon any other notice, request, consent, certificate, or other instructions or
paper reasonably believed by it to have been executed by a duly authorized
person, so long as it acts in good faith in taking or omitting to take any such
action. The Trustee need not inquire as to the basis in fact of any statement in
writing received from the Employer or Administrator.
The Trustee will be entitled to rely on the latest certificate it has
received from the Employer or Administrator as to any person or persons
authorized to act for the Employer or Administrator hereunder and to sign on
behalf of the Employer or Administrator any directions or instructions, until it
receives from the Employer or Administrator written notice that such authority
has been revoked.
Notwithstanding any provision contained herein, the Trustee will be under
no duty to take any action with respect to any Participant's Account (other than
as specified herein) unless and until the Employer or Administrator furnishes
the Trustee with written instructions on a form acceptable to the Trustee, and
the Trustee agrees thereto in writing. The Trustee will not be liable for any
action taken pursuant to the Employer's or Administrator's written instructions
(nor for the
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8/1/93
collection of contributions under the Plan, nor the purpose or propriety of any
distribution made thereunder).
14.14. INDEMNIFICATION BY EMPLOYER. The Employer shall indemnify and save
harmless the Trustee from and against any and all liability to which the Trustee
may be subjected by reason of any act or conduct (except willful misconduct or
negligence) in its capacity as Trustee, including all expenses reasonably
incurred in its defense.
14.15. CONSULTATION BY TRUSTEE WITH COUNSEL. The Trustee may consult with
legal counsel (who may be but need not be counsel for the Employer or the
Administrator) concerning any question which may arise with respect to its
rights and duties under the Plan and Trust, and the opinion of such counsel
will, to the extent permitted by law, be full and complete protection in respect
of any action taken or omitted by the Trustee hereunder in good faith and in
accordance with the opinion of such counsel.
14.16. PERSONS DEALING WITH THE TRUSTEE. No person dealing with the Trustee
will be bound to see to the application of any money or property paid or
delivered to the Trustee or to inquire into the validity or propriety of any
transactions.
14.17. RESIGNATION OR REMOVAL OF TRUSTEE. The Trustee may resign at any time by
written notice to the Employer, which resignation shall be effective 60 days
after delivery to the Employer. The Trustee may be removed by the Employer by
written notice to the Trustee, which removal shall be effective 60 days after
delivery to the Trustee.
Upon resignation or removal of the Trustee, the Employer may appoint a
successor trustee. Any such successor trustee will, upon written acceptance of
his appointment, become vested with the estate, rights, powers, discretion,
duties and obligations of the Trustee hereunder as if he had been originally
named as Trustee in this Agreement.
Upon resignation or removal of the Trustee, the Employer will no longer
participate in this prototype plan and will be deemed to have adopted an
individually designed plan. In such event, the Employer shall appoint a
successor trustee within said 60-day period and the Trustee will transfer the
assets of the Trust to the successor trustee upon receipt of sufficient evidence
(such as a determination letter or opinion letter from the Internal Revenue
Service or an opinion of counsel satisfactory to the Trustee) that such trust
will be a qualified trust under the Code.
The appointment of a successor trustee shall be accomplished by delivery to
the Trustee of written notice that the Employer has appointed such successor
trustee, and written acceptance of such appointment by the successor trustee.
The Trustee may, upon transfer and delivery of the Trust Fund to a successor
trustee, reserve such reasonable amount as it shall deem necessary to provide
for its fees, compensation, costs and expenses, or for the payment of any other
liabilities chargeable against the Trust Fund for which it may be
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liable. The Trustee shall not be liable for the acts or omissions of any
successor trustee.
14.18. FISCAL YEAR OF THE TRUST. The fiscal year of the Trust will coincide
with the Plan Year.
14.19. DISCHARGE OF DUTIES BY FIDUCIARIES. The Trustee and the Employer and
any other fiduciary shall discharge their duties under the Plan and this Trust
Agreement solely in the interests of Participants and their Beneficiaries in
accordance with the requirements of ERISA.
14.20. AMENDMENT. In accordance with provisions of the Plan, and subject to
the limitations set forth therein, this Trust Agreement may be amended by an
instrument in writing signed by the Employer and the Trustee. No amendment to
this Trust Agreement shall divert any part of the Trust Fund to any purpose
other than as provided in Section 2 hereof.
14.21. PLAN TERMINATION. Upon termination or partial termination of the Plan
or complete discontinuance of contributions thereunder, the Trustee will make
distributions to the Participants or other persons entitled to distributions as
the Employer or Administrator directs in accordance with the provisions of the
Plan. In the absence of such instructions and unless the Plan otherwise
provides, the Trustee will notify the Employer or Administrator of such
situation and the Trustee will be under no duty to make any distributions under
the Plan until it receives written instructions from the Employer or
Administrator. Upon the completion of such distributions, the Trust will
terminate, the Trustee will be relieved from all liability under the Trust, and
no Participant or other person will have any claims thereunder, except as
required by applicable law.
14.22. PERMITTED REVERSION OF FUNDS TO EMPLOYER. If it is determined by the
Internal Revenue Service that the Plan does not initially qualify under Section
401 of the Code, all assets then held under the Plan will be returned by the
Trustee, as directed by the Administrator, to the Employer, but only if the
application for determination is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan was adopted or such
later date as may be prescribed by regulations. Such distribution will be made
within one year after the date the initial qualification is denied. Upon such
distribution the Plan will be considered to be rescinded and to be of no force
or effect.
Contributions under the Plan are conditioned upon their deductibility under
Section 404 of the Code. In the event the deduction of a contribution made by
the Employer is disallowed under Section 404 of the Code, such contribution (to
the extent disallowed) must be returned to the Employer within one year of the
disallowance of the deduction.
Any contribution made by the Employer because of a mistake of fact must be
returned to the Employer within one year of the contribution.
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14.23. GOVERNING LAW. This Trust Agreement will be construed, administered and
enforced according to ERISA and, to the extent not preempted thereby, the laws
of the Commonwealth of Massachusetts.
<PAGE>
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CORPORATEplan FOR RETIREMENT-SM-
PROFIT SHARING/401(k) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
AMENDMENT ONE
SECTION 2.01(a)(7) "COMPENSATION" is amended to include:
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in this
plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision. Notwithstanding
2.0l(a)(7)(A), for purpose of Section 4.02 (Additional Limit on Deferral
Contributions) and Section 4.04 (Limit on Matching Contributions), the Employer
may use Compensation as defined in Section 5.03(e)(2) excluding reimbursements
or other expense allowances, fringe benefits (cash and non-cash), moving
expenses, deferred compensation and welfare benefits, but including amounts that
are not includable in the gross income of the Participant under a salary
reduction agreement by reason of the application of Section 125, 402(a)(8),
402(h) or 403(b) of the Code.
If compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current plan year, the
compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
SECTION 8.01(d) "DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES" is
amended to include:
(5) If a distribution is one to which sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less than 30
days after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively elects
a distribution.
<PAGE>
EXHIBIT 10.17
TSW INTERNATIONAL, INC.
CONSULTANTS STOCK OPTION PLAN
Section 1. PURPOSE OF PLAN. The purpose of the TSW International, Inc.
Consultants Stock Option Plan (the "Plan") is to provide a means whereby TSW
International, Inc. (the "Company") will, through the grant of options to
purchase common stock of the Company ("Options"), attract and retain highly
qualified and competent consultants and motivate such consultants to exert their
best efforts on behalf of the Company and any "Subsidiary" (as hereinafter
defined) of the Company. As used herein, the term "Subsidiary" means any
subsidiary of the Company within the definition of "subsidiary corporation" in
Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the term "Parent" means any corporation within the definition of "parent
corporation" in Section 424(e) of the Code.
Section 2. ELIGIBILITY; NUMBER OF SHARES AVAILABLE UNDER PLAN.
(a) The consultants eligible to participate in the Plan as recipients of
Options (hereinafter referred to as "consultants") shall be determined by the
"Committee" (as hereinafter defined) in its absolute discretion.
(b) The Company hereby allocates and reserves an aggregate number of
100,000 shares of the $.0l par value common stock of the Company (the "Shares")
for the grant of Options hereunder by the Company to consultants of the Company
or of a Subsidiary thereof and the Company shall reserve and set aside in
accordance with the Georgia Business Corporation Code, the number of authorized
but unissued, or reacquired, Shares to be issued only on the exercise of any
Options granted under the Plan. If any Option granted under the Plan shall
terminate, expire, be reacquired by the Company or, with the consent of the
optionee, be cancelled as to any Shares, new Options may thereafter be granted
with respect to such Shares. In addition, any Shares surrendered as
consideration upon exercise of any Option shall be included in the number of
Shares thereafter available to be granted as Options.
Section 3. ADMINISTRATION OF THE PLAN.
(a) ESTABLISHMENT OF COMMITTEE. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors as
established and appointed by the Board of Directors of the Company from time to
time. In the event the Board of Directors elects not to constitute the
Committee from time to time or wishes to grant Options or otherwise exercise the
functions of the Committee, then the Board of Directors shall have the rights,
powers and responsibilities of the Committee hereunder as if the Board were the
"Committee" referred to in this Agreement.
(b) RESPONSIBILITIES OF COMMITTEE Subject to the terms hereof, the
Committee shall have the plenary authority in its discretion to (i) determine
and designate those consultants of the Company or of any Subsidiary thereof to
whom an Option or Options shall be granted; (ii) authorize the grant of Options,
and the price, term of payment and other terms thereof; (iii)
<PAGE>
determine the number of Shares subject to each such Option; (iv) determine the
time or times when and the manner in which each such Option shall be
exercisable, whether in full or in installments, and the duration of such
exercise period; and (v) determine the terms and provisions (and amendments
thereof) of each Option Agreement (as hereinafter defined), including such
terms, provisions and amendments as shall be required by the Committee in its
discretion to conform to any law or regulation or any change thereof.
(c) INTERPRETATION OF THE PLAN. The Committee shall have the plenary
authority in its discretion to interpret the Plan, prescribe, amend or rescind
any rules and regulations necessary or appropriate for the administration of the
Plan, and take such other actions as it deems necessary or advisable to fully
implement the terms and the spirit hereof, except as otherwise expressly
provided herein. Any interpretation, determination or other action made or
taken by the Committee shall be final, binding and conclusive upon any optionee,
unless otherwise provided herein.
Section 4. TERMS AND CONDITIONS. Each Option hereunder shall be
evidenced by a written agreement (the "Option Agreement"), which need not be
identical with other Option Agreements, in form and substance satisfactory to
the Committee and in accordance with the following express terms and conditions
and such other terms and conditions as the Committee may find appropriate.
(a) OPTION PERIOD. The term of each Option shall be fixed by the
Committee, but no Option shall be exercisable more than 10 years after the date
the Option is granted.
(b) OPTION PRICE. The option price per Share shall be determined by the
Committee at the time any such Option is granted and may be greater than, equal
to but not less than the fair market value (but in no event less than the par
value) of a Share at the time such Option is granted.
(c) EXERCISE OF OPTION. Subject to the provisions of this Plan, any
Option granted hereunder shall be exercised only at such time or times as
determined by the Committee at the time of the grant thereof and as set forth in
the Option Agreement.
(d) PAYMENT OF PURCHASE PRICE UPON EXERCISE. The purchase price of the
Shares subject to any Option hereunder shall be paid to the Company at the time
of exercise (i) in cash, or (ii) in such other consideration as the Committee
deems appropriate at the time of grant of such Option.
(e) EXERCISE UPON TERMINATION OF RELATIONSHIP. Upon the termination of
any optionee's relationship with the Company or, if applicable, a Subsidiary (i)
for reason of disability, all rights to exercise the Option shall expire ninety
(90) days following termination, (ii) for reason of death, all rights to
exercise the Option shall expire one-hundred and twenty (120) days following the
date of death, or (iii) for any other reason, all rights to exercise the Option
shall expire thirty (30) days following termination.
2
<PAGE>
(f) NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable by any optionee other than by will or the laws of descent and
distribution, and an Option held by a person is exercisable during the
optionee's lifetime only by such optionee.
(g) INVESTMENT REPRESENTATION. Each Option Agreement shall contain the
requirement that, upon demand by the Committee and prior to the delivery of any
Shares to be acquired thereunder, the optionee shall deliver to the Committee a
written representation in form and substance satisfactory to the Committee,
affirming that the Shares to be acquired by optionee thereby, if not registered
pursuant to applicable state and/or federal securities laws, shall be acquired
for investment purposes only and not for resale or with a view to the
distribution thereof.
(h) ADJUSTMENTS. In the event of any change in the capital of the Company
by reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of Shares, any rights offering
to purchase Shares at a price substantially below fair market value, or of any
similar change affecting the Shares, then, in any such event, the number and
kind of Shares subject to an Option and the purchase price per Share shall be
appropriately adjusted consistent therewith in accordance with Treasury
Regulation Section 1.425-1(a); however, in the case of a merger or
consolidation, the Committee may determine that adjustments are not appropriate
under the circumstances. Any adjustment(s) so made shall be final and binding
upon optionees.
(i) NO RIGHTS AS SHAREHOLDER. No optionee shall have any rights as a
shareholder of the Company thereof prior to the date of issuance of a
certificate or certificates representing all or any portion of the Shares
purchased pursuant to such Option.
(j) NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan and any Option granted
hereunder shall not affect in any way whatsoever the relationship of such
optionee with the Company or any Subsidiary nor the right of the Company or the
Subsidiary, as the case may be, to terminate optionee's relationship with same.
Section 5. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the
grant and exercise of Options thereunder, and the obligation of the Company to
sell and deliver Shares under such Options, shall be subject to all applicable
laws, rules and regulations, including, but not limited to, those of the United
States and its states, and to such approvals by any government or regulatory
agency as may be required.
Section 6. AMENDMENT AND DISCONTINUANCE. The Board of Directors of the
Company may from time to time amend, suspend or discontinue the Plan; provided,
however, that, unless otherwise approved by a majority of the issued and
outstanding shares of the Company and subject to the provisions of Section 4(k)
hereof, the Board of Directors of the Committee may not (a) increase the number
of Shares reserved for Options pursuant to Section 2; or (b) change the class of
persons or entities eligible to receive Options hereunder. The Board of
Directors of the Company or the Committee, except as provided for in Section
4(h), may not adjust the
3
<PAGE>
pricing for any Options. Without the written consent of an optionee, no
amendment or suspension of the Plan shall alter or impair any Option previously
granted to same under the Plan.
Section 7. EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board of Directors of the Company, provided that the approval of
the holders of a majority of the outstanding shares of stock of the Company
entitled to vote thereon is secured within twelve months before or after the
Plan is or was adopted by such Board. The Plan shall continue in effect until
_____________, unless sooner terminated in accordance with Section 6 hereof, but
Options granted while the Plan is in effect may extend beyond the effective date
of the Plan.
Section 8. WITHHOLDING ON EXERCISE OF OPTIONS. If upon the exercise of
any Option granted under this Plan the Company or any Subsidiary is required to
withhold or pay any amount under applicable federal or state law, the
independent contractor exercising the Option shall pay such amount to the
Company or Subsidiary, as applicable, or the amount of Shares delivered by the
Company upon exercise of the Option shall be appropriately reduced, to reimburse
the Company or the Subsidiary for such payment.
Section 9. TIME OF GRANTING OPTIONS. Nothing contained the Plan or in
any resolution adopted or to be adopted by the Committee, the Board or the
shareholders of the Company shall constitute the granting of any Option
hereunder. The granting of an Option pursuant to the Plan shall take place only
when a written Option Agreement shall have been duly executed and delivered by
or on behalf of the Company and the individual (or his duly authorized
attorney-in-fact) to whom such Option is to be granted.
Section 10. GOVERNING LAW. This Plan shall be construed and interpreted
in accordance with Georgia law.
Section 11. NAME. The Plan shall be known as "The TSW International,
Inc. Consultants Stock Option Plan."
4
<PAGE>
EXHIBIT 10.18
LEASE AGREEMENT
by and between
COUSINS PROPERTIES INCORPORATED
("Landlord")
and
THE SYSTEM WORKS, INC.
dated
JUNE 8, 1993
for
Suite Number 500
containing
63,688 square feet of Rentable Floor Area
Term: 120 months
3301 Windy Ridge Parkway
Marietta, Georgia 30067
FORM II
5/28/93
<PAGE>
TABLE OF CONTENTS
Page
----
1. CERTAIN DEFINITIONS.........................................................1
2. LEASE OF PREMISES...........................................................2
3. TERM........................................................................3
4. POSSESSION..................................................................3
5. RENTAL PAYMENTS.............................................................3
6. BASE RENTAL.................................................................4
7. RENT ESCALATION.............................................................5
8. ADDITIONAL RENTAL...........................................................6
9. OPERATING EXPENSES..........................................................8
10. TENANT TAXES..............................................................13
11. PAYMENTS..................................................................14
12. LATE CHARGES..............................................................14
13. USE RULES.................................................................14
14. ALTERATIONS...............................................................14
15. REPAIRS AND MAINTENANCE...................................................15
16. LANDLORD'S RIGHT OF ENTRY.................................................17
17. INSURANCE.................................................................18
18. WAIVER OF SUBROGATION.....................................................19
19. DEFAULT...................................................................19
20. WAIVER OF BREACH..........................................................22
21. ASSIGNMENT AND SUBLETTING.................................................22
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22. DESTRUCTION...............................................................24
23. LANDLORD'S LIEN...........................................................25
24. SERVICES BY LANDLORD......................................................25
25. ATTORNEYS' FEES AND HOMESTEAD.............................................25
26. TIME......................................................................25
27. SUBORDINATION AND ATTORNMENT..............................................25
28. ESTOPPEL CERTIFICATES.....................................................27
29. NO ESTATE.................................................................28
30. CUMULATIVE RIGHTS.........................................................28
31. HOLDING OVER..............................................................28
32. SURRENDER OF PREMISES.....................................................29
33. NOTICES...................................................................29
34. DAMAGE OR THEFT OF PERSONAL PROPERTY......................................30
35. EMINENT DOMAIN............................................................30
36. PARTIES...................................................................31
37. INDEMNITIES...............................................................32
38. Intentionally Deleted.....................................................32
39. FORCE MAJEURE.............................................................32
40. LANDLORD'S LIABILITY......................................................33
41. LANDLORD'S COVENANT OF QUIET ENJOYMENT....................................34
42. SECURITY DEPOSITS.........................................................34
43. HAZARDOUS SUBSTANCES......................................................34
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44. SUBMISSION OF LEASE.......................................................36
45. SEVERABILITY..............................................................36
46. ENTIRE AGREEMENT..........................................................36
47. HEADINGS..................................................................36
48. BROKER....................................................................36
49. GOVERNING LAW.............................................................37
50. SPECIAL STIPULATIONS......................................................37
51. AUTHORITY.................................................................37
52. JOINT AND SEVERAL LIABILITY...............................................37
Rules and Regulations
Exhibit "A" - Legal Description
Exhibit "B" - Floor Plan
Exhibit "B" - Initial Demised Premises Basement Level (Crosshatched)
Exhibit "B" - Initial Demised Premises 2nd Floor (Crosshatched)
Exhibit "B" - Initial Demised Premises 3rd Floor (Crosshatched)
Exhibit "B" - Initial Demised Premises 5th Floor (Crosshatched)
Exhibit "B-1" - 4th Floor South Half - First Expansion Space (Crosshatched)
Exhibit "B-2" - 4th Floor North Half - Second Expansion Space (Crosshatched)
Exhibit "B-3" - 1st Floor - Third Expansion Space (Crosshatched)
Exhibit "C" - Supplemental Notice
Exhibit "D" - Construction Work
Exhibit "D-1" - Landlord's Construction
Exhibit "D-2" - Tenant's Construction
Exhibit "E" - Building Standard Services
Exhibit "F" - Intentionally Omitted
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Exhibit "G" - Special Stipulations
Exhibit "H" - Clark Letter Regarding Rentable Area
Exhibit "I" - Operating Expense Schedule
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<PAGE>
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT ("Lease"), is made and entered into this 8 day of
JUNE, 1993, by and between Landlord and Tenant.
W I T N E S S E T H:
- - - - - - - - - -
1. CERTAIN DEFINITIONS. For purposes of this Lease, the following terms
shall have the meanings hereinafter ascribed thereto:
(a) Landlord: COUSINS PROPERTIES INCORPORATED, a Georgia corporation
(b) Landlord's Address:
2500 Windy Ridge Parkway
Suite 1600
Marietta, Georgia 30067
Attn: T. Charlesworth
(c) Tenant: THE SYSTEM WORKS, INC.
(d) Tenant's Address:
Building 11
1640 Powers Ferry Rd.
Marietta, Georgia 30067
provided, however, from and after the date upon which Tenant
takes possession and occupies any portion of the Demised Premises
for the conduct of Tenant's business, Tenant's Address shall be:
Suite 500
3301 Windy Ridge Parkway
Marietta, Georgia 30067
(e) Building Address:
3301 Windy Ridge Parkway
Marietta, Georgia 30067
(f) Suite Number: 500
<PAGE>
(g) Rentable Floor Area of Demised Premises:
63,688 square feet, which amount is conclusively agreed by the
parties hereto to be correct.
(h) Rentable Floor Area of Building:
105,654 square feet, which amount is conclusively agreed by the
parties hereto to be correct.
(i) Lease Term: 120 months.
(j) Base Rental Rate: $6.00 per square foot of Rentable Floor Area
of Demised Premises per year, subject to adjustments as set forth in
Article 7 below.
(k) Rental Commencement Date: The earlier of (x) thirty (30) days
after Landlord substantially completes (as defined in EXHIBIT "D-1") the
improvements to be constructed by Landlord pursuant to EXHIBIT "D-1"
hereof, but such date shall be accelerated for each day of Tenant Delay
(as defined in EXHIBIT "D-1"), but such date shall not occur earlier
than December 31, 1993 or (y) the date upon which any of Tenant's
personnel occupies any portion of the Demised Premises for the conduct
of Tenant's business, provided, however, that moving in, installing
equipment and furnishings and other preparation of the Demised Premises
for occupancy shall not be deemed to constitute conduct of Tenant's
business. Landlord and Tenant will both use good faith efforts to have
the Building ready for Tenant occupancy by November 1, 1993.
(l) Construction Allowance: $286,596.00
(m) Security Deposits:
(i) $71,304.91 (Article 42[a])
(ii) $ None (Article 42[b])
(n) Broker(s): Cousins Real Estate Corporation and Griffin
Management Services, Inc., dba The Griffin Company.
2. LEASE OF PREMISES. Landlord, in consideration of the covenants and
agreements to be performed by Tenant, and upon the terms and conditions
hereinafter stated, does hereby rent and lease unto Tenant, and Tenant does
hereby rent and lease from Landlord, certain premises (the "Demised Premises")
in the building (hereinafter referred to as "Building") located on that certain
tract of land (the "Land") more particularly described on EXHIBIT "A" attached
hereto and by this reference made a part hereof, which Demised Premises are
crosshatched on the floor plan attached hereto as EXHIBIT "B" and by this
reference made a part hereof, with no easement for light, view or
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<PAGE>
air included in the Demised Premises or being granted hereunder. The "Project"
is comprised of the Building, the Land, the Building's parking facilities, any
walkways, covered walkways, tunnels or other means of access to the Building and
the Building's parking facilities, all common areas, including any lobbies or
plazas, and any other improvements or landscaping on the Land. The Project is
located in the development known as "Wildwood Office Park". The Demised
Premises shall include the appurtenant right to use, in common with other
tenants of the Building, the second floor general building lobby and entrance,
Building stairs, first floor patio (but only during the Sole Tenancy Period),
elevators, the Building's parking facilities and other areas of the Building
designed by Landlord as "common areas" from time to time (sometimes herein
referred to as "common areas"). All windows and outside walls of the Building
and any space in the Demised Premises used for shafts, sinks, pipes, conduits,
ducts, telephone ducts and equipment, electric or other utilities or other
similar Building facilities, and the use thereof and access thereto through the
Demised Premises for the purposes of operation, maintenance, reasonable
inspection, display and repairs, as expressly permitted hereunder, are reserved
to Landlord.
3. TERM. The term of this Lease ("Lease Term") shall commence on the date
first hereinabove set forth, and, unless sooner terminated as provided in this
Lease, shall end on the expiration of the period designated in Article 1(i)
above, which period shall commence on the Rental Commencement Date, unless the
Rental Commencement Date shall be other than the first day of a calendar month,
in which event such period shall commence on the first day of the calendar month
following the month in which the Rental Commencement Date occurs. Promptly
after the Rental Commencement Date Landlord shall send to Tenant a Supplemental
Notice in the form of EXHIBIT "C" attached hereto and by this reference made a
part hereof, specifying the Rental Commencement Date, the date of expiration of
the Lease Term in accordance with Article 1(i) above and certain other matters
as therein set forth.
4. POSSESSION. The obligations of Landlord and Tenant with respect to
the initial leasehold improvements to the Demised Premises are set forth in
EXHIBIT "D" attached hereto and by this reference made a part hereof. Taking of
possession by Tenant shall be deemed conclusively to establish that Landlord's
obligations set forth in EXHIBIT "D" with respect to the Demised Premises have
been completed in accordance with the requirements of EXHIBIT "D" excluding
latent defects and that the Demised Premises, to the extent of Landlord's
obligations set forth in EXHIBIT "D" with respect thereto, are in good and
satisfactory condition, excluding latent defects.
5. RENTAL PAYMENTS.
(a) Commencing on the Rental Commencement Date, and continuing
thereafter throughout the Lease Term, Tenant hereby agrees to pay all Rent
due and payable under this Lease. As used in this Lease, the term "Rent"
shall mean the Base Rental, Tenant's Forecast Additional Rental, Tenant's
Additional Rental, and any other amounts that Tenant assumes or agrees to
pay under the provisions of this Lease that are owed to Landlord, including
without limitation any and all other sums that may become due by reason of
any default of Tenant or failure on Tenant's part to comply with the
agreements, terms, covenants and
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<PAGE>
conditions of this Lease to be performed by Tenant. Base Rental together
with Tenant's Forecast Additional Rental shall be due and payable in twelve
(12) equal installments on the first day of each calendar month, commencing
on the Rental Commencement Date and continuing thereafter throughout the
Lease Term and any extensions or renewals thereof, and Tenant hereby agrees
to pay such Rent to Landlord at Landlord's address as provided herein (or
such other address as may be designated by Landlord from time to time)
monthly in advance. Tenant shall pay all Rent and other sums of money as
shall become due from and payable by Tenant to Landlord under this Lease at
the times and in the manner provided in this Lease, without demand, set-off
or counterclaim, except as otherwise provided herein. If for any reason
services to at least 10% of the Demised Premises, which are provided by,
through or under Landlord are interrupted other than as a result of the
actions of Tenant or its employees, contractors, agents and invitees, such
interruption of services is of a nature that it materially interferes with
Tenant's use, occupancy and enjoyment of the Demised Premises or the
portion thereof, as applicable, and the provision of such service (and the
interruption thereof) is within the reasonable control of Landlord, then if
such interruption lasts in excess of eight (8) consecutive business days
after receipt by Landlord of written notice from Tenant, Tenant may abate
payments of its Rent for the portion of the Demised Premises in question
after said eighth (8th) consecutive business day until such service is once
again provided to the portion of the Demised Premises in question at a
level which does not materially interfere with Tenant's use, occupancy and
enjoyment of the portion of the Demised Premises in question.
(b) If the Rental Commencement Date is other than the first day of a
calendar month or if this Lease terminates on other than the last day of a
calendar month, then the installments of Base Rental and Tenant's Forecast
Additional Rental for such month or months shall be prorated on a daily
basis and the installment or installments so prorated shall be paid in
advance. Also, if the Rental Commencement Date occurs during a calendar
year, or if this Lease expires or is terminated during a calendar year,
Tenant's Additional Rental shall be determined by reference to Operating
Expense's for said calendar year multiplied by a fraction, the numerator of
which shall be the number of days of the Lease Term during the said
calendar year, and the denominator of which shall be 365, and, in the case
of the termination year the calculation described in Article 8 hereof shall
be made as soon as possible after the expiration or termination of this
Lease, Landlord and Tenant hereby agreeing that the provisions relating to
said calculation shall survive the expiration or termination of this Lease.
6. BASE RENTAL. Subject to adjustments in accordance with Article 7
below, from and after the Rental Commencement Date Tenant shall pay to Landlord
a base annual rental (herein called "Base Rental") equal to the Base Rental Rate
set forth in Article 1(j) above multiplied by the Rentable Floor Area of Demised
Premises set forth in Article 1(g) above.
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<PAGE>
7. RENT ESCALATION.
(a) As used in this Article 7, the term "Lease Year" shall mean the
twelve month period commencing on the Rental Commencement Date, or, if the
Rental Commencement Date is not on the first day of a calendar month,
commencing on the first day of the first calendar month following the
Rental Commencement Date, and each successive twelve month period
thereafter during the Lease Term. The term "Subsequent Year" shall mean
each Lease Year of the Lease Term following the first Lease Year. The term
"Prior Year" shall mean the Lease Year prior to each Subsequent Year. The
term "Index" shall mean the Consumer Price Index for all Urban Consumers
(U.S. City Average; Base 1982-84=100), published by the Bureau of Labor
Statistics of the United States Department of Labor. The term "Base Month"
shall mean January, 1990. The term "Comparison Month" shall mean the
calendar month which is four months prior to the first full month of each
Subsequent Year in question.
(b) If the Index for the Comparison Month for any Subsequent Year is
greater than the Index for the Base Month, then the Base Rental Rate for
such Subsequent Year shall be increased to an amount equal to the product
of the Base Rental Rate for the first Lease Year (exclusive of any
concessions) as set forth in Article 1(j) above, multiplied by a fraction,
the numerator of which is the Index for the Comparison Month and the
denominator of which is the Index for the Base Month. Notwithstanding the
foregoing, in no event shall the Base Rental Rate for a Subsequent Year be
less than the Base Rental Rate applicable to the Prior Year and in no event
shall the Base Rental Rate for a Subsequent Year (subject to the provisions
of subparagraph (d) of this Article 7) be greater than the following
amounts for the Lease Years shown:
Second Lease Year $6.00
Third Lease Year 6.25
Fourth Lease Year 6.50
Fifth Lease Year 6.75
Sixth Lease Year 7.00
Seventh Lease Year 7.25
Eighth Lease Year 7.50
Ninth Lease Year 7.75
Tenth Lease Year 8.00
(c) If the Bureau of Labor Statistics should discontinue the
publication of the Index, or publish the same less frequently, or alter the
same in some manner, then Landlord shall adopt a substitute Index or
substitute procedure which reasonably reflects and monitors consumer
prices.
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<PAGE>
(d) The Base Rental Rates, as escalated pursuant to other provisions
of this Article 7, shall be further escalated under the following
circumstances:
(1) If Tenant does not exercise its First Expansion Option (as
defined in Special Stipulation Paragraph 1) in the manner and by the
time provided therein, the Base Rental Rate otherwise provided for in
this Article 7 for Lease Years 3 through 10 shall be increased
automatically, without the need for any action by either party and
without the need for any amendment to this Lease, by $1.00 for each
such Lease Year;
(2) If Tenant exercises the First Expansion Option in the manner
and by the time provided therein, but does not exercise the Second
Expansion Option (as defined in Special Stipulation Paragraph 1) I the
manner and by the time provided therein, the Base Rental Rate
otherwise provided for in this Article 7 for Lease Years 4 through 10
shall be increased automatically, without the need for any action by
either party and without the need for any amendment to this Lease, by
$.75 for each such Lease Year; and
(3) If Tenant exercises the First Expansion Option and the
Second Expansion Option, in the manner and by the times provided
therein, but does not exercise the Third Expansion Option (as defined
in Special Stipulation Paragraph 1) in the manner and by the time
provided therein, the Base Rental Rate otherwise provided for in this
Article 7 for Lease Years 5 through 10 shall be increased
automatically, without the need for any action by either party and
without the need for any amendment to this Lease, by $.50 for each
such Lease Year.
8. ADDITIONAL RENTAL.
(a) For purposes of this Lease, "Tenant's Forecast Additional Rental"
shall mean Landlord's reasonable estimate of Tenant's Additional Rental for
the coming calendar year or portion thereof. If at any time it appears to
Landlord that Tenant's Additional Rental for the current calendar year will
vary from Landlord's estimate by more than five percent (5%), Landlord
shall have the right to revise, by notice to Tenant, its estimate for such
year, and subsequent payments by Tenant for such year shall be based upon
such revised estimate of Tenant's Additional Rental. Failure to make a
revision contemplated by the immediately preceding sentence shall not
prejudice Landlord's right to collect the full amount of Tenant's
Additional Rental. Prior to the Rental Commencement Date and thereafter
prior to the beginning of each calendar year during the Lease Term,
including any extensions thereof, Landlord shall present to Tenant a
statement of Tenant's Forecast Additional Rental for such calendar year;
provided, however, that if such statement is not given prior to the
beginning of any calendar year as aforesaid, Tenant shall continue to pay
during the next ensuing calendar year on the basis of the amount of
Tenant's Forecast Additional Rental payable
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<PAGE>
during the calendar year just ended until the month after such statement is
delivered to Tenant.
(b) For purposes of this Lease, "Tenant's Additional Rental" shall
mean for each calendar year the sum of "Demised Premises Additional Rental"
(defined below) plus "Other Additional Rental" (defined below):
(1) "Demised Premises Additional Rental" for each calendar year
shall mean the Operating Expense Amount (defined below) multiplied by
the number of square feet of Rentable Floor Area of Demised Premises.
As used herein, "Operating Expense Amount" shall mean an amount equal
to (x) plus (y), where:
(x) equals the amount of Operating Expenses (as defined
below) for such calendar year divided by the greater of (i) 95%
of the number of square feet of Rentable Floor Area of the
Building, or (ii) the total number of square feet of Rentable
Floor Area occupied in the Building for such calendar year on an
average annualized basis; provided, however, if the amount as
calculated under (i) above, the Operating Expenses actually
incurred with respect to such calendar year shall be adjusted to
reflect the amount of Operating Expenses which would have been
incurred if the Building were 95% occupied throughout such
calendar year; and
(y) equals a management fee contribution equal to $.25 for
each of the years 1993 and 1994, and for each calendar year
thereafter, the prior calendar year's amount multiplied by 1.05.
(2) "Other Additional Rental" for each calendar year is defined
as follows:
(x) During the Sole Tenancy Period (as defined below)
"Other Additional Rental" shall be the positive difference
between Operating Expenses for the entire Project for such period
and the amount of Operating Expenses which are reimbursable by
Tenant to Landlord for such period as Demised Premises Additional
Rental. It is the intent of this Lease that during the Sole
Tenancy Period, Tenant shall bear the economic burden of and
shall reimburse Landlord for all Operating Expenses for the
entire Project. For any period that is not a part of the Sole
Tenancy Period, there shall be no "Other Additional Rental", and
(y) "Sole Tenancy Period" shall be defined as the period
beginning on the Rental Commencement Date and ending on the
earlier of (i) the end of the Lease Term and (ii) the end of the
first Lease Year containing an Expansion Option Exercise Deadline
(as defined in Special Stipulation Paragraph 1) in which Tenant
fails to exercise the available Expansion Option
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(as defined in Special Stipulation Paragraph 1) in the manner and
by the time provided therein.
(c) Within one hundred fifty (150) days after the end of the calendar
year in which the Rental Commencement Date occurs and of each calendar year
thereafter during the Lease Term, Landlord shall provide Tenant a statement
showing the Operating Expenses (including components thereof in reasonable
detail) for said calendar year, and a statement prepared by Landlord
comparing Tenant's Forecast Additional Rental with Tenant's Additional
Rental. In the event Tenant's Forecast Additional Rental exceeds Tenant's
Additional Rental for said calendar year, Landlord shall credit such amount
against Rent next due hereunder or, if the Lease Term has expired or is
about to expire, refund such excess to Tenant if there is not an event of
default on the part of Tenant under this Lease (in the instance of an event
of default such excess shall be held as additional security for Tenant's
performance, may be applied by Landlord to cure any such event of default,
and shall not be refunded until any such event of default is cured). In
the event that the Tenant's Additional Rental exceeds Tenant's Forecast
Additional Rental for said calendar year, Tenant shall pay Landlord, within
thirty (30) days of receipt of the statement, an amount equal to such
difference. The provisions of this Lease concerning the payment of
Tenant's Additional Rental shall survive the expiration or earlier
termination of this Lease.
(d) Landlord's books and records pertaining to the calculation of
Operating Expenses for any calendar year within the Lease Term may be
audited by Tenant or its representatives at Tenant's expense, at any time
within twelve (12) months after the end of each such calendar year;
provided that Tenant shall give Landlord not less than thirty (30) days'
prior written notice of any such audit. If Landlord agrees that Tenant's
audit establishes that Landlord's final statement of Operating Expenses for
the year in question was overstated by more than five percent (5%) (or if a
final, unappealable judgement from a court of competent jurisdiction
establishes that fact), Landlord shall reimburse Tenant, within thirty (30)
days of Tenant's written demand therefor, for the reasonable costs and
expenses of Tenant's audit. If Landlord's calculation of Tenant's
Additional Rental for the audited calendar year was incorrect, then Tenant
shall be entitled to a prompt refund of any overpayment or Tenant shall
promptly pay to Landlord the amount of any underpayment, as the case may be.
9. OPERATING EXPENSES.
(a) For the purposes of this Lease, "Operating Expenses" shall mean
all expenses, costs and disbursements (but not specific costs billed to
specific tenants of the Building) of every kind and nature, computed on the
accrual basis, relating to or incurred or paid in connection with the
ownership, management, operation, repair and maintenance of the Project,
including but not limited to, the following:
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(1) reasonable wages, salaries and other costs of all on-site
and off-site employees engaged either full or part-time in the operation,
management, maintenance or access control of the Project, including taxes,
insurance and benefits relating to such employees, allocated based upon the
time such employees are engaged directly in providing such services;
(2) the reasonable cost of all supplies, tools, equipment and
materials used in the operation, management, maintenance and access control
of the Project;
(3) the cost of all utilities for the Project, including but not
limited to the cost of electricity, gas, water, sewer services and power
for heating, lighting, air conditioning and ventilating;
(4) the cost of all maintenance and service agreements for the
Project and the equipment therein, including but not limited to security
service, garage operators, window cleaning, elevator maintenance, HVAC
maintenance, janitorial service, landscaping maintenance and customary
landscaping replacement;
(5) the reasonable cost of repairs and general maintenance of
the Project, including all costs incurred by Landlord under Article 15
hereof;
(6) amortization (together with reasonable financing charges,
whether or not actually incurred) of the cost of acquisition and/or
installation of capital investment items (including security equipment),
amortized over their respective useful lives, which are installed for the
purpose of reducing operating expenses (but only to the extent of
reasonably expected cost savings), promoting safety (but, during the Sole
Tenancy Period, any costs related to safety within or on the Building will
be included herein only if Tenant has consented to the expenditure, but
Tenant shall have no right to refuse to consent if such expenditure is
necessary in order for Landlord to continue to be able to obtain insurance
at commercially reasonable rates), complying with governmental requirements
imposed or determined to be applicable after the date of this Lease, or
maintaining the first-class nature of the Project;
(7) the cost of casualty, rental loss, liability and other
insurance applicable to the Project and Landlord's personal property used
in connection therewith, including insurance required to be carried by
Landlord under Article 17;
(8) the reasonable cost of trash and garbage removal, vermin
extermination, and snow, ice and debris removal;
(9) the cost of legal and accounting services incurred by
Landlord in connection with the management, maintenance, operation and
repair of the Project, excluding
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the owner's or Landlord's general accounting, such as partnership
statements and tax returns, and excluding services described in Article
9(b)(14) below;
(10) all taxes, assessments and governmental charges, incurred by
Landlord, whether federal, state, county, community improvement district or
municipal and whether they be by taxing districts or authorities presently
taxing the Project or by others subsequently created or otherwise, and any
other taxes and assessments attributable to the Project or its operation
(and the costs of contesting any of the same), including business license
taxes and fees, excluding, however, taxes and assessments imposed on the
personal property of the tenants of the Project, federal and state taxes on
income, death taxes, franchise taxes, and any taxes (other than business
license taxes and fees) imposed or measured on or by the income of Landlord
from the operation of the Project; provided, however, that if at any time
during the Lease Term, the present method of taxation or assessment shall
be so changed that the whole or any part of the taxes, assessments, levies,
impositions or charges now levied, assessed or imposed on real estate and
the improvements thereon shall be discontinued and as a substitute
therefor, or in lieu of or in addition thereto, taxes, assessments, levies,
impositions or charges shall be levied, assessed and/or imposed wholly or
partially as a capital levy or otherwise on the rents received from the
Project or the rents reserved herein or any part thereof, then such
substitute or additional taxes, assessments, levies, impositions or
charges, to the extent so levied, assessed or imposed, shall be deemed to
be included within the Operating Expenses to the extent that such
substitute or additional tax would be payable if the Project were the only
property of the Landlord subject to such tax; and it is agreed that Tenant
will be responsible for ad valorem taxes on its personal property and on
the value of the leasehold improvements in the Demised Premises to the
extent that the same relate to improvements made after the occupancy of any
portion of the Demised Premises, if said taxes are based upon an assessment
which includes the cost of such leasehold improvements (and if the taxing
authorities do not separately assess Tenant's leasehold improvements,
Landlord may make an appropriate allocation of the ad valorem taxes
allocated to the Project to give effect to this sentence). If Landlord
receives a refund of any portion of taxes that were included in the
Operating Costs paid by Tenant, Landlord shall reimburse Tenant its prorata
share of the refunded taxes, less any expenses that Landlord reasonably
incurred to obtain the refund;
(11) the reasonable cost of operating the management office for
the Project and an equitable portion of the cost of operating the
management office for Wildwood Office Park, including in each case the cost
of office supplies, postage, telephone expenses, maintenance and repair of
office equipment, non-capital investment equipment, amortization (together
with reasonable financing charges) of the cost of capital investment
equipment, and rent; and
(12) the pro rata share applicable to the Project of the sum of
(i) the costs of operation, maintenance, repair and replacement of the
landscaping and irrigation systems now or hereafter located along Windy
Ridge Parkway, Windy Hill Road, Wildwood
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Parkway, Wildwood Plaza, the right-of-way areas of Powers Ferry Road
adjoining Wildwood Office Park, and all future roadways, whether public or
private, constructed in Wildwood Office Park, together with the landscaped
median strips and shoulders of such roadways (but not including the
landscaping and irrigation system located on the shoulder of any roadway
contiguous to a site upon which construction of improvements has commenced)
and any and all light systems located on or in any rights-of-way for
private roads; (ii) ad valorem taxes on any private roadways now or
hereafter located within Wildwood Office Park and on any medians adjacent
to public roads if such medians are not included in public road
rights-of-way; (iii) the costs of ownership, operation, maintenance, repair
and replacement of office park signage for Wildwood Office Park (excluding
leasing, building and office park monumental signage) and any underground
sanitary sewer lines, storm water drainage lines, electric lines, gas
lines, water lines, telephone lines and communication lines located across,
through and under any public or private roadways now or hereafter located
within Wildwood Office Park, except for any such utility facilities serving
solely another project within Wildwood Office Park; (iv) the costs of
ownership, operation, maintenance, repair and replacement of any private
transportation system and equipment from time to time provided or made
available to the developed portions of Wildwood Office Park, including but
not limited to ad valorem taxes on personal property or equipment,
electricity, fuel, painting and cleaning costs; (v) the costs and expenses
of ownership and operation of any security patrols or services, if any,
from time to time provided to Wildwood Office Park in general, but
excluding any such security patrols or services provided solely to another
project within Wildwood Office Park; and (vi) such other costs and expenses
incurred by Landlord as "Owner" of the Project under and pursuant to that
certain Master Declaration of Covenants and Cross-Easements for Wildwood
Office Park dated as of January 23, 1991, recorded in Deed Book 5992, page
430, Cobb County, Georgia records, as modified, amended or supplemented
from time to time (the "Master Declaration"). The share of the foregoing
costs which are applicable to the Project shall be determined in accordance
with the Master Declaration.
(b) For purposes of this Lease, and notwithstanding anything in any
other provision of this Lease to the contrary, "Operating Expenses" shall
not include the following:
(1) the cost of any special work or service performed for any
tenant (including Tenant) at such tenant's cost;
(2) the cost of installing, operating and maintaining any
specialty service, such as an observatory, broadcasting facility, luncheon
club, restaurant, cafeteria, retail store, sundry shop, newsstand, or
concession, but only to the extent such costs exceed those which would
normally be expected to be incurred had such space been general office
space;
(3) the cost of correcting defects in construction;
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(4) compensation paid to officers and executives of Landlord
(but it is understood that the office park manager, the on-site building
manager and other on-site employees below the grade of building manager may
carry a title such as vice president and the salaries and related benefits
of these officers/employees of Landlord would be allowable Operating
Expenses under Article 9[a][1] above);
(5) the cost of any items for which Landlord is reimbursed by
insurance, condemnation or otherwise, except for costs reimbursed pursuant
to provisions similar to Articles 8 and 9 hereof;
(6) the cost of any additions, changes, replacements and other
items which are made in order to prepare for a new tenant's occupancy or
the renewal or expansion of an existing tenant;
(7) the cost of repairs incurred by reason of fire or other
casualty other than commercially reasonable deductible amounts which may
be included in Operating Expenses;
(8) insurance premiums to the extent Landlord may be directly
reimbursed therefor, except for premiums reimbursed pursuant to provisions
similar to Articles 8 and 9 hereof;
(9) interest on debt or amortization payments on any mortgage or
deed to secure debt (except to the extent specifically permitted by Article
9[a]) and rental under any ground lease or other underlying lease;
(10) any real estate brokerage commissions or other costs
incurred in procuring tenants or any fee in lieu of such commission;
(11) any advertising expenses incurred in connection with the
marketing of any rentable space;
(12) rental payments for base building equipment such as HVAC
equipment and elevators;
(13) any expenses for repairs or maintenance which are covered by
warranties and service contracts, to the extent such maintenance and
repairs are made at no cost to Landlord;
(14) legal expenses arising out of the construction of the
improvements on the Land or the enforcement of the provisions of any lease
affecting the Land or Building, including without limitation this Lease;
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(15) management fees (Tenant's obligation for a management fee
contribution is set forth in Article 8[b][1][y] above);
(16) the purchase price of capital items, provided, however that
the provisions of Articles 9(a)(6), 9(a)(11) and 9(a)(12) shall not be
affected by the exclusion;
(17) depreciation, except as expressly allowed in Article
9(a)(6), 9(a)(11) and 9(a)(12);
(18) legal, accounting and other professional fees incurred by
Landlord arising from a sale or financing of the Building or the Project;
(19) the cost of membership in any political organization;
(20) the cost of any political or campaign contributions;
(21) Landlord's cost of electricity or other services sold to
tenants for which Landlord is reimbursed as a charge over the base rent and
additional rent payable under the lease with that tenant;
(22) costs incurred due to Landlord's failure to timely comply
with or pay amounts due with respect to a contractual, legal or
governmental requirement, provided, however, this exclusion shall not be
applicable if Landlord has filed a timely good faith protest or dispute of
the charge in question or if the failure results from Landlord's good faith
interpretation of the applicable contractual, legal or governmental
requirement; and
(23) costs or fees paid to entities or individuals related to or
affiliated with Landlord to the extent such costs or fees exceed the fair
market value for the services rendered by that entity or individual.
(c) Landlord represents that EXHIBIT "I" sets forth its good faith
estimates of what the Operating Expenses would be if calendar year 1993
were the first Lease Year, amounts having been estimated by Landlord for
each category of Operating Expense set forth in Article 9(a). Tenant
acknowledges that it has been offered an opportunity to audit prior
expenses of the Project and, accordingly, has been afforded an opportunity
to develop independent conclusions as to the estimated level of operating
expenses.
10. TENANT TAXES. Tenant shall pay promptly when due all taxes directly
or indirectly imposed or assessed upon Tenant's gross sales, business
operations, machinery, equipment, trade fixtures and other personal property or
assets, whether such taxes are assessed against Tenant, Landlord or the
Building. In the event that such taxes are imposed or assessed against Landlord
or
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the Building, Landlord shall furnish Tenant with all applicable tax bills,
public charges and other assessments or impositions and Tenant shall forthwith
pay the same either directly to the taxing authority or, at Landlord's option,
to Landlord.
11. PAYMENTS. All payments of Rent and other payments to be made to
Landlord shall be made on a timely basis and shall be payable to Landlord or as
Landlord may otherwise designate. All such payments shall be mailed or
delivered to Landlord's Address designated in Article 1(b) above or at such
other place as Landlord may designate from time to time in writing. If mailed,
all payments shall be mailed in sufficient time and with adequate postage
thereon to be received in Landlord's account by no later than the due date for
such payment. Tenant agrees to pay to Landlord Fifty Dollars ($50.00) for each
check presented to Landlord in payment of any obligation of Tenant which is not
paid by the bank on which it is drawn, together with interest from and after the
due date for such payment at the rate of eighteen percent (18%) per annum on the
amount due.
12. LATE CHARGES. Any Rent or other amounts payable to Landlord under
this Lease, if not paid by the fifth day of the month for which such Rent is
due, or by the due date specified on any invoices from Landlord for any other
amounts payable hereunder, shall incur a late charge of Fifty Dollars ($50.00)
for Landlord's administrative expense in processing such delinquent payment and
in addition thereto shall bear interest at the rate of eighteen percent (18%)
per annum from and after the due date for such payment. In no event shall the
rate of interest payable on any late payment exceed the legal limits for such
interest enforceable under applicable law.
13. USE RULES. The Demised Premises shall be used for general offices,
executive offices, sales offices, accounting offices, training center, computer
and computer software development center, computer operations center, kitchen
facilities related to each of the foregoing uses and all functions and purposes
now or hereafter incidental to the foregoing uses and the operation of a full
service computer software firm and no other purposes and in accordance with all
applicable laws, ordinances, rules and regulations of governmental authorities
and the Rules and Regulations attached hereto and made a part hereof. Landlord
warrants that applicable laws, ordinances, regulations, and restrictive
covenants permit the Demised Premises to be used for general office and
executive office uses and purposes. Tenant covenants and agrees to abide by the
Rules and Regulations in all respects as now set forth and attached hereto or as
hereafter promulgated by Landlord. Landlord shall have the right at all times
during the Lease Term to publish and promulgate and thereafter enforce such
rules and regulations or changes in the existing Rules and Regulations as it may
reasonably deem necessary in its sole discretion to protect the tenantability,
safety, operation, and welfare of the Demised Premises, the Project and Wildwood
Office Park. Landlord shall apply and enforce the Rules and Regulations in a
nondiscriminatory fashion.
14. ALTERATIONS. Except for any initial improvement of the Demised
Premises pursuant to EXHIBIT "D", which shall be governed by the provisions of
said EXHIBIT "D", Tenant shall not make, suffer or permit to be made any
alterations, additions or improvements to or of the Demised Premises or any part
thereof, or attach any fixtures or equipment thereto, without first obtaining
Landlord's written consent, which consent shall not be unreasonably withheld,
conditioned or
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delayed by Landlord. Any such alterations, additions or improvements to the
Demised Premises consented to by Landlord shall be made by Landlord or under
Landlord's supervision for Tenant's account and Tenant shall reimburse Landlord
for all costs thereof (including construction coordination fees as set forth in
EXHIBIT "D-1" if Landlord is coordinating the work or as set forth in EXHIBIT
"D-2" if Tenant is coordinating the work), as Rent, within ten (10) days after
receipt of a statement. This provision shall not apply to basic, non-material
work within the Demised Premises, such as, by way of illustration but not
limitation, picture hanging, furniture installation and the rearranging of
offices within the Demised Premises, and Tenant may cause such tasks to be
performed without the prior consent of Landlord. All such alterations,
additions and improvements shall become Landlord's property at the expiration or
earlier termination of the Lease Term and shall remain on the Demised Premises
without compensation to Tenant unless Landlord elects by notice to Tenant to
have Tenant remove such alterations, additions and improvements, in which event,
notwithstanding any contrary provisions respecting such alterations, additions
and improvements contained in Article 32 hereof, Tenant shall promptly restore,
at its sole cost and expense, the Demised Premises to its condition prior to the
installation of such alterations, additions and improvements excepting only (i)
reasonable wear and tear and (ii) casualty damage and condemnation.
15. REPAIRS AND MAINTENANCE.
(a) Landlord shall maintain in good order and repair, subject to
normal wear and tear and subject to casualty and condemnation, the Building
(excluding the Demised Premises and other portions of the Building leased
to other tenants), the Building parking facilities, the public areas and
the landscaped areas. Such maintenance shall be in a manner comparable to
other buildings in Wildwood Office Park and shall include, without
limitation, the "Maintenance Services", as defined below. Notwithstanding
the foregoing obligation, the cost of any repairs or maintenance to the
foregoing necessitated by the intentional acts or negligence of Tenant or
its agents, contractors, employees, invitees, licensees, tenants or
assigns, shall be borne solely by Tenant and shall be deemed Rent hereunder
and shall be reimbursed by Tenant to Landlord within fifteen (15) days
after demand. Landlord shall not be required to make any repairs or
improvements to the Demised Premises except structural repairs necessary
for safety and tenantability and material repairs necessitated by damage
caused by Landlord, its agents or employees acting within the scope of
their agency or employment. The term Maintenance Services shall include
(i) maintaining the exterior walls, exterior windows, exterior doors and
roof of the Building, common areas, public corridors, stairs, elevators,
storage rooms, restrooms, the heating, ventilating and air conditioning
systems, electrical and plumbing systems of the Building, the walks, paving
and landscaping surrounding the Building, (ii) grounds care, including, but
not limited to, the sweeping of walks and parking areas and maintenance of
landscaping in an attractive manner, illumination, snow removal, deicing
and lawn care, all consistent with the grounds care of Wildwood Office
Park, (iii) general maintenance, including supervision, inspections and
management functions as typically carried out in Wildwood Office Park, and
(iv) extermination and pest control services for the Building (and common
areas herein) and
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parking deck for the Building when necessary. Notwithstanding any other
term of this Lease, if during the Sole Tenancy Period Landlord has
requested that Tenant consent to a capital investment intended to promote
safety and, pursuant to the terms of Article 9(a)(6) Tenant has not
consented to the expenditure ("Unapproved Safety Expenditure"), Landlord
shall have no obligation to make such expenditure. Furthermore, Tenant for
itself and its employees hereby waives and releases Landlord from and
agrees to hold Landlord harmless against any and all liability, loss, cost,
damage or expense, including without limitation, court costs and reasonable
attorneys fees, incurred or suffered by Tenant or its employees arising out
of or resulting from the failure to make an Unapproved Safety Expenditure
or to undertake actions that would have been made possible by such
expenditure.
(b) Tenant covenants and agrees that it will take good care of the
Demised Premises and all alterations, additions and improvements thereto
and will keep and maintain the same in good condition and repair, except
for (i) normal wear and tear and (ii) casualty damage and condemnation.
Tenant shall at once report, in writing, to Landlord any defective or
dangerous condition known to Tenant. To the fullest extent permitted by
law, Tenant hereby waives all rights to make repairs at the expense of
Landlord or in lieu thereof to vacate the Demised Premises as may be
provided by any law, statute or ordinance now or hereafter in effect.
Landlord has no obligation and has made no promise to alter, remodel,
improve, repair, decorate or paint the Demised Premises or any part
thereof, except as specifically and expressly herein set forth.
(c) If Landlord fails to keep or perform any of its obligations under
the Lease with respect to repairs and maintenance of the Demised Premises
or Building required under the Lease to be made by Landlord, if such
failure materially and adversely affects Tenant's ability to use the
Demised Premises for normal business operations; or if Landlord fails to
keep the common areas of the Building and Project in a condition at least
comparable to the upkeep of other first class buildings in the area of the
Building, and if either such failure materially and adversely affects
Tenant's ability to use the Demised Premises for normal business
operations; then, upon the continuance of such failure on Landlord's part
for thirty (30) days after the receipt by Landlord and any mortgagee of
notice from Tenant indicating with specificity the nature of the failure
(or, in the case of any such failure which cannot reasonably be cured
within thirty (30) days, within such additional period, if any, as may be
reasonably required by Landlord to cure such failure with due diligence),
and without waiving or releasing Landlord from any obligation, then (i)
Tenant may undertake to perform such obligation, and all sums actually paid
or incurred by Tenant and all necessary and incidental costs and expenses
(but not costs to improve the Building, Demised Premises or other
facilities beyond rectifying Landlord's failure), including reasonable
attorney's fees and expenses paid to legal counsel, incurred by Tenant in
making such payment or performing such obligation, together with interest
thereon at the prime rate of interest quoted form time to time by Trust
Company Bank, main branch, Atlanta, Georgia, plus one percent (1%) interest
per annum, from the date the payment in question is received by Tenant,
shall be paid by Landlord to Tenant within thirty (30) days after demand,
or (ii) Tenant may pursue
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any other remedies available to Tenant at law or in equity to collect
payment and/or cause Landlord to cure such failure. Notwithstanding
anything to the contrary set forth hereinabove, during periods other than
the Sole Tenancy Period, Tenant shall be entitled to perform any such
obligations of Landlord only within the Demised Premises or in the elevator
lobbies on floors occupied solely by Tenant and Tenant shall not be
entitled to perform such obligations with respect to any portions of the
Building systems or facilities that serve any other tenant's space. Any
contractors employed by Tenant to cure a Landlord failure hereunder shall
be reputable contractors and Tenant upon completion of such work shall
provide appropriate lien waivers to Landlord. In effectuating a cure in
connection with Tenant's self-help or cure rights hereunder, Tenant shall
take precautions that a reasonable building manager would undertake to
avoid unreasonable interference with other tenants in the Building or the
Building systems (such as electrical or mechanical systems).
16. LANDLORD'S RIGHT OF ENTRY. Landlord shall retain duplicate keys to
all doors of the Demised Premises and Landlord and its agents, employees and
independent contractors shall have the right to enter the Demised Premises at
reasonable hours to inspect and examine same, to make repairs, additions,
alterations, and improvements, to exhibit the Demised Premises to mortgagees,
prospective mortgagees, purchasers or tenants, and to inspect the Demised
Premises to ascertain that Tenant is complying with all of its covenants and
obligations hereunder, all without being liable to Tenant in any manner
whatsoever for any damages arising therefrom; provided, however, that Landlord
shall, except in case of emergency, afford Tenant such prior notification of an
entry into the Demised Premises as shall be reasonably practicable under the
circumstances and shall use all reasonable efforts to avoid causing any
disruption of the Demised Premises. Landlord shall be allowed to take into and
through the Demised Premises any and all materials that may be required to make
such repairs, additions, alterations or improvements. During such time as such
work is being carried on in or about the Demised Premises, the Rent provided
herein shall not abate, and Tenant waives any claim or cause of action against
Landlord for damages by reason of interruption of Tenant's business or loss of
profits therefrom because of the prosecution of any such work or any part
thereof. Notwithstanding any other provisions of this Lease to the contrary,
Tenant shall be permitted to designate not more than 5,000 square feet of the
Demised Premises as safe or confidential areas or locked computer rooms to be
known as "Locked Documentation Rooms", to which Landlord shall have no access,
unless accompanied by Tenant's authorized representatives. Tenant must
designate such spaces as "Locked Documentation Rooms" by written notice to
Landlord, and such status shall only be effective after receipt by Landlord of
such written notice. Landlord, when accompanied by Tenant's representative may
inspect any Locked Documentation Rooms during Tenant's normal business hours
after giving Tenant reasonable prior notice requesting such an inspection. In
emergency where immediate access to such rooms is necessary, Landlord may, after
being unable to locate an employee of Tenant using all reasonable means, gain
access to a Locked Documentation Room by using force. Landlord shall not be
responsible for providing janitorial services with respect to any Locked
Documentation Room. Landlord shall not receive copies of keys, pass cards or
cipher lock combinations to Locked Documentation Rooms.
17. INSURANCE.
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(a) Tenant shall procure at its expense and maintain throughout the
Lease Term a policy or policies of fire and extended coverage insurance
insuring the full replacement cost of its furniture, equipment, supplies,
and other property owned, leased, held or possessed by it and contained in
the Demised Premises, together with the excess value of the improvements to
the Demised Premises over the Construction Allowance, and workmen's
compensation insurance as required by applicable law. Tenant shall also
procure at its expense and maintain throughout the Lease Term a policy or
policies of insurance, insuring Tenant, Landlord and any other person
designated by Landlord, against any and all liability for injury to or
death of a person or persons and for damage to property occasioned by or
arising out of any construction work being done on the Demised Premises, or
arising out of the condition, use, or occupancy of the Demised Premises, or
in any way occasioned by or arising out of the activities of Tenant, its
agents, contractors, employees, guests, or licensees in the Demised
Premises, or other portions of the Building, the Project or Wildwood Office
Park, the limits of such policy or policies to be in combined single limits
for both damage to property and personal injury and in amounts not less
than Three Million Dollars ($3,000,000) for each occurrence, with annual
general aggregate limits of not less than Five Million Dollars
($5,000,000), provided, however, that said $3,000,000 and $5,000,000 limits
shall be adjusted (x) as of the end of the fifth Lease Year by multiplying
said limits by a fraction whose numerator is the Index (as defined in
Article 7) for the last month of the fifth Lease Year and whose denominator
is the Index for December 1993 and (y) as of the end of the tenth Lease
Year by multiplying said limits by a fraction whose numerator is the Index
for the last month of the tenth Lease Year and whose denominator is the
Index for December 1993. Such insurance shall, in addition, extend to any
liability of Tenant arising out of the indemnities provided for in this
Lease. All insurance policies procured and maintained by Tenant pursuant to
this Article 17 shall name Landlord and the building manager (said building
manager at the time of execution of this Lease being the Landlord and
Landlord will notify Tenant in writing of any change in the building
manager) as additional insured, shall be carried with companies licensed to
do business in the State of Georgia reasonably satisfactory to Landlord,
and shall be non-cancelable and not subject to material change except after
twenty (20) days' written notice to Landlord. Copies of policies and duly
executed certificates of insurance with respect thereto, shall be delivered
to Landlord prior to the Rental Commencement Date, and copies of policies
and certificates evidencing renewals of such policies shall be delivered to
Landlord at least twenty (20) days prior to the expiration of each
respective policy term, (but if copies of such policies are not available by
such date, such copies will be submitted as soon as they are available).
Any insurance required by the terms of this Lease to be carried by Tenant
may be under a blanket policy (or policies) covering other properties of
Tenant and/or its related or affiliated business entities, provided that
the policies otherwise comply with the provisions of this Lease and
allocate to Tenant's property at the Demised Premises the specified
coverage, without possibility of reduction or co-insurance by reason of, or
damage to, any other property named therein. If such insurance is
maintained under a blanket policy, Tenant shall procure and deliver to
Landlord a statement from the insurer or general agent of the insurer
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setting forth the coverage maintained, which shall be sufficient to meet
the requirements of this Lease, and the amounts thereof allocated to the
risk intended to be insured hereunder.
(b) Landlord shall procure at its expense and maintain throughout the
Lease Term a policy of fire and extended coverage insurance insuring an
amount equal to the greater of ninety (90%) of the replacement value of the
Building or the amount required by landlord's mortgagee, if any. Landlord
shall also procure at its expense and maintain throughout the Lease Term a
liability insurance policy with respect to the common areas of the
Building, in commercially reasonable amounts and with commercially
reasonable deductibles. All such costs shall be included in Operating
Expenses.
18. WAIVER OF SUBROGATION. Landlord and Tenant shall each have included
in all policies of fire, extended coverage, business interruption and other
insurance respectively obtained by them covering the Demised Premises, the
Building and contents therein, a waiver by the insurer of all right of
subrogation against the other in connection with any loss or damage thereby
insured against. Any additional premium for such waiver shall be paid by the
primary insured. To the full extent permitted by law, Landlord and Tenant each
waives all right of recovery against the other for, and agrees to release the
other from liability for, loss or damage to the extent such loss or damage is
covered by valid and collectible insurance in effect at the time of such loss or
damage or would be covered by the insurance required to be maintained under this
Lease by the party seeking recovery.
19. DEFAULT.
(a) The following events shall be deemed to be events of default by
Tenant under this Lease: (i) Tenant shall fail to pay any installment of
Rent or any other charge or assessment against Tenant pursuant to the terms
hereof within five (5) days after the "Default Date" for such payment, the
"Default Date" being (x) if all payments previously due from Tenant in the
current calendar year, or if all except one or two of such payments, have
been paid by their respective due dates, the Default Date for the payment
in question shall be the date notice is given by Landlord that the payment
has not been received by its due date and (y) in all other cases, the
Default Date shall be the due date of the payment; (ii) Tenant shall fail
to comply with any term, provision, covenant or warranty made under this
Lease by Tenant, other than the payment of the Rent or any other charge or
assessment payable by Tenant, and (x) shall not cure such failure within
fifteen (15) days after notice thereof to Tenant, or (y) if Tenant notifies
Landlord that said cure will take more than fifteen (15) days and Tenant
provides evidence that it is diligently pursuing said cure, Tenant shall
not cure such failure within a reasonable time, not to exceed sixty (60)
days; (iii) Tenant or any guarantor of this Lease shall make a general
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts as they become due, or shall file a petition
in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or shall
file a petition in any proceeding seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, or shall file an
answer admitting or fail timely to contest the material allegations of a
petition filed
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against it in any such proceeding; (iv) a proceeding is commenced against
Tenant or any guarantor of this Lease seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, and such
proceeding shall not have been dismissed within forty-five (45) days after
the commencement thereof; (v) a receiver or trustee shall be appointed for
the Demised Premises or for all or substantially all of the assets of Tenant
or of any guarantor of this Lease; (vi) Tenant shall fail to take possession
thereof by the later of (x) July 1, 1994 or (y) the date which is sixty
(60) days after the date the Demised Premises are deemed substantially
completed as defined in EXHIBIT "D-1"; (vii) Tenant shall do or permit to
be done anything which creates a lien upon the Demised Premises or the
Project and such lien is not removed or discharged within fifteen (15) days
after the filing thereof; (viii) Tenant shall fail to return a properly
executed instrument to Landlord in accordance with the provisions of Article
27 hereof within the time period provided for such return following
Landlord's request for same as provided in Article 27 and, further fails to
return such instrument within five (5) business days following Landlord's
second written request therefore; or (ix) Tenant shall fail to return a
properly executed estoppel certificate to Landlord in accordance with the
provisions of Article 28 hereof within the time period provided for such
return following Landlord's request for same as provided in Article 28 and
further fails to return such certificate within five (5) business days
following Landlord's second written request therefore.
(b) Upon the occurrence of any of the aforesaid events of default,
Landlord shall have the option to pursue any one or more of the following
remedies without any notice or demand whatsoever: (i) terminate this Lease,
in which event Tenant shall immediately surrender the Demised Premises to
Landlord and if Tenant fails to do so, Landlord may without prejudice to any
other remedy which it may have for possession or arrearages in Rent, enter
upon and take possession of the Demised Premises and expel or remove Tenant
and any other person who may be occupying said Demised Premises or any part
thereof, by force, if necessary, without being liable for prosecution or any
claim of damages therefor; Tenant hereby agreeing to pay to Landlord on
demand the amount of all loss and damage which Landlord may suffer by reason
of such termination, whether through inability to relet the Demised Premises
on satisfactory terms or otherwise; (ii) terminate Tenant's right of
possession (but not this Lease) and enter upon and take possession of the
Demised Premises and expel or remove Tenant and any other person who may be
occupying said Demised Premises or any part thereof, by entry, dispossessory
suit or otherwise, without thereby releasing Tenant from any liability
hereunder, without terminating this Lease, and without being liable for
prosecution or any claim of damages therefor and, if Landlord so elects,
make such alterations, redecorations and repairs as, in Landlord's judgment,
may be necessary to relet the Demised Premises, and Landlord may, but shall
be under no obligation to do so, relet the Demised Premises or any portion
thereof in Landlord's or Tenant's name, but for the account of Tenant, for
such term or terms (which may be for a term extending beyond the Lease
Term) and at such rental or rentals and upon such other terms as Landlord
may deem advisable, with or without advertisement, and by private
negotiations, and receive the rent therefor, Tenant hereby agreeing to pay
to Landlord the deficiency, if any, between
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all Rent reserved hereunder and the total rental applicable to the Lease
Term hereof obtained by Landlord re-letting, and Tenant shall be liable for
Landlord's expenses in redecorating and restoring the Demised Premises and
all costs incident to such re-letting, including broker's commissions and
lease assumptions, and in no event shall Tenant be entitled to any rentals
received by Landlord in excess of the amounts due by Tenant hereunder; or
(iii) enter upon the Demised Premises, without being liable for prosecution
or any claim of damages therefor, and do whatever Tenant is obligated to do
under the terms of this Lease; and Tenant agrees to reimburse Landlord on
demand for any reasonable expenses including, without limitation,
reasonable attorneys' fees which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease. If this Lease is
terminated by Landlord as a result of the occurrence of an event of
default, Landlord may declare to be due and payable immediately, the
present value (calculated with a discount factor of eight percent [8%]
per annum) of the difference between (x) the entire amount of Rent and
other charges and assessments which in Landlord's reasonable determination
would become due and payable during the remainder of the Lease Term
determined as though this Lease had not been terminated (including, but not
limited to, increases in Rent pursuant to Article 7 hereof), and (y) the
then fair market rental value of the Demised Premises for the remainder of
the Lease Term. Upon the acceleration of such amounts, Tenant agrees to
pay the same at once, together with all Rent and other charges and
assessments theretofore due, at Landlord's address as provided herein, it
being agreed that such payment shall not constitute a penalty or forfeiture
but shall constitute liquidated damages for Tenant's failure to comply with
the terms and provisions of this Lease (Landlord and Tenant agreeing that
Landlord's actual damages in such event are impossible to ascertain and
that the amount set forth above is a reasonable estimate thereof).
(c) Pursuit of any of the foregoing remedies shall not preclude
pursuit of any other remedy herein provided or any other remedy provided by
law or at equity, nor shall pursuit of any remedy herein provided
constitute an election of remedies thereby excluding the later election of
an alternate remedy, or a forfeiture or waiver of any Rent or other charges
and assessments payable by Tenant and due to Landlord hereunder or of any
damages accruing to Landlord by reason of violation of any of the terms,
covenants, warranties and provisions herein contained. No reentry or
taking possession of the Demised Premises by Landlord or any other action
taken by or on behalf of Landlord shall be construed to be an acceptance of
a surrender of this Lease or an election by Landlord to terminate this
Lease unless written notice of such intention is given to Tenant.
Forbearance by Landlord to enforce one or more of the remedies herein
provided upon an event of default shall not be deemed or construed to
constitute a waiver of such default. In determining the amount of loss or
damage which Landlord may suffer by reason of termination of this Lease or
the deficiency arising by reason of any reletting of the Demised Premises
by Landlord as above provided, allowance shall be made for the expense of
repossession. Tenant agrees to pay to Landlord all costs and expenses
incurred by Landlord in the enforcement of this Lease, including, without
limitation, the fees of Landlord's attorneys as provided in Article 25
hereof.
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20. WAIVER OF BREACH. No waiver of any breach of the covenants,
warranties, agreements, provisions, or conditions contained in this Lease shall
be construed as a waiver of said covenant, warranty, provision, agreement or
condition or of any subsequent breach thereof, and if any breach shall occur and
afterwards be compromised, settled or adjusted, this Lease shall continue in
full force and effect as if no breach had occurred.
21. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord, assign this Lease or any interest herein or in the
Demised Premises, or mortgage, pledge, encumber, hypothecate or otherwise
transfer or sublet the Demised Premises or any part thereof or permit the use of
the Demised Premises by any party other than Tenant. Consent to one or more
such transfers or subleases shall not destroy or waive this provision, and all
subsequent transfers and subleases shall likewise be made only upon obtaining
the prior written consent of Landlord. Without limiting the foregoing
prohibition, in no event shall Tenant assign this Lease or any interest herein,
whether directly, indirectly or by operation of law, or sublet the Demised
Premises or any part thereof or permit the use of the Demised Premises or any
part thereof by any party if such proposed assignment, subletting or use would
contravene any restrictive covenant (including any exclusive use) granted to any
other tenant of the Building. Sublessees or transferees of the Demised Premises
for the balance of the Lease Term shall become directly liable to Landlord for
all obligations of Tenant hereunder, without relieving Tenant (or any guarantor
of Tenant's obligations hereunder) of any liability therefor, and Tenant shall
remain obligated for all liability to Landlord arising under this Lease during
the entire remaining Lease Term including any extensions thereof, whether or not
authorized herein. If Tenant is a partnership, a withdrawal or change, whether
voluntary, involuntary or by operation of law, of partners owning a controlling
interest in the Tenant shall be deemed a voluntary assignment of this Lease and
subject to the foregoing provisions. If Tenant is a corporation, any
dissolution, merger, consolidation or other reorganization of Tenant, or the
sale or transfer of a controlling interest in the capital stock of Tenant, shall
be deemed a voluntary assignment of this Lease and subject to the foregoing
provisions. Landlord may, as a prior condition to considering any request for
consent to an assignment or sublease, require Tenant to obtain and submit
current financial statements of any proposed subtenant or assignee. In the
event Landlord consents to an assignment or sublease, Tenant shall pay to
Landlord a reasonable fee to cover Landlord's accounting costs plus any legal
fees incurred by Landlord as a result of the assignment or sublease. Landlord
may require an additional security deposit from the assignee or subtenant as a
condition of its consent. Any consideration, in excess of the Rent and other
charges and sums due and payable by Tenant under this Lease, paid to Tenant by
any assignee of this Lease for its assignment, or by any sublessee under or in
connection with its sublease, or otherwise paid to Tenant by another party for
use and occupancy of the Demised Premises or any portion thereof, shall be
promptly remitted by Tenant to Landlord as additional rent hereunder and Tenant
shall have no right or claim thereto as against Landlord. No assignment of this
Lease consented to by Landlord shall be effective unless and until Landlord
shall receive an original assignment and assumption agreement, in form and
substance satisfactory to Landlord, signed by Tenant and Tenant's proposed
assignee, whereby the assignee assumes due performance of this Lease to be done
and performed for the balance of the then remaining Lease Term of this Lease.
No subletting of the Demised Premises, or any part thereof, shall be effective
unless and until there
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shall have been delivered to Landlord an agreement, in form and substance
satisfactory to Landlord, signed by Tenant and the proposed sublessee, whereby
the sublessee acknowledges the right of Landlord to continue or terminate any
sublease, in Landlord's sole discretion, upon termination of this Lease, and
such sublessee agrees to recognize and attorn to Landlord in the event that
Landlord elects under such circumstances to continue such sublease.
Notwithstanding any provision to the contrary contained in Article 21 of
this Lease Agreement Landlord's consent under Article 21 to an assignment or
subletting of this Lease Agreement or any interest herein or in the Demised
Premises shall not be unreasonably withheld or unduly delayed. Landlord and
Tenant agree that Landlord may withhold its consent to any proposed assignment
of this Lease Agreement or subletting of all or any portion of the Demised
Premises, and such withholding of consent by Landlord will not be deemed to be
unreasonable, if the proposed assignee or sublessee is not a reputable business
entity or individual, is a governmental or quasi-governmental entity or is a
party who would (or whose use would) detract from the character of the Building
as a first-class office building, such as, without limitation, a dental, medical
or chiropractic office. Landlord may reasonably withhold consent to an
assignment or subletting for reasons other than those enumerated immediately
above. Sublessee or transferees of the Demised Premises for the balance of the
Lease Term shall become directly liable to Landlord for all obligations of
Tenant hereunder, without relieving Tenant (or any guarantor of Tenant's
obligations hereunder) of any liability therefor, and Tenant shall remain
obligated for all liability to Landlord arising under this Lease during the
entire remaining Lease Term including any extensions thereof, whether or not
authorized herein.
Notwithstanding any provision to the contrary in Article 21 of this Lease,
Tenant may sublease any or all of the Demised Premises to an Affiliate (as
defined below) without the consent of Landlord. The term "Affiliate" shall mean
an entity in which Tenant owns a controlling interest or in which the
controlling interest is owned by a party owning a controlling interest in
Tenant. Any such sublease shall only be effective upon Tenant providing
evidence reasonably satisfactory to Landlord that demonstrates that such
sublessee is an Affiliate. Sublessees of the Demised Premises for the balance
of the Lease Term shall become directly liable to Landlord for all obligations
of Tenant hereunder, without relieving Tenant (or any guarantor of Tenant's
obligations hereunder) of any liability therefor, and Tenant shall remain
obligated for all liability to Landlord arising under this Lease during the
entire remaining Lease Term including any extensions thereof, whether or not
authorized herein.
Notwithstanding any provision to the contrary contained in Article 21 of
this Lease, a merger of Tenant with another corporation or the sale or transfer
of a controlling interest in the capital stock of Tenant shall not be deemed to
be an assignment of this Lease which requires the consent of Landlord if Tenant
establishes to the reasonable satisfaction of Landlord that the surviving entity
will have a net worth and earning potential at least equivalent to that of
Tenant.
22. DESTRUCTION.
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(a) If the Demised Premises are damaged by fire or other casualty,
the same shall be repaired or rebuilt as speedily as practical under the
circumstances at the expense of the Landlord, unless this Lease is
terminated as provided in this Article 22, and during the period required
for restoration, a just and proportionate part of Base and Additional
Rental shall be abated until the Demised Premises are repaired or rebuilt.
(b) If the Demised Premises are (i) damaged to such an extent that
repairs cannot, in Landlord's judgment, be completed within one hundred
eighty (180) days after the date of the casualty or (ii) damaged or
destroyed as a result of a risk which is not insured under standard fire
insurance policies with extended coverage endorsement, or (iii) damaged or
destroyed during the last eighteen (18) months of the Lease Term, or if the
Building is damaged in whole or in part (whether or not the Demised Premises
are damaged), to such an extent that the Building cannot, in Landlord's
judgment, be operated economically as an integral unit, then and in any
such event Landlord may at its option terminate this Lease by notice in
writing to the Tenant within sixty (60) days after the date of such
occurrence, provided, however, Landlord will use its best efforts to
attempt to provide such notice within thirty (30) days of such occurrence.
If the Demised Premises are damaged to such an extent that repairs cannot,
in Landlord's judgment, be completed within one hundred eighty (180) days
after the date of the casualty or if the Demised Premises are substantially
damaged during the last eighteen (18) months of the Lease Term, then in
either such event Tenant may elect to terminate this Lease by notice in
writing to Landlord within fifteen (15) days after the date of such
occurrence. Unless Landlord or Tenant elects to terminate this Lease as
hereinabove provided, this Lease will remain in full force and effect and
Landlord shall repair such damage at its expense to the extent required
under subparagraph (c) below as expeditiously as possible under the
circumstances.
(c) If Landlord should elect or be obligated pursuant to subparagraph
(a) above to repair or rebuild because of any damage or destruction,
Landlord's obligation shall be limited to the original Building and any
other work or improvements which were originally performed or installed at
Landlord's expense as described in EXHIBIT "D" hereto or with the proceeds
of the Construction Allowance. If the cost of performing such repairs
exceeds the actual proceeds of insurance paid or payable to Landlord on
account of such casualty, or if Landlord's mortgagee or the lessor under a
ground or underlying lease shall require that any insurance proceeds from a
casualty loss be paid to it, Landlord may terminate this Lease unless
Tenant, within fifteen (15) days after demand therefor, deposits with
Landlord a sum of money sufficient to pay the difference between the cost
of repair and the proceeds of the insurance available to Landlord for such
purpose.
(d) In no event shall Landlord be liable for any loss or damage
sustained by Tenant by reason of casualties mentioned hereinabove or any
other accidental casualty unless such loss or damage is not insured and was
caused by the gross negligence or willful misconduct of Landlord.
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23. LANDLORD'S LIEN. Notwithstanding any other provision of this Lease or
of applicable law to the contrary, Landlord's lien rights and right of distraint
with respect to the personal property of Tenant, in the case of an event of
default of Tenant or otherwise, if any, shall not apply to any computer
software, computer tapes, computer program tapes, computer program disks,
computer program documentation and manuals, computer program codes, computers,
customer lists or other proprietary information which is the property of Tenant
or in the possession of Tenant.
24. SERVICES BY LANDLORD. Landlord shall provide the Building Standard
Services described on EXHIBIT "E" attached hereto and by reference made a part
hereof.
25. ATTORNEYS' FEES AND HOMESTEAD. If any Rent or other debt owing by
Tenant to Landlord hereunder is collected by or through an attorney-at-law,
Tenant agrees to pay an additional amount equal to fifteen percent (15%) of such
sum as attorney's fees. If Landlord uses the services of any attorney in order
to secure compliance with any other provisions of this Lease, to recover damages
for any breach or default of any other provisions of this Lease, or to terminate
this Lease or evict Tenant, Tenant shall reimburse Landlord upon demand for any
and all attorney's fees and expenses so incurred by Landlord. Tenant waives all
homestead rights and exemptions which it may have under any law as against any
obligation owing under this Lease, and assigns to Landlord its homestead and
exemptions to the extent necessary to secure payment and performance of its
covenants and agreements hereunder. If there is a law suit or court action
between Landlord and Tenant arising out of or under this Lease or the terms and
conditions stated herein, the prevailing party in such law suit or court action
shall be entitled to and shall collect from the non-prevailing party the
reasonable attorney's fees and court costs actually incurred by the prevailing
party with respect to said lawsuit or court action.
26. TIME. Time is of the essence of this Lease and whenever a certain day
is stated for payment or performance of any obligation of Tenant or Landlord,
the same enters into and becomes a part of the consideration hereof.
27. SUBORDINATION AND ATTORNMENT.
(a) Tenant agrees that this Lease and all rights of Tenant hereunder
are and shall be subject and subordinate to any ground or underlying lease
which may now or hereafter be in effect regarding the Project or any
component thereof, to any mortgage now or hereafter encumbering the Demised
Premises or the Project or any component thereof, to all advances made or
hereafter to be made upon the security of such mortgage, to all amendments,
modifications, renewals, consolidations, extensions, and restatements of
such mortgage, and to any replacements and substitutions for such mortgage.
The terms of this provision shall be self-operative and no further
instrument of subordination shall be required. Tenant, however, upon
request of any party in interest, shall execute promptly such instrument or
certificates as may be reasonably required to carry out the intent hereof,
whether said requirement is that of Landlord or any other party in
interest, including, without limitation, any mortgagee. Landlord is hereby
irrevocably vested with full power and
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authority as attorney-in-fact for Tenant and in Tenant's name, place and
stead, to subordinate Tenant's interest under this Lease to the lien or
security title of any mortgage and to any future instrument amending,
modifying, renewing, consolidating, extending, restating, replacing or
substituting any such mortgage.
(b) If any mortgagee or lessee under a ground or underlying lease
elects to have this Lease superior to its mortgage or lease and signifies
its election in the instrument creating its lien or lease or by separate
recorded instrument, then this Lease shall be superior to such mortgage or
lease, as the case may be. In such case, Tenant shall deliver to any such
mortgagee within ten (10) days of a written request an attornment agreement
whose terms are consistent with the provisions of Article 27(c), providing
that Tenant shall continue to abide by and comply with the terms and
conditions of this Lease in the event such mortgagee takes title to the
Property, so long as the mortgagee delivers to Tenant a non-disturbance
agreement (which non-disturbance agreement may be a part of the above
mentioned attornment agreement), which non-disturbance agreement shall
provide that so long as Tenant continues to abide by and comply with the
terms and conditions of this Lease, mortgagee will permit Tenant to
continue to occupy the Demised Premises. The term "mortgage", as used in
this Lease, includes any deed to secure debt, deed of trust or security
deed and any other instrument creating a lien in connection with any other
method of financing or refinancing. The term "mortgagee", as used in this
Lease, refers to the holder(s) of the indebtedness secured by a mortgage.
(c) In the event any proceedings are brought for the foreclosure of,
or in the event of exercise of the power of sale under, any mortgage
covering the Demised Premises or the Project, or in the event the interests
of Landlord under this Lease shall be transferred by reason of deed in lieu
of foreclosure or other legal proceedings, or in the event of termination
of any lease under which Landlord may hold title, Tenant shall, at the
option of the transferee or purchaser at foreclosure or under power of
sale, or the lessor of the Landlord upon such lease termination, as the
case may be (sometimes hereinafter called "such person"), attorn to such
person and shall recognize and be bound and obligated hereunder to such
person as the Landlord under this Lease provided that such person delivers
a non-disturbance agreement (which may be a part of the attornment
agreement), which non-disturbance agreement provides that so long as Tenant
continues to abide by and comply with the terms and conditions of this
Lease (subject to the provisions and conditions immediately below), such
person will continue to allow the Tenant to occupy the Demised Premises;
and further provided, however, that no such person shall be (i) bound by
any payment of Rent for more than one (1) month in advance, except
prepayments in the nature of security for the performance by Tenant of its
obligations under this Lease (and then only if such prepayments have been
deposited with and are under the control of such person); (ii) bound by any
amendment or modification of this Lease made without the express written
consent of the mortgagee or lessor of the Landlord, as the case may be;
(iii) obligated to cure any defaults under this Lease of any prior landlord
(including Landlord); (iv) liable for any act or omission of any prior
landlord (including Landlord); (v) subject to any offsets or
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defenses which Tenant might have against any prior landlord (including
Landlord); or (vi) bound by any warranty or representation of any prior
landlord (including Landlord) relating to work performed by any prior
landlord (including Landlord) under this Lease. Tenant agrees to execute
any attornment agreement not in conflict herewith requested by Landlord,
the mortgagee or such person. Tenant's obligation to attorn to such person
shall survive the exercise of any such power of sale, foreclosure or other
proceeding. Tenant agrees that the institution of any suit, action or
other proceeding by any mortgagee to realize on Landlord's interest in the
Demised Premises or the Building pursuant to the powers granted to a
mortgagee under its mortgage, shall not, by operation of law or otherwise,
result in the cancellation or termination of the obligations of the Tenant
hereunder. Landlord and Tenant agree that notwithstanding that this Lease
is expressly subject and subordinate to any mortgages, any mortgagee, its
successors and assigns, or other holder of a mortgage or of a note secured
thereby, may sell the Demised Premises or the Building, in the manner
provided in the mortgage and may, at the option of such mortgagee, its
successors and assigns, or other holder of the mortgage or note secured
thereby, make such sale of the Demised Premises or Building subject to this
Lease.
(d) Landlord hereby represents that, as of the date of this Lease,
there are no mortgages, security deeds, deeds of trust or other security
interests encumbering the Land or the Building.
28. ESTOPPEL CERTIFICATES.
(a) Within ten (10) days after request therefor by Landlord, Tenant
agrees to execute and deliver to Landlord in recordable form an estoppel
certificate addressed to Landlord, any mortgagee or assignee of Landlord's
interest in, or purchaser of, the Demised Premises or the Building or any
part thereof, certifying (if such be the case) that this Lease is
unmodified and is in full force and effect (and if there have been
modifications, that the same is in full force and effect as modified and
stating said modifications); that there are no defenses or offsets against
the enforcement thereof or stating those claimed by Tenant; and stating the
date to which Rent and other charges have been paid. Such certificate
shall also include such other information as may reasonably be required by
such mortgagee, proposed mortgagee, assignee, purchaser or Landlord. Any
such certificate may be relied upon by Landlord, any mortgagee, proposed
mortgagee, assignee, purchaser and any other party to whom such certificate
is addressed.
(b) If Landlord has consented to an assignment or sublease of this
Lease as provided herein, Landlord shall, within twenty (20) days of the
request by Tenant, execute, acknowledge and deliver to Tenant or the
prospective assignee or any prospective subtenant an Estoppel Certificate
in recordable form, or in such other form as Tenant may from time to time
require, evidencing whether or not (i) this Lease is in full force and
effect; (ii) this Lease has been amended in any way; (iii) there are any
existing defaults on the part of Tenant hereunder or defenses or offsets
against the enforcement of this Lease to knowledge
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of Landlord (specifying the nature of such defaults, defenses or offsets,
if any); (iv) the date to which Base Rent and other amounts due hereunder,
if any, have been paid; and (v) any such other information as may be
reasonably requested by Tenant. Landlord shall also deliver such an
Estoppel Certificate if Tenant so requests and Tenant has entered into a
legitimate business transaction in which such a certificate is normally and
customarily required. Each certificate delivered pursuant to this
Paragraph may be relied on by Tenant, the prospective assignee of Tenant's
interest hereunder and any other intended recipient. If Landlord fails to
deliver an Estoppel Certificate that it is required to deliver within the
time required, and further fails to deliver such certificate within five
(5) business days after a second written request, Landlord shall be deemed
to have delivered a certificate which indicated that, to the best of
Landlord''s knowledge, there were no events of default, amendments,
defenses or offsets and that all payments currently due from Tenant had
been paid. Notwithstanding the foregoing, if such a certificate is deemed
delivered, Landlord shall not be deemed to have waived any subsequent or
ongoing events of default or any rights, including rights to receive
payments due under the Lease.
29. NO ESTATE. This Lease shall create the relationship of landlord and
tenant only between Landlord and Tenant and no estate shall pass out of
Landlord. Tenant shall have only an usufruct, not subject to levy and sale and
not assignable in whole or in part by Tenant except as herein provided.
30. CUMULATIVE RIGHTS. All rights, powers and privileges conferred
hereunder upon the parties hereto shall be cumulative to, but not restrictive
of, or in lieu of those conferred by law.
31. HOLDING OVER. If Tenant remains in possession after expiration or
termination of the Lease Term with or without Landlord's written consent, Tenant
shall become a tenant-at-sufferance, and there shall be no renewal of this Lease
by operation of law. During the period of any such holding over, all provisions
of this Lease shall be and remain in effect except that the monthly rental shall
be double the amount of Base Rent (including any adjustments as provided herein)
payable for the last full calendar month of the Lease Term including renewals or
extensions plus, for each month or portion thereof after the expiration of the
Lease Term, an amount equal to Tenant's Additional Rental for the last full
calendar month of the Lease Term. Notwithstanding the foregoing, if Tenant has
exercised its renewal option as set forth in Paragraph 5 of EXHIBIT "G", the
Base Rent component of the rent for the holding over period shall be one hundred
fifty percent (150%) of the Base Rent for the last full calendar month of the
Renewal Term (not "double") plus an amount equal to Tenant's Additional Rental
for the last full calendar month of the Renewal Term. The inclusion of the
preceding sentence in this Lease shall not be construed as Landlord's consent
for Tenant to hold over.
32. SURRENDER OF PREMISES. Upon the expiration or other termination of
this Lease, Tenant shall quit and surrender to Landlord the Demised Premises and
every part thereof and all alterations, additions and improvements thereto,
broom clean and in good condition and state of repair,
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excepting only (i) reasonable wear and tear and (ii) casualty damage and
condemnation loss, reasonable wear and tear only excepted. If Tenant is not
then in default, Tenant shall remove all personalty and equipment not
attached to the Demised Premises which it has placed upon the Demised
Premises including any signage installed by Tenant, computers and related
equipment including peripheral equipment and tape and disk vaults, all
projectors and projection screens and related equipment, blackboards
whiteboards, tackboards, and other display units, telephone systems, cipher
locks and electronic security systems, paging systems, kitchen equipment,
including but not limited to any refrigerators, microwave ovens, dishwasher,
disposal, trash compactor, or other built-in kitchen equipment, phone system
equipment including patch panel and subfeed panel locations for such phone
system, fire suppression systems, CRT patch panels, and Tenant shall restore
the Demised Premises to the condition immediately preceding the time of
placement thereof excepting only (i) reasonable wear and tear and (ii)
casualty damage and condemnation loss. If Tenant shall fail or refuse to
remove all of Tenant's effects, personalty and equipment from the Demised
Premises upon the expiration or termination of this Lease for any cause
whatsoever or upon the Tenant being dispossessed by process of law or
otherwise, such effects, personalty and equipment shall be deemed
conclusively to be abandoned and may be appropriated, sold, stored, destroyed
or otherwise disposed of by Landlord without written notice to Tenant or any
other party and without obligation to account for them. Tenant shall pay
Landlord on demand any and all reasonable expenses incurred by Landlord in
the removal of such property, including, without limitation, the cost of
repairing any damage to the Building or Project caused by the removal of such
property and storage charges (if Landlord elects to store such property).
The covenants and conditions of this Article 32 shall survive any expiration
or termination of this Lease.
33. NOTICES. All notices required or permitted to be given hereunder
shall be in writing and may be delivered in person to either party or may be
sent by courier or by United States Mail, certified, return receipt requested,
postage prepaid. Any such notice shall be deemed received by the party to whom
it was sent (i) in the case of personal delivery or courier delivery, on the
date of delivery to such party, and (ii) in the case or certified mail, the date
receipt is acknowledged on the return receipt for such notice or, if delivery is
rejected or refused or the U.S. Postal Service is unable to deliver same because
of changed address of which no notice was given pursuant hereto, the first date
of such rejection, refusal or inability to deliver. All such notices shall be
addressed to Landlord or Tenant at their respective address set forth
hereinabove or at such other address as either party shall have theretofore
given to the other by notice as herein provided. Tenant hereby designates and
appoints as its agent to receive notice of all distraint proceedings and all
other notices called for or required under this Lease, the person in charge of
the Demised Premises at the time said notice is given or occupying said Demised
Premises at said time; and, if no person is in charge of or occupying the said
Demised Premises, then such service or notice may be made by attaching the same,
in lieu of mailing, on the main entrance to the Demised Premises.
34. DAMAGE OR THEFT OF PERSONAL PROPERTY. All personal property brought
into Demised Premises by Tenant, or Tenant's employees or business visitors,
shall be at the risk of Tenant only, and Landlord shall not be liable for theft
thereof or any damage thereto occasioned by any act of co-tenants, occupants,
invitees or other users of the Building or any other person unless caused by
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the gross negligence or willful misconduct of Landlord. Landlord shall not at
any time be liable for damage to any property in or upon the Demised Premises,
which results from power surges or other deviations from the constancy of
electrical service or from gas, smoke, water, rain, ice or snow which issues or
leaks from or forms upon any part of the Building or from the pipes or plumbing
work of the same, or from any other place whatsoever unless caused by the gross
negligence or willful misconduct of Landlord.
35. EMINENT DOMAIN.
(a) If all or part of the Demised Premises shall be taken for any
public or quasi-public use by virtue of the exercise of the power of
eminent domain or by private purchase in lieu thereof, this Lease shall
terminate as to the part so taken as of the date of taking, and, in the
case of a partial taking, either Landlord or Tenant shall have the right to
terminate this Lease as to the balance of the Demised Premises by written
notice to the other within thirty (30) days after such date; provided,
however, that a condition to the exercise by Tenant of such right to
terminate shall be that the portion of the Demised Premises taken shall be
of such extent and nature as substantially to handicap, impede or impair
Tenant's use of the balance of the Demised Premises. If title to so much
of the Building is taken that a reasonable amount of reconstruction thereof
will not in Landlord's sole discretion result in the Building being a
practical improvement and reasonably suitable for use for the purpose for
which it is designed, then this Lease shall terminate on the date that the
condemning authority actually takes possession of the part so condemned or
purchased.
(b) If this Lease is terminated under the provisions of this Article
35, Rent shall be apportioned and adjusted as of the date of termination.
Tenant shall have no claim against Landlord or against the condemning
authority for the value of any leasehold estate or for the value of the
unexpired Lease Term provided that the foregoing shall not preclude any
claim that Tenant may have against the condemning authority for the
unamortized cost of leasehold improvements, to the extent the same were
installed at Tenant's expense (and not with the proceeds of the
Construction Allowance), or for loss of business, moving expenses or other
consequential damages, in accordance with subparagraph (d) below.
(c) If there is a partial taking of the Building and this Lease is
not thereupon terminated under the provisions of this Article 35, then this
Lease shall remain in full force and effect, and Landlord shall, within a
reasonable time thereafter, repair or reconstruct the remaining portion of
the Building to the extent necessary to make the same a complete
architectural unit; provided that in complying with its obligations
hereunder Landlord shall not be required to expend more than the net
proceeds of the condemnation award which are paid to Landlord.
(d) All compensation awarded or paid to Landlord upon a total or
partial taking of the Demised Premises or the Building shall belong to and
be the property of Landlord without any participation by Tenant. Nothing
herein shall be construed to preclude Tenant
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from prosecuting any claim directly against the condemning authority for
loss of business, for damage to, and cost of removal of, trade fixtures,
furniture and other personal property belonging to Tenant, and for the
unamortized cost of leasehold improvements to the extent same were
installed at Tenant's expense (and not with the proceeds of the
Construction Allowance), provided, however, that no such claim shall
diminish or adversely affect Landlord's award. In no event shall Tenant
have or assert a claim for the value of any unexpired term of this Lease.
Subject to the foregoing provisions of this subparagraph (d), Tenant hereby
assigns to Landlord any and all of its right, title and interest in or to
any compensation awarded or paid as a result of any such taking.
(e) Notwithstanding anything to the contrary contained in this
Article 35, if, during the Lease Term, the use or occupancy of any part of
the Building or the Demised Premises shall be taken or appropriated
temporarily for any public or quasi-public use under any governmental law,
ordinance, or regulations, or by right of eminent domain, this Lease shall
be and remain unaffected by such taking or appropriation and Tenant shall
continue to pay in full all Rent payable hereunder by Tenant during the
Lease Term. In the event of any such temporary appropriation or taking,
Tenant shall be entitled to receive that portion of any award which
represents compensation for the loss of use or occupancy of the Demised
Premises during the Lease Term, and Landlord shall be entitled to receive
that portion of any award which represents the cost of restoration and
compensation for the loss of use or occupancy of the Demised Premises after
the end of the Lease Term.
36. PARTIES. The term "Landlord", as used in this Lease, shall include
Landlord and its assigns and successors. It is hereby covenanted and agreed by
Tenant that should Landlord's interest in the Demised Premises cease to exist
for any reason during the Lease Term, then notwithstanding the happening of such
event, this Lease nevertheless shall remain in full force and effect, and Tenant
hereby agrees to attorn to the then owner of the Demised Premises. The term
"Tenant" shall include Tenant and its heirs, legal representatives and
successors, and shall also include Tenant's assignees and sublessees, if this
Lease shall be validly assigned or the Demised Premises sublet for the balance
of the Lease Term or any renewals or extensions thereof. In addition, Landlord
and Tenant covenant and agree that Landlord's right to transfer or assign
Landlord's interest in and to the Demised Premises, or any part or parts
thereof, shall be unrestricted, and that in the event of any such transfer or
assignment by Landlord which includes the Demised Premises and there is an
assumption of such obligations by the transferee or assignee, Landlord's
obligations to Tenant hereunder shall cease and terminate, and Tenant shall look
only and solely to Landlord's assignee or transferee for performance thereof.
37. INDEMNITIES. Subject to Article 18 above, Tenant hereby indemnifies
Landlord from and agrees to hold Landlord harmless against any and all
liability, loss, cost, damage or expense, including, without limitation, court
costs and reasonable attorneys' fees, incurred or suffered by Landlord arising
out of or resulting from (i) any negligence or willful misconduct of Tenant, its
agents, contractors or employees acting within the scope of their agency or
employment, or (ii) any damage to any property or injury or death to any person
in or upon the Demised Premises regardless
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of cause (unless caused by the negligence or willful misconduct of Landlord or
Landlord's agents, contractors or employees acting within the scope of their
agency or employment or the breach by Landlord of its obligations hereunder).
Subject to the provisions of Articles 18, 34 and 40 and subparagraph (e) of
EXHIBIT "E" attached hereto and any other provision herein that expressly limits
Landlord's liability, Landlord hereby indemnifies Tenant from and agrees to hold
Tenant harmless against any and all liability, loss, cost, damage or expense,
including without limitation, court costs and reasonable attorneys fees,
incurred or suffered by Tenant arising out of or resulting from (i) any
negligence or willful misconduct of Landlord, its agents, contractors or
employees acting within the scope of their agency or employment or (ii) any
damage to property or injury or death to any person occurring outside the
Demised Premises regardless of cause (unless caused by the negligence or willful
misconduct of Tenant, its agents, contractors or employees acting within the
scope of their agency or employment) or by the breach by Tenant of its
obligations hereunder. The provisions of this Article 37 shall survive any
termination of this Lease with respect to any damage, injury or death prior to
such termination.
38. Intentionally Deleted.
39. FORCE MAJEURE. In the event of strike, lockout, labor trouble, civil
commotion, Act of God, or any other cause beyond a party's control (collectively
"force majeure") resulting in the Landlord's inability to supply the services or
perform the other obligations required of Landlord hereunder, this Lease shall
not terminate and Tenant's obligation to pay Rent and all other charges and sums
due and payable by Tenant shall not be affected or excused and Landlord shall
not be considered to be in default under this Lease. If, as a result of force
majeure, Tenant is delayed in performing any of its obligations under this
Lease, other than Tenant's obligation to take possession of the Demised Premises
on or before the Rental Commencement Date and to pay Rent and all other charges
and sums payable by Tenant hereunder, Tenant's performance shall be excused for
a period equal to such delay and Tenant shall not during such period be
considered to be in default under this Lease with respect to the obligation,
performance of which has thus been delayed.
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40. LANDLORD'S LIABILITY.
(a) Except as provided in Articles 40(b) and 40(c) below, Landlord
shall have no personal liability with respect to any of the provisions of
this Lease. Except as provided in Articles 40(b) and 40(c) below, if
Landlord is in default with respect to its obligations under this Lease,
Tenant shall look solely to the equity of Landlord in and to the Building
and the Land described in EXHIBIT "A" hereto for satisfaction of Tenant's
remedies, if any. Except as provided in Articles 40(b) and 40(c) below, it
is expressly understood and agreed that Landlord's liability under the
terms of this Lease shall in no event exceed the amount of its interest in
and to said Land and Building. In no event shall any partner of Landlord
nor any joint venturer in Landlord, nor any officer, director or
shareholder of Landlord or any such partner or joint venturer of Landlord
be personally liable with respect to any of the provisions of this Lease.
(b) If a court issues a final and unappealable order, ordering
Landlord to pay Tenant a money judgement because of Landlord's default,
then except in those instances listed in Article 40(c) below, Tenant's sole
remedy to satisfy the judgment shall be from:
(i) Landlord's interest in the Building and Land
including the rental income (but only rental income not applied to
Operating Expenses or debt service on the Building) and proceeds from
sale accruing or received after the date the judgement becomes final
and unappealable; and
(ii) any insurance or condemnation proceeds received
because of damage or condemnation to, or of, the Building or Land that
become available after the judgement becomes final and unappealable
and are not applied to restore the Building or Land.
(c) Notwithstanding the foregoing, Landlord will have personal
liability when and to the extent provided below:
(i) Landlord has failed to apply insurance or
condemnation proceeds as required by the Lease, but only to the extent
of such misappropriation of proceeds;
(ii) Landlord misappropriated the funds of Tenant or
escrow funds, but only to the extent of such misappropriation of
proceeds; or
(iii) Landlord has failed to carry insurance
required by Article 17(b), but only to the extent of insurance
proceeds that would have been available after the date the judgement
becomes final and unappealable but for such failure.
Nothing in this Article 40 shall be interpreted to mean that Tenant
cannot be awarded specific performance, an injunction or other equitable relief.
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41. LANDLORD'S COVENANT OF QUIET ENJOYMENT. Provided Tenant performs the
terms, conditions and covenants of this Lease, and subject to the terms and
provisions hereof, Landlord covenants and agrees to provide for the benefit of
Tenant the quiet and peaceful possession of the Demised Premises, for the Lease
Term, without hindrance, claim or molestation by Landlord or any other person
lawfully claiming under Landlord.
42. SECURITY DEPOSITS.
(a) As security for Tenant's obligations to take possession of the
Demised Premises in accordance with the terms of this Lease and to
comply with all of Tenant's covenants, warranties and agreements
hereunder, Tenant has deposited with Landlord the sum set forth in
Article l(m)(i) above. Such amount shall be applied by Landlord to the
first monthly installment(s) of Base Rental as they become due
hereunder. In the event Tenant fails to take possession of the Demised
Premises as aforesaid, said sum shall be retained by Landlord for
application in reduction, but not in satisfaction, of damages suffered
by Landlord as a result of such breach by Tenant.
(b) Intentionally omitted.
(c) In the event of a sale or transfer of Landlord's interest in the
Demised Premises or the Building or a lease by Landlord of the Building,
Landlord shall have the right to transfer the within described security
deposit to the purchaser or lessee, as the case may be, and Landlord shall
be relieved of all liability to Tenant for the return of such security
deposit. The Tenant shall look solely to the new owner or lessor for the
return of said security deposits upon the acknowledgment of receipt of said
amount by the purchaser or lessee. The Tenant shall look solely to the new
owner or lessor for the return of said security deposits. The security
deposits shall not be mortgaged, assigned or encumbered by Tenant. In the
event of a permitted assignment or subletting under this Lease by Tenant,
the security deposits shall be held by Landlord as a deposit made by the
permitted assignee or subtenant and the Landlord shall have no further
liability with respect to the return of said security deposits to the
original Tenant.
(d) Landlord shall not be required to keep the security deposit
separate from its general accounts.
43. HAZARDOUS SUBSTANCES.
(a) Tenant hereby covenants and agrees that Tenant shall not cause or
permit any "Hazardous Substances" (as hereinafter defined) to be generated,
placed, held, stored, used, located or disposed of at the Project or any
part thereof, except for Hazardous Substances as are commonly and legally
used or stored as a consequence of using the Demised Premises for general
office and administrative purposes, but only so long as the quantities
thereof do not pose a threat to public health or to the environment or
would necessitate a "response action", as that term is defined in CERCLA
(as hereinafter defined), and so long as Tenant
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strictly complies or causes compliance with all applicable governmental
rules and regulations concerning the use, storage, production,
transportation and disposal of such Hazardous Substances. Promptly upon
receipt of Landlord's request, Tenant shall submit to Landlord true and
correct copies of any reports filed by Tenant with any governmental or
quasi-governmental authority regarding the generation, placement, storage,
use, treatment or disposal of Hazardous Substances on or about the Demised
Premises. For purposes of this Article 43, "Hazardous Substances" shall
mean and include those elements or compounds which are contained in the
list of Hazardous Substances adopted by the United States Environmental
Protection Agency (EPA) or in any list of toxic pollutants designated by
Congress or the EPA or which are defined as hazardous, toxic, pollutant,
infectious or radioactive by any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability (including, without limitation, strict
liability) or standards of conduct concerning, any hazardous, toxic or
dangerous waste, substance or material, as now or at any time hereinafter
in effect (collectively "Environmental Laws"). Tenant hereby agrees to
indemnify Landlord and hold Landlord harmless from and against any and all
losses, liabilities, including strict liability, damages, injuries,
expenses, including reasonable attorneys' fees, costs of settlement or
judgment and claims of any and every kind whatsoever paid, incurred or
suffered by, or asserted against, Landlord by any person, entity or
governmental agency for, with respect to, or as a direct or indirect result
of, the presence in, or the escape, leakage, spillage, discharge, emission
or release from, the Demised Premises of any Hazardous Substances by or
through Tenant or its employees, agents, contractors or invitees
(including, without limitation, any losses, liabilities, including strict
liability, damages, injuries, expenses, including reasonable attorneys'
fees, costs of any settlement or judgment or claims asserted or arising
under the Comprehensive Environmental Response, Compensation and Liability
Act ["CERCLA"], any so-called federal, state or local "Superfund" or
"Superlien" laws or any other Environmental Law); provided, however, that
the foregoing indemnity is limited to matters arising solely from Tenant's
violation of the covenant contained in this Article. The obligations of
Tenant under this Article shall survive any expiration or termination of
this Lease.
(b) Landlord covenants and agrees that if any Hazardous Substances
other than "Permitted Hazardous Substances" as defined below are found in
the Project in such amounts and locations as would require Landlord to
remove such materials as a matter of law, then Landlord shall remove or
cause to be removed such Hazardous Substances. Such removal shall be
accomplished in a manner that does not cause an unreasonable disruption to
Tenant's operations in the Demised Premises. The term "Permitted Hazardous
Substances" shall mean such Hazardous Substances as are commonly and
legally used or stored as a consequence of using, maintaining or operating
the Project, but only so long as the quantities thereof do not pose a
threat to public health or to the environment or would necessitate a
"response action" as that term is defined in CERCLA, and so long as
Landlord strictly complies or causes compliance with all applicable
governmental rules and regulations concerning the use, storage, production,
transportation and disposal of such Hazardous Substances.
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44. SUBMISSION OF LEASE. The submission of this Lease for examination
does not constitute an offer to lease and this Lease shall be effective only
upon execution hereof by Landlord and Tenant.
45. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, the remainder of this
Lease shall not be affected thereby, and in lieu of each clause or provision of
this Lease which is illegal, invalid or unenforceable, there shall be added as a
part of this Lease a clause or provision as nearly identical to the said clause
or provision as may be legal, valid and enforceable.
46. ENTIRE AGREEMENT. This Lease contains the entire agreement of the
parties and no representations, inducements, promises or agreements, oral or
otherwise, between the parties not embodied herein shall be of any force or
effect. No failure of Landlord to exercise any power given Landlord hereunder,
or to insist upon strict compliance by Tenant with any obligation of Tenant
hereunder, and no custom or practice of the parties at variance with the terms
hereof, shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof. This Lease may not be altered, waived, amended or
extended except by an instrument in writing signed by Landlord and Tenant. This
Lease is not in recordable form, and Tenant agrees not to record or cause to be
recorded this Lease or any short form or memorandum thereof.
47. HEADINGS. The use of headings herein is solely for the convenience of
indexing the various paragraphs hereof and shall in no event be considered in
construing or interpreting any provision of this Lease.
48. BROKER. Broker(s) (as defined in Article 1[n]) is (are) entitled to a
leasing commission from Landlord by virtue of this Lease, which leasing
commission shall be paid by Landlord to Broker(s) in accordance with the terms
of a separate agreement between Landlord and Broker(s). Tenant hereby
authorizes Broker(s) and Landlord to identify Tenant as a tenant of the Building
and to state the amount of space leased by Tenant in advertisements and
promotional materials relating to the Building. Tenant represents and warrants
to Landlord that (except with respect to any Broker[s] identified in Article
1[n][ hereinabove) no broker, agent, commission salesperson, or other person has
represented Tenant in the negotiations for and procurement of this Lease and of
the Demised Premises and that (except with respect to any Broker[s] identified
in Article 1[n] hereinabove) no commissions, fees, or compensation of any kind
are due and payable in connection herewith to any broker, agent, commission
salesperson, or other person as a result of any act or agreement of Tenant.
Tenant agrees to indemnify and hold Landlord harmless from all loss, liability,
damage, claim, judgment, cost or expense (including reasonable attorneys' fees
and court costs) suffered or incurred by Landlord as a result of a breach by
Tenant of the representation and warranty contained in the immediately preceding
sentence or as a result of Tenant's failure to pay commissions, fees, or
compensation due to any broker who represented Tenant, whether or not disclosed,
or as a result of any claim for any fee, commission or similar compensation with
respect to this Lease made by any broker, agent or finder (other than the
Broker[s] identified in Article 1[n] hereinabove) claiming to have dealt with
Tenant, whether or not such claim is meritorious.
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Landlord represents and warrants to Tenant that (except with respect to any
Broker(s) identified in Article 1(n) hereinabove) no broker, agent, commission
salesperson, or other person has represented Landlord in the negotiations for
and procurement of this Lease and of the Demised Premises and that (except with
respect to any Broker(s) identified in Article 1(n) hereinabove) no commissions,
fees, or compensation of any kind are due and payable in connection herewith to
any broker, agent, commission salesperson, or other person as a result of any
act or agreement of Landlord. Landlord agrees to indemnify and hold Tenant
harmless from all loss, liability, damage, claim, judgment, cost or expense
(including reasonable attorneys fees and court costs) suffered or incurred by
Tenant as a result of a breach by Landlord of the representation and warranty
contained in the immediately preceding sentence or as a result of Landlord's
failure to pay commissions, fees, or compensation due to any broker who
represented Landlord, whether or not disclosed, or as a result of any claim for
any fee, commission or similar compensation with respect to this Lease made by
any broker, agent or finder (other than the Broker(s) identified in Article 1(n)
hereinabove) claiming to have dealt with Landlord, whether or not such claim is
meritorious.
49. GOVERNING LAW. The laws of the State of Georgia shall govern the
validity, performance and enforcement of this Lease.
50. SPECIAL STIPULATIONS. The special stipulations attached hereto as
EXHIBIT "G" are hereby incorporated herein by this reference as though fully set
forth. In the event of any conflict between the terms of the Lease and such
Special Stipulations, the Special Stipulations shall control.
51. AUTHORITY. If Tenant executes this Lease as a corporation, each of
the persons executing this Lease on behalf of Tenant does hereby personally
represent and warrant that Tenant is a duly incorporated or a duly qualified (if
a foreign corporation) corporation and is fully authorized and qualified to do
business in the State in which the Demised Premises are located, that the
corporation has full right and authority to enter into this Lease, and that each
person signing on behalf of the corporation is an officer of the corporation and
is authorized to sign on behalf of the corporation. If Tenant signs as a
partnership, joint venture, or sole proprietorship or other business entity
(each being herein called "Entity"), each of the persons executing on behalf of
Tenant does hereby covenant and warrant that Tenant is a duly authorized and
existing Entity, that Tenant has full right and authority to enter into this
Lease, that all persons executing this Lease on behalf of the Entity are
authorized to do so on behalf of the Entity, and that such execution is fully
binding upon the Entity and its partners, joint venturers, or principal, as the
case may be. Upon the request of Landlord, Tenant shall deliver to Landlord
documentation satisfactory to Landlord evidencing Tenant's compliance with this
Article, and Tenant agrees to promptly execute all necessary and reasonable
applications or documents as reasonably requested by Landlord, required by the
jurisdiction in which the Demised Premises is located, to permit the issuance of
necessary permits and certificates for Tenant's use and occupancy of the Demised
Premises.
52. JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person, corporation, partnership or other entity, the liability hereunder of all
such persons, corporations, partnerships or other entities shall be joint and
several.
-37-
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as
of the day, month and year first above written.
"LANDLORD":
COUSINS PROPERTIES INCORPORATED,
a Georgia corporation
By: /s/ JOHN MURPHY
------------------------
Its: SENIOR VICE PRESIDENT
------------------------
(CORPORATE SEAL)
"TENANT":
THE SYSTEM WORKS, INC.
By: /s/ D. WELDEN
-------------------------
Its: PRESIDENT
-------------------------
Attest: /s/ ALICE K. WELDEN
--------------------
Its: SECRETARY
-------------------------
(CORPORATE SEAL)
-38-
<PAGE>
RULES AND REGULATIONS
1. No sign, picture, advertisement or notice visible from the exterior of
the Demised Premises shall be installed, affixed, inscribed, painted or
otherwise displayed by Tenant on any part of the Demised Premises or the
Building unless the same is first approved by Landlord. Any such sign,
picture, advertisement or notice approved by Landlord shall be painted
or installed for Tenant at Tenant's cost by Landlord or by a party
approved by Landlord. No awnings, curtains, blinds, shades or screens
shall be attached to or hung in, or used in connection with any window
or door of the Demised Premises without the prior consent of the
Landlord, including approval by the Landlord of the quality, type,
design, color and manner of attachment.
2. Tenant agrees that its use of electrical current shall never exceed
the capacity of existing feeders, risers or wiring installation.
3. The Demised Premises shall not be used for storage of merchandise held
for sale to the general public. Tenant shall not do or permit to be
done in or about the Demised Premises or Building anything which shall
increase the rate of insurance on said Building or obstruct or interfere
with the rights of other lessees of Landlord or annoy them in any way,
including, but not limited to, using any musical instrument, making loud
or unseemly noises, or singing, etc. The Demised Premises shall not be
used for sleeping or lodging. No cooking or related activities shall be
done or permitted by Tenant in the Demised Premises except with
permission of Landlord. Tenant will be permitted to use for its own
employees within the Demised Premises a small microwave oven and
Underwriters' Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages, provided that such use is in accordance
with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations. No vending machines of any kind will
be installed, permitted or used on any part of the Demised Premises
without the prior consent of Landlord, except for those installed for
use by Tenant or its employees, guests or invitees. No part of said
Building or Demised Premises shall be used for gambling, immoral or
other unlawful purposes. No intoxicating beverage shall be sold in said
Building or Demised Premises without prior written consent of the
Landlord. No area outside of the Demised Premises shall be used for
storage purposes at any time.
4. Except as provided in this Paragraph 4, no birds or animals of any kind
shall be brought into the Building. Trained seeing-eye dogs required to
be used by the visually impaired and fish in aquariums whose weight does
not exceed floor load limits are permissible. However, Tenant assumes
all liability for damage resulting from or related to the presence of
the aquariums in the Demised Premises. No bicycles, motorcycles or
other motorized vehicles shall be brought into the Building.
<PAGE>
5. The sidewalks, entrances, passages, corridors, halls, elevators, and
stairways in the Building shall not be obstructed by Tenant or used for
any purposes other than those for which same were intended as ingress
and egress. No windows, floors or skylights that reflect or admit light
into the Building shall be covered or obstructed by Tenant. Toilets,
wash basins and sinks shall not be used for any purpose other than those
for which they were constructed, and no sweeping, rubbish, or other
obstructing or improper substances shall be thrown therein. Any damage
resulting to them, or to heating apparatus, from misuse by Tenant or its
employees, shall be borne by Tenant.
6. Only two (2) keys to the Building (during one Sole Tenancy Period) or to
main entrances to each floor of the Demised Premises (during periods
other than the Sole Tenancy Period) will be furnished Tenant without
charge. Landlord may make a reasonable charge for any additional keys.
Except as provided in Article 16, no additional lock, latch or bolt of
any kind shall be placed upon any door nor shall any changes be made in
existing locks without written consent of Landlord and Tenant shall in
each such case furnish Landlord with a key for any such lock. At the
termination of the Lease, Tenant shall return to Landlord all keys
furnished to Tenant by Landlord, or otherwise procured by Tenant, and in
the event of loss of any keys so furnished, Tenant shall pay to Landlord
the cost thereof.
7. Landlord shall have the right to prescribe the weight, position and
manner of installation of heavy articles such as safes, machines and
other equipment brought into the Building. No safes, furniture, boxes,
large parcels or other kind of freight shall be taken to or from the
Demised Premises or allowed in any elevator, hall or corridor except at
times allowed by Landlord. Tenant shall make prior arrangements with
Landlord for use of freight elevator for the purpose of transporting
such articles and such articles may be taken in or out of said Building
only between or during such hours as may be arranged with and designated
by Landlord. The persons employed to move the same must be approved by
Landlord. In no event shall any weight be placed upon any floor by
Tenant so as to exceed the design conditions of the floors at the
applicable locations.
8. Tenant shall not cause or permit any gases, liquids or odors to be
produced upon or permeate from the Demised Premises, and no flammable,
combustible or explosive fluid, chemical or substance, except those
substances normally, customarily and legally used in connection with
general office operations, shall be brought into the Building.
9. During a period other than Sole Tenancy Period, (i) every person,
including Tenant, its employees and visitors, entering and leaving the
Building may be questioned by a watchman as to that person's business
therein and may be required to sign such person's name on a form
provided by Landlord for registering such person; provided that, except
for emergencies or other extraordinary circumstances, such procedures
shall not be required between the hours of 7:00 a.m. and 6:00 p.m., on
all days except Saturdays, Sundays and Holidays, (ii) Landlord may also
implement a card access security system to control access during such
other times, (iii) Landlord shall not be liable for excluding any person
from the Building
-2-
<PAGE>
during such other times, or for admission of any person to the Building at
any time, or for damages or loss for theft resulting there from to any
person, including Tenant. Notwithstanding the foregoing, Landlord
shall not have any oblig ation to imple ment any such security
procedures in the Building. Tenant, its permitted subtenants and their
employees, invitees, licensees and guests, shall have access to the
Building and Demised Premises at all times, 24 hours per day, every day
of the year, subject to casualty and condemnation.
10. If Tenant elects to provide its own cleaning service, Landlord shall
have the right to approve of such service, which approval will not be
unreasonably withheld or delayed. When Landlord provides cleaning
service, such service will not be furnished on nights when rooms are
occupied after 6:30 p.m., unless, by agreement in writing, service is
extended to a later hour for specifically designated rooms. Landlord
shall not be responsible for any loss, theft, mysterious disappearance
of or damage to, any property, unless occurring as a result of or in
connection with Landlord's gross negligence or willful misconduct.
11. No connection shall be made to the electric wires or gas or electric
fixtures, without the consent in writing on each occasion of Landlord,
which consent shall not be unreasonably withheld, conditioned or
delayed. All glass, locks and trimmings in or upon the doors and
windows of the Demised Premises shall be kept whole and in good repair.
Tenant shall not injure, overload or deface the Building, the woodwork
or the walls of the Demised Premises, nor permit upon the Demised
Premises any noisome, noxious, noisy or offensive business.
12. If Tenant requires wiring, no outside wiring men shall be allowed to do
work of this kind unless by the written permission of Landlord or its
representatives, such written permission not to be unreasonably withheld
or delayed. If telegraph or telephonic service is desired, the wiring
for same shall be approved by Landlord, and no boring or cutting for
wiring shall be done unless approved by Landlord or its representatives,
as stated, which approval shall not be unreasonably withheld or delayed.
13. Tenant and its employees and invitees shall observe and obey all parking
and traffic regulations as imposed by Landlord. All vehicles shall be
parked only in areas designated therefor by Landlord.
14. Canvassing, peddling, soliciting and distribution of handbills or any
other written materials in the Building are prohibited, and Tenant shall
cooperate to prevent the same.
15. Landlord shall have the right to change the name of the Building, but
only during periods other than the Sole Tenancy Period and to change the
street address of the Building, provided that in the case of a change in
the street address, Landlord shall give Tenant not less than 180 days'
prior notice of the change, unless the change is required by
governmental authority.
-3-
<PAGE>
16. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular lessee, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of
any other lessee, nor prevent Landlord from thereafter enforcing any
such Rules and Regulations against any or all of the other lessees of
the Building.
17. These Rules and Regulations are supplemental to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of any premises in the
Building.
18. Landlord reserves the right to make such other and reasonable Rules and
Regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building, the Land and Wildwood
Office Park, and for the preservation of good order therein.
-4-
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
All that tract of land lying and being in Land Lot 1007 and 1008, 17th District,
2nd Section, Cobb County, Georgia, and being described as follows:
Commence at the intersection of the southeast corner of Land Lot 940, the
northeast corner of Land Lot 941, the southwest corner of Land Lot 987 and the
northwest corner of Land Lot 986, said District and Section, thence,
northwesterly, along the north Land Lot Line of said Land Lot 941, North 89
degrees 36 minutes 00 seconds West, a distance of 527.94 feet to a point;
thence, leaving said Land Lot Line, South 11 degrees 36 minutes 00 seconds East,
a distance of 730.00 feet to a point, said point being located on the north
right-of-way of Windy Hill Road; thence, South 07 degrees 01 minute 30 seconds
East, a distance of 119.65 feet to a point, said point being located on the
south right-of-way of said Windy Hill Road; thence, northwesterly, along said
Windy Hill Road right-of-way, North 88 degrees 33 minutes 25 seconds West, a
distance of 6.24 feet to a point; thence, along an arc of curve to the left
(which has a radius of 575.00 feet and a chord distance of 239.92 feet, along a
bearing of South 79 degrees 24 minutes 05 seconds West), an arc distance of
241.70 feet to a point; thence, South 67 degrees 21 minutes 30 seconds West, a
distance of 177.79 feet to a point, said point being the intersection of said
right-of-way and the northeast right-of-way of Powers Ferry Road, having a
varying right-of-way; thence, southeasterly, along said Powers Ferry Road
right-of-way, South 24 degrees 26 minutes 42 seconds West, a distance of 26.14
feet to a point; thence, along an arc of curve to the left (which has a radius
of 730.00 feet and a chord distance of 337.27 feet, along a bearing of South 52
degrees 50 minutes 42 seconds East), an arc distance of 340.34 feet to a point;
thence, along an arc of curve to the left (which has a radius of 8,034.00 feet
and a chord distance of 347.28 feet, along a bearing of South 64 degrees 58
minutes 00 seconds East), an arc distance of 347.31 feet to a point; thence,
South 65 degrees 29 minutes 16 seconds East, a distance of 211.30 feet to a
point; thence, South 63 degrees 11 minutes 16 seconds East, a distance of 189.28
feet to a point; thence, South 63 degrees 02 minutes 00 seconds East, a distance
of 46.56 feet to a point; thence, South 61 degrees 34 minutes 40 seconds East, a
distance of 7.23 feet to a point; thence, South 61 degrees 34 minutes 40 seconds
East, a distance of 232.82 feet to a point; thence, along an arc of curve to the
left (which has a radius of 5,516.00 feet and a chord distance of 149.99 feet,
along a bearing of South 61 degrees 52 minutes 52 seconds East), an arc distance
of 150.00 feet to a point; thence, North 74 degrees 53 minutes 44 seconds East,
a distance of 35.89
1 of 2
<PAGE>
feet to a point, said point being the intersection of said Powers Ferry Road
right-of-way and the northwest right-of-way of Windy Ridge Parkway, having a
varying right-of-way; thence, leaving said Powers Ferry Road right-of-way,
northeasterly, along said Windy Ridge Parkway, North 30 degrees 46 minutes 00
seconds East, a distance of 98.57 feet to a point; thence, along an arc of curve
to the right (which has a radius of 139.00 feet and a chord distance of 191.66
feet, along a bearing of North 74 degrees 21 minutes 00 seconds East), an arc
distance of 211.47 feet to a point; thence, South 62 degrees 04 minutes 00
seconds East, a distance of 87.00 feet to a point; thence, along an arc of curve
to the left (which has a radius of 301.00 feet and a chord distance of 389.37
feet, along a bearing of North 77 degrees 38 minutes 00 seconds East), an arc
distance of 423.43 feet to a point; thence, North 37 degrees 20 minutes 00
seconds East, a distance of 67.69 feet to a point; thence, along an arc of curve
to the right (which has a radius of 274.00 feet and a chord distance of 324.28
feet, along a bearing of North 73 degrees 36 minutes 56 seconds East), an arc
distance of 347.01 feet to a point, and THE TRUE POINT OF BEGINNING. Thence,
leaving said Windy Ridge Parkway right-of-way, North 35 degrees 01 minutes 18
seconds East, a distance of 310.20 feet to a point; thence, North 76 degrees 58
minutes 30 seconds East, a distance of 500.00 feet to a point; thence, South 41
degrees 57 minutes 00 seconds East, a distance of 340.20 feet to a point;
thence, South 58 degrees 58 minutes 30 seconds East, a distance of 289.80 feet
to a point; thence, South 71 degrees 00 minutes 00 seconds West, a distance of
199.90 feet to a point; thence, South 45 degrees 02 minutes 00 seconds West, a
distance of 223.00 feet to a point; thence, North 32 degrees 16 minutes 21
seconds West, a distance of 145.00 feet to a point; thence, South 57 degrees 43
minutes 39 seconds West, a distance of 217.00 feet to a point; thence, North 83
degrees 54 minutes 18 seconds West, a distance of 61.50 feet to a point; thence,
South 59 degrees 43 minutes 39 seconds West, a distance of 277.84 feet to a
point; thence, North 75 degrees 58 minutes 00 seconds West, a distance of 72.02
feet to a point; said point being located on the southeast right-of-way of the
aforementioned Windy Ridge Parkway; thence, North 13 degrees 20 minutes 29
seconds East, a distance of 48.10 feet to a point; thence, along an arc of curve
to the left (which has a radius of 274.00 feet and a chord distance of 364.70
feet, along a bearing of North 28 degrees 22 minutes 51 seconds West), an arc
distance of 399.05 feet to a point, and THE TRUE POINT OF BEGINNING.
Said tract of land containing 453,843 square feet, or 10.419 acres, more or
less, as shown on a survey for Wildwood Associates, prepared by Engineering &
Inspection Systems, Inc., dated April 21, 1993.
2 of 2
<PAGE>
EXHIBIT "A"
(continued)
[GRAPHICS]
[Plat of 3301 Windy Ridge Parkway]
<PAGE>
EXHIBIT "B"
INITIAL DEMISED PREMISES
BASEMENT LEVEL
(Crosshatched)
[GRAPHIC]
[Drawing of Initial Demised Premises Basement Level]
<PAGE>
EXHIBIT "B"
INITIAL DEMISED PREMISES
2ND FLOOR
(Crosshatched)
[GRAPHIC]
[Drawing of Initial Demised Premises 2nd Floor]
<PAGE>
EXHIBIT "B"
INITIAL DEMISED PREMISES
3RD FLOOR
(Crosshatched)
[GRAPHIC]
[Drawing of Initial Demised Premises 3rd Floor]
<PAGE>
EXHIBIT "B"
INITIAL DEMISED PREMISES
5TH FLOOR
(Crosshatched)
[GRAPHICS]
[Drawing of Initial Demised Premises 5th Floor]
<PAGE>
EXHIBIT "B-1"
4TH FLOOR
SOUTH HALF
First Expansion Space
(Crosshatched)
[GRAPHIC]
[Drawing of 4th Floor South Half First Expansion Space]
<PAGE>
EXHIBIT "B-2"
4TH FLOOR
NORTH HALF
Second Expansion Space
(Crosshatched)
[GRAPHIC]
[Drawing of 4th Floor North Half Second Expansion Space]
<PAGE>
EXHIBIT "B-3"
1ST FLOOR
Third Expansion Space
(Crosshatched)
[GRAPHIC]
[Drawing of 1st Floor Third Expansion Space]
<PAGE>
EXHIBIT "C"
SUPPLEMENTAL NOTICE
Re: Lease dated as of_________________, 199__, by and between
COUSINS PROPERTIES INCORPORATED, as Landlord, and THE SYSTEM WORKS,
INC., as Tenant.
Dear Sirs:
Pursuant to Article 3 of the captioned Lease, please be advised as follows:
1. The Rental Commencement Date is the__________day of______________,
199__, and the expiration date of the Lease Term is the________day of
________, _____, subject however to the terms and provisions of the Lease.
2. Terms denoted herein by initial capitalization shall have the meanings
ascribed thereto in the Lease.
"LANDLORD":
COUSINS PROPERTIES INCORPORATED,
a Georgia corporation
By:
---------------------------------------
Its:
---------------------------------------
(CORPORATE SEAL)
<PAGE>
EXHIBIT "D"
CONSTRUCTION WORK
1. The construction work to be undertaken prior to the occupancy shall be
coordinated by Landlord. The provisions of EXHIBIT "D-1" shall
pertain to and govern this work. If Landlord is not deemed to have
substantially completed the work for the Demised Premises as described
in EXHIBIT "D-1" on or before February 1, 1994, Landlord shall
reimburse Tenant on a day to day basis for any increase in Tenant's
existing monthly rental payments under that certain Lease dated
_____________ between The System Works, Inc. and ____________ for
periods from and after February 1, 1994 until the earlier of the date
the Demised Premises are deemed substantially complete and July 1,
1994, provided that such increase shall not exceed $300.00 per day.
In addition, if the Demised Premises are not deemed substantially
complete by July 1, 1994, Tenant may either (i) terminate this Lease
by written notice to Landlord no later than August 1, 1994 or (ii)
elect to complete the improvements pursuant to Tenant's Plans, with
such work being governed by the provisions of EXHIBIT "D-2." The
February 1, 1994 date above or the July 1, 1994 date above shall be
extended on a day for day basis for each day of force majeure delay as
defined in Article 39.
2. Tenant has the right to elect to coordinate all of the construction
work for the Expansion Space, the First Offer Space, and, in the event
Tenant exercises its renewal rights as set forth in paragraph 5 of
EXHIBIT "G", the construction work related to the renewal. If Tenant
elects to have Landlord coordinate any such work, the provisions of
EXHIBIT "D-1" shall pertain to and govern said work. If Tenant elects
to coordinate any of the three construction projects, the provisions of
EXHIBIT "D-2" shall pertain and govern said work. In such case all
references in EXHIBIT "D-2" to the "work described in Paragraphs 2 and
4 hereof" shall be deemed to be references to the applicable Expansion
Space work, or the First Offer Space work or the renewal work, as the
case may be.
<PAGE>
EXHIBIT "D-1"
LANDLORD'S CONSTRUCTION
1. Landlord, at Landlord's sole cost and expense, has prepared and Tenant
acknowledges receipt of drawings showing the Building's interior
layout as it presently exists.
2. Tenant, at Tenant's sole cost and expense, shall cause to be prepared
by an architect and/or designer and/or engineer approved by Landlord
the following:
(a) Any additional modification requested by Tenant to the existing
schematic partition plan described in Paragraph 1 above;
(b) Complete, finished, detailed architectural drawings and
specifications for Tenant's partition layout, reflected ceiling
and other installations for the work to be done by Landlord under
Paragraphs 3 and 4 hereof;
(c) Complete mechanical and electrical plans and specifications where
necessary for installation of air conditioning system and
ductwork, heating, electrical, plumbing and other mechanical
plans for the work to be done by Landlord under Paragraphs 3 and
4 hereof; and
(d) Any subsequent modifications to the drawings and specifications
requested by Tenant.
All such plans and specifications are expressly subject to Landlord's
approval and shall comply with all applicable laws, rules and regulations.
Tenant covenants and agrees to cause three sets of said plans and
specifications to be delivered to Landlord as soon as reasonably possible
and as soon as completed, but in no event later than September 1, 1993 and,
upon approval by Landlord, Landlord will cause said plans to be filed at
Tenant's sole cost and expense with the appropriate governmental agencies
in such form (building notice, alteration or other form) as Landlord may
direct. The final, approved plans and specifications are referred to in
this Lease as "Tenant's Plans". The Demised Premises shall be deemed
"substantially complete" when Landlord has completed the work described in
Paragraphs 3 and 4 substantially in accordance with Tenant's Plans (except
for minor punchlist items that don't materially, adversely affect Tenant's
occupancy) and has obtained a certificate of occupancy, if required, for
the Demised Premises, as such date is accelerated for each day of Tenant
Delay. In the event of any dispute as to when construction of the
improvements for the Demised Premises is substantially complete as
aforesaid, the determination of Landlord's architect or designer shall be
final and binding upon the parties. Landlord will
-1-
<PAGE>
give Tenant ten (10) days' advance written notice of the date on which
Landlord expects the Demised Premises to be substantially complete.
3. Landlord agrees, at its sole expense and without charge to Tenant, to
supply and install the following work in the Demised Premises (the
following describes the scope of the "building standard" work which
will be provided by Landlord at its expense in accordance with the
specifications for the Building):
(a) The existing air conditioning system in its current, "as is"
condition, including existing diffusers and returns, which system
is capable of maintaining 78 degrees F when outside temperature
is 92 degrees F and 72 degrees F when outside temperature is 17
degrees F. Air conditioning design basis is 3.5 watts per
usable square foot lighting and power load, based upon an
occupancy rate of one (1) person per 100 rentable square feet
and venetian blinds drawn with slats tilted against the sun at
not less than 45 degrees from horizontal;
(b) Clean building exterior, including windows, prior to the
commenceme nt of Tenant's occupancy; and
(c) Removal of all visible evidence of the previous tenant's name,
initials and logo from all common areas.
4. Landlord agrees, at Landlord's sole cost and expense but only up to the
amount of the Construction Allowance and, thereafter, at Tenant's sole
cost and expense, to construct the improvements to the Demised Premises
which are shown in Tenant's Plans. Landlord shall cause such
construction to be performed in a good, first-class, workmanlike
manner, in accordance with Tenant's Plans. Landlord shall use all
reasonable efforts to substantially complete such construction no
later than November 1, 1993.
5. Prior to commencing any work, Landlord or Landlord's contractor will
submit to Tenant written estimates of the cost of the work described
in Paragraphs 2 and 4 hereof. If Tenant shall fail to approve any such
estimate within one (1) week, the same shall be deemed disapproved in
all respects by Tenant and Landlord shall not be authorized to proceed
thereon.
6. Tenant agrees to pay Landlord within ten (10) business days of being
billed therefor fifty percent (50%) of the difference between the cost
of the work described in Paragraphs 2 and 4 hereof, less the amount of
the Construction Allowance, if any, stated in Article 1(1) of the
Lease. Tenant agrees to pay the remaining fifty percent (50%) of such
difference when the Demised Premises are deemed substantially complete.
Tenant agrees that the failure to pay any such amount, as and when due,
shall constitute a default under this Lease. Landlord shall (in
addition to all other remedies) have the same rights as in the event of
default of payment of Base Rental. Tenant further agrees to pay to
Landlord or Landlord's designated
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<PAGE>
agent, a fee for construction coordination in an amount equal to 5% of
the cost of the work described in Paragraphs 2 and 4 hereof (Landlord
hereby agrees that it will not hire a general contractor to perform
such work and accordingly there will be no additional general
contractor's fee but there will be customary fees for the contractor
used by Landlord for each trade discipline payable to each such
contractor). The failure to pay such fee promptly after being billed
therefore shall constitute a default under this Lease. If the cost
estimate approved by Tenant pursuant to Paragraph 5 above is for an
amount in excess of the Construction Allowance, Landlord shall have
the right to require Tenant to pay 50% of such excess prior to
Landlord's commencing the construction work. If the cost of the
construction pursuant to Tenant's Plans is less than the Construction
Allowance the shortfall shall be retained by Landlord and Tenant shall
have no right whatsoever to such shortfall.
7. The term "Tenant Delay," as used throughout this Lease, shall mean each
day by which (a) Tenant shall fail to furnish approved plans and
specifications in accordance with Paragraph 2 hereof, or (b) Landlord
shall be delayed in substantially completing Landlord's construction
as a result of:
(i) Tenant's request for materials, finishes or installations
other than Landlord's standard; or
(ii) Tenant's changes in the approved Tenant's Plans; or
(iii)The performance of work by a person, firm or
corporation employed by Tenant and delays in the completion
of said work by said person, firm or corporation; or
(iv) Tenant's request in Tenant's plans for work other than
painting, wallcovering, recarpeting, installation and
relocation of Landlord's standard lighting, installation
and updating building wiring to accommodate Tenant's
computers and telephones and relocation of an insubstantial
amount of wall partitions.
The date on which the improvement being constructed by Landlord in the
Demised Premises are deemed substantially complete shall be
accelerated on a day for day basis for each day of Tenant Delay.
Landlord shall notify Tenant within ten (10) business days of the
commencement of a Tenant Delay.
8. Tenant shall not make any alterations, additions or improvements in or
to the Demised Premises without Landlord's prior written consent,
except as set forth in Article 14. Except for construction as
provided in Paragraphs 3 and 4 hereof, and except for the work
described in Exhibit "G", paragraphs 12 and 13, the Demised Premises
are delivered to Tenant "as is" without any warranty or representation
whatsoever. Any alterations, additions or improvements requested by
Tenant and approved by Landlord shall be performed (i) by Landlord's
contractor or another contractor approved by Landlord, (ii) in a good
and
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<PAGE>
workmanlike manner, and (iii) in accordance with all applicable laws,
ordinances, rules and regulations of governmental
authorities havingjurisdiction over the Demised Premises.
9. Any approval by Landlord of or consent by Landlord to any plans,
specifications or other items to be submitted to and/or reviewed by
Landlord pursuant to this Lease including Tenant's Plans shall be
deemed to be strictly limited to an acknowledgment of approval or
consent by Landlord thereto and, whether or not the work is performed
by Landlord or by Tenant's contractor, such approval or consent shall
not constitute the assumption by Landlord of any responsibility for
the accuracy, sufficiency or feasibility of any plans, specifications
or other such items and shall not imply any acknowledgment,
representation or warranty by Landlord that the design is safe,
feasible, structurally sound or will comply with any legal or
governmental requirements, and Tenant shall be responsible for all
of the same.
<PAGE>
EXHIBIT "D-2"
TENANT'S CONSTRUCTION
1. Landlord, at Landlord's sole cost and expense, has prepared and Tenant
acknowledges receipt of drawings showing the Building's interior layout as
it presently exists.
2. Tenant, at Tenant's sole cost and expense, shall cause to be prepared by an
architect and/or designer and/or engineer approved by Landlord the
following:
(a) Any additional modification requested by Tenant to the existing
schematic partition plan described in Paragraph 1 above;
(b) Complete, finished, detailed architectural drawings and specifications
for Tenant's partition layout, reflected ceiling and other
installations for the work to be done under Paragraph 4 hereof;
(c) Complete mechanical and electrical plans and specifications where
necessary for installation of air conditioning system and ductwork,
heating, electrical, plumbing and other mechanical plans for the work
to be done under Paragraph 4 hereof; and
(d) Any subsequent modifications to the drawings and specifications
requested by Tenant.
All such plans and specifications are expressly subject to Landlord's
approval and shall comply with all applicable laws, rules and regulations.
Tenant covenants and agrees to cause three sets of said plans and
specifications to be delivered to Landlord at the times specified in
Exhibit "G" hereof. At the time of submission of its plans and
specifications, Tenant shall also submit to Landlord a list of contractors
it desires to use for the work to be done in the Demised Premises, as well
as a description of each contractor's work or materials to be supplied.
Landlord shall have the right to approve of Tenant's contractors, which
approval shall not be unreasonably withheld, conditioned or delayed.
Landlord shall approve or disapprove of said plans and specifications and
said contractors within fifteen (15) days of receipt of the complete set of
plans and specifications. Upon approval by Landlord, Tenant will cause
said plans and specifications to be filed at Tenant's sole cost and expense
with the appropriate governmental agencies in such form (building notice,
alteration or other form) as may be required. The final, approved plans
and specifications are referred to in this Lease as "Tenant's Plans". The
Demised Premises shall be deemed "substantially complete" when Tenant has
completed the work described in Paragraphs 2 and 4 substantially in
accordance with Tenant's Plans (except for minor punchlist items that don't
materially, adversely Tenant's occupancy) and has obtained a certificate of
occupancy, if required, for the Demised Premises.
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3. [Not used]
4. Tenant agrees, at Tenant's sole cost and expense (subject to Landlord's
obligation to pay the Construction Allowance described in Exhibit "G"
hereof at the times and in the manner provided in Paragraph 8 of this
EXHIBIT "D") to construct the improvements to the Demised Premises which
are shown in Tenant's Plans. Tenant shall cause such construction to be
performed in a good, first-class, workmanlike manner, in accordance with
Tenant's Plans using only contractors approved in advance by Landlord.
5. Prior to commencing any work, Tenant must provide to Landlord the
following:
(a) An insurance certificate evidencing (i) builder's risk coverage for
materials to be brought onto the Demised Premises and (ii) all Tenant
insurance required to be carried under Article 17 of the Lease;
(b) Insurance certificates from each of Tenant's contractors evidencing:
(i) Worker's compensation insurance for all of contractor's
employees;
(ii) Comprehensive general liability insurance, owner's &
contractor's protective liability insurance and
products/completed operation liability coverage with minimum
limits of $1,000,000 for each accident and $1,000,000 aggregate,
with such insurance providing broad form comprehensive general
liability endorsement, including "XCU" coverage;
(iii) Comprehensive automobile liability insurance for all owned,
nonowned and hired vehicles with minimum limit of $1,000,000
bodily injury and property damage combined; and
(iv) Umbrella for excess liability insurance with limit of $1,000,000
bodily injury and property damage combined.
(c) A work schedule showing start dates for all work and completion dates;
and
(d) A schedule reflecting the cost of the work to be done under Paragraphs
2 and 4 hereof, including contract amounts and estimates for items not
yet under contract.
6. Landlord shall have the right to inspect Tenant's work at any time and
shall have the right to terminate the work if it does not substantially
comply with Tenant's Plans or if Tenant is not otherwise in compliance with
the terms of the Lease, including this Exhibit "D". Tenant shall keep
Landlord apprised of the status of the work and shall notify Landlord of
the occurrence of critical events and milestones identified by Landlord.
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7. Tenant shall pay for all work done and all materials supplied in connection
with the work described in Paragraphs 2 and 4 hereof as and when due and
shall not permit any liens to attach to Project. Within fifteen (15) days
after the end of each month following commencement of Tenant's work, Tenant
will submit to Landlord:
(a) Fully executed and notarized lien waivers and affidavits, in form
satisfactory to Landlord and in compliance with Georgia law, from each
contractor who has performed any work described in Paragraphs 2 and 4
hereof and from each supplier who has supplied materials in connection
with the work described in Paragraphs 2 and 4 hereof, which lien
waivers and affidavits (i) state that such party has been paid in full
for work done and materials supplied through the end of the prior
calendar month, (ii) state that such party waives all lien rights and
other claims against owner, through the date of the last payment and
(iii) make such other statements as are reasonably required by
Landlord;
(b) A schedule of costs incurred for the work described in Paragraphs 2
and 4 hereof and of estimated costs to complete;
(c) Copies of all invoices for the cost of work materials incurred as of
the end of the prior month.
(d) Copies of all required building permits, governmental approvals and
licenses.
8. (a) Within thirty (30) days after the end of each calendar month after the
commencement of the work described in Paragraphs 2 and 4 hereof,
Landlord shall pay an amount to Tenant such that the total of all
amounts paid to Tenant under this Paragraph 8(a) for all calendar
months equals: 90% of the amount which equals the positive
difference, if any, between (i) the total costs incurred as of the end
of the prior calendar month for the work done pursuant to Paragraphs 2
and 4 hereof and (ii) the positive difference, if any, between
Landlord's good faith estimate of the total cost to complete the work
described in Paragraphs 2 and 4 hereof and the amount of the
Construction Allowance for such work; provided, however, that such
amount currently payable under this Paragraph 8(a) shall be paid if
and only if all of the following conditions are met:
(i) All items required to be delivered to Landlord under Paragraph 7
hereof have been delivered;
(ii) There are no liens against the Project or claims related to or
arising from the work described in Paragraphs 2 and 4 hereof
outstanding at such time;
(iii) No event of default under the Lease has occurred which has not
been cured in a manner accepted by Landlord; and
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(iv) All work described in Paragraphs 2 and 4 hereof has been done in
substantial accordance with Tenant's plans and in strict
accordance with all relevant building codes and governmental
regulations.
(b) Within thirty (30) days of substantial completion of the work
described in Paragraphs 2 and 4 hereof, Landlord shall pay to Tenant
an amount equal to the positive difference, if any, between (A) the
lesser of the Construction Allowance for the work described in
Paragraphs 2 and 4 hereof and the total actual cost of such work and
(B) the sum of the amounts previously paid to Tenant under Paragraph
8(a); provided, however, that such amount shall be paid if and only if
all of the following conditions are met:
(i) All items described in Paragraph 7, for the period through the
completion of the work described in Paragraphs 2 and 4 hereof,
have been delivered to Landlord along with a final contractor's
affidavit, in form reasonably satisfactory to Landlord and in
compliance with Georgia law;
(ii) there are no liens against the Project or claims related to or
arising from the work described in Paragraphs 2 and 4 hereof
outstanding at such time;
(iii) No event of default under the Lease has occurred which has not
been cured in a manner accepted by Landlord; and
(iv) All work described in Paragraphs 2 and 4 hereof has been done
substantially in accordance with Tenant's Plans and in strict
adherence to all relevant building codes and governmental
regulations.
(v) The work described in Paragraphs 2 and 4 hereof has been
substantially completed;
(vi) Tenant has obtained all required governmental approvals of the
work, including any required certificates of occupancy.
9. Tenant shall pay to Landlord a construction coordination fee equal to 3% of
the actual cost of the work described in Paragraphs 2 and 4 hereof.
Landlord shall be entitled to withhold such fee from the payments of the
Construction Allowance as set forth in Paragraph 8 hereof.
10. Tenant shall not make any alterations, additions or improvements in or to
the Demised Premises without Landlord's prior written consent, except as
set forth in Article 14. Except for construction as provided in Paragraph
3 hereof, and except for the work described in Exhibit "G", paragraphs 12
and 13, the Demised Premises are delivered to Tenant "as is"
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without any warranty or representation whatsoever. Any alterations,
additions or improvements requested by Tenant and approved by Landlord
shall be performed (i) by Landlord's contractor or another contractor
approved by Landlord, (ii) in a good and workmanlike manner, and (iii) in
accordance with all applicable laws, ordinances, rules and regulations of
governmental authorities having jurisdiction over the Demised Premises.
11. Any approval by Landlord of or consent by Landlord to any plans,
specifications or other items to be submitted to and/or reviewed by
Landlord pursuant to this Lease including Tenant's Plans shall be deemed to
be strictly limited to an acknowledgment of approval or consent by Landlord
thereto and, whether or not the work is performed by Landlord or by
Tenant's contractor, such approval or consent shall not constitute the
assumption by Landlord of any responsibility for the accuracy, sufficiency
or feasibility of any plans, specifications or other such items and shall
not imply any acknowledgment, representation or warranty by Landlord that
the design is safe, feasible, structurally sound or will comply with any
legal or governmental requirements, and Tenant shall be responsible for all
of the same.
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EXHIBIT "E"
BUILDING STANDARD SERVICES
Landlord shall furnish the following services to Tenant during the Lease
Term (the "Building Standard Services"):
(a) Hot and cold domestic water and common-use restrooms and toilets at
locations provided for general use and as reasonably deemed by Landlord to be in
keeping with the first-class standards of the Building.
(b) Subject to curtailment as required by governmental laws, rules or
mandatory regulations and subject to the design conditions set forth in
paragraph 3(a) of EXHIBIT "D-1" attached hereto, central heat and air
conditioning in season, at such temperatures and in such amounts as are
reasonably deemed by Landlord to be in keeping with the first-class standards of
the Building. Such heating and air conditioning shall be furnished between
7:00 a.m. and 7:00 p.m. on weekdays (from Monday through Friday, inclusive) and
between 8:00 a.m. and 1:00 p.m. on Saturdays, all exclusive of Holidays, as
defined below (the "Building Operating Hours"). Upon the timely request of
Tenant, Landlord shall provide heating and air conditioning service to the
Demised Premises at hours other than Building Operating Hours, provided,
however, that Landlord shall not be required to operate the Building systems for
periods of time or in a manner that is contrary to the manufacturer's
recommendations or guidelines. A request by Tenant shall be deemed timely if
(i) with respect to operation after Building Operating Hours on a business day,
such notice is delivered by noon of such day and (ii) with respect to operation
on a day other than a business day or operation on a business day before
Building Operating Hours, such notice is delivered by noon of the last business
day before such day. During the Sole Tenancy Period, the costs of such
operation shall be included in Operating Expenses and no separate charges shall
be assessed to Tenant. During periods other than the Sole Tenancy period,
Tenant agrees that in the event it shall request and utilize such service during
hours other than Building Operating Hours, it shall pay to Landlord, as
Additional Rent, the cost to Landlord of providing such service. Landlord
agrees that if such charges were applicable in 1993, the amount of charge to
Tenant for such service would be $25.00 per hour for the initial floor and $5.00
per hour for each additional floor. In the event any portion of the Demised
Premises requires twenty-four (24) hour air conditioning or heating service
during a period other than the Sole Tenancy Period, that portion of the Demised
Premises shall be separately metered, at Tenant's cost, and Tenant shall pay
said amount directly to the Landlord. Landlord and Tenant acknowledge that the
current cost of providing such after hours heating and air conditioning service
is subject to adjustment to reflect increased utility costs, but in no event
shall Landlord increase such rates to reflect profit, allocation of overhead or
administrative charges.
(c) Electric lighting service for all public areas and special service
areas of the Building in the manner and to the extent reasonably deemed by
Landlord to be in keeping with the first-class standards of the Building.
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(d) Except during periods in which Tenant elects to provide janitor
services, janitor service shall be provided by Landlord five (5) days per week,
exclusive of Holidays (as hereinbelow defined), in a manner that Landlord
reasonably deems to be consistent with the first-class standards of the
Building.
(e) Except during periods when Tenant provides security under paragraph 8
of EXHIBIT "G", security services for the Building comparable as to coverage,
control and responsiveness (but not necessarily as to means for accomplishing
same) to other similarly situated first-class, multi-tenant office buildings in
suburban Atlanta, Georgia; provided, however, Landlord shall have no
responsibility to prevent, and shall not be liable to Tenant for, any liability
or loss to Tenant, its agents, employees and visitors arising out of losses due
to theft, burglary, or damage or injury to persons or property caused by persons
gaining access to the Demised Premises, and Tenant hereby releases Landlord from
all liability for such losses, damages or injury unless caused by Landlord's
gross negligence or willful misconduct and provided further that Landlord shall
not be obligated to improve any security services or comply with the first-class
building standard set forth the above if Tenant has rejected a request by
Landlord to make a capital change for safety purposes during the Sole Tenancy
Period which has been rejected by Tenant.
(f) Sufficient electrical capacity to operate (i) incandescent lights,
typewriters, calculating machines, photocopying machines and other machines of
the same low voltage electrical consumption (120/208 volts), provided that the
total rated electrical design load for said lighting and machines of low
electrical voltage shall not exceed 3.5 watts per square foot of rentable area;
and (ii) lighting (277/480 volts), provided that the total rated electrical
design load for said lighting shall not exceed 2.0 watts per square foot of
rentable area (each such rated electrical design load to be hereinafter referred
to as the "Building Standard Rated Electrical Design Load").
Should Tenant's total rated electrical design load exceed the Building
Standard Rated Electrical Design Load for either low or high voltage electrical
consumption, or if Tenant's electrical design requires low voltage or high
voltage circuits in excess of Tenant's share of the Building Standard circuits,
Landlord will (at Tenant's expense) install such additional circuits and
associated high voltage panels and/or additional low voltage panels with
associated transformers (which additional circuits, panels and transformers
shall be hereinafter referred to as the "Additional Electrical Equipment"). If
the Additional Electrical Equipment is installed because Tenant's low or high
voltage rated electrical design load exceeds the applicable Building Standard
Rated Electrical Design Load, then a meter shall also be added (at Tenant's
expense) to measure the electricity used through the Additional Electrical
Equipment.
The design and installation of any Additional Electrical Equipment (or any
related meter) required by Tenant shall be subject to the prior approval of
Landlord (which approval shall not be unreasonably withheld). All expenses
incurred by Landlord in connection with the review and approval of any
Additional Electrical Equipment shall also be reimbursed to Landlord by Tenant.
Tenant shall also pay on demand the actual metered cost of electricity consumed
through the Additional Electrical Equipment (if applicable), plus any actual
accounting expenses incurred by Landlord in connection with the metering
thereof.
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Tenant agrees that if Tenant uses data processing or other electronic
equipment which incorporates the use of switched mode power supplies or any
other type device causing harmonic distortion on Landlord's power distribution
system, Tenant shall install filters at Tenant's cost to eliminate the harmonic
distortion. In addition, any damage to Landlord's equipment resulting from
harmonic distortion caused by Tenant's electronic equipment shall be repaired at
Tenant's expense. Total harmonic distortion shall not exceed thirteen percent
(13%).
If any of Tenant's electrical equipment requires conditioned air in excess
of Building Standard air conditioning, the same shall be installed by Landlord
(on Tenant's behalf), and Tenant shall pay all design, installation, metering
and operating costs relating thereto.
If Tenant requires that certain areas within Tenant's Demised Premises must
operate in excess of the normal Building Operating Hours (as hereinabove
defined), the electrical service to such areas shall be separately circuited and
metered (at Tenant's expense) such that Tenant shall be billed the costs
associated with electricity consumed during hours other than Building Operating
Hours.
(g) All Building Standard fluorescent bulb replacement in all areas and
all incandescent bulb replacement in public areas, toilet and restroom areas,
and stairwells.
(h) Non-exclusive multiple cab passenger service to the Demised Premises
during Building Operating Hours (as hereinabove defined) and at least one (1)
cab passenger service to the floor(s) on which the Demised Premises are located
twenty-four (24) hours per day and non-exclusive freight elevator service during
Building Operating Hours (all subject to temporary cessation for ordinary repair
and maintenance and during times when life safety systems override normal
building operating systems) with such freight elevator service available at
other times upon reasonable prior notice and the payment by Tenant to Landlord
of any additional expense actually incurred by Landlord in connection therewith.
To the extent the services described above require electricity and water
supplied by public utilities, Landlord's covenants thereunder shall only impose
on Landlord the obligation to use its reasonable efforts to cause the applicable
public utilities to furnish same. Except for deliberate and willful acts of
Landlord, failure by Landlord to furnish the services described herein, or any
cessation thereof, shall not render Landlord liable for damages to either person
or property, nor be construed as an eviction of Tenant, nor work an abatement of
rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof.
In addition to the foregoing, should any of the equipment or machinery, for any
cause, fail to operate, or function properly, Tenant shall have no claim for
rebate of rent or damages on account of an interruption in service occasioned
thereby or resulting therefrom; provided, however, Landlord agrees to use
reasonable efforts to promptly repair said equipment or machinery and to restore
said services during normal business hours.
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The following dates shall constitute "Holidays" as that term is used in
this Lease: New Year's Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas, and any other holiday generally recognized as such
by landlords of office space in the metropolitan Atlanta office market, as
determined by Landlord in good faith. If in the case of any specific holiday
mentioned in the preceding sentence, a different day shall be observed than the
respective day mentioned, then that day which constitutes the day observed by
national banks in Atlanta, Georgia on account of said holiday shall constitute
the Holiday under this Lease. Business days shall mean Monday through Friday
except for Holidays.
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<PAGE>
EXHIBIT "F"
GUARANTY
INTENTIONALLY OMITTED.
<PAGE>
EXHIBIT "G"
SPECIAL STIPULATIONS
1. EXPANSION OPTIONS
(a) GRANT OF EXPANSION OPTIONS
Landlord does hereby grant unto Tenant the First Expansion Option, the
Second Expansion Option and the Third Expansion Option as more fully
defined herein (collectively the "Expansion Options") exercisable
subject to and in accordance with the terms and conditions of these
Special Stipulations. At Landlord's option, Tenant may not exercise
any Expansion Option if there is an event of default in the
performance of Tenant's covenants under this Lease either at the time
for exercising any of the Expansion Options or on the Rent
Commencement Date applicable thereto.
(b) PRINCIPAL DEFINITIONS
(1) FIRST EXPANSION OPTION
The "First Expansion Option" is an option to include within the
Demised Premises that area (the "First Expansion Space") shown
on Exhibit "B-1". The "First Expansion Option Exercise
Deadline" is the last day of the 20th calendar month following
the Rental Commencement Date. The "First Expansion Rentable
Floor Area" is hereby conclusively agreed by the parties to be
10,775 square feet. The "First Expansion Option Rent
Commencement Date" shall be the earlier of (i) the date of
occupancy of any portion of the First Expansion Space or (ii)
120 days following the delivery of the First Expansion Option
Exercise Notice (as defined below) to Landlord; provided,
however, if occupancy is delayed solely due to Landlord's
failure to approve or disapprove the plans and specifications
and contractors (if Tenant has elected to do the Expansion Space
Construction itself), submitted by Tenant, within ten (10) days
of Landlord's receipt thereof or, if Landlord is doing the
Expansion Space Construction, due to Landlord's failure to
promptly commence and diligently pursue to completion as soon as
reasonably possible the improvements described in Tenant's plans
and specifications (but it is clearly agreed that such 120-day
period shall not be extended even if the construction is not
substantially complete by the expiration of that period so long
as Landlord promptly commenced and diligently pursued such
construction), the "120 days" immediately above shall be
increased by the number of days of delay attributable such
failures with respect to either matter described above is
herewith referred to as "Landlord Delay"). The "Construction
Allowance" for the
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First Expansion Space shall be equal to $4.50 (i) multiplied by
the number of whole months remaining in the 120-month Lease Term
after the First Expansion Option Rent Commencement Date, (ii)
divided by 120 and (iii) multiplied by the First Expansion
Rentable floor Area.
(2) SECOND EXPANSION OPTION
The "Second Expansion Option" is an option to include within the
Demised Premises that area (the "Second Expansion Space") shown
on Exhibit "B-2". The "Second Expansion Option Exercise
Deadline" is the last day of the 32nd month following the Rental
Commencement Date. The "Second Expansion Rentable Floor Area"
is hereby conclusively agreed by the parties to be 10,775 square
feet. The "Second Expansion Option Rent Commencement Date"
shall be the earlier of (i) the date of occupancy of any portion
of the Second Expansion Space or (ii) 120 days following the
delivery of the Second Expansion Option Exercise Notice (as
defined below) to Landlord; provided, however, if occupancy is
delayed solely due to Landlord Delay, the "120 days" immediately
above shall be increased by the number of days of delay solely
attributable to Landlord Delay. The "Construction Allowance"
for the Second Expansion Space shall be equal to $4.50 (i)
multiplied by the number of whole months remaining in the 120-
month Lease Term after the Second Expansion Option Rent
Commencement Date, (ii) divided by 120 and (iii) multiplied by
the Second Expansion Rentable Floor Area.
(3) THIRD EXPANSION OPTION
The "Third Expansion Option" is an option to include within the
Demised Premises that area (the "Third Expansion Space") shown
on Exhibit "B-3". The "Third Expansion Option Exercise Deadline"
is the last day of the 44th month following the Rental
Commencement Date. The "Third Expansion Rentable Floor Area" is
hereby conclusively agreed by the parties to be 20,416 square
feet. The "Third Expansion Option Rent Commencement Date" shall
be the earlier of (i) the date of occupancy of any portion of
the Third Expansion Space or (ii) 120 days following the
delivery of the Third Expansion Option Exercise Notice (as
defined below) to Landlord; provided, however, if occupancy is
delayed solely due to Landlord Delay, the "120 days" immediately
above shall be increased by the number of days of delay solely
attributable to Landlord Delay. The "Construction Allowance"
for the Third Expansion Space shall be equal to $4.50 (i)
multiplied by the number of whole months remaining in the
120-month Lease Term after the Third Expansion Option Rent
Commencement Date, (ii) divided by 120 and (iii) multiplied by
the Third Expansion Rentable Floor Area.
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(c) EXERCISE OF EXPANSION OPTIONS
(1) The First Expansion Option may be exercised by Tenant only by
delivery of a written notice to Landlord ("First Expansion
Option Exercise Notice") at any time on or before the First
Expansion Option Exercise Deadline. Failure to deliver said
notice to Landlord on or before the First Expansion Option
Exercise Deadline shall terminate such First Expansion Option,
the Second Expansion Option and the Third Expansion Option.
(2) If and only if Tenant has properly exercised the First Expansion
Option, the Second Expansion Option may be exercised by Tenant
only by delivery of a written notice to Landlord ("Second
Expansion Option Exercise Notice") at any time on or before the
Second Expansion Option Exercise Deadline. Failure to deliver
said notice to Landlord on or before the Second Expansion Option
Exercise Deadline shall terminate such Second Expansion Option
and the Third Expansion Option.
(3) If and only if Tenant has properly exercised the First and
Second Expansion Options, the Third Expansion Option may be
exercised by Tenant only by delivery of a written notice to
Landlord ("Third Expansion Option Exercise Notice") at any time
on or before the Third Expansion Option Exercise Deadline.
Failure to deliver said notice to Landlord on or before the
Third Expansion Option Exercise Deadline shall terminate such
Third Expansion Option.
(4) Any exercise of an Expansion Option must be made with respect to
the entire First, Second or Third Expansion Space, as the case
may be. No attempted exercise with respect to less than all of
the respective First, Second or Third Expansion Space shall be
valid or effective.
(5) CERTAIN RENTABLE FLOOR AREA ADJUSTMENTS IN THE EVENT OF FAILURE
TO EXERCISE EXPANSION OPTIONS
(i) If the First Expansion Option terminates without Tenant
exercising such option, from and after the date of such
termination the Rentable Floor Area of Demised Premises
shall be increased for the remainder of the Lease Term by
nine (9) percent as of the date such Expansion Option
terminates.
(ii) If the Tenant exercises the First Expansion Option and
does not exercise the Second Expansion Option and such
Second Expansion Option terminates, the Rentable Floor
Area of Demised Premises (including the First Expansion
Rentable Floor Area and any First Offer Space Rentable
Floor Area) shall be increased for the
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remainder of the Lease Term by six and one-half (6-1/2)
percent as of the date such Expansion Option terminates.
(iii) If Tenant exercises the First and Second Expansion
Options, but does not exercise the Third Expansion Option
and such Third Expansion Option terminates, the Rentable
Floor Area of Demised Premises (including the First
Expansion Rentable Floor Area and the Second Expansion
Rentable Floor Area and any First Offer Space Rentable
Floor Area) shall be increased for the remainder of the
Lease Term by four and one-half (4-1/2) percent as of the
date such Expansion Option terminates.
(iv) It is acknowledged and agreed by Tenant that the effect
of the increases in Rentable Floor Area under
subparagraphs (i), (ii) and (iii) immediately above will
be to increase Tenant's Base Rental, Tenant's Forecast
Additional Rental and Tenant's Additional Rental.
(d) EXPANSION SPACE CONSTRUCTION
(1) Tenant may elect to have Landlord coordinate the Expansion Space
Construction or Tenant may elect to coordinate such construction
itself, all as set forth in Exhibit "D". On or before sixty
(60) days after delivery of an Expansion Option Exercise Notice,
Tenant shall deliver to Landlord three (3) sets of the final
construction plans and specifications for the work to be done in
the Expansion Space, and, if Tenant is doing the Expansion Space
Construction, a list of contractors, as set forth in Exhibit
"D". Landlord shall have ten (10) days to notify Tenant of its
approval or disapproval of such plans and specifications and
contractors (if applicable), but such approval shall not be
unreasonably withheld, conditioned or delayed. Upon Landlord's
final approval of such plans and specifications, Landlord or
Tenant, as the case may be, shall promptly and diligently
construct the leasehold improvements in accordance with such
plans and specifications (subject to these Special Stipulations
and Exhibit "D").
(2) With respect to the Expansion Space work to be done pursuant to
these Special Stipulations, Landlord or Tenant, as the case may
be, shall build out the leasehold improvements in such space in
accordance with the general requirements, terms and conditions
of Exhibit "D" and the Tenant's plans and specifications
submitted to Landlord in accordance with these Special
Stipulations (except, if Landlord is coordinating the work,
Landlord shall have no obligation to perform the work described
in Paragraph 3(b) of Exhibit "D-1"). The plans and
specifications delivered by Tenant to Landlord pursuant to these
Special Stipulations shall be detailed and complete, including
all lighting and mechanical systems.
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(3) As provided in Exhibit "D", all costs and expenses for
constructing and installing the improvements desired by Tenant
in the Expansion Space not covered by Landlord's Construction
Allowance for such Expansion Space shall be the sole
responsibility of Tenant and shall be paid by Tenant at the same
time and in the same manner provided in Exhibit "D". Tenant
agrees to pay Landlord or Landlord's designated agent
construction coordination fees in the same percentage set forth
in Exhibit "D" with respect to the Expansion Space work.
Landlord or Tenant, as the case may be, agrees to build out the
space in a workmanlike manner in compliance with all applicable
laws, ordinances and codes. If Landlord coordinates the work,
Landlord further agrees to use reasonable efforts so as to
achieve the lowest price reasonably possible through a
competitive process and quality equal to the initial leasehold
improvements of the Demised Premises, subject to reasonable
approval of Tenant.
(e) RENT FOR EXPANSION SPACE
Base Rental for Expansion Space which is leased by Tenant under an
Expansion Option shall be calculated at the same Base Rental Rate then
in effect and shall be subject to the same adjustments and at the same
time, in the same manner and in the same amount per square foot of
Rentable Floor Area as for the original portion of the Demised
Premises as provided in this Lease and Tenant shall pay Tenant's
Forecast Additional Rental and Tenant's Additional Rental at the same
time, in the same manner and in the same amount per square foot of
Rentable Floor Area as for the original portion of the Demised
Premises. Tenant shall be obligated to commence payment of Rent,
including Base Rental, Tenant's Forecast Additional Rental, and
Tenant's Additional Rental for Expansion Space on the respective
Expansion Option Rent Commencement Dates.
(f) OTHER TERMS
Except as expressly provided herein to the contrary, all Expansion
Space shall be added to the Demised Premises subject to and in
accordance with all of the terms and conditions set forth in the
Lease.
(g) FURTHER ASSURANCES
Upon the exercise of an Expansion Option pursuant to the terms hereof,
Landlord and Tenant shall execute an instrument memorializing the
Expansion Space added to this Lease thereby.
(h) LEASE TERM
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The Lease Term for Expansion Space added to this Lease pursuant to an
Expansion Option shall terminate when the Lease Term for the initial
Demised Premises terminates.
(i) LIMITATION ON ASSIGNMENT
Tenant may not independently assign its Expansion Options, provided,
however, the Expansion Option rights provided herein shall not
terminate solely as a result of a permitted assignment of the entire
Lease.
(j) RENTABLE FLOOR AREA AND DEMISED PREMISES
As of an Expansion Option Rent Commencement Date:
(x) The Rentable Floor Area of Demised Premises for purposes of this
Lease shall be equal to the Rentable Floor Area immediately
prior to such date plus the Expansion Rentable Floor Area for
the Expansion Space upon which rent is commencing; and
(y) The Demised Premises shall include the Expansion Space upon
which rent is commencing.
2. RIGHT OF FIRST OFFER.
(a) If any Expansion Option should terminate without Tenant exercising
said option, Tenant shall have a Right of First Offer ("Right of First
Offer") with respect to unleased space in the Project, subject to the
terms and conditions set forth below.
(b) The Right of First Offer shall terminate (i) if there is an event of a
default by Tenant under the terms of this Lease and (ii) in any and
all events at the end of the eighth (8th) Lease Year. After such
time, any unleased space which is not part of the Demised Premises
shall not be subject to the Right of First Offer and may be leased by
Landlord to any party without prior notice or offer to Tenant.
(c) If Landlord in good faith desires to enter into negotiations with
specific third parties with respect to unleased space in the Building
("Unleased Space"), Landlord shall deliver to Tenant a written notice
("First Offer Notice") stating this fact. The First Offer Notice
shall also describe the space to be offered to third parties (the
"First Offer Space") and Landlord's designation of the Rentable Floor
Area of the First Offer Space ("First Offer Space Rentable Floor
Area").
(d) Tenant shall have ten (10) business days from receipt of the First
Offer Notice in which to accept the First Offer Space. If Tenant
fails to deliver a written notice within said ten (10) business day
period, which notice includes Tenant's acceptance of such space under
the terms of this Lease and subparagraph (e) below, the Right
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of First Offer shall terminate with respect to the First Offer Space.
In such case, Landlord may lease such space to any party without prior
notice or offer to Tenant and Tenant shall have no further rights
whatsoever with respect to that particular First Offer Space.
(e) If Tenant accepts the First Offer Space by delivery of a written
notice to Landlord within ten (10) business days of receipt of the
First Offer Notice:
(i) RENTABLE FLOOR AREA AND DEMISED PREMISES
Rentable Floor Area of Demised Premises shall be increased by
the First Offer Space Rentable Floor Area as of the First Offer
Rent Commencement Date (as defined below) and the Demised
Premises shall be deemed to include the First Offer Space as of
the First Offer Rent Commencement Date.
(ii) RENT COMMENCEMENT DATE
The "First Offer Rent Commencement Date" shall be the earlier of
(x) the date of occupancy of any portion of the First Offer
Space or (y) one hundred twenty (120) days from the date Tenant
delivers written notice to Landlord accepting the First Offer
Space; provided, however, if occupancy is delayed solely due to
Landlord's failure to approve or disapprove the plans and
specifications and contractors (if Tenant has elected to do the
First Offer Space Construction itself), submitted by Tenant,
within ten (10) days of Landlord's receipt thereof or, if
Landlord is coordinating the First Offer Space Construction,
due to Landlord's failure to properly commence and diligently
pursue to completion as soon as reasonably possible, the
improvements described in Tenant's Plans (but it is clearly
agreed that such 120-day period shall not be extended even if
the construction is not substantially complete by the expiration
of that period so long as Landlord promptly commenced and
diligently pursued such construction), the "120 days"
immediately above shall be increased by the number of days of
delay attributable to such failure by Landlord (each such delay
caused by Landlord's failure with respect to either matter
described above is hereinafter referred to as "Landlord Delay").
(iii) CONSTRUCTION ALLOWANCE
The "Construction Allowance" for the First Offer Space shall be
equal to $.45 multiplied by the First Offer Space Rentable Floor
Area and further multiplied by the number of whole years or
fractions thereof, remaining in the original 120-month Lease
Term after the First Offer Rent Commencement Date.
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(iv) FIRST OFFER SPACE CONSTRUCTION
(1) Tenant may elect to have Landlord coordinate the First
Offer Space Construction or Tenant may elect to
coordinate such construction itself, all as set forth in
Exhibit "D". On or before sixty (60) days after delivery
to Landlord of the written acceptance of the First Offer
Space, Tenant shall deliver to Landlord three (3) sets
of the final construction plans and specifications for
the work to be done in the First Offer Space, and, if
Tenant is doing the First Offer Space Construction, a
list of contractors, as set forth in Exhibit "D".
Landlord shall have ten (10) days to notify Tenant of its
approval or disapproval of such plans and specifications
and contractors, if applicable, but such approval shall
not be unreasonably withheld, conditioned or delayed.
Upon Landlord's final approval of such plans and
specifications, Landlord or Tenant, as the case may be,
shall promptly and diligently construct the leasehold
improvements in accordance with such plans and
specifications (subject to these Special Stipulations and
Exhibit "D").
(2) With respect to the First Offer space work to be done
pursuant to these Special Stipulations, Landlord or
Tenant, as the case may be, shall build out the leasehold
improvements in such space in accordance with the
general requirements, terms and conditions of Exhibit "D"
and the Tenant's plans and specifications submitted to
Landlord in accordance with these Special Stipulations
(except, if Landlord is coordinating the work, Landlord
shall have no obligation to perform that work described
in Paragraph 3 of Exhibit "D-1"). The plans and
specifications delivered by Tenant to Landlord pursuant
to these Special Stipulations shall be detailed and
complete, including all lighting and mechanical systems.
(3) As provided in Exhibit "D", all costs and expense for
constructing and installing the improvements desired by
Tenant in the First Offer Space not covered by Landlord's
Construction Allowance for the First Offer Space shall be
the sole responsibility of Tenant and shall be paid by
Tenant at the same time and in the same manner provided
in Exhibit "D". Tenant also hereby agrees to pay
Landlord or Landlord's designated agent construction
coordination fee in the percentage amount set forth in
Exhibit "D" with respect to the First Offer Space work.
Landlord or Tenant, as the case may be, agrees to build
out the space in a workmanlike manner in compliance with
all applicable laws, ordinances and codes. If Landlord
coordinates the work, Landlord further agrees to use
reasonable efforts so as to achieve the lowest price
reasonably
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possible through a competitive process and quality equal
to the initial leasehold improvements of the Demised
Premises, subject to reasonable approval of Tenant.
(v) RENT FOR FIRST OFFER SPACE
Base Rental for First Offer Space which is leased by Tenant
under the Right of First Offer shall be calculated at the same
Base Rental Rate then in effect and shall be subject to the
same adjustments and at the same time, in the same manner and
in the same amount per square foot of Rentable Floor Area as
for the original portion of the Demised Premises as provided in
this Lease and Tenant shall pay Tenant's Forecast Additional
Rental and Tenant's Additional Rental at the same time, in the
same manner and at the same amount per square foot of Rentable
Floor Area as for the original portion of the Demised Premises.
Tenant shall be obligated to commence payment of Rent,
including Base Rental, Tenant's Forecast Additional Rental and
Tenant's Additional Rental for the First Offer Space on the
First Offer Rent Commencement Date.
(vi) OTHER TERMS
Except as expressly provided herein to the contrary, all First
Offer Space shall be added to the Demised Premises subject to
and in accordance with all of the terms and conditions set
forth in the Lease.
(vii) FURTHER ASSURANCES
Upon the exercise of a Right of First Offer pursuant to the
terms hereof, Landlord and Tenant shall execute an instrument
memorializing the First Offer Space added to this Lease
thereby.
(viii) LEASE TERM
The Lease Term for First Offer Space added to this Lease
pursuant to the Right of First Offer shall terminate when the
Lease Term for the initial Demised Premises terminates.
(ix) LIMITATION ON ASSIGNMENT
Tenant may not independently assign its Right of First Offer,
provided, however, the First Offer rights provided herein shall
be terminate solely as a result of a permitted assignment of
the entire Lease.
3. CANCELLATION OPTIONS.
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(a) CONDITIONS
If the following conditions are met, Tenant may exercise either the
First or Second Cancellation Options (as defined below):
(i) At lease one of the following conditions exists on the
respective Cancellation Notice Date (as defined below):
(x) Tenant is moving the offices of at least 50% of its
personnel, as well as its Chief Executive Officer,
outside of the greater Atlanta Metropolitan Area; or
(y) Tenant establishes to the reasonable satisfaction of
Landlord that Tenant's management, as of the commencement
of the Lease Term, ceases to own a controlling interest
in Tenant and ceases to control the day to day business
decisions for Tenant; or
(z) Tenant's gross income for the 12 month period immediately
preceding the Cancellation Notice Date is less than
seventy percent (70%) of its gross income for the period
immediately preceding the date of this Lease and the
number of employees (including full-time and part-time
employees and independent contractors) employed by Tenant
on the respective Cancellation Notice Date is less than
seventy percent (70%) of the number (including full-time
and part-time employees and independent contractors) so
employed as of the date of this Lease; and
(ii) Tenant has paid all amounts due under the Lease as of the date
of cancellation, including, without limitation, any amounts due
to and demanded by landlord for any existing events of default
on the part of Tenant under the Lease; and
(iii) As of the respective Cancellation Notice Date, Tenant has paid
cash funds to Landlord equal to the Cancellation Charge (as
defined below), which amount is intended to compensate Landlord
for the Lease termination and which the parties hereby is a
liquidated damages amount and not a penalty, Landlord's damages
being difficult, if not impossible to calculate; and
(iv) Tenant has delivered to Landlord on or before the respective
Cancellation Notice Date, but not more than ninety (90) days
prior thereto, a written notice ("Cancellation Notice") that it
elects to exercise its cancellation rights pursuant to this
Paragraph, which notice also enumerates the conditions which
are satisfied which entitle Tenant to exercise its
cancellation rights hereunder (including the specific condition
in Paragraph
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3(a)(i) which has occurred). Upon request of Landlord, Tenant
shall provide evidence to Landlord which reasonably establishes
that all applicable conditions to the exercise of the
cancellation rights are met.
(b) FIRST CANCELLATION OPTION
The "First Cancellation Option" is an option to cancel the Lease as of
the end of the fifth Lease Year. The "Cancellation Notice Date" for
the First Cancellation Option is the last day of the third month of
the fifth Lease Year. If all of the conditions of paragraph 3(a)
above are met for the First Cancellation Option, the Lease shall
terminate at the end of the fifth Lease Year. If any of the
conditions enumerated in paragraph 3(a) above are not satisfied,
Tenant shall have not right to exercise the First Cancellation Option
and the First Cancellation Option shall terminate.
(c) SECOND CANCELLATION OPTION
The "Second Cancellation Option" is an option to cancel the Lease as
of the end of the seventh Lease Year. The Cancellation Notice Date
for the Second Cancellation Option is the last day of the third month
of the seventh Lease Year. If all of the conditions of paragraph 3(a)
above are met for the Second Cancellation Option, the Lease shall
terminate at the end of the seventh Lease Year. If any of the
conditions enumerated in paragraph 3(a) above are not satisfied,
Tenant shall have no right to exercise the Second Cancellation Option
and the Second Cancellation Option shall terminate.
(d) OTHER DEFINITIONS
(i) The "Cancellation Charge" for the First Cancellation Option,
shall be equal to the sum of (x) an amount equal to the total
Base Rental for the fifth Lease Year, plus (y) $178,255, which
represents the unamortized Construction Allowance on the
initial construction, plus (z) for each Expansion Space, the
unamortized portion of the Construction Allowance for such
space as of the end of the fifth Lease Year which unamortized
portion shall be determined by assuming that the applicable
Construction Allowance is amortized on a straight line basis in
equal monthly payments, with interest thereon at ten percent
(10%) per annum, for the period from the Rent Commencement Date
for such space to the end of the initial 120 month Lease Term,
plus (aa) for each First Offer Space, the unamortized portion
of the Construction Allowance for such space as of the end of
the fifth Lease Year which unamortized portion shall be
determined by assuming that the applicable Construction
Allowance is amortized on a straight line basis in equal
monthly payments, with interest thereon at ten percent (10%)
per annum, for the period from the Rent Commencement Date for
such space to the end of the initial 120 month Lease Term. The
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portion of the Cancellation Charge represented by item (x)
immediately above is in addition to the Base Rental for the
fifth Lease Year.
(ii) The "Cancellation Charge" for the Second Cancellation Option,
shall be equal to the sum of (x) an amount equal to sixty (60)
percent of the Base Rental for the seventh Lease Year, plus (y)
$117,376, which represents the unamortized Construction
Allowance on the initial construction, plus (z) for each
Expansion Space, the unamortized portion of the Construction
Allowance for such space as of the end of the seventh Lease
Year which unamortized portion shall be determined by assuming
that the applicable Construction Allowance is amortized on a
straight line basis in equal monthly payments, with interest
thereon at ten percent (10%) per annum, for the period from the
Rent Commencement Date for such space to the end of the initial
120 month Lease Term, plus (aa) for each First Offer Space,
the unamortized portion of the Construction Allowance for such
space which unamortized portion shall be determined by
assuming that the applicable Construction Allowance is
amortized on a straight line basis in equal monthly payments,
with interest thereon at ten percent (10%) per annum, for the
period from the Rent Commencement Date for such space to the
end of the initial 120 month Lease Term. The portion of the
Cancellation Charge represented by item (x) immediately above
is in addition to the Base Rental for the seventh Lease Year.
4. USE OF COMMON AREA; PARKING AREAS.
(a) If any third party tenants shall occupy any portion of the Project due
to failure of Tenant to fully exercise Expansion Option rights and/or
Right of First Offer rights, it is acknowledged and agreed that such
third party tenants shall have full access to all common areas,
including, without limitation, second floor and basement common areas.
(b)
(i) Landlord shall maintain unreserved parking facilities adjacent
to the Building for the purpose of accommodating Tenant,
Tenant's invitees and employees, and other tenants, their
invitees and employees, subject to such reasonable limitations
and conditions as from time to time are imposed by Landlord,
but at no additional charge or rent for such use due from
Tenant; provided, however, that the ratio of parking available
to Tenant shall not in such circumstances be reduced below that
ratio specified below.
(ii) Throughout the Lease Term, Tenant shall be entitled to use
parking spaces on a unreserved and nonexclusive basis, the
number of such spaces being equal to the Rentable Floor Area of
Demised Premises from time to time, divided by one thousand
(1000) and multiplied by the Parking Ratio (as defined below).
The Parking Ratio during the entire Lease Term shall be
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equal to 3.10, provided, however, such ratio shall be adjusted
to take into account any changes in government rules and
regulations (such terms shall not be deemed to refer to
condemnation proceedings) that are effective subsequent to the
commencement of the Lease Term. Parking is available in
accordance with all applicable zoning laws, codes, rules and
regulations.
(iii) Landlord shall provide periodic motorized patrol security for
the parking area in a method and manner which is reasonable,
and not materially less than the security provided for Wildwood
Office Park. Landlord shall keep the parking area clean and
well-lighted in a reasonable and safe manner. The cost of such
security shall be included in Operating Expenses as defined in
Article 9.
(c) Tenant does hereby acknowledge that Landlord owns property adjacent to
the Land on which it may construct additional improvements. If
Landlord elects to construct such additional improvements, the parking
areas on the Project may be used in common with that property's
improvements. Tenant hereby agrees that such shared use shall be
permitted and will not be a violation of this Lease so long as Tenant
has access to a number of unassigned parking spaces on the Project
Land, which number is equal to the Parking Ratio multiplied by the
Rentable Floor Area of Demised Premises divided by one thousand (1000)
and the Operating Expenses for such parking areas are fairly allocated
between the two properties.
5. RENEWAL OPTIONS.
If there is no then existing event of default by Tenant under the terms of
this Lease, Tenant may extend the Lease Term by five (5) years ("Renewal
Term") by giving written notice to Landlord ("Renewal Notice") at least 12
months prior to the termination of the original Lease Term. If Tenant
exercises its option to renew this Lease for five (5) years, the Base
Rental Rate for the five (5) year renewal period shall be an agreed upon
amount greater than or equal to $13.00 per annum, per square foot of
Rentable Floor Area of Demised Premises but less than or equal to $16.00
per annum, per square foot of Rentable Floor Area of Demised Premises. If
Landlord and Tenant cannot agree by the end of the first month of the tenth
Lease Year on the amount of Base Rental Rate for the Renewal Term, Tenant
may give Landlord written notice by the end of the second month of the
tenth Lease Year that it accepts a Base Rental Rate of $16.00 per annum,
per square foot of Rentable Floor Area of Demises Premises. If Landlord
and Tenant do not agree on the Base Rental Rate and Tenant fails to timely
give such notice, the Renewal Option shall be deemed terminated. In the
event of the exercise of the Renewal Option, Landlord will provide a
"Construction Allowance" equal to $5.00 per square foot of Rentable Floor
Area of Demised Premises. Such Construction Allowance shall be
administered in a manner consistent with Exhibit "D" of this Lease (but
Landlord shall have no obligation to perform the work described in
Paragraph 3(b) of Exhibit "D-1") and Tenant may also receive reimbursement
from such Construction Allowance (upon presentation of valid, paid
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invoices) for permanent leasehold improvements constructed by Tenant in the
Demised Premises at any time from and after the beginning of the eighth
Lease Year. Landlord shall not be required to undertake any work other
than work to be paid for from such Construction Allowance remaining after
the above reimbursements to Tenant or paid for by Tenant. Tenant agrees to
pay landlord's construction management fees in the same percentage amount
set forth in Exhibit "D" with respect to the renewal work. The other terms
of the Lease will remain unchanged during the Renewal Term. Tenant's
option is to renew the Lease under the terms and conditions described
herein for the entire Demised Premises, including Expansion Space and First
Offer Space. Tenant shall not have an option to renew the Lease Term only
for a portion of the Demised Premises.
6. ADDITIONAL EXPANSION.
If Tenant has exercised all Expansion Options and desires additional office
space, Landlord agrees to act in good faith to use its best efforts to
locate additional office space in Wildwood Office Park which meets the
following criteria:
(a) The location of the space and the size of the space are acceptable to
both Tenant and owner of said space;
(b) The base rental rate for said space is between $14.00 and $17.50 per
rentable square foot, with Tenant paying its pro rata share of
operating expenses;
(c) The owner provides a construction allowance of $5.00 or more per
rentable square foot; and
(d) The other terms of the applicable lease are mutually acceptable to
both Tenant and the owner of said space.
7. AUDITED FINANCIAL STATEMENTS OF TENANT.
Tenant must provide to Landlord (i) audited financial statements of Tenant
as soon as such statements are available for the year ended March 31, 1993
and for each year ending during the Lease Term and (ii) interim financial
statements if Landlord has a reasonable need therefore and requests such
statements describing the basis for such need in the request. Landlord
will maintain the confidentiality of said statements, provided, however,
that Landlord's employees, accountants, advisors, consultants and
prospective lenders may have access to such statements.
8. TENANT'S SECURITY.
During the Sole Tenancy Period Tenant shall be authorized and entitled to
provide Tenant's own security for the Building and Project, at Tenant's
sole cost and expense, subject to and conditioned upon the following terms
and conditions:
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(a) Landlord and its agents shall have access to the Demised Premises at
all times (subject to the terms, conditions and limitations of Article
16 herein), notwithstanding Tenant's security system, and Tenant shall
make all arrangements necessary so that Landlord and its agents have
such access; and
(b) Tenant's security, may, at Tenant's option, include Tenant's own
security guards which may patrol the Building and parking facilities.
The rights of Tenant to utilize Tenant's own security service and
guards shall be further subject to and conditioned upon the following:
(i) Tenant's security guards shall in all instances be subject to
the direction and authority of Landlord's building management
and security guards for the Project, and Tenant shall so notify
Tenant's security guards;
(ii) Landlord shall have the right to approve Tenant's security
service, which approval shall not be unreasonably withheld,
conditioned or delayed. Tenant shall cause such security
service to post a roster and list of the persons which will be
working as Tenant's security guards with the building
management, indicating the people which will be working on
behalf of Tenant, and the exist times at which such people will
be working.
(iii) Tenant shall cause its security service to provide liability
insurance in amounts which Tenant and Landlord agree are
reasonable, and such insurance shall be written with companies
licensed to write insurance in the State of Georgia which are
otherwise satisfactory to Tenant and Landlord, and Tenant shall
cause ethe insurer to name Tenant, Landlord and any mortgagee
as additional named insureds on any such insurance policies,
and shall cause the insurer to issue insurance certificates to
landlord and mortgagee, and no such insurance may be modified
or cancelled on less than thirty (30) days' notice to Tenant,
Landlord and any mortgagee;
(iv) Tenant's security guards shall not in any manner interfere with
any other tenants in Wildwood Office Park, or the employees,
agents or invitees of such tenants;
(v) During the period in which Tenant provides security services
under this paragraph, Landlord shall have no obligation to
provide security for the Building, Landlord's sole security
obligation being to provide security services for the parking
facilities as described in paragraph 4 of this EXHIBIT "G"; and
(vi) If Tenant desires to provide security services under this
paragraph, Tenant shall give sixty (60) days written notice to
Landlord, which notice identifies the security service to be
used by Tenant.
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9. BUILDING DIRECTORY AND SIGNAGE.
Landlord, at its expense, shall provide and maintain a Building directory
in the lobby of the Building for Tenant and the other tenants of the
Building, at Landlord's option, but only during periods other than the Sole
Tenancy Period. Tenant may install a new, discrete and tasteful monumental
sign containing Tenant's name or initials in a place between the entrance
of the Building and Windy Ridge Parkway, which place is reasonably approved
by Landlord. The cost of the sign and the design and materials will be
paid by Tenant and will be subject to Landlord's approval and may be funded
out of the Construction Allowance, to the extent available.
10. RESTRICTIONS ON USES OF OTHER TENANTS IN BUILDING.
Landlord shall not enter into a lease or consent to a sublease or an
assignment of any space in the Building or any other occupancy of space to
any tenant for the purpose of or which shall result in the conduct of
retail operations from such tenant's premises, except those businesses
primarily providing services to tenants in the Building or the Project,
such as, by way of illustration but not limitation, newsstands, sundry
shops, office supply stores, shoe repair stores, restaurants and retail
branch banks. The term "retail operations" shall not include stock
brokerage, insurance related or other uses which are principally office but
have a retail component. No retail space in the Building shall be on any
floor other than the first (1st) floor or basement.
11. TOTAL RENTABLE SQUARE FEET.
Attached as Exhibit "H" is a letter dated 5/19/93 Revised from Barbara
Bencic Clark, IBD ("Architect") in which the Architect states that the
total rentable square feet of the Building is at least equal to the Rental
Floor Area of Building, using the measurement methods and assumptions
identified in such letter.
12. AMERICANS WITH DISABILITIES ACT.
Landlord does hereby agree to make those alterations and improvements to
the Building which Landlord in good faith determines are necessary to bring
the Building into compliance with the Americans With Disabilities Act of
1992 ("ADA"), as reasonably interpreted by Landlord as of the date of this
Lease. The costs and expenses incurred by Landlord to accomplish such
compliance shall not be included in Operating Expenses. However, if after
the date of this Lease, new regulations are added to the ADA or the ADA is
interpreted in a manner that requires additional alterations and
improvements to be made to the Building and Landlord was reasonable in
making the determination, in good faith, that such alterations and
improvements were not required as of the date of this Lease, then Landlord
shall make the newly required alterations and improvements but the costs of
such alterations and improvements may be included in Operating Expenses;
provided, however, that if the new alterations and improvements are of a
capital nature, the costs of such capital improvements shall be amortized
over their respective useful lives
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and only the amortization included in Operating Expenses in the manner
provided by Paragraph 9(a)(6) of the Lease.
13. ROOF REPAIRS.
Landlord and Tenant will jointly inspect the roof on the Rental
Commencement Date. If their inspection discloses to the reasonable
satisfaction of both parties, that there is an active roof leak, Landlord
shall repair such leak at its sole cost. Landlord does hereby agree that
if any leaks occur to the roof of the Building at any time after the Rental
Commencement Date and prior to the first anniversary of the Rental
Commencement Date and provided such leaks are not caused by the acts or
omissions of Tenant, its agents, contractors or employees, then Landlord
shall promptly take all action necessary to repair the roof of the Building
and, to the extent such costs exceed $5,000.00, such costs shall not be
included in Operating Expenses.
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EXHIBIT "H"
Barbara Bencic Clark, IBD
Interior Architecture and Design
1387 Northview Avenue
Atlanta, Georgia 30306
(404) 876-3011
Mr. Walter Ashmore
Cousins Real Estate Corporation
Suite 1600
2500 Windy Ridge Parkway
Marietta, GA 30306
19 May 1993 Revised
RE: Wildwood A Building Area Calculations
Dear Walter:
Using the BOMA standards, I have calculated the rentable area of the Basement
through the Fifth Floors of the Wildwood A Building, 3301 Windy Ridge Parkway.
Please note the following qualifications:
- The areas have been calculated manually as opposed to via computer
because the CAD files are no longer available.
- Areas were calculated from blueprints received from Cousins. These
prints are fourth generation reproductions and it can be assumed that
there has been some stretching or distortion in the floor plan during
the reproduction process.
- It is assumed that the original floor plans were drawn based on
verified (actual) field dimensions and not upon base building
architectural design drawings.
The gross area was calculated from the outside face of the dominant portion of
the permanent outer building walls; this is the glass curtain wall on the first
through fifth floors and the exterior wall on the basement level. Rentable area
was calculated by the subtraction of all the building shafts and the curtain
wall from the gross area. Shaft areas include the stairs, elevators and HVAC
chases as well as their surrounding walls. It does not include small
penetrations of the slab for plumbing or roof drains. No deductions have been
made to the areas for columns or projections necessary to the building.
<PAGE>
EXHIBT "H" (contiued)
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Walter Ashmore
19 May 1993 Revised
Page Two
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GROSS AREA S/F RENTABLE AREA S/F
-------------- -----------------
<S> <C> <C>
Ground Floor 11,021 10,464
First Floor 19,126 18,492
Second Floor 19,565 18,575
Third Floor 20,177 19,543
Fourth Floor 20,643 20,009
Fifth Floor 21,208 20,574
------- -------
111,740 107,657
</TABLE>
Please note that the overall rentable area has been calculated to be 2003 square
feet greater than your previous calculations indicated. This discrepancy is
attributable to the first two qualifications described herein. Please feel free
to call me should have any questions or require additional information.
Best regards,
/s/ Barbara B. Clark
Barbara B. Clark, I.B.D.
BBC:abc
<PAGE>
EXHIBIT "I"
SCHEDULE OF 3301 WINDY RIDGE PARKWAY OPERATING EXPENSES
<TABLE>
<CAPTION>
ACTUAL (1) BUDGET (1)
----1992 EXPENSES---- ----1993 EXPENSE----
EXPENSE CATEGORY $'S PER RSF $'S PER RSF
AMT 105,654 AMT 105,654 COMMENTS
- --------------------- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
SALARIES 48,400 $0.46 42,000 $0.40 MGT & ENG STAFF ALLOCATED BASED ON TOTAL BLDG RSF TO ALL
CLEANING & JANITORIAL 102,276 $0.97 107,390 $1.02 INCLUDES CLEANING, SUPPLIES, BRONZE CONTRACT, WINDOW WASHING.
REPAIRS & MAINTENANCE 34,134 $0.32 36,500 $0.35 (4)
ELECTRICITY 142,422 $1.35 149,543 $1.42 ESTIMATED - DEPENDENT ON TENANT LOADS.
WATER 11,480 $0.11 12,500 $0.12
SECURITY 10,542 $0.10 13,246 $0.13 (5)
ROADS & GROUNDS 44,045 $0.42 47,319 $0.45 (6)
MANAGEMENT FEES (2) 26,414 $0.25 26,414 $0.25 SET PER AGREEMENT.
OTHER MGT COSTS 11,265 $0.11 10,896 $0.10 (7)
TAXES (3) 135,273 $1.28 108,608 $1.03 SEE NOTE #3.
INSURANCE 8,478 $0.08 8,800 $0.08
----------- --------- ----------- --------
TOTAL 574,729 $5.45 563,216 $5.35
</TABLE>
(1) ASSUMING FULL OCCUPANCY. (GROSSING UP OF VARIABLE OPERATING EXPENSES)
(2) SET PER AGREEMENT.
(3) PROPERTY TAXES UNDER APPEAL & BUDGET ASSUMES THE FOLLOWING:
BUSINESS LICENSE 1,408
APPEAL COSTS 800
---------
SUB TOTAL 2,208
PROPERTY TAXES
VALUE 7,060,000
ASSESSMENT RATIO 40.00%
MILLAGE 0.038
----------
TAXES 106,400
TOTAL TAXES 108,608
(4) INCLUDES CONTRACTS ON ELEVATOR, HVAC AND LIFE SAFETY EQUIPMENT, LIGHT
BULBS, PLUMBING, ELECTRICAL, SUPPLIES & GENERAL BUILDING R&M.
(5) ALLOCATION OF WINDY RIDGE DECK PATROL BETWEEN THE 3 OFFICE BLDGS. LOCATED
ON WINDY RIDGE, PLUS ALLOCATION OF WILDWOOD NIGHT PATROL ("3RD SHIFT") AMONG
ALL OFFICE BUILDINGS.
(6) DIRECT COSTS OF EXT LANDSCAPING FOR PROPERTY, INCLUDING LOT SWEEPING, LOT
MAINTENANCE, PINESTRAW, SPRINKLER REPAIR & SNOW REMOVAL. PLUS, ALLOCATION OF
TOTAL PARKWAY COSTS IN WILDWOOD, BASED ON TOTAL PARKWAY COSTS LESS
REIMBURSEMENT FROM FREE STANDING RETAIL SITES, THE NET PKWY COST IS ALLOCATED
TO EACH OFFICE BUILDING IN WILDWOOD BASED ON TOTAL BUILDING RSF. AMOUNT
ALLOCATED TO 3301 IS $17,390 ($.16 PER RSF) OR 5.41% OF NET PARKWAY COSTS.
(7) ALLOCATION OF "G&A" COSTS OF WW MGT OFFICE LOCATED AT 2300 WINDY RIDGE
MGT OFFICE (INCLUDING MGT OFFICE RENT).
<PAGE>
WILDWOOD OFFICE PARK
3301 WINDY RIDGE PARKWAY
THE SYSTEM WORKS, INC.
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE ("Amendment"), is made the 11TH of July, 1994
between COUSINS PROPERTIES INCORPORATED, a Georgia Corporation, having an
office at Suite 1600, 2500 Windy Ridge Parkway, Marietta, Georgia 30067,
hereinafter called "Landlord" and THE SYSTEM WORKS, Inc., having its
principal office at Suite 500, 3301 Windy Ridge Parkway, Marietta, Georgia
30067, hereinafter called "Tenant".
W I T N E S S E T H:
--------------------
WHEREAS, Landlord and Tenant entered into that certain Lease dated June
8, 1993 (herein called the "Lease") with respect to the Demised Premises (as
defined in the Lease) located in the Building at 3301 Windy Ridge Parkway,
Marietta, Georgia; and
WHEREAS, Tenant wishes to amend its Lease to expand its Demised Premises;
and
WHEREAS, Landlord and Tenant desire to modify and amend the Lease to
accommodate such expansion.
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises contained in this Amendment, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged by the parties hereto, Landlord and Tenant do hereby agree as
follows:
1. All terms and words of art used herein, as indicated by the initial
capitalization thereof, shall have the same respective meaning
designated for such terms and words of art in the Lease.
2. ARTICLE 1, CERTAIN DEFINITIONS. Page 1 of the Lease Agreement shall be
modified as follows:
(g) RENTABLE FLOOR AREA OF DEMISED PREMISES: shall be amended by
deleting "63,688 square feet" and inserting "73,896 square
feet", effective on the Expansion Area Rental Commencement Date.
A new subparagraph "(o) Expansion Area" shall be added as follows:
"(o) EXPANSION AREA: The Expansion Area shall be defined as the
additional 10,208 square feet of Rentable Floor Area being
rented by Tenant on the first (1st) floor of the Building, as shown
in green on Exhibit "B-4" attached hereto. The Expansion Area
shall be included in the definition of Demised Premises for all
purposes of this Lease when such definition would not be
inconsistent with the specific reference to the Expansion Area."
-1-
<PAGE>
3. EXHIBIT "G", PARAGRAPH 1, EXPANSION OPTIONS: The original Expansion
Options, paragraph 1(a) and (b), shall be deleted and the
following new Expansion Options, paragraph 1(a) and (b), shall be
inserted as follows:
"(a) GRANT OF EXPANSION OPTIONS: Landlord does hereby grant unto Tenant
the First Expansion Option, the Second Expansion Option and
the Third Expansion Option as more fully defined herein
(collectively the "Expansion Options") exercisable subject to
and in accordance with the terms and conditions of these Special
Stipulations. At Landlord's option, Tenant may not
exercise any Expansion Option if there is an event of default in the
performance of Tenant's covenants under this Lease either
at the time for exercising any of the Expansion Options or on the
Rent Commencement Date applicable thereto.
(b) PRINCIPAL DEFINITIONS:
(1) FIRST EXPANSION OPTION. The "First Expansion Option" is an
option to include within the Demised Premises that area (the
"First Expansion Space") shown on Exhibit "B-4". The
"First Expansion Option Exercise Deadline" is the last day of
August, 1995. The "First Expansion Rentable Floor
Area" is hereby conclusively agreed by the parties to be 10,208
square feet. The "First Expansion Option Rent
Commencement Date" shall be the earlier of (i) the date of
occupancy of any portion of the First Expansion
Space or (ii) 120 days following the delivery of the First
Expansion Option Exercise Notice (as defined
below) to Landlord; provided, however, if occupancy is delayed
solely due to Landlord's failure to approve or
disapprove the plans and specifications and contractors (if
Tenant has elected to do the Expansion Space
Construction itself), submitted by Tenant, within ten (10) days
of Landlord's receipt thereof or, if Landlord is
doing the Expansion Space Construction, due to Landlord's
failure to promptly commence and diligently
pursue to completion as soon as reasonably possible the
improvements described in Tenant's plans and specifications
(but it is clearly agreed that such 120-day period
shall not be extended even if the construction is not
substantially complete by the expiration of that period so
long as Landlord promptly commenced and diligently pursued
such construction), the "120 days" immediately above
shall be increased by the number of days of delay attributable
to such failures by Landlord (each such day of
delay caused by Landlord's failure with respect to either
matter described above is herewith referred to as
"Landlord Delay"). The "Construction Allowance" for the First
Expansion Space shall be equal to $4.50 (i)
multiplied by the number of whole months remaining in the
120-month Lease Term after the First Expansion
Option Rent Commencement Date, (ii) divided by 120 and (ii)
multiplied by the First Expansion Rentable Floor
Area.
(2) SECOND EXPANSION OPTION. The "Second Expansion Option" is an
option to include within the Demised Premises that area
(the "Second Expansion Space") shown on Exhibit "B -5".
The "Second Expansion Option Exercise Deadline" is the last
day of August, 1996. The "Second Expansion Rentable
Floor Area" is hereby conclusively agreed by the parties to be
10,208 square feet. The "Second Expansion Option
Rent
-2-
<PAGE>
Commencement Date" shall be the earlier of (i) the date of
occupancy of any portion of the Second Expansion Space or
(ii) 120 days following the delivery of the Second
expansion Option Exercise Notice (as defined below) to
Landlord; provided, however, if occupancy is
delayed solely due to Landlord Delay, the "120 days"
immediately above shall be increased by the
number of days of delay solely attributable to Landlord Delay.
The "Construction Allowance" for the Second
Expansion Space shall be equal to $4.50 (i) multiplied by the
number of whole months remaining in the 120-month
Lease Term after the Second Expansion Option Rent Commencement
Date, (ii) divided by 120 and (iii) multiplied by
the Second Expansion Rentable Floor Area.
(3) THIRD EXPANSION OPTION. The "Third Expansion Option" is an
option to include within the Demised Premises that area
(the "Third Expansion Space") shown on Exhibit "B-6". The
"Third Expansion Option Exercise Deadline" is the last day
of August 1977. The "Third Expansion Rentable Floor
Area" is hereby conclusively agreed by the parties to be 21,550
square feet. The "Third Expansion Option Rent
Commencement Date" shall be the earlier of (i) the date of
occupancy of any portion of the Expansion Option
Exercise Notice (as defined below) to Landlord; provided,
however, if occupancy is delayed solely due to
Landlord Delay, the "120 days" immediately above shall be
increased by the number of days of delay solely
attributable to Landlord Delay. The "Construction Allowance"
for the Third Expansion space shall be equal to
$4.50 (i) multiplied by the number of whole months remaining in
the 120-month Lease Term after the Third
Expansion Option Rent Commencement Date, (ii) divided by 120
and (iii) multiplied by the Third Expansion
Rentable Floor Area."
4. FIRST EXPANSION OPTION. It is understood by execution of this First
Amendment to Lease, Tenant has hereby exercised its "First Expansion
Option".
5. EXHIBIT "G", SPECIAL STIPULATIONS, PARAGRAPH 4, USE OF COMMON AREA:
PARKING AREAS. A new subparagraph "(d)" shall be added as follows:
"(d) It is agreed that Tenant may use the Common Area Lobby on the first
(1st) floor of the Building as a reception area as long as
Tenant is the sole tenant of the Building. It is further understood
should Tenant make any alterations, additions or
improvements to the Common Area Lobby for its use as a reception
area, Tenant shall promptly restore, at its sole cost and
expense, the Lobby to its condition prior to the installation of
such alterations, additions or improvements at the earlier
of the expiration of the Lease Term or when the Landlord commences
leasing of the Building to third party tenants."
6. Except as expressly modified herein, the Lease shall remain in full force
and effect and, as hereby modified, is expressly ratified and confirmed
by the parties hereto. This Amendment shall be binding upon and shall
inure to the benefit of Landlord and Tenant and their respective,
permitted legal representatives, successors and assigns.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
signed and their respective seals to be affixed as of the date and year first
above written.
"Landlord"
COUSINS PROPERTIES INCORPORATED,
a Georgia corporation
BY: /S/[ILLEGIBLE]
------------------------
Its: VICE PRESIDENT
--------------------
[Corporate Seal]
"Tenant"
THE SYSTEM WORKS, INC.
BY: /S/ T. K. DEFOREST
-----------------------
Its: CONTROLLER
-------------------
[Corporate Seal]
-4-
<PAGE>
EXHIBIT "B-4"
1ST FLOOR
First Expansion Space
(Crosshatched)
[Graphic]
[Drawing of First Expansion Space]
<PAGE>
EXHIBIT "B-5"
1ST FLOOR
Second Expansion Space
(Crosshatched)
[Graphic]
[Drawing of Second Expansion Space]
<PAGE>
EXHIBIT "B-6"
1st Floor
Third Expansion Space
(Crosshatched)
[Graphic]
[Drawing of Third Expansion Space]
<PAGE>
WILDWOOD OFFICE PARK
3301 WINDY RIDGE PARKWAY
TSW INTERNATIONAL, INC.
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE ("Amendment"), is made the 31ST day of August,
1996, between COUSINS PROPERTIES INCORPORATED, a Georgia Corporation, having
an office at Suite 1600, 2500 Windy Ridge Parkway, Atlanta, Georgia
30339-5683, hereinafter called "Landlord", and TSW INTERNATIONAL, Inc.
(successor in interest to The System Works, Inc. by name change), having its
principal office at Suite 500, 3301 Windy Ridge Parkway, Atlanta, Georgia
30339, hereinafter called "Tenant".
W I T N E S S E T H:
-------------------
WHEREAS Landlord and Tenant entered into that certain Lease dated June 8,
1993 as amended by First Amendment to Lease dated July 11, 1994 (herein
called the "Lease") with respect to the Demised Premises (as defined in the
Lease) located in the Building at 3301 Windy Ridge Parkway, Atlanta, Georgia;
and
WHEREAS Tenant wishes to amend its Lease and exercise its Second
Expansion Option to expand its Demised Premises; and
WHEREAS, Landlord and Tenant desire to modify and amend the Lease to
accommodate such expansion.
NOW, THEREFORE, for and in consideration of the premises, the mutual
promises contained in this Amendment, and other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged by the parties hereto, Landlord and Tenant do hereby agree as
follows:
1. All terms and words of art used herein, as indicated by the initial
capitalization hereof, shall have the same respective meaning
designated for such terms and words of art in the Lease.
2. ARTICLE 1, CERTAIN DEFINITIONS. Page 1 o the Lease Agreement shall be
modified as follows:
(g) RENTABLE FLOOR AREA OF DEMISED PREMISES: shall be amended by
deleting "73,896" and inserting "84,104" square feet.
A new subparagraph "(p) Second Expansion Area" shall be added as follows:
"(p) SECOND EXPANSION AREA. The Second Expansion Area shall be defined as
the additional 10,208 square feet of Rentable Floor Area
being leased by Tenant located on the 1st floor of the Building, as
shown in green on Exhibit "B-4" attached hereto. The
Expansion Area shall be included in definition of Demised Premises
for all purposes of this Lease when such definition would
not be consistent with the specific reference to the First Expansion
Area."
-1-
<PAGE>
3. EXHIBIT "G, EXPANSION OPTIONS, PARAGRAPH 1(b)(2) shall be deleted in its
entirety and the following paragraph 1(b)(2) shall be inserted in lieu of:
"(2) SECOND EXPANSION OPTION. The "Second Expansion Option" is an option
to include within the Demised Premises that area (the "Second
Expansion Space") shown on Exhibit "B-4". The "Second Expansion
Option Exercise Deadline" is the last day of August, 1996. The
"Second Expansion Rentable Floor Area" is hereby conclusively agreed
by the parties to be 10,208 square feet. The "Second Expansion
Option Rent Commencement Date" shall be the earlier of (i) the date
of occupancy of any portion of the Second Expansion Space or
(ii) December 15, 1996; provided, however, if occupancy is delayed
solely due to Landlord Delay, the "120 days" immediately above shall
be increased by the number of days of delay solely attributable to
Landlord Delay. The "Construction Allowance" for the Second
Expansion Space shall be equal to $4.50 (i) multiplied by the number
of whole months remaining in the 120-month Lease Term after the Second
Expansion Option Rent Commencement Date, (ii) divided by 120 and
(iii) multiplied by the Second Expansion Rentable Floor Area. It is
further agreed Exhibit "B-5" attached hereto outlines the space Tenant
leased in its First Expansion Option."
4. SECOND EXPANSION OPTION. It is understood by execution of this Second
Amendment to Lease, Tenant has hereby exercised its "Second Expansion
Option".
5. Except as expressly modified herein, the Lease shall remain in full force
and effect and, as hereby modified, is expressly ratified and
confirmed by the parties hereto. This Amendment shall be binding upon
and shall inure to the benefit of Landlord and Tenant and their
respective, permitted legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
signed and their respective seals to be affixed as of the date and year first
above written.
"LANDLORD"
COUSINS PROPERTIES INCORPORATED,
a Georgia corporation
By:
-----------------------------
Its:
-------------------------
[CORPORATE SEAL]
"TENANT"
TSW INTERNATIONAL INC.,
By: /S/ JOHN BARTELS
-----------------------------
Its: CFO
--------------------------
[CORPORATE SEAL]
-2-
<PAGE>
EXHIBIT "B-4"
1ST FLOOR
Second Expansion Space
(Crosshatched)
[Graphic]
[Drawing of Second Expansion Space]
<PAGE>
EXHIBIT "B-5"
1ST FLOOR
First Expansion Space
(Crosshatched)
[Graphic]
[Drawing of First Expansion Space]
<PAGE>
EXHIBIT 10.19
CONFORMED COPY
31 OCTOBER 1994
SQL SYSTEMS INTERNATIONAL PLC
SQL SYSTEMS INTERNATIONAL BV
TSW (UK) LIMITED
THE SYSTEM WORKS, INC.
--------------------------------
AGREEMENT
FOR THE SALE AND PURCHASE OF
THE BUSINESS OF
SQL SYSTEMS INTERNATIONAL PLC
--------------------------------
FRESHFIELDS
<PAGE>
THIS AGREEMENT is made on 31 October 1994+
BETWEEN:
(1) SQL SYSTEMS INTERNATIONAL PLC whose registered office is at Almners Priory,
Almners Road, Lyne, Chertsey, Surrey KT16 OBH (the VENDOR)
(2) SQL SYSTEMS INTERNATIONAL BV whose registered office is at Tielweg 3, 2803
PK Gouda, Netherlands (the PARENT COMPANY)
(3) TSW (UK) LIMITED whose registered office is at Rolls House, 7 Rolls
Building, Fetter Lane, London EC4A INH (the PURCHASER)
(4) THE SYSTEM WORKS, INC whose registered office is at 3301 Windy Ridge
Parkway, Atlanta, Georgia 30339 (the PURCHASER PARENT COMPANY)
WHEREAS:
(A) The Vendor has agreed to sell the Business (as defined below) to the
Purchaser for the consideration and upon the terms set out in this Agreement.
(B) The Vendor has made representations to the Purchaser in the terms of the
undertakings and warranties set out in Schedule 2 with the intention that the
Purchaser should rely upon such representations in entering into this Agreement.
(C) The Parent Company has agreed, in consideration of the Purchaser entering
into this Agreement, to guarantee the performance by the Vendor of its
obligations hereunder upon the terms set out in clause 16 of this Agreement and
to dispose of to the Purchaser its interest in the Business IPR and the Rapier
IPR.
NOW IT IS AGREED as follows:
DEFINITIONS
1.1 In this Agreement unless the context otherwise requires:
ACCOUNTS DATE means 31 December 1993;
ADDITIONAL CONSIDERATION has the meaning attributed to it in clause 2.5;
ASSUMED CONTRACTS means the Contracts listed in Part C of Schedule 1;
<PAGE>
ASSUMED LIABILITIES means the Liabilities listed in Part D of Schedule 1 and any
trade credit of the type assumed by the Purchaser which in the Purchaser's
reasonable opinion arose in the ordinary course of the Business relating to the
calendar quarter ending on the Transfer Date;
BUSINESS means the business carried on by the Vendor (including through its
interests in the Subsidiary in the development, licensing, maintenance, support
and sale of computer software);
BUSINESS ASSETS means all the undertaking and assets of the Vendor insofar as
they relate to the Business (other than the Excluded Assets);
BUSINESS CLAIMS means the benefit of all rights and claims of the Vendor arising
out of or in connection with the Business other than claims relating to
taxation;
BUSINESS DAY means a day (other than a Saturday) when banks are open for the
transaction of normal banking business in London.
BUSINESS IPR means all existing Intellectual Property Rights owned by the Vendor
or, to the extent of Intellectual Property Rights which are used in or relate to
or have been created for use in whole or in part in the Business, owned by the
Parent Company;
CLAIM means any claim for breach of a Warranty or for breach of the IP
Indemnity;
COMPLETION means completion of the sale and purchase of the Business in
accordance with clause 3;
CONTRACTS means all contracts, engagements, licences, guarantees and other
commitments relating to the Business (including Intellectual Property Licences
and any finance and/or equipment leases) which have been entered into or
undertaken by or on behalf of the Vendor in the course of the Business;
EMPLOYEES means the employees of the Vendor listed in Schedule 6;
EXCLUDED ASSETS means the assets excluded from the sale and purchase pursuant to
this Agreement, being those more specifically detailed in Part B of Schedule 1;
EXCLUDED LIABILITIES means all Liabilities other than those listed in Part D of
Schedule 1;
GOODWILL means the goodwill of the Vendor in relation to the Business together
with the exclusive right for the Purchaser to represent itself as carrying on
the Business in succession to the Vendor;
Page 2
<PAGE>
HOLDING COMPANY AND SUBSIDIARY shall have the meanings attributed to them in
sections 736 and 736A of the Companies Act 1985;
INFORMATION TECHNOLOGY SYSTEMS means the computer and data processing systems
including all dedicated power supplies, printing facilities and network cabling
together with any bureau, disaster recovery or facilities management
arrangements relating thereto used in or relating to the Business;
INTELLECTUAL PROPERTY LICENCES means all existing agreements or arrangements
between the Vendor and the Parent Company and third parties insofar as they
relate to Intellectual Property Rights which are used in or relate to or have
been created for use in whole or in part in the Business;
INTELLECTUAL PROPERTY RIGHTS means patents, trade marks, service marks, trade
names, design rights, copyright (including rights in computer software and the
Proprietary Software and data bases), rights in know-how and other intellectual
property rights, in each case whether registered or unregistered and including
applications for the grant of any such rights and all rights or forms of
protection having equivalent or similar effect anywhere in the world;
IPR ASSIGNMENT means the assignment of all Intellectual Property Rights relating
to the Business including but not limited to the Business IPR in the agreed form
between the Vendor, the Parent Company, the Purchaser and the Purchaser Parent
Company;
IP INDEMNITY means the Indemnity contained in clause 10.5;
LIABILITIES means amounts owed by and liabilities (both ascertained and
contingent including future obligations under finance leases) of the Vendor in
connection with the Business existing at the Transfer Date or at any time
thereafter but excluding tax liabilities arising in respect of any profits
accruing or transactions or circumstances occurring up to the Transfer Date.
PLANT AND EQUIPMENT means all plant, machinery, motor vehicles, furniture, tools
and equipment owned by the Vendor and used in the Business (for the avoidance of
doubt, excluding for this purpose plant and machinery which are the subject of
finance and/or equipment leases and included in the term CONTRACTS);
PROPERTIES means the leasehold properties of the Vendor at Britannia Wharf,
Monument Road, Woking, Surrey described in Schedule 4;
PROPERTY WARRANTIES means the representations and warranties set out in Part B
of Schedule 2;
PROPRIETARY SOFTWARE means the computer software listed in the Disclosure Letter
and all computer software developed in the course of carrying on the Business or
used in connection with the Business and in respect of which any Intellectual
Page 3
<PAGE>
Property Rights therein have been assigned to one or more members of the
Vendor's Group in writing.
PURCHASER'S GROUP means the Purchaser, any holding company of the Purchaser and
any subsidiary of the Purchaser or any such holding company from time to time;
RMS means Resource Management Systems Limited;
RMS/PARENT COMPANY INDEMNITY CLAIM means a claim by the Purchaser under clause
10.5 as a result of the use or possession of the Proprietary Software by the
Purchaser or any third party licensed to use or possess the Proprietary Software
by the Vendor, its Parent Company, the Purchaser or any of its successors in
title infringing or allegedly infringing any Intellectual Property Rights in the
Proprietary Software owned or held by RMS or the Parent Company or any of their
respective successors or predecessors in title;
RAPIER IPR means the computer software assigned to the Parent Company by
Resource Management Systems Limited on 28 November 1988 and all enhancements and
updates thereof belonging to the Parent Company;
REGISTERED RIGHTS means, in relation to any jurisdiction, any Intellectual
Property Rights which are the subject of registration (or application for
registration) with any competent authority in that jurisdiction;
SECURITY INTEREST means any security interest of any nature whatsoever
including, without limitation, any mortgage, charge, pledge, lien, assignment by
way of security or other encumbrance;
STAMP DUTY AGREEMENT means the stamp duty agreement in the agreed form between
the Vendor, the Parent Company, the Purchaser and the Purchaser Parent Company;
SUBSIDIARY means SQL Systems International Pty Limited, a company incorporated
in Australia details of which are set out in Part A of Schedule 1;
TAXES ACT means the Income and Corporation Taxes Act 1988;
TAX WARRANTIES means the representations and warranties set out in Part C of
Schedule 2;
TRADE MARK ASSIGNMENT means the assignment of trade marks in the agreed form
between the Vendor and the Purchaser;
TRANSFER DATE means the date of Completion;
Page 4
<PAGE>
VENDOR'S GROUP means the Vendor, any holding company from time to time of the
Vendor and any subsidiary from time to time of the Vendor or any such holding
company;
WARRANTIES means the representations and warranties set out in Schedule 2.
1.2 In this Agreement:
(a) references to PERSONS shall include individuals, bodies corporate (wherever
incorporated), incorporated associated and partnerships;
(b) the HEADINGS are inserted for convenience only and shall not affect the
construction of this Agreement;
(c) any reference to an ENACTMENT is a reference to it as from time to time
amended, consolidated or re-enacted (with or without modification) and
includes all instruments or orders made under such enactment;
(d) any statement qualified by the expression TO THE BEST KNOWLEDGE OF THE
VENDOR or SO FAR AS THE VENDOR IS AWARE or any similar expression shall be
deemed to include an additional statement that it has been made after due
and careful enquiry and shall be deemed to include the knowledge of each
director of the Vendor; any statement qualified by the expression to THE
ACTUAL KNOWLEDGE OF THE VENDOR shall be deemed to include an additional
statement that it has been made after no express enquiry and shall be
deemed to include the knowledge of Ivor Lewis;
(e) any reference to a document IN THE AGREED FORM is to the form of the
relevant document agreed between the parties and for the purpose of
identification initialled by each of them or on their behalf (in each case
with such amendments as may be agreed by or on behalf of the Vendor and the
Purchaser);
(f) references to any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court, official or any
other legal concept shall, in respect of any jurisdiction other than
England, be deemed to include the legal concept which most nearly
approximates in that jurisdiction to the English legal term.
AGREEMENT TO SELL AND PRICE
2.1 The Vendor as beneficial owner shall sell and the Purchaser shall purchase
the Business as a going concern and with effect from the opening of business on
the Transfer Date, including the following Business Assets:
(a) (subject to the provisions of Schedule 4) the Properties;
(b) the Plant and Machinery;
Page 5
<PAGE>
(c) the petty cash, raw materials, stocks, work-in-progress and finished
products of the Business;
(d) the Business IPR;
(e) the benefit (subject to the burden) of all Assumed Contracts;
(f) the benefit of all Business Claims; and
(g) the Goodwill.
2.2 The Parent Company as beneficial owner shall sell and the Purchaser shall
purchase, with effect from the opening of business on the Transfer Date the
Rapier IPR and any other Business IPR owned by the Parent Company.
2.3 The Vendor shall sell and the Purchaser Parent Company shall purchase, with
effect from close of business on the Transfer Date the shares of the Vendor in
the Subsidiary (together with all rights attaching to them including any
dividend or other distribution declared or paid on or after the date hereof).
2.4 For the avoidance of doubt it is agreed that the said sale and purchase
shall not include and nothing in this Agreement shall operate to transfer the
Excluded Assets.
2.5 In consideration for the sale and transfer by the Vendor of the Business
Assets, the Purchaser shall:
(a) pay to the Vendor and the Parent company, subject always to clause 13.2,
additional consideration (the ADDITIONAL CONSIDERATION) in respect of the
Business IPR and Rapier IPR at the time and on the bases set out in
Schedule 5 such Additional Consideration to be payable as to 65% to the
Vendor and 35% to the Parent Company;
(b) assume responsibility for the satisfaction of all the Assumed Liabilities
(excluding any liabilities for which the Vendor is expressly to remain
liable under this Agreement) and the Purchaser shall indemnify the Vendor
against all proceedings, claims and demands in respect of such Liabilities;
(c) pay to the Vendor, as advance payments of Additional Consideration, L20,000
on or before the third day following Completion and L50,000 on 1 December
1994. The Purchaser shall be entitled to offset such advance payments
against any amounts of Additional Consideration payable after the date of
this Agreement as and when such amounts become due and to make the
appropriate deductions from such amounts.
2.6 The apportionment of the consideration referred to in clause 2.5 as between
the respective Business Assets shall be as set out in Schedule 5.
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2.7 In consideration for the sale and transfer by the Vendor of the shares in
the Subsidiary, the Purchaser Parent Company shall pay the Vendor the sum of
L43, the receipt of which is hereby acknowledged.
2.8 The Purchaser may, in its absolute discretion, within 14 days of Completion
elect to issue loan notes to the Vendor and/or the Parent Company in
satisfaction of all or part of the Additional Consideration on terms to be
mutually agreed between the Purchaser and/or the Vendor (as the case may be)
reflecting the calculation of payment terms set out in Schedule 3 (PROVIDED that
if the terms of the Loan Notes are not so mutually agreed within a further 7
days of such election, the election shall lapse).
COMPLETION
3.1 The sale and purchase shall be completed at Business Centre Schiphol,
Schiphol Airport, Amsterdam immediately after the signing of this Agreement when
the events detailed in the remainder of this clause 3 shall take place.
3.2 On Completion, the Vendor shall cause Messrs Daniel Robert Chapchal and
George Anthony Waddington to resign as directors of the Subsidiary and to be
delivered or made available to the Purchaser:
(a) such documents as the Purchaser may reasonably require to complete the sale
and purchase of the Business Assets (including, without limitation an
Assignment in respect of the Registered Rights in the form of the agreed
draft) together with all deeds and documents of title relating thereto;
(b) a letter from Barclays Bank plc confirming that its existing charge will be
released on discharge of amounts due.
(c) possession of the Property and of the other tangible Business Assets hereby
agreed to be sold including:
(i) all lists of customers, books of account and records relating to the
Business (but not those relating to the general affairs of the Vendor
or to any assets of the Vendor not being sold to the Purchaser save
that, insofar as such excluded lists, books and records shall relate
to the Business and be reasonably required by the Purchaser, the
Purchaser shall have the right to examine the same at all reasonable
times and to make copies thereof and to take extracts therefrom); and
(ii) all the designs and drawings, plans, manufacturing data, technical and
sales publications, advertising material and other technical and sales
matter of the Vendor in relation to the Business together with any
plates, blocks, negatives and other like material relating to the
Business;
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(d) share transfer forms (together with the relative share certificates) duly
executed by the Vendor and/or its nominees in favour of the Purchaser
Parent Company or its nominee in respect of the shares of the Vendor in the
Subsidiary;
(e) originals of the Deed of Confirmation and the Trade Mark Assignment duly
executed by the Vendor; and
(f) originals of the Stamp Duty Agreement and the IPR Assignment duly executed
by the Vendor and the Parent Company.
3.3 On Completion, the Purchaser shall cause to be delivered or made available
to the Vendor;
(a) counterpart originals of the Deed of Confirmation and the Trade Mark
Assignment duly executed by the Purchaser and the Purchaser Parent Company;
and
(b) counterpart originals of the IPR Assignment and the Stamp Duty Agreement
duly executed by the Vendor and the Parent Company.
3.4 On Completion the Purchaser shall procure that there shall be paid to
Barclays Bank plc (the BANK) sufficient funds to discharge the Vendor's
overdraft (including uncleared items) (up to an aggregate of L250,000 and any
additional amount drawn down to discharge what would have otherwise have been an
Assumed Liability) with the Bank and thereafter the Parties shall use their
reasonable endeavours to procure that the Bank will release its existing charge
over certain of the Business Assets and the Parent Company's guarantee and that
of Gable CAD UK Limited of the liabilities of the Vendor to the Bank.
TITLE AND SUPPLEMENTARY PROVISIONS
4.1 Beneficial ownership and risk in respect of the Business Assets (other than
the Properties) shall pass to the Purchaser on Completion. Title to all
Business Assets which are capable of transfer by delivery shall pass on delivery
and such delivery shall be deemed to take place at the Properties on Completion.
Subject to the provisions of clauses 4.2 and 4.3, the Vendor shall be a trustee
for the Purchaser in respect of all the Business Assets until the same shall
have been actually delivered and/or, in the case of Business Assets not capable
of transfer by delivery, formally transferred or assigned to the Purchaser.
4.2 Insofar as the Business Assets comprise the benefit of Business Claims and
the benefit (subject to the burden) of Assumed Contracts which cannot
effectively be assigned or transferred by the Vendor to the Purchaser except by
agreements of novation or without obtaining a consent, an approval, a waiver or
the like from a third party (CONSENTS):
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(a) the Vendor shall (upon the request of the Purchaser) take all reasonable
steps to procure that such Assumed Contracts are novated or the necessary
Consents obtained and the Purchaser shall co-operate with the Vendor for
such purpose;
(b) unless or until any such Assumed Contract is so novated or assigned or any
necessary Consent is obtained, the Vendor shall receive and hold the
benefit of the relevant Assumed Contract or Business Claim as agent for the
Purchaser and shall accordingly pay to the Purchaser promptly upon receipt
any sums received by it under any such Assumed Contract or pursuant to any
such Business Claim;
(c) the Purchaser shall (at the Purchaser's cost) assist the Vendor to perform
all the obligations of the Vendor under any such Assumed Contracts and
indemnify the Vendor on an after-tax basis against all liability (and all
costs reasonably incurred by the Vendor) arising in connection with any
such Assumed Contracts;
(d) in the case of Intellectual Property Licences, the Vendor and the Purchaser
shall (where necessary) have discussions with a view to establishing by
mutual agreement (and the agreement of relevant third parties) the identity
of those Intellectual Property Licences where a sub-licence is to be
granted and/or those where a further licence is to be granted to the
Purchaser and/or those which are to be novated or otherwise assigned
(subject, where appropriate, to existing licences) to the Purchaser.
No effect shall, however, be given to sub-paragraphs (b) and (c) above if there
is a material risk that the relevant Assumed Contract would be treated as
repudiated by the third party or if the Vendor would be in breach of its
obligations to any third party under any such Assumed Contract if effect were
given thereto. If any necessary Consent is not obtained within six (6) months
after Completion or is refused and the procedure set out in this clause 4.2 does
not enable the full benefit of any Assumed Contract to be enjoyed by the
Purchaser after Completion, the parties shall use all reasonable endeavours to
achieve an alternative solution pursuant to which the Purchaser shall both
receive the full benefits of that Assumed Contract and assume the associated
obligations.
4.3 The Vendor shall with all due diligence execute such other documents and
take such other steps as may reasonably be required by the Purchaser to vest the
title to the Business Assets in the Purchaser and to give effect to this
Agreement. The Vendor hereby irrevocably, and by way of security for the
performance of its obligations under this Agreement, appoints the Purchaser as
its attorney to execute in its name and on its behalf all documents as may
reasonably be required by the Purchaser to vest the title to the Business Assets
in the Purchaser and in particular, but without limitation, to endorse in favour
of
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the Purchaser any cheques or bankers' drafts made out in favour of the Vendor
and received by the Purchaser.
PROPERTIES
5. The provisions of Schedule 4 shall apply to the assignment of the
Properties.
POST-COMPLETION UNDERTAKINGS
6. Following Completion, the Vendor undertakes to the Purchaser:
(a) to procure that, within 30 days after Completion, the name of the Vendor
and any other member of the Vendor's Group shall be changed so as to omit
the initials "SQL" or any confusingly similar initials or name and,
following such change or changes of name, the Vendor shall, and shall
procure that, all other members of the Vendor's Group, are not incorporated
with, or undergo a change of name to, a name that includes the initials
"SQL" or any confusing similar initials or name;
(b) to procure that, as soon as reasonably practicable after Completion and in
any event within 30 days afterwards, the Vendor's Group shall cease in any
manner whatsoever (including but not limited to use on or in connection
with:
(i) any completed goods or parts thereof held in stock by the Vendor to
which any such marks, names, designs or logos have already been
applied on or prior to the date of Completion or any goods of the type
manufactured by the Vendor and which relate to the Business;
(ii) any remaining stocks of labelling, packaging (including containers)
advertising material, brochures, catalogues or other items of sales
literature to which any such marks, names, designs or logos have
already been applied on or prior to the date of Completion; and
(iii)any signs currently in place on any building or property owned or used
by the Vendor in relation to the Business immediately prior to the
date of Completion and on any letterhead or item to which any such
marks, names, designs or logos have already been applied on or prior
to the date of Completion;)
to use to display any trade or service marks, trade or service names,
registered designs or logos used or intended to be used in relation to or
held by the Business or any confusingly similar mark, design, name or logo
(whether registered or unregistered).
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EMPLOYEES
7.1 The parties acknowledge and agree that the sale of the Business from the
Vendor to the Purchaser is a RELEVANT TRANSFER within the meaning of the
Transfer of Undertakings (Protection of Employment) Regulations 1981 (the
EMPLOYMENT REGULATIONS).
7.2 All amounts (other than amounts comprised in Assumed Liabilities) payable
to or in relation to the Employees by the Vendor, including but not limited to
wages and salaries, in respect of the period to the close of business on the
Transfer Date shall be discharged by the Vendor and the Vendor shall indemnity
the Purchaser against any costs, claims, liabilities and expenses arising out of
or in connection with such amounts. All necessary apportionments shall be made
to give effect to this clause.
7.3 The Vendor shall indemnity the Purchaser against any costs, claims,
liabilities and expenses which are attributable to any act or omission by the
Vendor prior to the close of business on the Transfer Date in respect of any of
the Vendor's obligations or duties (in either case, whether arising under common
law, statute, custom or otherwise) to or in relation to any of its employees or
former employees (including but not limited to any liability arising out of the
termination or dismissal of any employee or former employee) and which the
Purchaser may incur or suffer as a result of the Purchaser succeeding to the
Vendor pursuant to the Employment Regulations or otherwise howsoever in relation
to the contracts of employment of employees or former employees or any of them.
7.4 If any contract of employment of a person who is not an Employee (other
than John Connell and Frank Burns) has effect as if originally made between the
Purchaser and such person, then:
(a) the Purchaser may, within 3 months of becoming aware of such contract
having effect as if originally made by the Purchaser, give notice to such
person to terminate such contract; and
(b) the Vendor shall indemnity the Purchaser from and against any costs,
claims, charges, expenses, demands or liabilities arising out of or in
connection with such termination and from and against any sums payable to
or in relation to such person under his contract of employment from
Completion to the date of such termination.
7.5 The Purchaser shall indemnity the Vendor from all liabilities, claims and
demands made against the Vendor arising from:
(a) any substantial change in the working conditions of the Employees or any of
them occurring on or after the Transfer Date; and
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(b) the change of employer occurring by virtue of the Employment Regulations
and this Agreement being significant and detrimental to any of the
Employees; and
(c) the employment by the Purchaser after Completion of any of the Employees
other than on terms at least as good as those set out in the Schedule of
Employees or otherwise detailed in the Disclosure Letter or the termination
of the employment of any of them after Completion; or
(d) any breach by the Purchaser after the opening of business on the Transfer
Date of any of the Purchaser's obligations or duties (in either case
whether arising under the Agreement, common law, statute, custom or
otherwise) to any of the Employees (including, but not limited to any
liability arising out of the termination or dismissal of any Employee).
VAT
8.1 The parties shall use all reasonable efforts to ensure that the transfer of
the Business and the Business Assets is treated as a transfer of a business as a
going concern for the purposes of section 49 of the Value Added Tax Act 1994 and
article 5 of The Value Added Tax (Special Provisions) Order 1992, including the
making by the Purchaser of any election to waive exemption that may be required
for this purpose. If it is not so treated, the Purchaser shall pay VAT pursuant
to a VAT invoice to be submitted by the Vendor.
8.2 The Vendor shall deliver to the Purchaser at Completion all the records of
the Business for value added tax purposes which are required by section 49(1)(b)
of the Value Added Tax Act 1994 to be preserved by the Purchaser.
8.3 In the event that H.M. Customs and Excise determine that Value Added Tax is
chargeable on the sale of the Business and Business Assets hereunder or any of
them then the Vendor shall immediately notify the Purchaser of such
determination and the Purchaser agrees to pay such Value Added Tax (against
receipt of a tax invoice in respect thereof) seven Business Days after the date
upon which the Purchaser obtains credit for or repayment of such Value Added
Tax.
8.4 All amounts payable under clause 2.5 shall be exclusive of Value Added Tax.
PRE-TRANSFER LIABILITIES
9.1 Nothing in this Agreement shall make the Purchaser assume any liability
for:
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(a) any indebtedness or other liability of the Vendor outstanding at the
opening of business on the Transfer Date other than Assumed
Liabilities or under the Assumed Contracts; or
(b) any breach of contract, negligence, breach of duty or other
circumstance giving rise to liability to any third party which is
attributable to any act, neglect or default of the Vendor in the
course of the Business prior to the close of business on the Transfer
Date other than Assumed Liabilities and under the Assumed Contracts,
and the Vendor shall indemnify and hold the Purchaser harmless against any
liability, other than Assumed Liabilities or under the Assumed Contracts, which
the Purchaser may incur in respect of any such indebtedness or liability or as a
result of any such act, neglect or default (and all costs reasonably incurred by
the Purchaser in connection therewith). The limitations set out in clause 13
shall not apply to any claim under the indemnity contained in this clause 9.
WARRANTIES
10.1 The Vendor represents and warrants to the Purchaser in terms of the
Warranties and acknowledges that the Purchaser has entered into this Agreement
in reliance upon the Warranties. The Warranties are subject to the matters
fairly disclosed in the Disclosure Letter.
10.2 The Vendor agrees to waive the benefit of all rights (if any) which
the Vendor may have against any Employee on whom the Vendor may have relied in
agreeing to any term of this Agreement or any statement set out in the
Disclosure Letter and the Vendor undertakes not to make any claim in respect of
such reliance.
10.3 Each of the Warranties shall be construed as a separate Warranty and
(save as expressly provided to the contrary) shall not be limited or restricted
by reference to or inference from the terms of any other Warranty or any other
term of this Agreement.
10.4 The rights and remedies of the Purchaser and the Vendor in respect of
this Agreement shall not be affected by (i) Completion, (ii) without prejudice
to the Vendor's rights under clause 18, any investigation made into the affairs
of the Vendor or the Business or any knowledge held or gained of any such
affairs by or on behalf of the Purchaser (except for matters fairly and
reasonably disclosed in the Disclosure Letter) or (iii) any event or matter
whatsoever, other than a specific and duly authorised written waiver or release
by the Purchaser.
10.5 The Vendor and its Parent Company shall fully indemnity and keep
indemnified the Purchaser against all claims, demands, actions, costs, expenses
(including but not limited to reasonable legal costs and disbursements on a
solicitor and client basis) losses and damages arising from or incurred by
reason of
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any infringement or alleged infringement (including but not limited to the
defence of such infringement or alleged infringement) of any Intellectual
Property Rights in the Proprietary Software by the use or possession of the
Proprietary Software by the Purchaser or any third party licensed to use or
possess the Proprietary Software by the Vendor, its Parent Company, the
Purchaser or any of its successors-in-title.
10.6 The Parent Company undertakes that it will not, prior to the second
anniversary of this Agreement, sell its shareholding in the Vendor or take any
steps to have the Vendor struck off the Register of Companies or to wind-up the
Vendor.
POST TRANSFER LIABILITIES
11. Except to the extent expressly provided otherwise nothing in this
Agreement shall make the Vendor liable for: --
(a) any indebtedness or other liability to the extent that it arises in
respect of the carrying on of the Business after the close of business
on the Transfer Date except where the same arises directly or
indirectly out of a breach of any of the Warranties; or
(b) any indebtedness or other liability in respect of the Assumed
Liabilities; or
(c) any breach of contract, negligence, breach of duty or other
circumstance giving rise to liability to any third party to the extent
that liability is in part thereof is attributable to any act neglect
or default of the Purchaser in the course of the Business after the
close of business on the Transfer Date;
and the Purchaser hereby undertakes to pay all debts and liabilities of and to
observe and perform all obligations relating to the Business except where the
same arises directly or indirectly out of a breach of any of the Warranties
incurred after the close of business on the Transfer Date or relating to the
Assumed Liabilities and the Purchaser shall indemnify and hold the Vendor
harmless against any liability which the Vendor may incur in respect of any such
indebtedness or liability or as a result of any such act neglect or default (and
all costs reasonably incurred by the Vendor in connection therewith).
TAX ON PAYMENTS
12. If any tax authority brings into charge to tax any sum paid to the
Purchaser in respect of any Claim or any sum paid to the Vendor pursuant to
Clause 10 (including in circumstances where any relief is available in respect
of such charge to tax), then the Vendor or, as the case may be, the Purchaser
shall pay such additional amount as shall be required to ensure that the total
amount paid, less the tax chargeable on such amount (or that would be so
chargeable but
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for such relief), is equal to the amount that would otherwise be payable under
the Claim.
LIMITATIONS ON CLAIMS
13.1 The Vendor shall not be liable for any Claim:
(a) unless it receives from the Purchaser written notice containing
details of the Claim including the Purchaser's estimate (on a without
prejudice basis) of the amount of such Claim on or before the second
anniversary of Completion; and
(b) unless the aggregate amount of the liability of the Vendor for all
Claims exceeds L25,000 (in which event the Purchaser shall be entitled
to claim the whole of the amount thereof and not merely the excess).
13.2 The aggregate amount of the liability of the Vendor for all Claims
shall not exceed the lesser of L2,000,000 and the amount of Additional
Consideration already paid to the Vendor at the time at which a Claim would
otherwise be payable hereunder (and not already repaid to the Purchaser under
this Clause 13.2) provided that the Purchaser shall be entitled to reduce the
amount of Additional Consideration subsequently payable by it by the amount of
any Claim for which the Vendor would, were it not for the limitations in this
Clause 13.2, be liable, subject to a maximum reduction of L2,000,000 less the
amount of any Claim actually paid by the Vendor to the Purchaser.
13.3 The figure of L2,000,000 in clause 13.2 will, in each place that it
occurs, be increased by the amount of any RMS/Parent Company Claim(s) for which
the Vendor is liable provided that it shall not be increased to above
L4,000,000.
13.4 The Vendor shall not be liable for any Claim in the case of a Claim in
respect of a breach of the Warranties, if and to the extent that the fact,
matter, event or circumstance giving rise to such Claim was fairly disclosed in
the Disclosure Letter.
13.5 If the Purchaser becomes aware that any claim has been made by a third
party after Completion which is likely to result in the Purchaser being entitled
to make a Claim against the Vendor in respect of a breach of any Warranty the
Purchaser shall give notice of such claim to the Vendor as soon as reasonably
practicable and if the Claim in question is as a result of or in connection with
a liability to or a claim by a third party the Purchaser if so required by the
Vendor by notice in writing shall make available to the Vendor or its advisers
all such information and access to such of its personnel as it may reasonably
require relating to any such liability or claim and to take such action to
avoid, dispute, resist, appeal, compromise or contest such liability or claim as
may be reasonably and properly requested by the Vendor but at the Vendor's
expense and provided
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that the Vendor shall indemnify the Purchaser against and in respect of the
costs and expenses of any such action.
13.6 Notwithstanding anything contained in this Agreement: --
(a) if, in respect of any matter which would give rise to a breach of any
of the Warranties, the Company or the Subsidiary would have been
entitled had the policies of insurance of the Business current at
Completion or policies providing equivalent cover thereto (together
THE COMPLETION POLICIES) been maintained in force, then unless
coverage equivalent to that comprised in the Completion Policies
cannot be obtained by the Purchaser at an equivalent premium for
periods after Completion the amount which could reasonably be expected
to have been received had the sale hereunder not occurred and had the
Completion Policies been maintained in force shall reduce pro tanto or
extinguish the Claim for a breach of the relevant Warranty;
(b) no Claim shall be made where such Claim would not have arisen but for
a voluntary act or transaction which could reasonably have been
avoided (other than to ensure compliance in contractual, legal or
regulatory obligations) carried out by the Purchaser (or persons
deriving title from it) after the date hereof otherwise than in the
ordinary course of business and which the Purchaser was aware could
give rise to a Claim;
(c) in the event of any Claim it shall be open to the Vendor to reduce the
amount of such Claim by the amount by which at the date of such Claim
the aggregate of the Assumed Liabilities has been discharged or
satisfied below the aggregate amount attributed thereto in Schedule 1
and any costs incurred in computing the amount of any such reduction
shall be borne by the Vendor;
(d) the Vendor shall not be liable in respect of any breach of the
Warranties if such breach would not have arisen but for a change in
legislation after the date hereof (whether relating to taxation or
otherwise) or the withdrawal of any extra-statutory concession
previously made by the Inland Revenue and whether or not such change
purports to be effective retrospectively in whole or in part.
RESTRICTIONS ON VENDOR
14.1 Neither the Parent Company nor the Vendor shall (whether alone or
jointly with another and whether directly or indirectly) carry on or be engaged
or (except as the owner for investment of securities dealt in on a stock
exchange and not exceeding 5 percent, in nominal value of the securities of that
class) be interested in any Competing Business during a period of 2 years after
Completion. For this purpose, COMPETING BUSINESS means a business which is
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carried on in competition with the Business wholly or partly within the area in
which the Business is carried on as at Completion.
14.2 The Parent Company and the Vendor shall not (and shall procure that
each other member of the Vendor's Group shall not) within a period of 1 year
after Completion, directly or indirectly, solicit or endeavour to entice away
from the Purchaser, or, without the consent of the Purchaser, offer employment
to or employ, or offer or conclude any contract for services with, any person
who was employed in skilled or managerial work in the Business at any time
during the 1 year prior to Completion.
14.3 Except so far as may be required by law and in such circumstances only
after prior consultation with the Purchaser, the Vendor shall not (and shall
procure that each other member of the Vendor's Group shall not) at any time
disclose to any person or use to the detriment of the Business any trade secret
or other confidential information of a technical character which it holds in
relation to the Business.
14.4 The Vendor acknowledges and agrees that the duration, extent and
application of the respective restrictions in clauses 14.1, 14.2 and 14.3 are no
greater than is reasonable and necessary for the protection of the interests of
the Purchaser but that, if any such restriction shall be adjudged by any court
of competent jurisdiction to be void or unenforceable but would be valid if part
of the wording thereof was deleted and/or the period thereof was reduced and/or
the area dealt with thereby was reduced, the said restriction shall apply within
the jurisdiction of that court with such modifications as nay be necessary to
make it valid and effective.
AVAILABILITY OF INFORMATION
15. The Vendor and the Purchaser shall make available to the other free of
charge upon written request all information which the other may reasonably
require relating to the Business and the Business Assets.
PARENT COMPANY GUARANTEE
16.1 In consideration of the Purchaser entering into and acting in
accordance with this Agreement, the Parent Company (as principal obligor and not
merely as a surety) unconditionally and irrevocably guarantees as a continuing
obligation the proper and punctual performance by the Vendor of all its
obligations under or pursuant to this Agreement.
16.2 The Parent Company's liability hereunder shall not be discharged or
impaired by any act or omission or any other events or circumstances whatsoever
(whether or not known to the Vendor, the Purchaser or the Parent Company) which
would or might (but for this clause) operate to impair or
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discharge the Parent Company's liability hereunder including, but without
limitation:
(a) any release of, or granting of time (or any other indulgence) to, the
Vendor or any other person; or
(b) the existence, validity, taking or renewal of any other security,
right or remedy taken by the Purchaser in relation to this Agreement
or any enforcement of, neglect to perfect, failure to enforce or
release or waiver any such security, right or remedy; or
(c) any amendment to or variation of this Agreement or any security
relating thereto or any assignment of this guarantee or any such
security; or
(d) any legal limitation, disability, incapacity or other circumstance
relating to the Vendor, the Purchaser, the Parent Company or any other
person; or
(e) any change in the name or constitution of the Parent Company (or its
successors or assigns) or its absorption by or amalgamation with any
other undertaking; or
(f) any irregularity, unenforceability or invalidity of any obligation of
the Vendor, the Purchaser or any other person under or pursuant to
this Agreement so that the obligations of the Parent Company hereunder
will remain in full force and effect and this guarantee will be
construed accordingly as if there were no such irregularity,
unenforceability or invalidity.
16.3 This guarantee is a continuing guarantee and will remain in full force
and effect until the obligations and liabilities of the Vendor under or arising
out of (or in connection with) this Agreement have been fully performed or
discharged.
16.4 Any release, compromise or discharge of the obligations of the Parent
Company shall be deemed to be made subject to the condition that it will be void
if any payment or security which may be or has been received by the Purchaser is
set aside or proves invalid for whatever reason.
16.5 As a separate, continuing and primary obligation, the Parent Company
undertakes to indemnify the Purchaser on demand against all losses, claims or
costs suffered or incurred by the Purchaser while acting in good faith should
any amounts which would otherwise be due under this Agreement not be recoverable
for any reason whatsoever including (but not limited to) the Agreement being or
becoming void, voidable or unenforceable.
16.6 The Parent Company hereby waives any right it may have of first
requiring the Purchaser to proceed against, or enforce any right against, the
Vendor or any other person and, until all obligations and liabilities of the
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Vendor have been performed or discharged in full, the Parent Company shall not:
(a) be entitled to, and shall not, claim in competition with the Vendor in
any liquidation, administration, receivership (including
administrative receivership) or winding-up or as part of any
composition of creditors or scheme of arrangement in relation to the
Vendor or any part of its assets; or
(b) claim, receive or have the benefit of any payment or distribution
from, or on account of, the Vendor or exercise any counterclaim, right
of set-off or lien against the Vendor or claim the benefit of any
security held by the Vendor so that the Vendor shall be entitled to
apply any such security as it considers fit; or
(c) exercise any other right or remedy in respect of any amount paid by
the Parent Company pursuant to this guarantee.
16.7 Any amount payable hereunder shall be paid in full without any
deduction or withholding whatsoever (whether in respect of set-off,
counterclaim, duties, charges, taxes or otherwise) unless such deduction or
withholding is required by law, in which event the Parent Company shall pay to
the Purchaser an additional amount so that the net amount received by the
Purchaser will equal the full amount which the Purchaser would have received had
no such deduction or withholding been made.
PURCHASER PARENT COMPANY GUARANTEE
17.1 In consideration of the Vendor entering into and acting in accordance
with this Agreement, the Purchaser Parent Company (as principal obligor and not
merely as a surety) unconditionally and irrevocably guarantees as a continuing
obligation the proper and punctual performance by the Purchaser of all its
obligations under or pursuant to this Agreement.
17.2 The Purchaser Parent Company's liability hereunder shall not be
discharged or impaired by any act or omission or any other events or
circumstances whatsoever (whether or not known to the Vendor, the Purchaser, the
Parent Company or the Purchaser Parent Company) which would or might but for
this clause) operate to impair or discharge the Purchaser Parent Company's
liability hereunder including, but without limitation:
(a) any release of, or granting of time (or any other indulgence) to, the
Purchaser or any other person; or
(b) the existence, validity, taking or renewal of any other security,
right or remedy taken by the Vendor in relation to this Agreement or
any enforcement of, neglect to perfect, failure to enforce or release
or waiver any such security, right or remedy; or
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(c) any amendment to or variation of this Agreement or any security
relating thereto or any assignment of this guarantee or any such
security; or
(d) any legal limitation, disability, incapacity or other circumstance
relating to the Vendor, the Purchaser, the Parent Company, the
Purchaser Parent Company or any other person; or
(e) any change in the name or constitution of the Purchaser Parent Company
(or its successors or assigns) or its absorption by or amalgamation
with any other undertaking; or
(f) any irregularity, unenforceability or invalidity of any obligation of
the Vendor, the Purchaser or any other person under or pursuant to
this Agreement so that the obligations of the Purchaser Parent Company
hereunder will remain in full force and effect and this guarantee will
be construed accordingly as if there were no such irregularity,
unenforceability or invalidity.
17.3 This guarantee is a continuing guarantee and will remain in full force
and effect until the obligations and liabilities of the Purchaser under or
arising out of (or in connection with) this Agreement have been fully performed
or discharged.
17.4 Any release, compromise or discharge of the obligations of the
Purchaser Parent Company shall be deemed to be made subject to the condition
that it will be void if any payment or security which may be or has been
received by the Vendor is set aside or proves invalid for whatever reason.
17.5 As a separate, continuing and primary obligation, the Purchaser Parent
Company undertakes to indemnify the Vendor on demand against all losses, claims
or costs suffered or incurred by the Vendor while acting in good faith should
any amounts which would otherwise be due under this Agreement not be recoverable
for any reason whatsoever including (but not limited to) the Agreement being or
becoming void, voidable or unenforceable.
17.6 The Purchaser Parent Company hereby waives any right it may have of
first requiring the Vendor to proceed against, or enforce any right against, the
Purchaser or any other person and, until all obligations and liabilities of the
Purchaser have been performed or discharged in full, the Purchaser Parent
Company shall not:
(a) be entitled to, and shall not, claim in competition with the Vendor in
any liquidation, administration, receivership (including
administrative receivership) or winding-up or as part of any
composition of creditors or scheme of arrangement in relation to the
Purchaser or any part of its assets; or
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(b) claim, receive or have the benefit of any payment or distribution
from, or on account of, the Purchaser or exercise any counterclaim,
right of set-off or lien against the Purchaser or claim the benefit of
any security held by the Purchaser so that the Purchaser shall be
entitled to apply any such security as it considers fit; or
(c) exercise any other right or remedy in respect of any amount paid by
the Purchaser Parent Company pursuant to this guarantee.
17.7 Any amount payable hereunder shall be paid in full without any
deduction or withholding whatsoever (whether in respect of set-off,
counterclaim, duties, charges, taxes or otherwise) unless such deduction or
withholding is required by law, in which event the Purchaser Parent Company
shall pay to the Vendor an additional amount so that the net amount received by
the Vendor will equal the full amount which the Purchaser would have received
had no such deduction or withholding been made.
PURCHASER'S WARRANTY
18. The Purchaser warrants that at the time of entering into this
Agreement, having carefully considered the information provided to it by the
Vendor in the course of the negotiations leading up to this Agreement and having
carefully considered the Warranties, it has no knowledge of any breach of any of
the Warranties. For the purposes of this clause, the Purchaser shall not be
deemed to have drawn the conclusion that particular facts known to it constitute
a breach of any Warranty unless it has actually drawn that conclusion. The
Purchaser further warrants that it has no current intention of making a Claim on
the basis of information known to it at the date hereof.
ENTIRE AGREEMENT
19. This Agreement sets out the entire agreement and understanding between
the parties in respect of the sale and purchase of the Business. This Agreement
supersedes the Letter of Intent dated 19 October, 1994 which shall cease to have
any further force or effect and no party has entered into this Agreement in
reliance upon any representation, warranty or undertaking of any other party
which is not set out or referred to in this Agreement.
ANNOUNCEMENTS
20. No announcement or circular in connection with the existence or the
subject matter of this Agreement shall be made or issued by or on behalf of the
Vendor or the Purchaser without the prior written approval of the other (such
approval not to be unreasonably withheld or delayed) during any period prior to
or within three (3) months after Completion. This shall not affect any
announcement or circular required by law or the rules of any stock exchange.
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COSTS
21. Each of the parties shall pay its own Costs incurred in connection
with the negotiation, preparation and implementation of this Agreement.
INVALIDITY
22. If any provision of this Agreement is held to be invalid or
unenforceable, then such provision shall (so far as it is invalid or
unenforceable) be given no effect and shall be deemed not to be included in this
Agreement but without invalidating any of the remaining provisions of this
Agreement.
COUNTERPARTS
23. This Agreement may be entered into in any number of counterparts and
by the parties to it on separate counterparts, each of which, when executed and
delivered, shall be an original, but all the counterparts shall together
constitute one and the same instrument.
RESTRICTIVE TRADE PRACTICES ACT
24. No provision of this Agreement (or of any agreement or arrangement of
which this Agreement forms part) by virtue of which this Agreement (or the
agreement or arrangement of which it forms part) is subject to registration
under the Restrictive Trade Practices Act 1976 shall take effect until the day
after particulars of this Agreement (or of the agreement or arrangement of which
it forms part) shall have been delivered to the Director General of Fair Trading
pursuant to section 24 of the Act.
FURTHER ASSURANCE
25.1 The Vendor shall do or procure to be done all such further acts and
things, and execute or procure the execution of all such other documents, as the
Purchaser may from time to time reasonably require, whether on or after
Completion, for the purpose of giving to the Purchaser the full benefit of all
of the provisions of this Agreement.
25.2 The Vendor and Parent shall, on being notified by the Purchaser, join
into an election with the Purchaser under section 531(3) of the Income and
Corporation Taxes Act 1988.
NOTICES
26.1 Any notice or other communication to be given under this Agreement
shall be in writing and signed by or on behalf of the party giving it and may be
served by leaving it or sending it by (i) fax, or (ii) prepaid recorded delivery
or registered post and fax to the address and for the attention of the relevant
party
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set out in clause 26.2 (or as otherwise notified from time to time hereunder).
Any notice so served by fax or post shall be deemed to have been received:
(a) in the case of fax, twelve (12) hours after the time of despatch;
(b) in the case of recorded delivery or registered post, forty eight (48)
hours from the date of posting.
26.2 The addresses for the parties for the purposes of clause 26.1 are as
follows:
VENDOR:
Address: Almners Priory, Almners Road, Lyne,
Chertsey, Surrey KT16 OBH
For the attention of: D. Chapchal
Fax: 0932 570 474
PURCHASER:
Address: 3301 Windy Ridge Parkway
Atlanta, Georgia 30339 U.S.A.
For the attention of: C. Huffaker
Fax: 404 989 4461
PARENT COMPANY:
Address: Europoint 10, Marconistraat 029
AK Rotterdam
For the attention of: D. Chapchal
Fax: 31 1820 72888
PURCHASER PARENT COMPANY:
Address: 3301 Windy Ridge Parkway
Atlanta, Georgia 30339 U.S.A.
For the attention of: C. Huffaker
Fax: 04 989 4461
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26.3 In proving such service it shall be sufficient to prove that the
envelope containing such notice was properly addressed and delivered either to
the address shown thereon or into the custody of the postal authorities as a
pre-paid recorded delivery or registered post letter, or that the facsimile
transmission was made after obtaining in person or by telephone appropriate
evidence of the capacity of the addressee to receive the same, as the case may
be.
NON-ASSIGNMENT
27. None of the parties shall, without the consent of the other, be
entitled to assign the benefit or burden of this Agreement in whole or in part
provided that the Vendor and the Parent Company may assign their respective
rights to receive the Additional Consideration in whole or in part at the
discretion of the Vendor or the Parent Company (as the case may be), but any
such assignment shall take effect subject to all the rights of the Purchaser and
the Purchaser Parent Company against the Vendor and the Parent Company.
VARIATION
28. No variation of any of the terms of this Agreement (or of any other
documents referred to herein) shall be valid unless it is in writing and signed
by or on behalf of each of the parties hereto. The expression "variation" shall
include any variation, supplement, election or replacement however effected.
WAIVER
29.1 Any delay by the Purchaser in exercising, or failure to exercise, any
right or remedy under this Agreement shall not constitute a waiver of the right
or remedy or a waiver of any other rights or remedies and no single or partial
exercise of any rights or remedy under this agreement or otherwise shall prevent
any further exercise of the right or remedy or the exercise of any other right
or remedy.
29.2 The rights and remedies of the Purchaser under this Agreement are
cumulative and not exclusive of any rights or remedies provided by law.
GOVERNING LAW AND JURISDICTION
30.1 This Agreement shall be governed by and construed in accordance with
the laws of England.
30.2 This Agreement shall be binding upon each of the parties hereto and
its of his assigns, successor in title or legal personal representatives as the
case may be.
30.3 Each of the parties hereby irrevocably submits to the non-exclusive
jurisdiction of the courts of England. Each of the parties with an address
outside England hereby appoints and agrees at all times to maintain an
authorised agent
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to receive service of process in England on its behalf. Such agent shall be
initially the Company Secretary of the Purchaser for the Purchaser Parent
Company and the Company Secretary of the Vendor for the Parent Company and each
of such parties hereby agrees not to revoke the authority of their respective
agents without first appointing a successor agent in England and notifying the
other parties to this Agreement of such change of agent.
AS WITNESS Agreement has been signed by or on behalf of the parties the day and
year first before written.
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SIGNED by D. R. CHAPCHAL )
for and on behalf of SQL SYSTEMS ) /s/ D.R.CHAPCHAL
INTERNATIONAL PLC )
SIGNED by D. R. CHAPCHAL )
for and on behalf of SQL SYSTEMS ) /s/ D.R.CHAPCHAL
INTERNATIONAL BV )
SIGNED by CRAIG HUFFAKER )
for and on behalf of TSW (UK) ) /s/ C. HUFFAKER
LIMITED )
SIGNED by CRAIG HUFFAKER )
for and on behalf of THE SYSTEM ) /s/ C. HUFFAKER
WORKS, INC )
<PAGE>
EXHIBIT 10.20
3 MARCH 1995
SOCOTEC SA
SOCOTEC INDUSTRIE SA
MR JACKY TALET
MR JEAN-JACQUES MAZE
TSW INTERNATIONAL INC
-------------------------------------
SHARE PURCHASE AGREEMENT
IN RELATION TO
SOCOTEC MAINTENANCE SERVICES
-------------------------------------
<PAGE>
CONTENTS
Clause Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SALE AND PURCHASE OF THE SHARES AND CURRENT ACCOUNT BALANCE. . . . . . . . . 3
CONSIDERATION AND PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
OBLIGATIONS OF THE VENDORS . . . . . . . . . . . . . . . . . . . . . . . . . 5
PURCHASER'S OBLIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PUT AND CALL OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
NON-COMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . .10
INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
DURATION OF THE WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . .14
CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
VARIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
COSTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
FURTHER ASSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
APPLICABLE LAW - SUBMISSION TO JURISDICTION. . . . . . . . . . . . . . . . .17
APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
<PAGE>
LIST OF APPENDICES TO THE AGREEMENT
APPENDIX 1 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 2 WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 3 1993 ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 4 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . .
APPENDIX 5 INTELLECTUAL PROPERTY LICENSES . . . . . . . . . . . . . . . .
APPENDIX 6 PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 7 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 8 EMPLOYMENT TERMS . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 9 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 10 SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX 11 VENDORS' GUARANTEES. . . . . . . . . . . . . . . . . . . . . .
<PAGE>
A SHARE PURCHASE AGREEMENT dated 3 March 1995
BETWEEN
SOCOTEC SA (SSA) whose registered office is at 33 avenue du Maine, 75755 Paris,
Cedex 15, France and which is registered at the Company and Commercial Registry
of Paris under number B 542 016 654, represented by Mr B Quetier who is duly
authorised to execute this Agreement;
SOCOTEC INDUSTRIE SA (SI) whose registered office is at 33 avenue du Maine,
75755, Paris, Cedex 15, France and which is registered at the Company and
Commercial Registry of Paris under number B 315 587 659 represented by
Mr J Talet who is duly authorised to execute this Agreement;
MR JACKY TALET of 98 bd. Montparnasse, 75014, Paris, France;
MR JEAN-JACQUES MAZE of Les Cottages, 61, Place du Carouge, 78720, Cernay la
Ville (MR MAZE);
(together the Vendors)
TSW INTERNATIONAL, INC whose registered office is at 3301 Windy Ridge, Parkway,
Atlanta, Georgia, GA 30339 and which is organised under the laws of the State of
Georgia, represented by Mr C Lane who is duly authorised to execute this
agreement (THE PURCHASER)
WHEREAS
(A) The Vendors together own the entire issued share capital of SOCOTEC
MAINTENANCE SERVICES, a societe anonyme incorporated under French law, whose
registered office is at 33 avenue du Maine, 75755, Paris, Cedex 15, France and
which is registered on the Commercial and Companies Register of Paris under
number B 34 7726 556 and which has a share capital of FRF 2 250 000 divided into
22.500 shares of FRF 100 each (THE COMPANY).
(B) The Vendors have agreed to sell eighty percent (80 %) of the shares
constituting the share capital of the Company, details of which are set out in
Appendix 1, to the Purchaser and the Purchaser has agreed to buy the said shares
on the terms and conditions set out hereafter.
(C) In addition, SI, and the Purchaser have agreed to enter into a promesse de
vente and a promesse d'achat (a call option and a put option) in respect of the
nineteen per cent (19 %) of the issued share capital of which SI will remain the
holder.
<PAGE>
IT IS HEREBY AGREED as follows
DEFINITIONS
1.1 For the application and interpretation of this Agreement, the following
terms and expressions shall, unless the context requires otherwise, have the
following meaning:
1993 ACCOUNTS means the audited accounts of the Company for the financial year
ending 31 December 1993 appearing in Appendix 3a;
1994 ACCOUNTS means the audited accounts of the Company for the financial year
ending 31 December 1994 appearing in Appendix 3b;
ACCOUNTING PRINCIPLES means the principles arising under article 8 et seq. of
the Commercial Code (CODE DU COMMERCE);
ALGERIAN CONTRACT means the contract between Entreprise Nationale Sonatrach,
Digital Equipment France and the Company dated 15 May 1993 (as amended)
BUSINESS DAY means any day, other than Saturday or Sunday, on which banks are
open for business in Atlanta, Georgia and Paris, France
CLAIM means any claim under article 12 against the Vendors;
COMPANY has the meaning given to it in recital A;
COMPLETION means the realisation of the steps set out in article 5.2;
COMPLETION DATE means 30 June 1995 or any other date agreed in writing between
the parties after the date of this agreement;
CURRENT ACCOUNT BALANCE means the balance of the current account advance made
by SSA to the Company appearing on the Company's books at Completion;
EXPERT means a firm of chartered accountants of international standing appointed
for the purposes of article 13 by agreement between the parties or, in the
absence of such agreement within ten days of either party proposing the
appointment of an Expert, the person nominated by the PRESIDENT of the TRIBUNAL
DE COMMERCE, Paris, upon the application of the first party to take action;
INTELLECTUAL PROPERTY RIGHTS means trademarks, patents, commercial names,
software source codes, know-how or other industrial or intellectual property
rights (whether registered or unregistered);
NET ASSETS means the CAPITAUX PROPRES of the Company for the financial year
ending 31 December 1994 as required to be set out in line DL of the liasse
fiscale (tax return accounts);
RETAINED EARNINGS means the non-distributed profit reserve of the Company;
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SHARES means the shares constituting eighty per cent of the entire capital of
the Company, described in further detail in Appendix 1;
TAXATION includes without limitation TVA, PRECOMPTE and IMPOT SUR LES SOCIETES;
TAX GUARANTEE means the bank guarantee given by Credit Lyonnais in the principal
sum of FRF 2,220,154 in respect of the potential obligations of the Company to
the French tax authorities in respect of the research tax credit claimed by the
Company in 1989 and 1990;
VENDORS' Guarantees means the obligations of SSA and SI under certain
performance bonds, details of which are set out in Appendix 11;
WARRANTED ACCOUNTS means the 1993 Accounts and the 1994 Accounts;
WARRANTIES means the warranties contained in Appendix 2;
1.2 Reference to a document as being IN THE AGREED FORM is a reference to the
form of that document agreed between the parties and initialed by them or on
their behalf.
SALE AND PURCHASE OF THE SHARES AND CURRENT ACCOUNT BALANCE
TRANSFER
2. The Vendors shall transfer or procure the transfer of and the Purchaser
shall acquire the Shares and the Current Account Balance free from all liens,
pledges or charges in favour of a third party and together with all rights which
are or might at any time hereafter become attached to them.
CONSIDERATION AND PAYMENT
SALE PRICE
3.1 The purchase price for the Shares and the Current Account Balance will be
FRF 4 600 000 apportioned as between the Vendors and as between the Shares and
the Current Account Balance as set out in Appendix 1. Subject to article 4, it
shall become due and payable by the Purchaser to the Vendors in full on
Completion.
DISCHARGE
3.2 The Vendors hereby acknowledge that delivery to each of the Vendors against
his receipt shall constitute a good and valid discharge to the Purchaser for all
payments which it is required to make to the Vendors and will discharge the
Purchaser for all liability as to their distribution.
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<PAGE>
CONDITIONS PRECEDENT
CONDITIONS
4.1 The sale of the Shares by the Vendors and their purchase by the Purchaser
is subject to the following conditions precedent:
(a) The receipt by the Purchaser of a letter from the Treasury Department of
the Ministry for the Economy and Finances (Direction du Tresor du Ministere
de l'Economie et des Finances) indicating that the Treasury Department has
no objection concerning the acquisition of the Shares by the Purchaser; the
Treasury Department not having replied within fifteen days following the
filing of the prior notification relating to direct foreign investments in
France required by the regulations in force will be considered as being
such an indication;
(b) The Vendors supplying evidence satisfactory to the Purchaser that the
Company has complied in all respects with its obligations in relation to
the maintenance of capital, pursuant to article 241 of the law of 24 July
1966;
(c) the 1994 Accounts shall have been certified by the Company's auditors and
approved by the Company in general meeting.
CO-OPERATION
4.2 The Vendors and the Purchaser will co-operate in order that the conditions
precedent provided for in article 4.1 are satisfied as soon as possible.
TERMINATION
4.3 If the condition precedent provided for in article 4.1 (a) is not satisfied
by the Completion Date, or either of the conditions precedent provided for in
article 4.1 (b) and (c) is not satisfied or has not been waived by the
Purchaser in writing by the Completion Date, this Agreement (except for
articles 15, 17, 19 and 23) will automatically become null and void.
COMPLETION
PLACE
5.1 Completion will take place in Paris on the Completion Date in the offices
of Freshfields, 69 boulevard Haussmann, 75008 Paris.
DELIVERY OF DOCUMENTS
5.2(a) On the Completion Date, the Vendors shall deliver to the Purchaser:
(i) the share transfer forms (ordres de mouvement) for all the Shares duly
completed and signed in favour of the Purchaser or such other person
as it may designate;
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<PAGE>
(ii) call option in respect of one share held by SI as a director
remaining in office and the share transfer form relating thereto;
(iii) register of share-transfers of the Company, the individual accounts
of the shareholders, the minutes of the general meetings and the
minutes of the proceedings of the board of directors, in both cases
including the attendance register;
(iv) letters of resignation in the agreed form, if their respective
mandates have not otherwise ended prior to their replacement, of
Georges Weassels, Bernard Quetier, Jacky Talet and SSA as directors
Mr. Philippe Houard and Scorex SA as titular and supplementary
auditors of the Company;
(v) minutes of one or more meetings of the board of directors of the
Company, held at least fifteen days prior to the Completion Date,
approving the transfer of shares to the Purchaser, noting the
resignations of the auditors and the directors resigning pursuant to
the letters required to be delivered under article 5.2(a) (iv) above
and duly convening the general meetings of the Company necessary to
appoint Christopher Lane, Craig Huffaker and SI as directors of the
Company and Patrick Atzel and Barbier Frinault & Associes as
auditors and to resolve to restructure the capital of the Company in
order to comply with its obligations under article 241 of the law of
24 July 1966;
(vi) minutes of one or more general meetings of the Company adopting the
resolutions referred to at articlea 5.2(a)(v);
(vii) evidence that the payables and receivables appearing in the
Company's books in relation to SSA's subsidiary, IGC, have been
settled in full, whether by set off or otherwise;
(viii) an original, executed by SSA, SI and/or any other company supplying
the premises or services, of the contracts in the agreed form
relating to the obligations undertaken in articles 6.5 and 6.6
(b) The Purchaser shall deliver to each of the Vendors cheques for the purchase
price payable for the Shares pursuant to article 3.
OBLIGATIONS OF THE VENDORS
MANAGEMENT
6.1 From the date hereof until Completion, the Vendors undertake:
(a) to manage the Company in a responsible and reasonable manner (EN BON PERE
DE FAMILLE);
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<PAGE>
(b) to ensure that the Company does not transfer more than FRF 100 000 per
month in respect of the months of January to April 1995 in reimbursement of
the shareholders' current account advances in existence at the date of
signature of this Agreement, and to ensure that the Company makes no other
transfers in reimbursement of Shareholder's current account advances;
(c) to ensure that no agreement or obligation is entered into by the Company
other than in the ordinary course of its business, and without limitation
to the generality of the foregoing, for the purposes of this sub-paragraph,
any sale of assets having an aggregate value or for an aggregate price in
excess of FRF 10,000, the conclusion of contracts involving expenditure in
aggregate in excess of FRF 100,000, or the grant of any guarantee or
security shall be deemed to be outside the ordinary course of business;
(d) to ensure that the Company takes all reasonable steps to preserve and
protect its assets;
(e) to ensure that no action is taken which is inconsistent with the provisions
of this Agreement or the consummation of the transactions contemplated
hereunder;
(f) to ensure that no distribution or dividend is approved or made and no
shares or other securities are issued or agreed to be issued by the
Company;
(g) to ensure that no change is made to the STATUTS of the Company;
WAIVER OF RE-CONSTITUTION OF DEBT
6.2 SSA hereby waives any actual or potential rights it may have to the
reconstitution of the current account advance made to the Company in the sum of
FRF 1 000 000 forgiven by it by decision of the board of directors of 4 May 1993
whether by virtue of any agreement with the Company relating to a return to
solvability (retour a la meilleure fortune) or otherwise.
COUNTERGUARANTEES
6.3 SSA and SI hereby undertake to maintain in force the Vendors' Guarantees
and the counter-guarantees given in respect of the Tax Guarantee until such time
as the Company has no further liability thereunder.
ACCESS
6.4 Following the signature of this Agreement, the Vendors shall continue to
provide the Purchaser, its advisers and its auditors with any information
reasonably required by the Purchaser, its auditors and advisers, in the context
of investigations made by the Purchaser into the financial and legal situation,
the activity, management, assets and liabilities of the Company.
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SOCOTEC NAME
6.5 SSA hereby agree to permit the Company to continue to use without charge
the name Socotec in its company name and logo as part of its trading identity
until the first anniversary of Completion upon the terms and conditions set out
in Appendix 12
PREMISES AND SERVICES
6.6 SSA and/or SI hereby agrees to continue to permit the Company or to procure
that the Company is permitted to occupy and use the premises described in
Appendix 6 on the terms set out in that appendix and agrees, to the extent of
their abilities and possibilities, to provide or procure that the Company be
provided with those administrative and other services listed in Appendix 10 at
the cost reasonably incurred by SSA (or, in the event that the service is
provided by a company controlled by SSA, at the cost reasonably incurred by that
company) and to make available to the Purchaser the office facilities of SSA and
SI in Europe together with logistical support including for translations of
software, on normal market terms, in all cases until the first anniversary of
Completion.
CONTRACTORS' WAIVER
6.7 The Vendors undertake to procure that the Company uses its best efforts to
obtain prior to Completion from each independent contractor involved in the
creation, development, production or improvement of the CIMIX software a
contractually binding, written waiver of any actual or potential right such
contractor may have in or over (whether arising by contract, operation of law or
otherwise) such software, its source code and component elements and in the
event that any such waiver is obtained promptly to supply a copy of it to the
Purchaser.
PURCHASER'S OBLIGATION
7.1 The Purchaser undertakes to obtain the release (by counter-guarantee or
otherwise) of the Vendors from their obligations (including costs) as soon as
practicable following Completion under the Vendors' Guarantees it being agreed
that SI shall continue to be liable for part of the Vendors' Guarantees in an
amount of FRF 500,000 and that any claim under the Vendors' Guarantee shall
first be paid from that part of the liabilities retained by the Vendors. The
Purchaser further undertakes to indemnify the Vendors against any liability
arising under the Vendors' Guarantees in respect of any period after Completion
and prior to such release being effected. It is further agreed that in the
event that any part of the Vendors' Guarantees are released, such release shall
be deemed to take effect first over the part of the Vendors' Guarantees for
which the Vendors retain liability, until that part is extinguished.
7.2 The Purchaser undertakes that, following Completion and for as long as SI
holds at least 19% of the share capital of the Company and the Purchaser
controls the majority of the voting rights attaching to the shares of the
Company, the Purchaser shall procure that SI may nominate one director of the
Company for appointment and may require the removal of that director and the
appointment of another in its place, from time to time. For the avoidance of
doubt, SI hereby undertakes to procure the resignation
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of any director nominated by it upon its ceasing to hold at least 19% of the
share capital of the Company and to indemnify the Company against any claim of
any such director arising out his loss of office.
PUT AND CALL OPTION
8.1 SI hereby grants to the Purchaser the option to acquire the 4 275
shares which SI shall hold in the capital of the Company following Completion
for a price of FRF 1 425 000, being FRF 333.33 per share, payable on
transfer. SI also grants to the Purchaser the option to purchase any
additional shares which it may have acquired at the date of exercise of the
option subject to article 8.3 below. Both options shall be exercisable at
the Purchaser's sole election by notice in writing addressed to SSA in
accordance with article 22 at any time on or prior to the fifth anniversary
of Completion. SI undertakes to transfer those shares in accordance with the
conditions set out at article 8.3 below to the Purchaser within five Business
Days of SI's receipt of notice exercising the option.
8.2 The Purchaser hereby grants to SI the option to acquire the 4 275
shares which SI shall hold in the Company following Completion for a price of
FRF 950 000, being FRF 222.22 per share, payable on transfer. The Purchaser
also grants to SI the option to sell any additional shares which it may have
acquired at the date of exercise of the option. Both options shall be
exercisable at SI's sole election by notice in writing addressed to the
Purchaser in accordance with article 22 at any time in the period of six
months immediately following the second anniversary of
Completion[, to cause the Purchaser]. SI undertakes to transfer those
shares, to the Purchaser, within fifteen Business Days of the Purchaser's
receipt of notice exercising the option.
8.3(a)The options granted under articles 8.1 and 8.2 above are subject to the
following conditions. Upon any transfer of shares in accordance
with article 8.1 or article 8.2, SI shall warrant to the Purchaser
in the terms of paragraphs 2(c), (d) and (e) of Appendix 2;
(b) The Shares shall be free transferred from all liens, pledges or
charges in favour of a third party and together with all rights
attaching to them;
(c) In the case of merger by absorption of the Company by another
Company, and in the case of demerger or restructuration prior to the
exercise of the option, the options shall be transferred to those
shares of the absorbing or new company which will have been issued
to SI in return for the Shares referred to in articles 8.1 and 8.2;
(d) In the event of an increase in capital of the Company by
capitalisation of reserves, profits or share premium and by the
issue of additional shares, before the exercise of the option, the
additional shares which will have been allotted to SI shall be
included in the option without any increase in the price provided
for in article 8.1 and 8.2 (as the case may be) above;
(e) In the event of an increase in capital for cash, the options will
extend to the new shares which have been subscribed by SI prior to
the exercise of the option, the
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option exercise price for those shares being equal to their paid-up
nominal amount, including any share premium;
(f) In the event of a reduction of capital and cancellation of shares by
reason of losses, the options will apply without any reduction in
the agreed exercise price, to the number of shares of which SI
remains the owner at the time of exercise.
8.4 SI undertakes that, whilst either of the put or the call option set
out at articles 8.1 and 8.2 above remains in force, it shall not transfer any of
its shares in the Company to any person.
8.5 In the event that the Vendors are liable to pay an indemnity to the
Purchaser pursuant to article 12, the option exercise price shall be reduced by
an amount equivalent to 23.75 % of the indemnity in question.
8.6 In the event that the put option is exercised by SI and the
Purchaser does not pay the option exercise price within thirty days of its
receipt of the notification of exercise of the option, SI shall be released from
its obligations under this article 8 and shall be free to sell the shares to a
third party.
NON-COMPETITION
9.1 Each of the Vendors irrevocably undertakes not, directly or
indirectly, by way of investment, employment or otherwise, to establish, carry
on or participate in any business in competition with the activity of the
provision of software programmes in connection with the management of asset care
and maintenance systems and ancillary products and services, with the exception
of the provision of BATENT and ANTILOPE software (and any developments of that
software), used in the context of building maintenance.
DURATION AND EXTENT
9.2 This non-competition undertaking shall remain in force for four
years commencing on the Completion Date in relation to France and for two years
in relation to the other member states of the European Union.
SOLICITATION OF CLIENTS AND EMPLOYEES
9.3 For a period of four years from the Completion Date, the Vendors
irrevocably undertake not directly or indirectly to solicit or seek to entice
away from the Company any person who is, at the Completion Date, a client, in
the context of the activities of the Company set out in article 9.1, of or
employed by the Company, the Purchaser or a company affiliated with the
Purchaser.
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USE OF CONFIDENTIAL INFORMATION
9.4 Each of the Vendors irrevocably undertakes not to disclose or use,
whether prior to or following Completion, any confidential information in its
possession relating to the Company or its business to the detriment (actual or
potential) of the Company, its business or the Purchaser.
TERMINATION
TERMINATION BY THE PURCHASER
10.1 If any of the Vendors fails, or has given notice that it is unable,
on the Completion Date to respect any of its obligations arising from articles
5.2 and 6 or if, at the Completion Date, any of the Warranties are untrue,
misleading or inaccurate, in whole or in part as a result of a matter which may
have a material adverse effect on the financial or trading position of the
Company, the Purchaser will have the right to terminate this Agreement (except
for articles 15, 17, 19 and 23) with immediate effect, by written notice to the
Vendors, and without incurring any liability.
RIGHT NOT TO BUY
10.2 The Purchaser will have the right not to buy the Shares at the
agreed price, without incurring any liability, if, on the Completion Date, all
of the Shares are not transferred to it in one tranche.
TERMINATION BY THE VENDORS
10.3 If the Purchaser fails, or has given notice that it is unable, on
the Completion Date to fulfil its obligations under article 5.2(b), the Vendors
shall have the right, acting jointly, to terminate this Agreement (except for
articles 15, 17, 19 and 23) with immediate effect, by written notice to the
Vendors, and without incurring any liability.
REPRESENTATIONS AND WARRANTIES
11. The Vendors jointly and severally represent and warrant to the
Purchaser with effect at the date of this Agreement and at Completion in the
terms of the Warranties.
INDEMNITY
GROUNDS
12.1 The Vendors agree jointly and severally to indemnify the
Purchaser for eighty per cent (80%) of any liabilities, losses, damages,
costs (including legal costs) and associated expenses sustained directly or
indirectly by the Purchaser or the Company resulting from or in connection
with:
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(a) notwithstanding any disclosure made by the Vendors to the Purchaser, or any
knowledge which the Purchaser has or may have, of any facts relating to
such matters:
(i) any liability of the Company to make any payment in respect of
claims for non-performance of the Algerian Contract covered by the
part of the Vendors Guarantees retained by the Vendors, as set out
in article 7.1;
(ii) any dispute in relation to the Company's copyright in the source
code and related software of the CIMIX product involving any present
or former employee of, or any independent contractor contracted to,
the Company;
(iii) any payment to Credit Lyonnais in respect of claims under the Tax
Guarantee or to the tax authorities in relation to the research tax
credit claimed by the Company in 1989 and 1990;
(iv) the action brought by Mr Ali Said in connection with his claim for
unfair dismissal by the Company;
(v) any penalty payable to the tax authorities in respect of the
non-reporting of interest payments made by SMS to SSA.
(b) any reduction of the book value of assets or increase in liabilities
compared with those appearing in the 1994 Accounts which has its origin,
source or cause in matters arising prior to Completion; or
(c) any matter constituting a breach of the Warranties.
PROFITS
12.2 The Vendors acknowledge that the purchase price of the shares
payable pursuant to article 3 was calculated on the basis of a valuation of
100% of the capital of the Company as a multiple of 11.5 times the estimated
pre-tax profit for the 1994 financial year of FRF 500 000. Thus, in the
event of any Claim arising out of a recurring matter which reduces the
profits of the Company, the loss to the Purchaser shall be calculated by
reference to the total price paid by the Purchaser for the Company and, in
particular but without limitation, this multiple of 11.5 times, and not
merely the reduction in the profits of the Company in a single financial
year. Any factor on which an indemnity claim is established under this
article 12.2 cannot serve as a basis for any other indemnity.
THRESHOLD
12.3 The Vendors shall not be obliged to indemnify the Purchaser
unless the aggregate amount of the losses suffered by the Purchaser or the
Company prior to any adjustment of the Vendors' liability for them under
article 12.5, exceeds FRF 100 000. If this condition is fulfilled, all
amounts due by the Vendors from the first franc without exception shall be
the Vendor's liability subject only to the limit provided in article 12.4 and
any set-off under article 12.5. This article 12.3 shall not apply to any
Claim which
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relates to those indemnities appearing in article 12.1(a) or which concerns
taxation or social security contributions.
CEILING
12.4 The aggregate amount of the indemnity which may be payable by the
Vendors to the Purchaser under this Agreement may not exceed the purchase
price payable pursuant to article 3.1. The amount of indemnity which Mr
Talet and Mr Maze may be required to pay under this Agreement shall not
exceed in the case of Mr Talet FRF 221 875 and in the case of Mr Maze FRF 177
500.
SETOFF
12.5 The Vendors' liability for the aggregate of the Claims shall be
reduced by the amount by which any provision or reserve (including any
provision or reserve taken into account in calculating the net value of an
asset) in the 1994 Accounts has been established in the most recent audited
accounts prior to the date of the Claim to have been unnecessary or excessive.
PAYEE
12.6 The Purchaser may call upon the Vendors to pay any amounts which
may become due to it due under the terms of this Agreement, either to itself
or to the Company or to the Company's creditors.
TAX SAVING
12.7 `No liability shall attach to the Vendors in respect of any Claim
if the Claim relates to a liability of the Company to taxation to the extent
that any other taxation liability for which the Company is liable is reduced
or extinguished as a result of payment being made by or on behalf of the
Company in respect of any such Claim or liability.
PROCEDURE
NOTIFICATION
13.1 The Purchaser, in accordance with the provisions contained in
article 22, will notify the Vendors of matters of which it becomes aware, and
which, in the Purchaser's opinion, amount to a substantial risk of a Claim,
within ninety (90) days from the date on which it reached that opinion in
respect of the relevant matter and promptly if a fixed period is imposed by
law. Failure to notify the Vendors within that period of a potential Claim
shall not limit the Vendors' liability in respect of that Claim except to the
extent that the Vendors prove that the failure to notify prevented them from
defending the Claim.
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TAX DEFICIT PROCEEDINGS
13.2 The Vendors and their advisers shall have the conduct of the
proceedings currently in progress relating to the claims of the tax authorities
concerning the research tax credit, at the expense of the Vendors and provided
that the proceedings are conducted so that the interests of the Company will not
be prejudiced by their actions. The Purchaser undertakes to procure that the
Company shall make available to the Vendors at their request all information
reasonably necessary for the conduct of the those proceedings and shall provide
the Vendors with reasonable access to those of its personnel having knowledge of
the matters relating to the proceedings and in particular Mr Jean-Jacques Maze,
provided always that such personnel are still employed by the Company.
SETTLEMENT
13.3 The Company may not recognise, accept, compromise, negotiate or pay
(except if it is obliged by an order for performance which does not permit a
delay in payment or execution or if the Vendors have not made their position
known within the periods laid down by law in which to challenge the demand or
claim or if the claim is one for which the Vendors would not be responsible by
reason of any limitation on their liability), any demand or claim from a third
party without the prior consent of the Vendors. The Vendors shall not refuse to
give their consent without a valid reason. Any refusal must be specified in
writing within ten (10) days following notification of the Purchaser's request
to this effect, subject to any shorter period laid down by law.
CONDUCT
13.4 At the Vendors' direction and at its expense, the Company shall take
any reasonable steps open to it reasonably requested by the Vendors, within
thirty (30) days following notification by the Purchaser under the terms of
article 13.1, in order to dispute a claim and/or to mitigate its consequences.
CLAIM FOR INDEMNITY
13.5 Any Claim must be notified to each of the Vendors by letter (LETTER
NO. 1) in accordance with the provisions of article 22 containing details of the
Claim.
DISPUTES
13.6 Any Warrantor who does not send to the Purchaser within thirty (30)
days after the receipt of Letter No. 1, a letter by registered post with
acknowledgement of service (LETTER NO. 2) setting and justifying out any
disagreement shall be deemed to have accepted the Claim.
EXPERT
13.7(a) Notification of Expert: If any Warrantor does not dispute the
validity of a Claim but only its amount under article 13.6 above, or
if a disagreement arises as to the implementation of article 12.1,
the Purchaser shall submit to the
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Expert, for his decision, within five (5) days of his appointment,
as the case may be, either copies of Letters No. 1 and No. 2 or a
resume of the points of disagreement relating to the application of
article 12.1. The Expert shall be entitled to receive from the
Vendors and the Purchaser such information as may be necessary to
enable him to reach his decision, upon his requesting it.
(b) MISSION OF THE EXPERT: The Expert's decision shall be given within
thirty (30) days of his notification, be certified by him (the
EXPERT'S CERTIFICATE), shall set out the amount (if any) to be paid
by the Vendors, shall be sent by the Expert to both parties; the
parties agree that the decision of the Expert in relation to an
amount shall be binding on the parties in accordance with article
1592 of the CODE CIVIL. The expenses and fees of the Expert will be
paid by the Vendors, except if the Expert were to judge that (i) no
loss had been suffered by the Purchaser or the Company or (ii) were
to award the Purchaser less than the amount claimed by it, in which
case they shall be borne in the first case by the Purchaser in their
entirety, and, in the second case, by the Purchaser in that
proportion which the amount claimed by it less the amount awarded to
it bears to the amount claimed by it.
DURATION OF THE WARRANTIES
14. The Vendors shall not be liable for any Claim unless they receive
from the Purchaser written notice in accordance with article 13.4
(i) on or before the third anniversary of the Completion Date, in the
case of a Claim other than a Claim covered by paragraph (ii) below;
(ii) in respect of any Claim relating to taxation or social security
contributions, on or before the expiry of thirty (30) days after the
expiry of the legal prescription period applicable to the subject
matter of the Claim, or, if any proceedings have been commenced by
the competent authorities prior to the expiry of that legal
prescription period, on or before the expiry of 30 days following a
definitive decision or judgement, not subject to appeal, on such
proceedings.
CONFIDENTIALITY
15.1 If the sale of the Shares does not take place for any reason
whatsoever, the Purchaser will not use or disclose, to the detriment of the
Vendors or the Company, information relating to the Company obtained from the
Vendors during the negotiations leading to the execution of this Agreement or
during the investigations carried out pursuant to article 6.3. The Purchaser
shall, at the request of the Vendors, redeliver to the Vendors all documents
relating to the Company, as well as any document appended to this Agreement.
15.2 Subject to the provisions of law and the applicable regulations
of any relevant Stock Exchange, no announcement or distribution of any
information concerning this Agreement or its subject-matter shall be made
before or after the Completion Date by any party without the consent of the
Purchaser and the Vendors.
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ENTIRE AGREEMENT
16. This Agreement constitutes the entire agreement and understanding
between the parties in connection with its subject matter and supersedes any
documents exchanged between any of the parties in connection with its subject
matter.
VARIATION
17. No variation of the Agreement (or any document entered into
pursuant to this Agreement) shall be valid unless it is in writing and signed
by or on behalf of each of the parties hereto.
ASSIGNMENT
18. The Vendors shall not be entitled to assign the benefit of any
provision of this Agreement.
COSTS
COSTS AND EXPENSES
19.1 Each of the parties to this Agreement shall bear its own costs,
fees and other expenses (including, without limitation, of a legal or
accounting nature) arising from the negotiation, preparation and putting into
effect of this Agreement.
REGISTRATION FEES
19.2 All registration fees which may become payable as a result of this
Agreement or the transfer of the Shares shall be borne by the Purchaser.
INVALIDITY
20. If any provision of this Agreement is held to be invalid or
unenforceable, then such provision shall (so far as invalid or unenforceable)
be given no effect and shall be deemed not to be included in this Agreement
but without invalidating any of the remaining provisions of this Agreement
and the parties undertake to negotiate in good faith in order to agree a
valid and enforceable alternative provision as close as possible in purpose
and effect to the original provision.
FURTHER ASSURANCE
21. Each of the Vendors shall do or procure to be done all such
further acts and things, and execute or procure the execution of all such
documents, as the Purchaser may from time to time reasonably require, whether
on or after Completion for the purpose of giving to the Purchaser the full
benefit of all of the provisions of this Agreement.
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NOTICES
22.1 Any notice under this Agreement shall be in writing and signed by
or on behalf of the party giving it and may be served by leaving it or
sending it by fax or prepaid recorded delivery to the address and for the
attention of the relevant party set out in article 22.2 (or as otherwise
notified from time to time hereunder). Any notice so served by fax or post
shall be deemed to have been received:
(a) in the case of fax, twelve (12) hours after the time of despatch, provided
that it is confirmed in writing left or sent by prepaid recorded delivery,
in each case received within five (5) days of despatch of the fax;
(b) in the case of recorded delivery, at the time of delivery recorded by the
postal service.
22.2 The addresses of the parties for the purpose of article 22.1 are as
follows:
THE VENDORS: SOCOTEC SA,
33 avenue du Maine,
75015, Paris, Cedex 15, France
FOR THE ATTENTION OF: President
FAX: 45 38 67 18
SOCOTEC INDUSTRIE SA
33 avenue du Maine
75015 Paris, Cedex 15, France
FOR THE ATTENTION OF: President
FAX: 30 44 19 73
Monsieur JACKY TALET
98 boulevard Montparnasse
Paris, France
Monsieur JEAN-JACQUES MAZE
Les Cottages
61 Place du Carouge
Cernay la Ville
FAX: 34 85 16 49
THE PURCHASER: TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, GA 30339, USA
FOR THE ATTENTION OF: Chief Financial Officer
FAX: 19 1 404 989 4461
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APPLICABLE LAW - SUBMISSION TO JURISDICTION
LAW
23.1 This contract is subject to, and shall be interpreted according to,
French law.
ARBITRATION
23.2 Any dispute, controversy or claim arising out of or in connection
with this contract, including any question regarding its existence, validity
or termination, shall be resolved by arbitration under the Rules of the ICC
in force at the date of the arbitration, which Rules are deemed to be
incorporated by reference into this clause. The tribunal shall consist of
three arbitrators. The place of arbitration shall be Paris. The language of
the arbitration shall be French. The parties hereby agree that the decision
of the arbitrators shall be final and binding upon them and shall not be
subject to appeal.
APPENDICES
24. Each of the appendices shall form an integral part of this Agreement.
Executed in three originals
On 3 March 1995
In Paris
The Vendors The Purchaser
[illegible] [illegible]
- -------------------- -----------------------
Socotec SA TSW International, Inc.
by by
[illegible]
- --------------------
Socotec Industrie SA
by
/s/ J. Talet
- --------------------
Mr J. Talet
/s/ JJ Maze
- --------------------
Mr JJ Maze
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APPENDIX I
Shares
SHAREHOLDER NUMBER OF PRICE/SHARE TOTAL PRICE
SHARES (FRF)
SOCOTEC SA 11 206 197.222 2 210 070.00
SOCOTEC
INDUSTRIE SA 4 769 197.222 940 552.00
M. Jacky TALET 1 125 197.222 221 875.00
M. Maze 900 197.222 177 500.00
CURRENT ACCOUNT BALANCE
SHAREHOLDER PRICE
(FRF)
SOCOTEC SA 1 050 000
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APPENDIX 2
WARRANTIES
CONSTITUTION AND CORPORATE AFFAIRS
1.(a) DUE CONSTITUTION AND CAPACITY: The Company has been duly
constituted and exists in accordance with French law; it has title
to its goods and assets and has the right (including all licences
and consents) to operate its businesses as currently carried on.
(b) CONFORMITY WITH THE LAW: The Company has been duly registered and
its registration has been kept up to date in accordance with all
applicable laws and regulations. The EXTRAITS K-BIS and the STATUTS
and the company books of the Company are in compliance with current
law and regulations, contain all amendments made to date and are
correct and complete as at the date hereof.
(c) SHAREHOLDERS' AGREEMENTS: There are no agreements or undertakings
whatsoever, other than the STATUTS, entered into by any of the
Vendors in relation to the shares of the Company.
(d) DECISIONS OF BOARD AND GENERAL MEETING: All decisions of the
management bodies of the Company (in particular, the Board of
Directors and General Assembly) have been taken in accordance with
the statuts and all applicable current laws and regulations.
(e) AUTHORISATIONS OF BOARD: All decisions in respect of the Company
which are subject to an authorisation or ratification by the Board
of Directors or the General Assembly, and in particular the
agreements subject to article 101 et seq of the law of 24 July 1966
have been brought to the attention of the statutory auditor, and
have been duly authorised.
SHARES
2.(a) ISSUE OF SHARES. The Company has not issued any equity securities
other than the Shares and 4,275 shares held by SI and the 225 shares
held by Mr MazE, which together comprise the entire capital of the
Company. The share capital of the Company at Completion will be
fully paid up and the Company has complied in all material respects
with its obligations in respect of maintenance of capital pursuant
to article 241 of the law of 24 July 1966.
(b) OPTIONS AND SUBSCRIPTION RIGHTS: No right, option, guarantee,
subscription right, offer, commitment, conversion right, arrangement
or other agreement of any nature exists, which might or would result
in the allotment or issue of any securities by the Company.
(c) FULL TITLE: The delivery by the Vendors of duly signed share
transfer forms in respect of the Shares will transfer the entire
title (NUE -PROPRIETE and USUFRUIT) to
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the Shares and the direct or indirect control of at least eighty per
cent of the dividend and voting rights attaching to the capital of
the Company.
(d) CHARGES: The Shares will be free of all liens, pledges, charges or
other rights in favour of a third party at Completion including
without limitation any rights arising under a written or oral
contract of sale.
(e) CAPACITY OF THE VENDORS: The Vendors have full capacity to sell the
Shares to the Purchaser and have obtained all necessary
authorisations in this respect. The sale of the Shares to the
Purchaser by the Vendors as well as all transactions which might be
required prior to this sale do not breach any applicable legislative
or regulatory requirement nor any provision of the STATUTS or any
other corporate documents of the Company or of any contract or act
whatsoever to which any of the Vendors or the Company is party or to
any administrative or legal decision whatsoever to which it may be
subject.
OPERATION
3.(a) CONFORMITY WITH THE LAW: The Company operates and has always
operated its business and its assets in compliance with all
applicable laws and regulations in force.
(b) VALIDITY OF CONTRACTS: All the current contracts of whatever nature
of the Company, have been entered into and performed at arm's length
under normal market conditions and in conformity with all applicable
laws and regulations.
(c) AUTHORISATIONS: The Company possesses all authorisations necessary
to carry out its activities is and is not aware of any violation,
whether contested or not, which could have a prejudicial effect on
the business of the Company.
(d) NORMAL MANAGEMENT: The business of the Company has been managed
only in a way that is normal for the sector of industry in question
and in the ordinary course of business.
(e) ADVERSE EFFECT: There is currently in existence no event, agreement
or contract which might directly or indirectly have an adverse
effect on the Company in respect of the terms on which it does
business with its clients.
CHANGE OF CONTROL
4. The Company is not a party to any contract containing a provision
permitting the other party to terminate, or modify the terms of the contract, in
the case of a change in the direct or indirect control of the Company.
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FINANCIAL POSITION
5.(a) WARRANTED ACCOUNTS: The Warranted Accounts have been drawn up in
accordance with the Accounting Principles. The Warranted Accounts
are correct and genuine and give a true and fair view of the general
situation, the financial situation and the results of the Company
for the periods to which they relate.
(b) NET ASSETS: The Net Assets of the Company at Completion are not
less than the amount in respect thereof appearing in the 1994
Accounts, subject to any reduction arising in the ordinary course of
business determined by reference to the business of the Company for
the financial years 1991, 1992 and 1993 and, which does result from
a material adverse change on the financial or commercial position of
the Company.
(c) RETAINED EARNINGS: The Retained Earnings of the Company at
Completion are not less than the amount in respect thereof appearing
in the 1994 Accounts.
(d) CURRENT ACCOUNT BALANCE: The Current Account Balance at Completion
shall be FRF 1 050 000.
POSITION SINCE 31 DECEMBER 1994
6.(a) Since 31 December 1994 there has been no material change in the
financial or trading position of the Company or which affects the
composition of the Company's assets and liabilities and which should
have been disclosed to the Purchaser in order to faithfully reflect
the situation of the Company and during that period, the business of
the Company has been carried on in its ordinary and usual course.
(b) Since 31 December 1994:
(i) no contract, liability or commitment (whether in respect of
capital expenditure or otherwise) has been entered into by
the Company which is of a long term or unusual nature or
which involved or could involve an obligation of a material
nature or magnitude (an individual liability for expenditure
in excess of FRF 100 000 and any liabilities having an
aggregate value in excess of FRF 500 000 being included as
MATERIAL for this purpose) or which is otherwise outside the
ordinary course of its business;
(ii) the Company has not (whether in the ordinary and usual
course of business or otherwise) acquired or disposed of, or
agreed to acquire or dispose of, any business or any asset
having, individually, a value in excess of FRF 10 000 or any
businesses and/or assets having an aggregate value in excess
of FRF 50 000;
(iii) no debtor has been released by the Company on terms that it
pays less than the book value of its debt and no individual
debt in excess of FRF 10 000 owing to the Company has been
deferred, subordinated or written off or has proved to any
extent irrecoverable and the sum of the debts which
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<PAGE>
have been deferred, subordinated or written off or proved to
any extent irrecoverable does not exceed FRF 50 000;
(iv) the Company has not repaid any borrowing or indebtedness in
advance of its stated maturity;
(v) the Company has not entered into any contract, liability or
commitment of an off-balance sheet nature
ACCOUNTING AND OTHER RECORDS
7. (a) The statutory books, books of account and other records of the
Company are up-to-date and have been maintained in accordance with
all applicable laws and the Accounting Principles.
(b) All the records and Systems (including but not limited to computer
Systems) and all data and information of Company are recorded,
stored, maintained or operated or otherwise held by the Company and
are not wholly or partly dependent on any facilities which are not
under the exclusive ownership or control of the Company, with the
exception of the computer Systems used for the management of the
accounts of the Company which belong to SSA and which will be made
available to the Company from Completion in the context of the
agreement to provide services set out in article 6.6 of this
Agreement.
(c) The Company or, in relation to the accounting system, SSA is
licensed to use all software necessary to enable it to continue to
use its computerised records for the foreseeable future in the same
manner in which they have been used prior to the date of this
Agreement and the Company is not dependent on any software which is
not the property or under the exclusive control of the Company or
which will not be made available to the Company in the context of
the agreement to provide services set out in article 6.6 of this
Agreement.
DEBTS OWED TO THE COMPANY
8. There are no debts owing to the Company other than trade debts incurred in
the ordinary and usual course of business.
DEBTS OWED BY THE COMPANY
9. (a) The Company does not have outstanding any financial debt or other
indebtedness other than trade debts arising in the ordinary course
of business;
(b) The Company has not received any notice to repay under any agreement
relating to any borrowing or indebtedness which is repayable on
demand.
CORPORATE NAME - INDUSTRIAL AND INTELLECTUAL PROPERTY RIGHTS
10.(a) OWNERSHIP: The Company has full and valid ownership of the
Intellectual Property Rights acquired or developed by it or on its
behalf in the course of its business and these rights are listed in
Appendix 4 and are duly protected in so
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far as they are capable of protection in accordance with industrial
or intellectual property laws and are not, so far as the Vendors are
aware, being infringed by, any third party.
(b) EMPLOYEE CLAIMS: No claims have been made or threatened by
employees or ex-employees under any statutory inventor compensation
provision, or like employee compensation provision, in any
jurisdiction.
(c) INTELLECTUAL PROPERTY LICENCES: A list of all licences granted to
or by the Company in respect of any Intellectual Property Rights are
set out in Appendix 5. For those licences in respect of Intellectual
Property Rights which were not concluded on normal market terms and
for those licences relating to products used as a basis for the
CIMIX software, further details are set out in appendix 5 in
particular details of royalties payable and any limit as to time or
right of termination affecting the use of the Intellectual Property
Right. The Company is not in default under any licence, sub-licence
or assignment granted to it in respect of any Intellectual Property
Rights.
(d) LOSS OF RIGHTS: No Intellectual Property Rights owned or used by
the Company and no licence of Intellectual Property Rights of which
the Company has the benefit will be lost, or rendered liable to any
right of termination or cessation by any third party, by virtue of
the acquisition by the Purchaser of the Shares.
(e) FEES AND DUTIES: The Company is not liable to pay any fees or duties
on account of any right relating to the use of Intellectual Property
Right not owned by it other than as detailed in Appendix 5.
(f) THIRD PARTY RIGHTS: There are no Intellectual Property Rights
belonging to or used and enjoyed by the Company which have been the
object of any dispute or action by a third party and the Company is
not infringing any Intellectual Property Rights of any third party.
(g) SOURCE CODES: The Company holds the source code of and each of the
elements necessary for the development, the copying and the
commercialisation of its software products.
COMPUTER SYSTEMS
11. The computers, hardware and software used by the Company, other than
those mentioned in paragraphs 7(b) and (c) above, are owned by it or are subject
to licences, authorisations or rights to use for the benefit of the Company. No
person is entitled to receive any royalty in respect of or to prevent or
otherwise control the use, development and exploitation by the Company or its
licensees of the software owned by the Company.
PROPERTY RIGHTS OVER GOODS AND ASSETS
12.(a) OWNERSHIP RIGHTS: The Company has full title to all goods and
rights appearing as assets in the Warranted Accounts or acquired
since the dates to which the Warranted Accounts were made up other
than the assets disposed of
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<PAGE>
since the relevant date in the normal course of business on
market terms, and to all goods and rights which are used in its
business but which do not appear in the Warranted Accounts.
(b) NO CHARGES: The assets referred to in 12(a) are not the subject of
any security interest or any assignment, equity, option, right of
pre-emption, royalty, factoring arrangement, leasing or hiring
agreement, hire purchase agreement, conditional sale or credit sale
agreement, agreement for payment on deferred terms or any similar
agreement or arrangement (or any agreement or obligation, including
a conditional obligation, to create or enter into any of the
foregoing) except for:
(i) any individual hire or lease agreement in the ordinary
course of business involving expenditure of less than FRF 10
000 per annum (where the aggregate expenditure under all
such agreements is less than FRF 100 000);
(ii) title retention provisions in respect of goods and materials
supplied to the Company in the ordinary course of business;
(iii) security interests, if any, reflected in the Warranted Accounts
and liens arising in the ordinary course of business by operation
of law;
(c) THIRD PARTY ASSETS: The Company does not use any asset in the case
of its business to which it does not have full title (by ownership
or hire) which is desirable to permit the Company to continue to
operate in its business activities following the Completion Date in
the manner in which they are currently carried on, with the
exception of those assets specifically mentioned in appendices 6 and
10.
PROPERTY
13.(a) RIGHTS OF OCCUPATION: The Company has a valid right of occupation
of the premises where it carries out its activities on the terms set
out in Appendix 6, which right may not be terminated without the
consent of the Company prior to the first anniversary of Completion.
(b) PREMISES: All premises occupied or used by the Company are fit for
the purpose for which they are currently used and the Company has
complied in all material respects with all health and safety and
planning laws relating thereto.
HOLDINGS
14.(a) UNDERTAKINGS TO CONTRIBUTE TO CAPITAL: The Company has not
undertaken to contribute to the capital of any other company or
entity.
(b) UNINCORPORATED ASSOCIATIONS ETC.: The Company is not an associate
(associa) or a manager (gerant) of any unincorporated associations,
unlimited liability companies, economic interest groups or
partnerships.
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<PAGE>
(c) OPTIONS: The Company has not given or taken any put or call options
relating to the shares of any other company.
TAX
15.(a) The Company has not entered into any agreements providing for a
deferral of the payment of any tax or duty whatsoever. The Company
has in a timely fashion and in accordance with all applicable
regulations filed all national, regional or local tax returns and
all statements or other information required in respect of social
security charges.
(b) The Warranted Accounts faithfully reflect all liability to tax,
duties or social security charges arising out of any event on or
before 31 December 1994.
(c) There will be no liability to tax, duties or social security charges
which may be imposed on the Company arising out of any event, other
than the ordinary course of trading of the Company, between 31
December 1994 and Completion.
LITIGATION
16. No legal, arbitral or conciliation procedure involving the Company,
other than as set out in Appendix 7, nor any procedure of a contentious nature
is in progress against the Company, and the Company has no knowledge of any
threat of proceedings against the Company.
EMPLOYEES
17.(a) REPRESENTATIVE BODIES: The Company has respected all employment
legislation, in particular relating to employee and union
representation.
(b) COLLECTIVE AGREEMENTS: The Company has respected the terms of all
applicable collective agreements and schemes and the terms of all
its employment contracts. It has complied with the requirements of
insurance policies, pension, and retirement schemes relating to
employees.
(c) TERMS OF EMPLOYMENT: Details of the terms of employment of all
employees and cadres of the Company (including bonuses and profit
sharing) are set out in Appendix 8.
(d) EMPLOYEE BENEFITS: There are no non-mandatory pension plans,
profit-sharing schemes, retirement bonus plans, life or health
insurance or other employee benefit schemes of whatever nature in
existence or proposed nor any contractual or moral obligation to
create or provide the same, other than as set Out in Appendix 8.
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<PAGE>
INSURANCE
18.(a) BUSINESS OPERATIONS: The Company is, and will be until Completion,
validly insured against the risks shown in Appendix 9 which lists
the policies taken out by the Company, the risks covered, the
maximum indemnity amounts together with the applicable excesses.
(b) EXPIRY OF INSURANCES: Each insurance policy may be terminated by
the Company and the Company shall be entitled to recover that
proportion of any premium paid PRO RATA TEMPORIS for the unexpired
period of the policy.
(c) PAYMENT OF PREMIUMS: The Company has paid all premiums due under
the relevant policies and has respected its obligations of
disclosure in respect of the said policies.
(d) CLAIMS: There are no material claims pending or likely to be made
under the said policies.
SECURITY - GUARANTEES - ENDORSEMENTS - OFF BALANCE SHEET LIABILITIES
19.(a) SECURITIES: The Company has not granted any guarantee, security,
promissory note or comfort letter relating to the performance of
obligations of third parties which is still in force.
(b) OFF BALANCE SHEET LIABILITIES: The appendices to the Warranted
Accounts set out the off balance sheet liabilities which are
required to be recorded pursuant to the Accounting Principles. The
Company has not incurred any off balance sheet liabilities since 31
December 1994.
UNFAVOURABLE EVENTS OR CONDITIONS TO DATE
20. Other than the facts set out in this Agreement, neither the Vendors
nor the Company is aware of any other event or matter of whatever nature,
affecting the Company and which has or which could have a material adverse
effect on the financial situation, the assets, the obligations or the running of
the Company.
THE ENTIRETY OF THE DECLARATIONS
21.(a) INFORMATION: All information which has been provided to the
Purchaser and its advisers by the Vendors or the Company and their
respective advisers is true and accurate.
(b) NO OMISSIONS: The Vendors' declarations in this Agreement or its
Appendices and the information which has been provided to the
Purchaser and its advisers by the Vendors or the Company or their
respective advisers do not contain any omission, the disclosure of
which might be significant or change the meaning of all or part of
the declarations in this Agreement.
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<PAGE>
(c) LIMITATIONS: An Appendix shall limit a representation or warranty
made by the Vendors only to the extent that the information is
accurate and complete in that Appendix.
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<PAGE>
EXHIBIT 11.1
TSW INTERNATIONAL, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Year Ended March 31,
1995 1996 1997
------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
HISTORICAL CALCULATION:
Weighted average number of common shares outstanding . . . . . . . . 275,857 216,444 277,792
Effect of Common Stock issued and stock options granted
subsequent to May 5, 1996 computed in accordance with
the treasury stock method as required by the SEC (1). . . . . . 428,750 428,750 428,750
------------ ------------ ------------
Total common and common equivalent shares. . . . . . . . . . . . . . 704,607 645,194 706,542
------------ ------------ ------------
------------ ------------ ------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,352) $ (11,725) $ (3,403)
Cumulative dividends on Redeemable Preferred Stock . . . . . . . . . - (61) (438)
------------ ------------ ------------
Net income (loss) applicable to Common Stock . . . . . . . . . . . . $ (13,352) $ (11,786) $ (3,841)
------------ ------------ ------------
------------ ------------ ------------
Net income (loss) per share. . . . . . . . . . . . . . . . . . . . . $ (18.95) $ (18.27) $ (5.44)
------------ ------------ ------------
------------ ------------ ------------
PRO FORMA CALCULATION:
Weighted average common and common equivalent shares
outstanding during the period . . . . . . . . . . . . . . . . . 277,792
Common equivalents from Common and Redeemable
Preferred Stock issued and stock options granted
subsequent to May 5, 1996 computed in accordance with
the treasury stock method as required by the SEC (1). . . . . . 428,750
Common equivalents attributable to Redeemable Preferred
Stock (if-converted method) . . . . . . . . . . . . . . . . . . 2,715,765
------------
Total common and common equivalent shares. . . . . . . . . . . . . . 3,422,307
------------
------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,403)
------------
------------
Pro forma net income (loss) per share. . . . . . . . . . . . . . . . $ (0.99)
------------
------------
</TABLE>
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, Common and Preferred Stock issued and stock options and warrants
granted at prices below the assumed initial public offering price during
the twelve-month period immediately preceding the initial filing date of
the Company's Registration Statement for its initial public offering have
been included as outstanding for all periods presented using the treasury
stock method.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION OF NAMES UNDER WHICH SUCH
NAME OF SUBSIDIARY INCORPORATION OR ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------------- ------------------------------ ------------------------
<S> <C> <C>
TSW International, Ltd. United Kingdom TSW International, Ltd.
TSW (UK) Limited
TSW International, SA France TSW International, SA
TSW International Pty Ltd New South Wales TSW International Pty Ltd
Cartsun Pty. Limited
Northernprise Sdn. Bhd. Kuala Lumpur Northernprise Sdn. Bhd.
TSW International Software Pte Ltd Singapore TSW International Software Pte Ltd
TSW International, SARL France TSW International, SARL
TSW Services, Inc. Georgia TSW Services, Inc.
TSW Network Services, Inc. Georgia TSW Network Services, Inc.
TSW Services Corporation Virgin Islands TSW Services Corporation
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our reports dated April
18, 1997, in the Registration Statement on Form S-1 and related Prospectus of
TSW International, Inc. dated May 5, 1997.
ERNST & YOUNG LLP
Atlanta, Georgia
May 5, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 549,000
<SECURITIES> 0
<RECEIVABLES> 33,534,000
<ALLOWANCES> (798,000)
<INVENTORY> 0
<CURRENT-ASSETS> 35,127,000
<PP&E> 13,015,000
<DEPRECIATION> 7,082,000
<TOTAL-ASSETS> 42,341,000
<CURRENT-LIABILITIES> 38,756,000
<BONDS> 20,191,000
18,100,000
0
<COMMON> 2,223,000
<OTHER-SE> (36,929,000)
<TOTAL-LIABILITY-AND-EQUITY> 42,341,000
<SALES> 0
<TOTAL-REVENUES> 67,099,000
<CGS> 0
<TOTAL-COSTS> 31,948,000
<OTHER-EXPENSES> 35,121,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,138,000
<INCOME-PRETAX> (3,108,000)
<INCOME-TAX> 295,000
<INCOME-CONTINUING> (3,403,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,403,000)
<EPS-PRIMARY> (0.99)
<EPS-DILUTED> (0.99)
</TABLE>
