<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
INDUS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7372 94-3273443
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
--------------
60 SPEAR STREET
SAN FRANCISCO, CALIFORNIA 94105
(415) 904-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
ROBERT W. FELTON
CHIEF EXECUTIVE OFFICER
60 SPEAR STREET
SAN FRANCISCO, CALIFORNIA 94105
(415) 904-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------
COPIES TO:
<TABLE>
<S> <C> <C>
HENRY P. MASSEY, JR., ESQ. ANDREW R. BROWNSTEIN, ESQ. DANIEL T. FALSTAD, ESQ.
DAVID C. DRUMMOND, ESQ. WACHTELL, LIPTON, ROSEN & KATZ TROUTMAN SANDERS LLP
ELIZABETH M. KURR, ESQ. 51 W. 52ND STREET 600 PEACHTREE STREET NE
DEBRA B. ROSLER, ESQ. NEW YORK, NEW YORK 10019 NATIONSBANK PLAZA, SUITE 5200
WILSON SONSINI GOODRICH & ROSATI (212) 403-1000 ATLANTA, GEORGIA 30308-2216
PROFESSIONAL CORPORATION (404) 885-3000
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(415) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effectiveness of this Registration Statement.
The issuance of securities shall occur at the effective time of the
transaction (the "Transaction") pursuant to which each of TSW International,
Inc., a Georgia corporation ("TSW"), and The Indus Group, Inc., a California
corporation ("Indus"), will become wholly-owned subsidiaries of the Registrant
as described in the Agreement and Plan of Merger and Reorganization (the
"Reorganization Agreement"), dated as of June 5, 1997, attached as Appendix A-
1 to the Joint Proxy Statement/Prospectus forming a part of this Registration
Statement.
--------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(2)
- ------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par val-
ue........................... $322,149,870 $97,623
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) This Registration Statement relates to securities of the Registrant
issuable to shareholders of Indus and security holders of TSW in the
Transaction. The proposed maximum aggregate offering price has been
estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(f) of the Securities Act of 1933. Pursuant to Rule
457(f)(1), the maximum aggregate offering price of the Common Stock to be
issued to the shareholders of Indus is $301,757,621, which is the product
of (i) $15.75, representing the average of the high and low sales price of
Indus Common Stock as reported on the Nasdaq National Market on August 4,
1997 and (ii) 20,023,987 shares of Indus Common Stock to be exchanged for
shares of Common Stock of the Registrant. Pursuant to Rule 457(f)(2), and
the maximum aggregate offering price of the Common Stock to be issued to
security holders of TSW, which has no trading market for any of its
securities and has an accumulated deficit, is $6,772,075, which is one-
third of the aggregate par value, stated value, and principal amount of
the securities to be exchanged for securities of the Registrant.
(2) Calculated in accordance with Section 6(b) of the Securities Act and Rule
457(f)(1) promulgated thereunder. In accordance with Rule 457(c),
$55,530.00 of this fee was previously paid with respect to this
transaction pursuant to Section 14(g) of the Securities Exchange Act of
1934, as amended.
--------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[LOGO]
THE INDUS GROUP, INC.
60 SPEAR STREET
SAN FRANCISCO, CALIFORNIA 94105
August 12, 1997
Dear Indus Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of Shareholders (the "Meeting") of The Indus Group, Inc.
("Indus") to be held at Indus' corporate headquarters located at 60 Spear
Street, San Francisco, California, on Monday, August 25, 1997 at 8:30 a.m.,
local time.
At the Meeting, you will be asked to consider and vote upon the merger of
Indus and TSW International, Inc. ("TSW") (the "Merger") pursuant to an
Agreement and Plan of Merger and Reorganization (the "Reorganization
Agreement") dated as of June 5, 1997.
Upon completion of this transaction:
. TSW and Indus will each become wholly-owned subsidiaries of the Delaware
company named "Indus International, Inc. " (the "Combined Company" or
"Newco");
. each outstanding share of Indus Common Stock will be converted into one
share of Newco Common Stock;
. each then outstanding option to purchase shares of Indus Common Stock
granted under the Indus stock option plans and the employee stock
purchase plan will be converted into an option to purchase that number of
shares of Newco Common Stock equivalent to the number of shares of Indus
Common Stock subject to such option at an exercise price or purchase
price per share of Newco Common Stock equal to the exercise price or
purchase price per share of Indus Common Stock pursuant to such option;
. each outstanding share of TSW Common Stock and each outstanding share of
TSW Preferred Stock will be converted into approximately 2.73 shares of
Newco Common Stock (the approximate exchange ratio as of July 25, 1997);
. the outstanding subordinated floating rate notes of TSW (including
accrued interest thereon) will be exchanged for an aggregate of
approximately 1,106,145 shares of Newco Common Stock (the approximate
exchange ratio as of July 25, 1997);
. all unpaid dividends on each series of TSW Preferred Stock will be
converted into an aggregate of approximately 46,305 shares of Newco
Common Stock (the approximate exchange ratio as of July 25, 1997);
. each outstanding option or warrant to purchase TSW Common Stock will be
converted into an option or warrant, respectively, to purchase that
number of shares of Newco Common Stock determined by multiplying the
number of shares of TSW Common Stock subject to such option or warrant by
2.73 (the approximate exchange ratio as of July 25, 1997), at an exercise
price per share of Newco Common Stock equal to the exercise price per
share of TSW Common Stock pursuant to such option or warrant divided by
such exchange ratio; and
. eight individuals, including three current directors of Indus, will be
appointed to the Newco Board of Directors.
A detailed description of the Combined Company, TSW, the Reorganization
Agreement and the proposed Merger is set forth in the accompanying Joint Proxy
Statement/Prospectus, which you should read carefully. If
<PAGE>
the Merger is approved and consummated, you will receive detailed information
on how to transmit your Indus share certificates to obtain your shares of
Newco Common Stock.
Indus' Board of Directors has received an opinion of Cowen & Company, Indus'
financial advisor, that, as of the date of the Reorganization Agreement, the
financial terms of the Merger, taken as a whole, are fair, from a financial
point of view, to Indus. A copy of this opinion is included as Appendix B-1 to
the accompanying Joint Proxy Statement/Prospectus.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THAT THE TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION AGREEMENT
ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF INDUS. ACCORDINGLY, THE BOARD
HAS APPROVED THE REORGANIZATION AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT ALL
INDUS SHAREHOLDERS VOTE FOR ITS APPROVAL AND ADOPTION.
Your vote on the business to be considered at the Meeting is important,
regardless of the number of shares you own. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO THE MEETING, SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING. Returning the proxy does not deprive
you of your right to attend the Meeting and to vote your shares in person.
We look forward to seeing you at the Meeting.
Sincerely,
[Sig]
ROBERT W. FELTON
Chairman of the Board, President
and Chief Executive Officer
2
<PAGE>
THE INDUS GROUP, INC.
60 SPEAR STREET
SAN FRANCISCO, CALIFORNIA 94105
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of The Indus Group, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of The Indus Group, Inc., a California corporation ("Indus"), will
be held at Indus' corporate headquarters located at 60 Spear Street, San
Francisco, California, on Monday, August 25, 1997 at 8:30 a.m., local time,
for the following purposes:
1. To consider and vote upon a proposal (the "Indus Merger Proposal") to
approve and adopt (i) an Agreement and Plan of Merger and Reorganization,
dated as of June 5, 1997 (the "Reorganization Agreement"), by and among
Indus, Indus International, Inc., a Delaware corporation (the "Combined
Company" or "Newco") and TSW International, Inc., a Georgia corporation
("TSW"), and (ii) an Agreement of Merger among Newco, Indus and Indus Sub,
Inc., a California corporation and a wholly-owned subsidiary of Newco
("Indus Sub"). The Reorganization Agreement contemplates, among other
things, that:
(i) Indus Sub will merge with and into Indus, with Indus as the
surviving corporation, and (a) each outstanding share of common stock,
$0.001 par value, of Indus ("Indus Common Stock") will be converted
into one share of common stock, $0.001 par value, of Newco ("Newco
Common Stock") and (b) each outstanding option to purchase shares of
Indus Common Stock granted under the Indus stock option plans and the
employee stock purchase plan will be converted into an option to
purchase that number of shares of Newco Common Stock equivalent to the
number of shares of Indus Common Stock subject to such option, at an
exercise price or purchase price per share of Newco Common Stock equal
to the exercise price or purchase price per share of Indus Common Stock
pursuant to such option; and
(ii) TSW Sub, Inc., a Georgia corporation and a wholly-owned
subsidiary of Newco, will merge with and into TSW, with TSW as the
surviving corporation, and (a) each outstanding share of common stock,
$0.01 par value, of TSW ("TSW Common Stock"), and each outstanding
share of preferred stock, $0.01 par value, of TSW ("TSW Preferred
Stock") will be converted into approximately 2.73 (the approximate
exchange ratio as of July 25, 1997) shares of Newco Common Stock, (b)
the outstanding subordinated floating rate notes of TSW (including
accrued interest thereon) will be exchanged for an aggregate of
approximately 1,106,145 shares of Newco Common Stock (the approximate
exchange ratio as of July 25, 1997), (c) all rights to receive any
unpaid dividends on TSW Preferred Stock will be converted into an
aggregate of approximately 46,305 shares of Newco Common Stock (the
approximate exchange ratio as of July 25, 1997) and (d) each
outstanding option or warrant to purchase TSW Common Stock will be
converted into an option or warrant, respectively, to purchase that
number of shares of Newco Common Stock determined by multiplying the
number of shares of TSW Common Stock subject to such option or warrant
by 2.73 (the approximate exchange ratio as of July 25, 1997), at an
exercise price per share of Newco Common Stock equal to the exercise
price per share of TSW Common Stock pursuant to such option or warrant
divided by such exchange ratio; and
2. To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
Only Indus shareholders of record at the close of business on July 25, 1997
are entitled to notice of and to vote at the Meeting or any adjournment or
postponement thereof. The affirmative vote of holders of a majority of the
outstanding shares of Indus Common Stock is required to approve the Indus
Merger Proposal.
<PAGE>
The foregoing items of business are more fully described in the Joint Proxy
Statement/Prospectus accompanying this Notice. To ensure that your vote will
be counted, please complete, date and sign the enclosed proxy card and return
it promptly in the enclosed postage-paid envelope, whether or not you plan to
attend the Meeting. Executed and unmarked proxies will be voted for approval
and adoption of the Indus Merger Proposal.
You may revoke your proxy in the manner described in the accompanying Joint
Proxy Statement/Prospectus at any time before it is voted at the Meeting.
By Order of the Board of Directors,
[Sig]
ROBERT W. FELTON
Chairman of the Board, President
and Chief Executive Officer
San Francisco, California
August 12, 1997
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARD
2
<PAGE>
[LOGO]
TSW INTERNATIONAL, INC.
3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
August 12, 1997
Dear TSW Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend a
Special Meeting of Shareholders (the "Meeting") of TSW International, Inc.
("TSW") to be held at TSW's principal executive offices located at 3301 Windy
Ridge Parkway, Atlanta, Georgia 30339 on Monday, August 25, 1997 at 11:30
a.m., local time.
At the Meeting, you will be asked to consider and vote upon the merger of
TSW and The Indus Group, Inc. ("Indus"), pursuant to an Agreement and Plan of
Merger and Reorganization (the "Reorganization Agreement") dated as of June 5,
1997.
Upon completion of this transaction:
. TSW and Indus will each become wholly-owned subsidiaries of the Delaware
company named "Indus International, Inc." (the "Combined Company" or
"Newco");
. each outstanding share of TSW Common Stock and each outstanding share of
TSW Preferred Stock will be converted into approximately 2.73 shares of
Newco Common Stock (the approximate exchange ratio as of July 25, 1997);
. the outstanding subordinated floating rate notes of TSW (including
accrued interest thereon) will be exchanged for an aggregate
of approximately 1,106,145 shares of Newco Common Stock (the approximate
exchange ratio as of July 25, 1997);
. all unpaid dividends on each series of TSW Preferred Stock will be
converted into an aggregate of approximately 46,305 shares of Newco
Common Stock (the approximate exchange ratio as of July 25, 1997);
. each outstanding option or warrant to purchase TSW Common Stock will be
converted into an option or warrant, respectively, to purchase that
number of shares of Newco Common Stock determined by multiplying the
number of shares of TSW Common Stock subject to such option or warrant by
2.73 (the approximate exchange ratio as of July 25, 1997), at an exercise
price per share of Newco Common Stock equal to the exercise price per
share of TSW Common Stock pursuant to such option or warrant divided by
such exchange ratio;
. each outstanding share of Indus Common Stock will be converted into one
share of Newco Common Stock;
. each then outstanding option to purchase shares of Indus Common Stock
granted under the Indus stock option plans and the employee stock
purchase plan will be converted into an option to purchase that number of
shares of Newco Common Stock equivalent to the number of shares of Indus
Common Stock subject to such option at an exercise price or purchase
price per share of Newco Common Stock equal to the exercise price or
purchase price per share of Indus Common Stock pursuant to such option;
and
. eight individuals, including four current directors of TSW, will be
appointed to the Newco Board of Directors.
A detailed description of the Combined Company, Indus, the Reorganization
Agreement and the proposed Merger is set forth in the accompanying Joint Proxy
Statement/Prospectus, which you should read carefully. If the Merger is
approved and consummated, you will receive detailed information on how to
transmit your TSW share certificates to obtain your shares of Newco Common
Stock.
TSW's Board of Directors has received an opinion of Alex. Brown & Sons
Incorporated, TSW's financial advisor, that, as of the date of the
Reorganization Agreement, the aggregate number of shares of Newco Common
<PAGE>
Stock to be issued to TSW securityholders in the Merger is fair, from a
financial point of view, to such securityholders, taken as a whole. A copy of
this opinion is included as Appendix B-2 to the accompanying Joint Proxy
Statement/Prospectus.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THAT THE TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION AGREEMENT
ARE FAIR AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF TSW. ACCORDINGLY,
THE BOARD HAS APPROVED THE REORGANIZATION AGREEMENT AND UNANIMOUSLY RECOMMENDS
THAT ALL TSW SHAREHOLDERS VOTE FOR ITS APPROVAL AND ADOPTION.
Your vote on the business to be considered at this Meeting is important,
regardless of the number of shares you own. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO THE MEETING, SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING. Returning the proxy does not deprive
you of your right to attend the Meeting and to vote your shares in person.
We look forward to seeing you at the Meeting.
Sincerely,
[Sig]
JOHN R. OLTMAN
Chairman of the Board
2
<PAGE>
TSW INTERNATIONAL, INC.
3301 WINDY RIDGE PARKWAY
ATLANTA, GEORGIA 30339
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of TSW International, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of TSW International, Inc., a Georgia corporation ("TSW"), will be
held at TSW's principal executive offices located at 3301 Windy Ridge Parkway,
Atlanta, Georgia 30339 on Monday, August 25, 1997 at 11:30 a.m., local time,
for the following purposes:
1. To consider and vote upon a proposal (the "TSW Merger Proposal") to
approve and adopt (i) an Agreement and Plan of Merger and Reorganization,
dated as of June 5, 1997 (the "Reorganization Agreement"), by and among
TSW, Indus International, Inc., a Delaware corporation (the "Combined
Company" or "Newco"), and The Indus Group, Inc., a California corporation
("Indus"), and (ii) an Agreement of Merger among Newco, TSW and TSW Sub,
Inc., a Georgia corporation and a wholly-owned subsidiary of Newco ("TSW
Sub"). The Reorganization Agreement contemplates, among other things, that:
(i) TSW Sub will merge with and into TSW, with TSW as the surviving
corporation, and (a) each outstanding share of common stock, $0.01 par
value, of TSW ("TSW Common Stock"), and each outstanding share of
preferred stock, $0.01 par value, of TSW ("TSW Preferred Stock") will
be converted into approximately 2.73 (the approximate exchange ratio as
of July 25, 1997) shares of common stock, $0.001 par value, of Newco
("Newco Common Stock"), (b) the outstanding subordinated floating rate
notes of TSW (including accrued interest thereon) will be exchanged for
an aggregate of approximately 1,106,145 shares of Newco Common Stock
(the approximate exchange ratio as of July 25, 1997), (c) all rights to
receive any unpaid dividends on TSW Preferred Stock will be converted
into an aggregate of approximately 46,305 shares of Newco Common Stock
(the approximate exchange ratio as of July 25, 1997) and (d) each
outstanding option or warrant to purchase TSW Common Stock will be
converted into an option or warrant, respectively, to purchase that
number of shares of Newco Common Stock determined by multiplying the
number of shares of TSW Common Stock subject to such option or warrant
by 2.73 (the approximate exchange ratio as of July 25, 1997), at an
exercise price per share of Newco Common Stock equal to the exercise
price per share of TSW Common Stock pursuant to such option or warrant
divided by such exchange ratio; and
(ii) Indus Sub, Inc., a California corporation and a wholly-owned
subsidiary of Newco, will merge with and into Indus, with Indus as the
surviving corporation, and (a) each outstanding share of common stock,
$0.001 par value, of Indus ("Indus Common Stock") will be converted
into one share of Newco Common Stock and (b) each outstanding option to
purchase shares of Indus Common Stock granted under the Indus stock
option plans and the employee stock purchase plan will be converted
into an option to purchase that number of shares of Newco Common Stock
equivalent to the number of shares of Indus Common Stock subject to
such option, at an exercise price or purchase price per share of Newco
Common Stock equal to the exercise price or purchase price per share of
Indus Common Stock pursuant to such option; and
2. To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
Only TSW shareholders of record at the close of business on July 25, 1997
are entitled to notice of and to vote at the Meeting or any adjournment or
postponement thereof. The affirmative vote of holders of a majority of the
outstanding shares of TSW Common Stock and TSW Preferred Stock, voting
together as a class, and the holders of a majority of each series of TSW
Preferred Stock, each voting separately as a class, is required for the
approval and adoption of the TSW Merger Proposal.
<PAGE>
The foregoing items of business are more fully described in the Joint Proxy
Statement/Prospectus accompanying this Notice. To ensure that your vote will
be counted, please complete, date and sign the enclosed proxy card and return
it promptly in the enclosed postage-paid envelope, whether or not you plan to
attend the Meeting. Executed but unmarked proxies will be voted for approval
and adoption of the TSW Merger Proposal.
You may revoke your proxy in the manner described in the accompanying Joint
Proxy Statement/Prospectus at any time before it is voted at the Meeting.
By Order of the Board of Directors,
[Sig]
JOHN R. OLTMAN
Chairman of the Board
Atlanta, Georgia
August 12, 1997
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARD
2
<PAGE>
THE INDUS GROUP, INC. TSW INTERNATIONAL, INC.
JOINT PROXY STATEMENT/PROSPECTUS
FOR THE SPECIAL MEETING OF
SHAREHOLDERS OF THE INDUS GROUP, INC., A CALIFORNIA CORPORATION
AND THE SPECIAL MEETING OF
SHAREHOLDERS OF TSW INTERNATIONAL, INC., A GEORGIA CORPORATION
TO BE HELD AUGUST 25, 1997
---------------
INDUS INTERNATIONAL, INC., A DELAWARE CORPORATION
PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to the shareholders
of The Indus Group, Inc., a California corporation ("Indus"), in connection
with the solicitation of proxies by the Indus Board of Directors for use at
the Special Meeting of Indus shareholders to be held on Monday, August 25,
1997, at 8:30 a.m., local time, at Indus' corporate headquarters at 60 Spear
Street, San Francisco, California, and at any adjournments or postponements
thereof (the "Indus Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to the
shareholders of TSW International, Inc., a Georgia corporation ("TSW"), in
connection with the solicitation of proxies by the TSW Board of Directors for
use at the Special Meeting of TSW shareholders to be held on Monday, August
25, 1997, at 11:30 a.m., local time, at TSW's principal executive offices
located at 3301 Windy Ridge Parkway, Atlanta, Georgia 30339, and at any
adjournments or postponements thereof (the "TSW Meeting" and, together with
the Indus Meeting, the "Meetings").
The Indus Meeting has been called to consider and vote upon a proposal to
approve and adopt (collectively, the "Indus Merger Proposal") (i) an Agreement
and Plan of Merger and Reorganization (the "Reorganization Agreement"), dated
as of June 5, 1997, among Indus, TSW and Indus International, Inc., a Delaware
corporation (the "Combined Company" or "Newco"), and (ii) an Agreement of
Merger between Newco, Indus and Indus Sub, Inc., a California corporation and
a wholly-owned subsidiary of Newco ("Indus Sub"), which provides for the
merger of Indus Sub with and into Indus, which will result in Indus becoming a
wholly-owned subsidiary of Newco (the "Indus Merger").
The TSW Meeting has been called to consider and vote upon a proposal to
approve and adopt (collectively, the "TSW Merger Proposal") (i) the
Reorganization Agreement, and (ii) an Agreement of Merger between Newco, TSW
and TSW Sub, Inc., a Georgia corporation and a wholly-owned subsidiary of
Newco ("TSW Sub"), which provides for the merger of TSW Sub with and into TSW,
which will result in TSW becoming a wholly-owned subsidiary of Newco (the "TSW
Merger").
The Indus Merger and the TSW Merger are collectively referred to herein as
the "Merger."
This Joint Proxy Statement/Prospectus constitutes the Prospectus of Newco
for use in connection with the offer and issuance of shares of Newco Common
Stock, par value $0.001 per share ("Newco Common Stock"), to holders of
outstanding shares of Indus Common Stock and holders of outstanding shares of
TSW Common Stock and TSW Preferred Stock and holders of subordinated floating
rate notes of TSW (the "TSW Subordinated Notes"). Upon the effectiveness of
the Merger, each outstanding share of Indus Common Stock will be converted
into one share of Newco Common Stock and each option to purchase shares of
Indus Common Stock granted under Indus stock option plans and the employee
stock purchase plan (the "Indus Options") will be converted into an option to
purchase an equivalent number of shares of Newco Common Stock. The total
number of shares to be issued to holders of TSW Capital Stock, the TSW Unpaid
Dividends and TSW Subordinated Notes and to become issuable to holders of TSW
Options and TSW Warrants will be the number of shares of Newco Common Stock to
be issued or to become issuable in the Merger to holders of Indus Common Stock
and Indus Options multiplied by 0.86047. See "SUMMARY--The Merger," and "THE
REORGANIZATION AGREEMENT--Merger Consideration."
Holders of Indus Common Stock may, by complying with Sections 1300 through
1312 of the California General Corporations Law (the "CGCL"), be entitled to
exercise dissenters' rights or appraisal rights with respect to the Indus
Merger. Under the Georgia Business Corporation Code (the "GBCC") holders of
TSW Common Stock are entitled to exercise dissenters' or appraisal rights with
respect to the TSW Merger. Holders of TSW Common Stock who do not vote in
favor of the TSW Merger Proposal and who otherwise comply with the provisions
of Article 13 of the GBCC are entitled to assert dissenters' rights if the
Merger is consummated. See "THE MERGER--Appraisal and Dissenters' Rights" and
"THE REORGANIZATION AGREEMENT--Conditions to the Merger."
On August 5, 1997, the closing sales price of the Indus Common Stock as
reported on the Nasdaq National Market was $17.25 per share. TSW can terminate
the Reorganization Agreement if the average of the high and low sales prices
of Indus Common Stock as reported on the Nasdaq National Market on each of the
ten trading days prior to the closing of the Merger is less than $9.50 per
share. Indus can terminate the Reorganization Agreement if the average of the
high and low sales prices sale price of the Indus Common Stock on each of the
ten trading days prior to the closing of the Merger is greater than $22.50 per
share. See "SUMMARY--The Merger--Termination" and "THE REORGANIZATION
AGREEMENT--Termination."
This Joint Proxy Statement/Prospectus and the accompanying form(s) of proxy
are first being mailed to shareholders of Indus and shareholders of TSW on or
about August 12, 1997.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION.
SHAREHOLDERS OF INDUS AND SHAREHOLDERS OF TSW ARE STRONGLY URGED TO READ AND
CONSIDER CAREFULLY THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY,
PARTICULARLY THE MATTERS REFERRED TO UNDER "RISK FACTORS" COMMENCING ON PAGE
18.
---------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS 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 JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Joint Proxy Statement/Prospectus is August 12, 1997.
<PAGE>
TABLE OF CONTENTS
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GLOSSARY.................................................................. iv
AVAILABLE INFORMATION..................................................... 1
TRADEMARKS................................................................ 2
FORWARD-LOOKING STATEMENTS................................................ 2
SUMMARY................................................................... 3
The Companies........................................................... 3
The Meetings............................................................ 3
The Merger.............................................................. 4
Certain Related Agreements.............................................. 11
Risk Factors............................................................ 12
Market Price and Dividend Data.......................................... 12
Selected Historical and Unaudited Pro Forma Combined Condensed
Consolidated Financial Data............................................ 13
Comparative Per Share Data.............................................. 17
RISK FACTORS.............................................................. 18
Risks Relating to the Merger............................................ 18
Risks Relating to the Combined Company.................................. 19
THE INDUS SPECIAL MEETING................................................. 26
Date, Time, Place and Purpose of Indus Meeting.......................... 26
Record Date and Outstanding Shares...................................... 26
Voting of Proxies....................................................... 26
Vote Required........................................................... 26
Quorum; Abstentions; Broker Non-Votes................................... 27
Solicitation of Proxies and Expenses.................................... 27
Appraisal Rights........................................................ 27
THE TSW SPECIAL MEETING................................................... 28
Date, Time, Place and Purpose of TSW Meeting............................ 28
Record Date and Outstanding Shares...................................... 28
Voting of Proxies....................................................... 28
Vote Required........................................................... 28
Quorum; Abstentions..................................................... 29
Solicitation Of Proxies And Expenses.................................... 29
Appraisal Rights........................................................ 29
THE MERGER................................................................ 30
General................................................................. 30
Background of the Merger................................................ 30
Reasons for the Merger.................................................. 33
Opinions of Financial Advisors.......................................... 35
Federal Securities Law Consequences..................................... 43
Nasdaq Listing.......................................................... 43
Certain Federal Income Tax Considerations............................... 43
Accounting Treatment.................................................... 46
Government and Regulatory Approvals..................................... 46
Appraisal and Dissenters' Rights Under the CGCL......................... 46
Appraisal and Dissenters' Rights Under the GBCC......................... 48
Interests of Certain Persons in the Merger.............................. 51
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THE REORGANIZATION AGREEMENT............................................. 52
The Merger............................................................. 52
Merger Consideration................................................... 52
Stock Option and Benefit Plans......................................... 54
Conditions to the Merger............................................... 54
Representations and Warranties......................................... 55
Covenants.............................................................. 55
Non-Solicitation....................................................... 57
Indemnification........................................................ 57
Termination............................................................ 58
Expenses............................................................... 59
No Survival of Representations and Warranties.......................... 59
Amendment; Waiver...................................................... 59
CERTAIN RELATED AGREEMENTS............................................... 60
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.............................................................. 61
SELECTED HISTORICAL COMBINED AND CONSOLIDATED FINANCIAL DATA OF INDUS.... 65
INDUS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 67
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TSW................... 77
TSW MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 78
BUSINESS OF THE COMBINED COMPANY......................................... 89
BUSINESS OF INDUS........................................................ 90
BUSINESS OF TSW.......................................................... 99
MANAGEMENT OF THE COMBINED COMPANY....................................... 106
Executive Officers and Directors....................................... 106
Committees of the Board of Directors................................... 107
Stock Plans............................................................ 108
SELECTED INFORMATION WITH RESPECT TO INDUS............................... 111
Compensation of Directors.............................................. 111
Compensation of Executive Officers..................................... 112
Certain Transactions................................................... 114
SELECTED INFORMATION WITH RESPECT TO TSW................................. 115
Compensation of Directors.............................................. 115
Compensation of Executive Officers..................................... 116
Employment Contracts................................................... 117
Certain Transactions................................................... 118
SECURITY OWNERSHIP OF THE COMBINED COMPANY............................... 121
SECURITY OWNERSHIP OF INDUS.............................................. 123
SECURITY OWNERSHIP OF TSW................................................ 124
PER SHARE MARKET PRICE AND DIVIDEND INFORMATION.......................... 126
DESCRIPTION OF NEWCO CAPITAL STOCK....................................... 127
</TABLE>
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COMPARISON OF RIGHTS OF HOLDERS OF INDUS COMMON STOCK, TSW COMMON STOCK
AND NEWCO COMMON STOCK................................................ 129
SHAREHOLDER PROPOSALS.................................................. 141
EXPERTS................................................................ 141
LEGAL MATTERS.......................................................... 141
INDEX TO FINANCIAL STATEMENTS.......................................... F-1
APPENDICES
A-1 AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, AS AMENDED
A-2 INDUS AGREEMENT OF MERGER
A-3 TSW AGREEMENT OF MERGER
B-1 COWEN & COMPANY OPINION
B-2 ALEX. BROWN & SONS INCORPORATED OPINION
C-1 SECTIONS 1300 THROUGH 1312 OF THE CGCL
C-2 ARTICLE 13 OF THE GBCC
</TABLE>
iii
<PAGE>
GLOSSARY
Unless otherwise specified in this Joint Proxy Statement/Prospectus, the
following terms shall have the meanings set forth below:
"Affiliate Agreements" means each of the Affiliate Agreements entered into
among each of the TSW Affiliates and Indus, Newco and TSW on the one hand, and
each of the Indus Affiliates and TSW, Indus and Newco, on the other,
collectively.
"Alex. Brown" means Alex. Brown & Sons Incorporated.
"Alex. Brown Engagement Letter" means an engagement letter dated May 8, 1997
between Alex. Brown and TSW.
"Alex. Brown Opinion" means the written opinion of Alex. Brown dated June 5,
1997 as to the fairness, as of such date, from a financial point of view, of
the TSW Number to the TSW Securityholders, taken as a whole.
"Antitrust Division" means the Antitrust Division of the United States
Justice Department.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, all other
federal, state, or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization, restraint of trade or lessening of competition
through merger or acquisition.
"Anti-Takeover Law" means Section 203 of the DGCL.
"CGCL" means the California General Corporation Law.
"Change of Ownership" means changes in a company's stock ownership over a
three-year period sufficient to trigger limitations on loss and credit
carryforwards under the Code.
"Closing" means the closing of the transactions contemplated by the
Reorganization Agreement which will take place as soon as practicable after
the Indus Meeting and the TSW Meeting, and in any event no later than the
third business day after all conditions to the closing of the Merger specified
in the Reorganization Agreement are satisfied or waived.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combined Company" means Newco.
"Commission" means the United States Securities and Exchange Commission.
"Consultants Plan" means TSW's 1995 Stock Option Plan for Outside
Consultants.
"Cowen" means Cowen & Company.
"Cowen Engagement Letter" means an engagement letter dated May 6, 1997
between Cowen and Indus with respect to the rendering by Cowen of financial
advisory services to Indus in connection with the Merger.
"Cowen Opinion" means the written opinion of Cowen to the Indus Board dated
June 5, 1997 as to the fairness, from a financial point of view, of the
financial terms of the Merger, taken as a whole, to Indus, as of such date.
"DGCL" means the Delaware General Corporation Law.
"Directors Plan" means Indus' 1995 Director Option Plan.
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<PAGE>
"Disqualifying Disposition" means a sale or other disposition of ISO Shares
or shares received pursuant to participation in a Code Section 423 employee
stock purchase plan prior to the expiration of the relevant one year and two
year holding periods by an employee benefit plan participant, including by way
of gift (but not death, bequest or inheritance).
"Dissenting Shares" means "dissenting shares" within the meaning of Section
1300(b) of the CGCL or Article 13 of the GBCC.
"DOJ" means the United States Department of Justice.
"Effective Time" means the date which is the later of (i) the filing of the
Indus Merger Agreement with the Secretary of State of the State of California
and (ii) the filing of the TSW Merger Agreement or a Certificate of Merger
with respect to the TSW Merger with the Secretary of State of the State of
Georgia.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliates" means any entity which is a member of (A) a "controlled
group of corporations," as defined in Section 414(b) of the Code, (B) a group
of entities under "common control," as defined in Section 414(c) of the Code,
or (C) an "affiliated service group," as defined in Section 414(m) of the
Code, or treasury regulations promulgated under Section 414(o) of the Code,
any of which includes TSW or any subsidiaries of TSW.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means ChaseMellon Shareholder Services LLC.
"Final Date" means December 5, 1997, except that if the FTC or DOJ issues a
"second request" under the HSR Act, the Final Date shall be extended to March
5, 1998, and except that if a temporary, preliminary or permanent injunction
or other order by any Federal or state court which would prohibit or otherwise
restrain consummation of the Merger is issued and in effect on December 5,
1997, and such injunction has not become final and nonappealable, either Indus
or TSW may, on or before December 5, 1997, extend the Final Date up to and
including the earlier of the date such injunction becomes final and
nonappealable or March 5, 1998, so long as such party shall, at its own
expense, use reasonable best efforts to have the injunction resolved.
"FTC" means the United States Federal Trade Commission.
"GAAP" means Generally Accepted Accounting Principles.
"GBCC" means the Georgia Business Corporation Code.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Indemnified Parties" means each present and former director or officer of
Indus or any Indus subsidiary or TSW or any TSW subsidiary who, after the
Effective Time and pursuant to the terms of the Reorganization Agreement, are
to be jointly and severally, to the fullest extent permitted under applicable
law, indemnified and held harmless by Newco and the Indus Surviving
Corporation or the TSW Surviving Corporation, as applicable.
"Indus" means The Indus Group, Inc., a California corporation.
"Indus Affiliates" means affiliates of Indus who have entered into Affiliate
Agreements, including Robert W. Felton, Richard W. MacAlmon, Michael E. Percy,
Alan G. Merten, Donald F. Robertson, Douglas R. Piper, Frank M. Siskowski, and
Edward R. Koepfler.
"Indus Articles" means the Amended and Restated Articles of Incorporation of
Indus.
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"Indus Board" means the Board of Directors of Indus.
"Indus Compensation Committee" means the Compensation Committee of the Indus
Board.
"Indus Common Stock" means the Common Stock of Indus, par value $0.001 per
share.
"Indus Common Stock Market Price" means the average of the high and low sale
prices of Indus Common Stock, as quoted on the Nasdaq National Market and
reported in the Wall Street Journal over the ten consecutive trading days
prior to the date of the Closing.
"Indus ESPP" means Indus' Employee Stock Purchase Plan.
"Indus Meeting" means the Special Meeting of Indus shareholders to be held
on August 25, 1997.
"Indus Merger" means the merger of Indus Sub with and into Indus pursuant to
the Indus Merger Agreement which will result in Indus, as the Surviving
Corporation, becoming a wholly-owned subsidiary of Newco.
"Indus Merger Agreement" means the Agreement of Merger between Indus and
Indus Sub to be entered into immediately prior to the Effective Time.
"Indus Merger Proposal" means the proposal to approve and adopt the
Reorganization Agreement, the Indus Merger Agreement and the Indus Merger,
including the assumption by Newco of the Indus Options, the Indus Stock
Purchase Plan Options, the TSW Options and the TSW Warrants and the
termination of the Indus Plans and the TSW Plans, as described in this Joint
Proxy Statement/Prospectus.
"Indus Option" means an outstanding option prior to the Effective Time to
purchase Indus Common Stock pursuant to the 1992 Plan, the 1995 Plan or the
Directors Plan.
"Indus Plans" means the 1992 Plan, the 1995 Plan, the Directors Plan and the
Indus ESPP, collectively.
"Indus Record Date" means the close of business on July 25, 1997.
"Indus Shareholder Rejection" means the failure of the shareholders of Indus
to approve the Indus Merger Proposal at the Indus Meeting.
"Indus Stock Purchase Plan Option" means an outstanding option prior to the
Effective Time to purchase Indus Common Stock under the Indus ESPP.
"Indus Sub" means Indus Sub, Inc., a California corporation and a wholly-
owned subsidiary of Newco.
"Indus Subject Shareholders" means the Indus shareholders who beneficially
own in the aggregate approximately 60.3% of the shares of outstanding Indus
Common Stock, collectively. These shareholders consist of Robert W. Felton,
Richard W. MacAlmon, Michael E. Percy and Douglas R. Piper.
"Indus Subject Shares" means the approximately 11,571,493 shares of Indus
Common Stock beneficially owned by the Indus Subject Shareholders in the
aggregate.
"Indus Surviving Corporation" means the corporation surviving the Indus
Merger.
"Indus Voting Agreement" means the Voting Agreement dated as of June 5, 1997
entered into by and between each of the Indus Subject Shareholders, on the one
hand, and TSW, on the other.
"IRS" means the Internal Revenue Service of the United States.
"ISO" means an incentive stock option as defined under Section 422 of the
Code.
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"ISO Shares" means stock acquired upon exercise of an ISO.
"Meetings" means the TSW Meeting and the Indus Meeting, collectively.
"Merger" means the Indus Merger and the TSW Merger, collectively.
"Merger Agreements" means the TSW Merger Agreement and the Indus Merger
Agreement, collectively.
"Named Executive Officers" means those individuals who will serve as
executive officers of the Combined Company following the Merger.
"Nasdaq" means the Nasdaq National Market.
"Newco" means Indus International, Inc., a Delaware corporation.
"Newco Board" means the Board of Directors of Newco.
"Newco Certificate" means the Certificate of Incorporation of Newco.
"Newco Common Stock" means the Common Stock of Newco, par value $0.001 per
share.
"Newco ESPP" means Newco's Employee Stock Purchase Plan.
"Newco Plan" means Newco's 1997 Stock Plan.
"New Warburg Shares" means the number of shares of Newco Common Stock to be
issued to Warburg in connection with the conversion of the TSW Subordinated
Notes and unpaid dividends on the TSW Preferred Stock.
"1984 Plan" means TSW's 1984 Stock Option Plan, as amended.
"1994 Plan" means TSW's 1994 Stock Option Plan, as amended.
"1992 Plan" means Indus' 1992 Stock Option Plan, as amended.
"1995 Plan" means Indus' 1995 Stock Plan, as amended.
"Nomination Agreement" means the Nomination Agreement to be entered into
between Newco, Robert W. Felton and Warburg.
"Notice of Approval" means the document that Indus must mail to any Indus
shareholder who could qualify as possessing Dissenting Shares which provides
notice of the approval of the Merger by the requisite number of outstanding
shares, along with a statement of the price determined by Indus to represent
the fair market value of Dissenting Shares and a brief description of the
procedure to be followed if the Indus shareholder desires to exercise
dissenters' rights.
"NQSO" means a stock option that is not qualified under Section 422 of the
Code.
"Outside Directors Plan" means TSW's 1995 Stock Option Plan for Outside
Directors.
"Planned Dispositions" means any action pursuant to a plan or intent
existing at or prior to the Merger, to dispose of or transfer so much of
either Indus Common Stock or TSW Common Stock in anticipation of the Merger,
or the Newco Common Stock to be received in the Merger such that the Indus
shareholders, or TSW shareholders, as a group, would no longer have a
significant equity interest in the Indus or TSW business conducted by the
Combined Company after the Merger.
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"Pooling Letters" means the letters from Ernst & Young LLP stating the
firm's written concurrence with the Indus management's and the TSW
management's conclusion as to the appropriateness of pooling-of-interests
accounting treatment for the Merger.
"Registration Rights Agreement" means the Registration Rights Agreement to
be entered into among Newco, Warburg, Robert W. Felton, Richard W. MacAlmon,
John W. Blend, III and John R. Oltman.
"Registration Statement" means the Registration Statement on Form S-4 under
the Securities Act with respect to the Newco Common Stock to be issued in the
Merger and of which this Joint Proxy Statement/Prospectus is a part.
"Reorganization" means a reorganization under Section 368(a) of the Code.
"Reorganization Agreement" means the Agreement and Plan of Merger and
Reorganization dated as of June 5, 1997, among Indus, Indus Sub, TSW, TSW Sub
and Newco.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 145" means Rule 145 promulgated under the Securities Act.
"SFAS 109" means Statement of Financial Accounting Standards No. 109.
"SFAS 123" means Statement of Financial Accounting Standards No. 123.
"Securities Act" means the Securities Act of 1933, as amended.
"Subject Holders" means the TSW Subject Shareholders and the Indus Subject
Shareholders, collectively.
"Substantial Material Adverse Change" means any event or change which,
individually or in the aggregate of all such events or changes, has resulted,
or reasonably would be expected to result in a substantial impairment to
Indus' or TSW's, as applicable, ability after the Closing to continue to
develop, produce, sell and distribute the products and services that are
material to Indus' or TSW's business, as applicable, in substantially the same
manner as such party had prior to the date of the Reorganization Agreement.
"Third Party Acquisition" means the possible acquisition of TSW or Indus, as
applicable (whether by way of merger, purchase of its capital stock, purchase
of assets or otherwise), or any material portion of TSW's or Indus', as
applicable, capital stock or assets.
"TSW" means TSW International, Inc., a Georgia corporation.
"TSW Affiliates" means affiliates of TSW who have entered into Affiliate
Agreements, including Christopher R. Lane, John F. Bartels, John W. Blend,
III, Kenneth C. Colby, Jr., David J. Loesch, Allen D. Vaughn, John R. Oltman,
George D. Busbee, William H. Janeway, Joseph P. Landy, and Warburg.
"TSW Applicable Ratio" means a fraction, the numerator of which will be the
TSW Number minus the New Warburg Shares and the denominator of which will be
the total number of shares of TSW Common Stock and TSW Preferred Stock
outstanding immediately prior to the Closing plus the total number of shares
of TSW Common Stock issuable upon exercise of TSW Options and TSW Warrants
outstanding immediately prior to the Closing (as of July 25, 1997, the TSW
Applicable Ratio would have been approximately 2.73).
"TSW Articles" means the Amended and Restated Articles of Incorporation of
TSW.
"TSW Board" means the Board of Directors of TSW.
"TSW Bylaws" means the Amended and Restated Bylaws of TSW.
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"TSW Capital Stock" means the TSW Common Stock and the TSW Preferred Stock,
collectively.
"TSW Common Stock" means the Common Stock of TSW, par value $0.01 per share.
"TSW Meeting" means the Special Meeting of TSW shareholders to be held on
August 25, 1997.
"TSW Merger" means the merger of TSW Sub with and into TSW pursuant to the
TSW Merger Agreement which will result in TSW, as the surviving corporation,
becoming a wholly-owned subsidiary of Newco.
"TSW Merger Agreement" means the Agreement of Merger between TSW and TSW Sub
to be entered into immediately prior to the Effective Time.
"TSW Merger Proposal" means the proposal to approve and adopt the
Reorganization Agreement, the TSW Merger Agreement and the TSW Merger,
including the assumption of the TSW Options, TSW Warrants, Indus Options and
Indus Stock Purchase Plan Options by Newco, and the termination of the TSW
Plans and the Indus Plans, as described in this Joint Proxy
Statement/Prospectus.
"TSW Number" means the total number of shares of Newco Common Stock to be
issued in the TSW Merger to the holders of TSW Capital Stock, TSW Unpaid
Dividends and TSW Subordinated Notes and to become issuable to holders of TSW
Options and TSW Warrants, calculated as the number of shares of Newco Common
Stock to be issued to Indus stockholders and to become issuable to Indus
optionholders multiplied by 0.86047.
"TSW Option" means an outstanding option prior to the Effective Time to
purchase TSW Common Stock.
"TSW Plans" means the 1984 Plan, 1994 Plan and Outside Directors Plan,
collectively.
"TSW Preferred Stock" means the TSW Series A Preferred Stock, the TSW Series
B Preferred Stock, the TSW Series C Cumulative Preferred Stock and the TSW
Series D Cumulative Preferred Stock, collectively.
"TSW Record Date" means the close of business on July 25, 1997.
"TSW Securityholders" means the holders of TSW Capital Stock, TSW Unpaid
Dividends, TSW Subordinated Notes, TSW Options and TSW Warrants.
"TSW Stockholder Rejection" means the failure of TSW shareholders to approve
the TSW Merger Proposal at the TSW Meeting.
"TSW Sub" means TSW Sub, Inc., a Georgia corporation, and a wholly-owned
subsidiary of Newco.
"TSW Subject Shareholders" means the TSW securityholders who beneficially
own in the aggregate approximately 95% of the shares of outstanding TSW
Capital Stock (including all of the outstanding shares of TSW Preferred
Stock), collectively. These shareholders consist of Warburg, John W. Blend,
III and John R. Oltman.
"TSW Subject Shares" means the approximately 4,662,176 shares of TSW Capital
Stock beneficially owned by the TSW Subject Shareholders in the aggregate.
"TSW Subordinated Notes" means the outstanding subordinated floating rate
notes of TSW held by Warburg.
"TSW Surviving Corporation" means the corporation surviving the TSW Merger.
"TSW Unpaid Dividends" means any unpaid dividends on shares of TSW Preferred
Stock.
"TSW Voting Agreement" means the Voting Agreement entered into by and
between each of the TSW Subject Shareholders, on the one hand, and Indus, on
the other hand.
"TSW Warrant" means a warrant outstanding prior to the Effective Time to
purchase TSW Common Stock.
"Voting Agreement" means each of the Indus Voting Agreements and TSW Voting
Agreements, collectively.
"Warburg" means Warburg, Pincus Investors, L.P.
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THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN CERTAIN EXHIBITS TO DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM
A COPY OF THIS JOINT PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED UPON
WRITTEN OR ORAL REQUEST TO THE INDUS GROUP, INC., 60 SPEAR STREET, SAN
FRANCISCO, CA 94105, ATTENTION: SECRETARY, TELEPHONE NUMBER (415) 904-5000. IN
ORDER TO ENSURE DELIVERY PRIOR TO THE INDUS SPECIAL MEETING, REQUESTS SHOULD
BE RECEIVED BY AUGUST 18, 1997.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES OFFERED BY THIS JOINT PROXY STATEMENT/PROSPECTUS OR A SOLICITATION
OF A PROXY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES TO
WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS RELATES SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION CONTAINED HEREIN SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
Indus is subject to the informational requirements of the Exchange Act, and
in accordance therewith files reports, proxy statements and other information
with the Commission. These materials can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, New York, New York 10048. Copies of
these materials can also be obtained from the Commission at prescribed rates
by writing to the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a World Wide
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of the World Wide Web site is http://www.sec.gov. The
Indus Common Stock is listed on the Nasdaq National Market and the Newco
Common Stock will be listed on the Nasdaq National Market and reports or other
information concerning such companies may be inspected at the offices of the
National Association of Securities Dealers, Inc. located at 9513 Key West
Avenue, Rockville, Maryland 20850.
Under the rules and regulations of the Commission, the solicitation of
proxies from shareholders of Indus and shareholders of TSW to approve and
adopt the Indus Merger Proposal and TSW Merger Proposal, respectively,
constitutes an offering of Newco Common Stock to be issued in connection with
the Indus Merger and TSW Merger. Accordingly, Newco has filed with the
Commission the Registration Statement with respect to such offering. This
Joint Proxy Statement/Prospectus constitutes the prospectus of Newco that is
filed as part of the Registration Statement. Other parts of the Registration
Statement are omitted from this Joint Proxy Statement/Prospectus in accordance
with the rules and regulations of the Commission. Copies of the Registration
Statement, including the exhibits to the Registration Statement and other
material that is not included herein, may be inspected, without charge, at the
regional offices of the Commission referred to above, obtained at the
Commission's World Wide Web site set forth above or obtained at prescribed
rates from the Public Reference Section of the Commission at the address set
forth above.
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Statements made in this Joint Proxy Statement/Prospectus concerning the
contents of any contract or other document are not necessarily complete. With
respect to each contract or other document filed as an exhibit to the
Registration Statement, reference is hereby made to that exhibit for a more
complete description of the matter involved, and each such statement is hereby
qualified in its entirety by such reference.
All information contained in this Joint Proxy Statement/Prospectus relating
to Indus and Newco has been supplied by Indus, and all information relating to
TSW has been supplied by TSW.
TRADEMARKS
INDUS is a registered trademark of The Indus Group, Inc. The Indus logo,
PASSPORT Software Solutions, ABACUS, PORTAL/G, PORTAL/95, PORTAL/97, VIEWPORT
and PRISM Consulting are trademarks and service marks of Indus. Curator is a
registered trademark of TSW. TSW International, Enterprise MPAC, TSWNet,
CareNet, MPAC-UX, EnGarde and Asset Care are trademarks of TSW. All other
brand names or trademarks appearing in this Joint Proxy Statement/Prospectus
are the property of their respective holders.
FORWARD-LOOKING STATEMENTS
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN
THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THE
RISK FACTORS BEGINNING ON PAGE 18 HEREOF. NEITHER NEWCO, INDUS NOR TSW MAKES
ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY AS TO THE ATTAINABILITY OF
THE PROJECTED OR ESTIMATED FINANCIAL INFORMATION REFERENCED OR SET FORTH
HEREIN UNDER "THE MERGER--OPINIONS OF FINANCIAL ADVISORS" OR ELSEWHERE HEREIN.
PROJECTIONS OR ESTIMATIONS OF THE COMBINED COMPANY'S FUTURE PERFORMANCE ARE
NECESSARILY SUBJECT TO A HIGH DEGREE OF UNCERTAINTY AND MAY VARY MATERIALLY
FROM ACTUAL RESULTS. REFERENCE IS MADE TO THE PARTICULAR DISCUSSIONS SET FORTH
UNDER "RISK FACTORS," "INDUS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "TSW MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." IN CONNECTION WITH
FORWARD-LOOKING STATEMENTS WHICH APPEAR IN THESE AND OTHER DISCLOSURES,
SHAREHOLDERS OF INDUS AND SHAREHOLDERS OF TSW SHOULD CAREFULLY REVIEW THE
FACTORS SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS UNDER "RISK
FACTORS" BEGINNING ON PAGE 18 HEREOF.
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus. The summary does not contain a complete
description of the terms of the Merger and is qualified in its entirety by
reference to the full text of this Joint Proxy Statement/Prospectus and the
Appendices hereto. Shareholders of Indus and shareholders of TSW are urged to
read this Joint Proxy Statement/Prospectus and the Appendices hereto in their
entirety.
For purposes of this Joint Proxy Statement/Prospectus, "Indus" refers to The
Indus Group, Inc. and its subsidiaries, "TSW" refers to TSW International, Inc.
and its subsidiaries, and the "Combined Company" or "Newco" refers to the
combined business of Indus and TSW formed as a result of the Merger.
This Joint Proxy Statement/Prospectus contains forward-looking statements.
Actual results could differ materially from those projected in these forward-
looking statements as a result of certain factors, including those risks
described under "RISK FACTORS" and elsewhere in this Joint Proxy
Statement/Prospectus.
THE COMPANIES
Indus
Indus develops, markets, and supports a proprietary line of enterprise
management software and implementation services for process industry customers
worldwide. Taking advantage of the client/server model of networked computing,
PassPort Software Solutions contain "best business practices" which serve as
the catalyst for improving core operational business functions for electric
utilities, oil and gas, chemical refining, forest products, nuclear and steel
producing industries. ABACUS, Indus' proprietary methodology, accelerates the
realization of benefits by delivering a reliable cost and time-efficient
approach to implementation across the enterprise. Indus was incorporated in
California in January 1990. Indus' principal executive offices are located at
60 Spear Street, San Francisco, California 94105; its telephone number is (415)
904-5000. See "BUSINESS OF INDUS."
TSW
TSW 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. Primary customers of TSW include
manufacturers, utilities, process companies, hospitals, educational systems,
governments and transportation authorities. TSW was incorporated in Georgia in
1976 as T.S.W. Company. TSW's principal executive offices are located at 3301
Windy Ridge Parkway, Atlanta, Georgia 30339; its telephone number is (770) 952-
8444. See "BUSINESS OF TSW."
The Combined Company
Newco was incorporated in Delaware in June 1997 and was organized for the
purpose of the Merger. Newco currently has no material assets and has not
conducted any substantial business activities to date. As a result of the
Merger, Indus and TSW will become wholly-owned subsidiaries of Newco.
Accordingly, following the Effective Time, the business of Newco will be
substantially similar to the business currently conducted by each of Indus and
TSW. The address of Newco's principal executive offices will be 60 Spear
Street, San Francisco, California 94105; its telephone number will be (415)
904-5000. See "BUSINESS OF THE COMBINED COMPANY."
THE MEETINGS
Indus
The Indus Meeting will be held on August 25, 1997 at 8:30 a.m., local time,
at Indus' principal executive offices located at 60 Spear Street, San
Francisco, California. See "THE INDUS MEETING." At the Indus Meeting,
shareholders of Indus at the close of business on the Indus Record Date will be
asked to approve and adopt the Indus Merger Proposal, including the assumption
by Newco of the Indus Options, the Indus Stock
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Purchase Plan Options, the TSW Options and the TSW Warrants and the termination
of the Indus Plans. The Reorganization Agreement and the Indus Merger Agreement
are attached hereto as Appendices A-1 and A-2, respectively. See "THE MERGER"
and "THE REORGANIZATION AGREEMENT."
Holders of record of Indus Common Stock at the close of business on the Indus
Record Date have the right to receive notice of and to vote at the Indus
Meeting. At the close of business on the Indus Record Date, there were
19,159,214 shares of Indus Common Stock outstanding and entitled to vote. The
affirmative vote of the holders of a majority of the outstanding shares of
Indus Common Stock is required to approve and adopt the Indus Merger Proposal.
As of the Indus Record Date, directors and executive officers of Indus as a
group beneficially owned 11,575,368 shares of Indus Common Stock, or
approximately 63.0% of those shares outstanding as of such date. Certain of
such directors and executive officers of Indus have executed Voting Agreements
with TSW, pursuant to which they have agreed to vote such shares in favor of
the Indus Merger Proposal. Accordingly, approval of the Indus Merger Proposal
at the Indus Meeting is assured.
TSW
The TSW Meeting will be held on August 25, 1997 at 11:30 a.m., local time, at
TSW's principal executive offices located at 3301 Windy Ridge Parkway, Atlanta,
Georgia 30339. See "THE TSW MEETING." At the TSW Meeting, shareholders of TSW
at the close of business on the TSW Record Date will be asked to consider and
vote upon the TSW Merger Proposal, including the assumption by Newco of the
Indus Options, the Indus Stock Purchase Plan Options, the TSW Options and the
TSW Warrants, and the termination of the TSW Plans. The Reorganization
Agreement and the TSW Merger Agreement are attached hereto as Appendices A-1
and A-3, respectively. See "THE MERGER" and "THE REORGANIZATION AGREEMENT."
Holders of record of TSW Common Stock and TSW Preferred Stock at the close of
business on the TSW Record Date have the right to receive notice of and to vote
at the TSW Meeting. At the close of business on the TSW Record Date, there were
306,824 shares of TSW Common Stock and 2,943,218 shares of TSW Preferred Stock
outstanding, each of which is entitled to one vote on each matter to be acted
upon. The affirmative vote of the holders of a majority of the shares of TSW
Capital Stock, voting together as a class, and a majority of each series of TSW
Preferred Stock, each voting as a separate class, issued and outstanding on the
TSW Record Date is required to approve and adopt the TSW Merger Proposal.
Abstentions will be included in determining the number of shares present for
purposes of determining the presence of a quorum. As of the TSW Record Date,
shareholders of TSW beneficially owning approximately 95% of the issued and
outstanding TSW Capital Stock (including all of the issued and outstanding TSW
Preferred Stock), as a group, have executed Voting Agreements with Indus,
pursuant to which they have agreed to vote such shares in favor of the TSW
Merger Proposal. Accordingly, approval of the TSW Merger Proposal at the TSW
Meeting is assured.
THE MERGER
Effects of the Merger
The Reorganization Agreement provides for, among other things: (a) the merger
of Indus Sub with and into Indus pursuant to the Indus Merger Agreement, which
will result in Indus, as the surviving corporation of the Indus Merger,
becoming a wholly-owned subsidiary of Newco and (b) the merger of TSW Sub with
and into TSW pursuant to the TSW Merger Agreement which will result in TSW, as
the surviving corporation of the TSW Merger, becoming a wholly-owned subsidiary
of Newco.
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Conversion of Indus Securities
At the Effective Time of the Indus Merger, each outstanding share of Indus
Common Stock will be converted into one share of Newco Common Stock and each
Indus Option and each Indus Stock Purchase Plan Option will be converted into
an option to purchase an equivalent number of shares of Newco Common Stock at
an exercise price or purchase price, as applicable, per share equal to that of
such Indus Option or Indus Stock Purchase Plan Option, as applicable. See "THE
REORGANIZATION AGREEMENT--Merger Consideration." For a description of the Newco
Common Stock, see "DESCRIPTION OF NEWCO CAPITAL STOCK." For a summary of the
principal differences between rights of holders of Newco Common Stock and Indus
Common Stock, see "COMPARISON OF RIGHTS OF HOLDERS OF INDUS COMMON STOCK, TSW
COMMON STOCK AND NEWCO COMMON STOCK."
Conversion of TSW Securities
The total number of shares of Newco Common Stock to be issued in the TSW
Merger to holders of TSW Capital Stock, TSW Unpaid Dividends and TSW
Subordinated Notes and to become issuable to holders of TSW Options and TSW
Warrants will be the number of shares of Newco Common Stock to be issued or to
become issuable in the Merger to holders of Indus Common Stock, Indus Options
and Indus Stock Purchase Plan Options multiplied by 0.86047 (the "TSW Number").
The outstanding TSW securities will be converted or exchanged as follows:
(i) Each share of TSW Common Stock and TSW Preferred Stock will be
converted into a number of shares of Newco Common Stock equal to a
fraction, the numerator of which will be the TSW Number minus the New
Warburg Shares (as defined below) and the denominator of which will be
the total number of shares of TSW Common Stock and TSW Preferred Stock
outstanding immediately prior to the Closing plus the total number of
shares of TSW Common Stock issuable upon exercise of TSW Options and
TSW Warrants outstanding immediately prior to the Closing (the "TSW
Applicable Ratio"). As of July 25, 1997, based on (a) the number of
shares of Indus Common Stock, Indus Options, Indus Stock Purchase Plan
Options, TSW Common Stock, TSW Preferred Stock, TSW Options and TSW
Warrants outstanding on such date, (b) the aggregate principal amount
of and accrued interest on the TSW Subordinated Notes and the accrued
and unpaid dividends on each series of TSW Preferred Stock on such date
and (c) the Indus Common Stock Market Price on such date, the TSW
Applicable Ratio would be approximately 2.73 shares of Newco Common
Stock for each outstanding share of TSW Capital Stock.
(ii) Each TSW Subordinated Note will be exchanged for a number of shares of
Newco Common Stock equal to a fraction, the numerator of which will be
the aggregate principal balance of such TSW Subordinated Note as of
the Effective Time plus all accrued and unpaid interest, and the
denominator of which will be the Indus Common Stock Market Price.
(iii) All TSW Unpaid Dividends will be converted into a number of shares of
Newco Common Stock equal to a fraction, the numerator of which will
be the aggregate amount of such unpaid dividends and the denominator
of which will be the Indus Common Stock Market Price. The number of
shares of Newco Common Stock to be issued in the Merger in respect of
such TSW Unpaid Dividends, together with the shares of Newco Common
Stock to be issued in exchange for the TSW Subordinated Notes, are
referred to herein as the "New Warburg Shares."
(iv) Each outstanding TSW Option and TSW Warrant will be converted into an
option or warrant, as applicable, to purchase a number of shares of
Newco Common Stock equal to the TSW Applicable Ratio multiplied by the
number of shares purchasable under each TSW Option or TSW Warrant, as
applicable, rounded down to the nearest whole share, at an exercise
price equal to the exercise price of such TSW Option or TSW Warrant at
the Effective Time divided by the TSW Applicable Ratio, rounded up to
the nearest cent.
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For a summary of the principal differences between the rights of holders of
Newco Common Stock, Indus Common Stock, and TSW Capital Stock, see "COMPARISON
OF RIGHTS OF HOLDERS OF INDUS COMMON STOCK, TSW COMMON STOCK AND NEWCO COMMON
STOCK."
HOLDERS OF INDUS COMMON STOCK OR TSW CAPITAL STOCK SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS APPROVED, A LETTER
OF TRANSMITTAL WILL BE MAILED AFTER THE EFFECTIVE TIME TO EACH PERSON WHO WAS A
HOLDER OF OUTSTANDING TSW COMMON STOCK IMMEDIATELY PRIOR TO THE EFFECTIVE TIME.
CERTIFICATES REPRESENTING INDUS COMMON STOCK NEED NOT BE EXCHANGED AFTER THE
MERGER AND WILL BE DEEMED, AFTER THE EFFECTIVE TIME, TO REPRESENT SHARES OF
NEWCO COMMON STOCK. CERTIFICATES REPRESENTING TSW CAPITAL STOCK SHOULD BE SENT
TO THE EXCHANGE AGENT ONLY AFTER RECEIPT OF, AND IN ACCORDANCE WITH, THE
INSTRUCTIONS CONTAINED IN THE LETTER OF TRANSMITTAL.
Ownership of Newco
Immediately following the consummation of the Merger, the former shareholders
and optionholders of Indus and the former shareholders, optionholders and
warrantholders of TSW will collectively hold approximately 53.75% and 46.25%,
respectively, of the Newco Common Stock on a fully diluted basis. See "SECURITY
OWNERSHIP OF THE COMBINED COMPANY."
Fairness Opinions
Cowen has delivered its written opinion to the Indus Board, dated as of June
5, 1997 (the "Cowen Opinion"), stating that, as of such date, the financial
terms of the Merger, taken as a whole, were fair, from a financial point of
view, to Indus. Cowen is under no obligation to update the Cowen Opinion. The
full text of the Cowen Opinion, which sets forth, among other things, the
assumptions made, matters considered and limitations on the review undertaken
by Cowen is attached as Appendix B-1 to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference. Indus shareholders are urged to read
the Cowen Opinion in its entirety.
Alex. Brown has delivered its written opinion, dated as of June 5, 1997 (the
"Alex. Brown Opinion"), stating that, as of such date, the TSW Number was fair,
from a financial point of view, to the TSW Securityholders, taken as a whole.
Alex. Brown is under no obligation to update the Alex. Brown Opinion. The full
text of the Alex. Brown Opinion which sets forth, among other things, the
assumptions made, matters considered and limitations on the review undertaken
by Alex. Brown, is attached as Appendix B-2 to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. TSW shareholders
are urged to read the Alex. Brown Opinion in its entirety.
Board Recommendations
The Indus Board has unanimously approved the Indus Merger Proposal and has
determined that the Merger is in the best interests of Indus and its
shareholders. The Indus Board unanimously recommends approval and adoption of
the Indus Merger Proposal by the Indus shareholders.
The TSW Board has unanimously approved the TSW Merger Proposal and has
determined that the Merger is in the best interests of TSW and its
shareholders. The TSW Board has unanimously recommended approval and adoption
of the TSW Merger Proposal by the TSW shareholders.
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Reasons for the Merger
Indus and TSW have identified the following potential mutual benefits which
may accrue to the Combined Company as a result of the Merger: (i) an ability to
provide solutions to enterprise customers of all sizes as a result of the
integration of each company's software solutions; (ii) an enhanced competitive
position as the result of the higher visibility of the Combined Company; (iii)
an increase in the sales and marketing capabilities of each company; and (iv)
cost synergies and economies of scale in operation.
In addition, the Board of Directors of Indus believes that Indus shareholders
should vote for the Merger for the following reasons: (i) the Merger will
provide Indus entry into new vertical segments; (ii) Indus' international
presence will be enhanced by TSW's strength in international sales; (iii) the
Merger will allow the Combined Company to more fully realize the benefits of
Indus' regional services infrastructure; and (iv) TWS's technology will enhance
Indus' product offerings and shorten its product development cycle.
Effective Time
The Merger will become effective at the Effective Time. Assuming all
conditions to the Merger are satisfied or waived prior thereto, it is
anticipated that the Closing and the Effective Time will be on or about
August 25, 1997. See "THE REORGANIZATION AGREEMENT--Conditions to the Merger."
Conditions to the Merger
In addition to the requirement that the Merger be approved by the Indus
shareholders and by the TSW shareholders, the obligations of Indus and TSW to
consummate the Merger are subject to the satisfaction of a number of other
conditions, including, without limitation: effectiveness of and the absence of
any stop-order or proceedings seeking a stop-order commenced or threatened by
the Commission with respect to the Registration Statement and this Joint Proxy
Statement/Prospectus; the waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any
authorization, consent or approval required under any Antitrust Law shall have
been obtained or any waiting period applicable to the review of the Merger
shall have expired or been terminated; the absence of any order, decree or
ruling by any governmental agency that would prohibit or render illegal the
transactions contemplated by the Reorganization Agreement; and the absence of
any effective temporary restraining order, preliminary injunction or permanent
injunction or other order preventing the consummation of the Merger issued by
any federal or state court. Each party's obligations under the Reorganization
Agreement are also conditioned upon the accuracy of the representations and
warranties made therein by the other party; the receipt of certain third party
consents; the performance in all material respects by the other party of its
covenants contained therein; the approval of the Merger by the shareholders of
Indus and TSW with the holders of less than 5% of the Indus Common Stock or the
TSW Common Stock eligible to exercise dissenters' rights; the absence of any
Substantial Material Adverse Change with respect to Indus or TSW; the receipt
of certain legal opinions (including opinions to the effect that the Merger
will be treated for federal income tax purposes as a Reorganization); and the
receipt of the Pooling Letter from Ernst & Young LLP.
TSW's obligation to consummate the Merger is further conditioned upon: (i)
the incorporation of Indus Sub and TSW Sub; and (ii) the approval for quotation
on the Nasdaq National Market of the Newco Common Stock to be issued in the
Merger, subject to notice of issuance.
At any time on or prior to the Merger, to the extent legally allowed, Indus
or TSW, without approval of the shareholders or shareholders of each such
company, as the case may be, may waive compliance with any of the agreements or
conditions contained in the Reorganization Agreement for the benefit of that
company. See "THE REORGANIZATION AGREEMENT--Conditions to the Merger."
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Surrender of Certificates
If the Merger becomes effective, as soon as practicable thereafter, the
Exchange Agent will mail specific written instructions to all holders of record
of TSW Capital Stock as of the Effective Time with respect to the procedure for
surrendering their stock certificates in exchange for certificates representing
shares of Newco Common Stock. Upon the Exchange Agent's receipt of such
certificates, each TSW Securityholder will receive a certificate representing
Newco Common Stock and a cash payment in lieu of fractional shares.
CERTIFICATES REPRESENTING SHARES OF TSW CAPITAL STOCK SHOULD NOT BE
SURRENDERED FOR EXCHANGE UNTIL THE WRITTEN INSTRUCTIONS ARE RECEIVED.
Termination
The Reorganization Agreement may be terminated prior to the Effective Time by
mutual agreement of TSW and Indus, or by either of them, (i) as a result of a
breach by the other party of a representation or warranty set forth in the
Reorganization Agreement which breach remains uncured for 10 business days
following written notice thereof (except that no cure period will be provided
for a breach which by its nature cannot be cured), (ii) as a result of a breach
by the other party of a covenant or agreement which would cause such party not
to perform or materially comply with all covenants or agreements required to be
performed or complied with by it and which breach remains uncured for 10
business days after written notice thereof (except that no cure period will be
provided for a breach which by its nature cannot be cured), (iii) if all the
conditions for Closing the Merger have not been satisfied or waived on or
before the Final Date other than as a result of the breach of the
Reorganization Agreement by the terminating party, (iv) if the required
approval of the shareholders of Indus or shareholders of TSW has not been not
obtained, (v) if either of the Pooling Letters cannot be delivered for any
reason related to the other party, or (vi) if a permanent injunction or other
order by a federal or state court which would make illegal or otherwise
restrain or prohibit consummation of the Merger is issued and has become final
and nonappealable.
The Reorganization Agreement may also be terminated (i) by TSW if the Indus
Common Stock Market Price is less than $9.50 per share and (ii) by Indus if the
Indus Common Stock Market Price is greater than $22.50 per share.
It is not anticipated that proxies of a party's shareholders will be
resolicited in the event that such party becomes entitled to exercise a right
to terminate the Reorganization Agreement.
Merger Expenses, Fees and Other Costs
If the Merger is consummated, the Combined Company will bear all costs and
expenses incurred in connection with the Reorganization Agreement and the
transactions provided for therein. If the Merger is not consummated, each of
TSW and Indus will bear its own costs and expenses with respect to the
Reorganization Agreement and the transactions contemplated thereby, provided
that TSW and Indus shall share equally all fees and expenses, other than
attorneys', accountants' and financial advisors' fees, incurred in connection
with the printing and filing of this Joint Proxy Statement/Prospectus.
The Combined Company expects to incur a charge of approximately $10.0 million
to $12.0 million in the quarter in which the Merger is consummated in
connection with the write-off of certain assets, transaction costs, personnel
severance costs, the cancellation and continuation of contractual obligations
and other integration costs incident to the Merger. See "RISK FACTORS--Risks
Relating to the Merger--Non-Recurring Charges" and "UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS."
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Nasdaq Listing
The shares of Newco Common Stock to be issued in the Merger will be traded on
Nasdaq under the symbol "IINT."
Amendment
The Reorganization Agreement may be amended by Indus and TSW at any time
before or after approval by the Indus shareholders or the TSW shareholders,
except that, after such approval, no amendments may be made which by law
require the further approval of the Indus shareholders or the TSW shareholders
unless such further approval is obtained.
Certain Federal Income Tax Consequences
The Merger is expected to be a Reorganization for federal income tax
purposes, so that no gain or loss will be recognized by Indus or TSW, by
holders of TSW Capital Stock on the exchange of TSW Common Stock and TSW
Preferred Stock except to the extent that holders of TSW Capital Stock receive
cash in lieu of fractional shares or upon the exercise of dissenters' or
appraisal rights, or by Indus shareholders on the exchange of Indus Common
Stock except to the extent the Indus shareholders receive cash upon exercise of
dissenters' or appraisal rights. As a condition to Indus' and TSW's obligations
to consummate the Merger, Indus and TSW must obtain opinions, prior to the
Effective Time, from Wilson Sonsini Goodrich & Rosati, Professional
Corporation, and Wachtell, Lipton, Rosen & Katz, their respective legal
counsels, to the effect that the Merger will be treated as a Reorganization.
Such opinions are included as exhibits to the Registration Statement of which
this Joint Proxy Statement/Prospectus is a part. Indus shareholders and holders
of TSW Capital Stock are urged to consult their own tax advisors regarding such
tax consequences. See "THE MERGER--Certain Federal Income Tax Considerations."
Accounting Treatment
The Merger is intended to be treated as a pooling of interests for financial
reporting purposes in accordance with GAAP. Consummation of the Merger is
conditioned upon (i) receipt by TSW of a letter from its independent auditors
to the effect that TSW qualifies as an entity that may be a party to a business
combination
for which the pooling-of-interests method of accounting would be available and
(ii) receipt by Indus of a letter from its independent auditors regarding
concurrence with Indus management's conclusion as to the appropriateness of
pooling-of-interests accounting treatment for the Merger under APB Opinion No.
16, if consummated in accordance with the Agreement. See "THE MERGER--
Accounting Treatment."
Appraisal and Dissenters' Rights
If the Merger is approved by the required vote of Indus shareholders and is
not abandoned or terminated, shareholders of Indus who voted against the Merger
may, by complying with Sections 1300 through 1312 of the CGCL, be entitled to
dissenters' rights as described therein only if (i) such holders' shares of
Indus Common Stock are subject to restriction on transfer imposed by Indus or
by law or regulation, or (ii) demands for payment pursuant to such dissenters'
rights are filed with respect to 5% or more of the outstanding shares of Indus
Common Stock at or before the Indus Meeting. However, it is a condition to the
effectiveness of the Merger that the number of shares eligible to dissent after
the Indus Meeting shall be less than 5% of the outstanding shares of Indus
Common Stock. See "THE MERGER--Appraisal and Dissenters' Rights."
Under the GBCC, TSW shareholders are entitled to dissenters' rights or
appraisal rights with respect to the Merger. Under the GBCC, holders of TSW
Common Stock who do not vote in favor of the TSW Merger Proposal and who
otherwise comply with the provisions of Article 13 of the GBCC are entitled to
assert dissenters' rights and to obtain payment of the fair value of their
shares if the Merger is consummated. However,
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it is a condition to the effectiveness of the Merger that the number of shares
eligible to dissent after the TSW Meeting shall be less than 5% of the
outstanding shares of TSW Capital Stock. See "THE MERGER--Appraisal and
Dissenters' Rights."
Regulatory Matters
Under the HSR Act and the rules promulgated thereunder, the Merger may not be
consummated until notifications have been given and certain information has
been furnished to the FTC and the Antitrust Division and the specified waiting
period requirements have been satisfied. See "THE MERGER--Governmental and
Regulatory Approvals."
Interests of Certain Persons in the Merger; Management of the Combined Company
Certain members of the management of Indus, the management of TSW, the Indus
Board and the TSW Board, respectively, have certain interests in the Merger
that are different from, or in addition to, the interests in the Merger of
shareholders of Indus and shareholders of TSW generally. It is anticipated that
Robert W. Felton, Richard W. MacAlmon and Alan G. Merten, who are currently
directors of Indus, and Edward R. Koepfler, currently Chief Operating Officer
of Indus, as well as Christopher R. Lane, John W. Blend, III, William H.
Janeway and Joseph P. Landy, who are currently directors of TSW, will become
directors of Newco. Certain executive officers of Indus and certain executive
officers of TSW will become executive officers of Newco. See "MANAGEMENT OF THE
COMBINED COMPANY." Pursuant to the terms of the Nomination Agreement, Warburg
and Mr. Felton will each have certain rights with respect to the nomination of
up to two directors each of Newco. Newco will also enter into the Registration
Rights Agreement with respect to the shares of Newco Common Stock to be
received by Warburg, John R. Oltman, a current director of TSW, and Messrs.
Felton, MacAlmon and Blend in the Merger or upon the exercise of Newco stock
options. See "RISK FACTORS--Risks Relating to the Merger--Interests of Certain
Persons in the Merger," "THE MERGER--Interests of Certain Persons in the
Merger," "CERTAIN RELATED AGREEMENTS--Nomination Agreement" and "--Registration
Rights Agreement."
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CERTAIN RELATED AGREEMENTS
Affiliate Agreements
To ensure that the Merger will be accounted for as a "pooling of interests,"
the Indus Affiliates and TSW Affiliates have executed the Affiliate Agreements
which prohibit such persons from disposing of their shares of Indus Common
Stock or TSW Capital Stock, respectively, (i) during the 30-day period prior to
the Closing,
and (ii) until the Combined Company publicly releases its first report
including the combined financial results of Newco, Indus and TSW for a period
of at least 30 days of "combined operations," as defined by the Commission.
Pursuant to such agreements, the Indus Affiliates and TSW Affiliates have also
acknowledged the resale restrictions imposed by Rule 145 on shares received by
them in the Merger and have made certain representations pertaining to the
"continuity of interest" requirements for a Reorganization. See "CERTAIN
RELATED AGREEMENTS--Affiliate Agreements."
Voting Agreements
Indus Subject Shareholders, who beneficially own approximately 60.3% of the
outstanding shares of Indus Common Stock, in the aggregate, and TSW Subject
Shareholders, who beneficially own approximately 95% of the outstanding shares
of TSW Common Stock and all of the shares of TSW Preferred Stock, have entered
into Voting Agreements with TSW (in the case of certain affiliates of Indus) or
Indus (in the case of certain affiliates of TSW) pursuant to which such persons
or entities have agreed to vote their shares of Indus Common Stock or TSW
Capital Stock, as applicable, in favor of the Merger. See "CERTAIN RELATED
AGREEMENTS--Voting Agreements."
Nomination Agreement
Newco, Robert W. Felton and Warburg, a stockholder of TSW who beneficially
owns approximately 93% of the outstanding shares of TSW Capital Stock
(including all of the outstanding shares of Preferred Stock), will enter into a
Nomination Agreement which provides that for so long as Warburg continues to
own more than 15% of the outstanding shares of Newco Common Stock, Warburg will
be permitted to nominate two members to the Newco Board, and that for so long
as Warburg continues to own between 7% and 15% of the outstanding shares of
Newco Common Stock, Warburg will be permitted to nominate one nominee to the
Newco Board. The Nomination Agreement also provides that for so long as Mr.
Felton continues to own more than 15% of the outstanding shares of Newco Common
Stock, Mr. Felton will be permitted to nominate two members to the Newco Board,
and that for so long as Mr. Felton continues to own between 7% and 15% of the
outstanding shares of Newco Common Stock, Mr. Felton will be permitted to
nominate one nominee to the Newco Board, which nominee in each instance may be
Mr. Felton. Under the Nomination Agreement, Newco will be obligated to use its
best efforts to cause to be voted the shares for which Newco's management or
Board of Directors holds proxies or is otherwise entitled to vote in favor of
the election of Warburg's and Mr. Felton's designees and to cause the Newco
Board to unanimously recommend to its stockholders to vote in favor of the
Warburg and Mr. Felton designees. See "THE MERGER--Interests of Certain Persons
in the Merger" and "CERTAIN RELATED AGREEMENTS--Nomination Agreement."
Registration Rights Agreement
Newco, Warburg, Mr. Felton and certain Indus shareholders and TSW
Securityholders will enter into the Registration Rights Agreement, which grants
Warburg and Mr. Felton the right to request Newco, on up to two occasions each,
to register the shares of Newco Common Stock to be received by Warburg and Mr.
Felton in exchange for Mr. Felton's Indus Common Stock and Warburg's TSW Common
Stock and TSW Preferred Stock, and issuable pursuant to certain TSW Warrants
assumed by Newco in the Merger. All parties to the Registration Rights
Agreement have "piggyback" registration rights with respect to shares of Newco
Common Stock. See "THE MERGER--Interests of Certain Persons in the Merger" and
"CERTAIN RELATED AGREEMENTS--Registration Rights Agreement."
11
<PAGE>
RISK FACTORS
Shareholders of Indus and shareholders of TSW should consider the following
risks in deciding whether or not to approve the Merger:
Risks Relating to the Merger
Risks relating to the Merger include: (i) risks relating to the integration
of the operations of Indus and TSW; (ii) the incurrence by the Combined Company
of certain non-recurring charges in connection with the Merger; (iii) the
additional shares of Newco Common Stock to be issued in the Merger as well as
the number of shares of Newco Common Stock to be eligible for public resale;
(iv) certain differences in the rights of holders of Indus Common Stock and TSW
Capital Stock resulting from the Merger; (v) the lack of effect on the Exchange
Ratio of price changes in the Indus Common Stock; and (vi) certain affiliates
of Indus and TSW have certain interests that are different from or in addition
to shareholders of Indus and shareholders of TSW.
Risks Relating to the Combined Company
Risks relating to the business of the Combined Company include: (i) the
accumulated deficit of TSW and the uncertainty of profitability of the Combined
Company; (ii) the potential for fluctuations in the operating results of the
Combined Company; (iii) significant historical volatility in the trading price
of Indus Common Stock, and potential future volatility in the trading price of
the Newco Common Stock; (iv) the Combined Company's ability to manage growth
and its dependence on key personnel; (v) the utilization by the Combined
Company of new distribution channels; (vi) intense competition in the Combined
Company's businesses; (vii) risks relating to the successful integration of
current and future products and technologies; (viii) the rapid technological
changes which occur in the Combined Company's businesses and the necessity for
frequent new product introductions; (ix) risks associated with international
operations; (x) the dependence of the Combined Company on its proprietary
technology and risks of infringement; (xi) risks related to lengthy sales and
implementation cycles and large order sizes; (xii) the dependence of the
Combined Company on licensed technology; (xiii) the dependence of the Combined
Company on third parties; (xiv) risks relating to software defects and product
liability claims; (xv) risks relating to past and future acquisitions; and
(xvi) concentration of ownership of Newco Common Stock.
For a more complete discussion of these and other risks affecting the
Combined Company and the Merger, see "RISK FACTORS."
MARKET PRICE AND DIVIDEND DATA
The Indus Common Stock is traded on Nasdaq under the symbol "IGRP." The Newco
Common Stock will be traded on Nasdaq under the symbol "IINT."
On June 4, 1997, the last trading day before announcement of the proposed
Merger, the closing price of the Indus Common Stock on Nasdaq was $15.75 per
share. On August 5, 1997, the last practicable trading day before the printing
of this Joint Proxy Statement/Prospectus, the closing price of the Indus Common
Stock on Nasdaq was $17.25 per share. Holders of Indus Common Stock are urged
to obtain current market quotations prior to making any decision with respect
to the Merger.
Newco anticipates that for the foreseeable future it will retain any earnings
for use in the operations of its business and does not intend to pay dividends.
See "RISK FACTORS--Risks Relating to the Combined Company--Volatility of Stock
Prices" and "COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION."
12
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL DATA
The following Selected Historical Financial Data of Indus and TSW has been
derived from their respective consolidated historical financial statements and
should be read in conjunction with their consolidated financial statements and
the notes thereto included herein.
The Selected Unaudited Pro Forma Combined Condensed Consolidated Financial
Data has been derived from the Unaudited Pro Forma Combined Condensed
Consolidated Financial Statements, appearing elsewhere herein, which give
effect to the Merger as a pooling of interests, and should be read in
conjunction with such pro forma financial statements and the notes thereto. For
the purpose of the Unaudited Pro Forma Combined Condensed Consolidated
Statements of Operations Data, Indus' financial data for the fiscal years ended
December 31, 1994, 1995 and 1996 has been combined with TSW's financial data
for the fiscal years ended March 31, 1995, 1996 and 1997. The pro forma
information is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger had been consummated at the
beginning of each period presented or as of the dates indicated, nor is it
necessarily indicative of the future operating results or financial position of
the Combined Company.
INDUS SELECTED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER THREE MONTHS
31, ENDED MARCH 31,
------------------------ ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $30,591 $53,791 $75,939 $16,859 $22,422
Gross margin........................ 17,792 31,213 44,149 10,210 12,904
Income (loss) from operations(1).... 1,874 (6,591) 14,531 3,016 4,439
Net income (loss)................... 1,705 (6,820) 2,528 (4,897) 2,813
Pro forma net income(1)(2).......... 6,322 9,228 1,803 2,813
Pro forma net income per share...... $ 0.36 $ 0.49 $ 0.10 $ 0.14
Shares used in computing pro forma
net income per share(3)............ 17,490 18,924 17,686 19,609
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1994 1995 1996 1997
------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................... $ 4,698 $ 7,640 $46,693 $40,604
Total assets.............................. 18,063 31,075 75,514 76,703
Total shareholders' equity................ 8,243 10,848 55,372 58,096
</TABLE>
- --------
(1) Income (loss) from operations for 1995 includes a nonrecurring expense of
$18.9 million incurred in the third quarter of 1995 in connection with an
amendment to the Indus 1992 Plan to accelerate the exercisability of
outstanding stock options, which had previously been contingent upon the
occurrence of certain events. Pro forma net income for 1995 includes a pro
forma adjustment of $17.9 million to reduce 1995 compensation expense to
the amount related to options granted in 1995 only. See Note 1 of the Notes
to the Indus Combined and Consolidated Financial Statements.
(2) Prior to January 1, 1996, Indus was not subject to federal corporate income
taxation because of its election to be taxed under the provisions of
Subchapter S of the Code. Pro forma net income for 1995 has been determined
by assuming that Indus had been taxed as a C Corporation for 1995. Pro
forma net income for 1996 reflects the elimination of a nonrecurring charge
for the cumulative effect of deferred income taxes incurred in the first
quarter of 1996 in connection with the termination of Indus' S Corporation
status. See Notes 1 and 12 of Notes to the Indus Combined and Consolidated
Financial Statements.
(3) See Note 1 of Notes to the Indus Combined and Consolidated Financial
Statements for a more complete explanation of the determination of the
number of shares used in computing pro forma net income per share.
13
<PAGE>
TSW SELECTED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED MARCH 31, ENDED MARCH 31,
------------------------- ----------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................... $27,514 $48,033 $67,099 $13,553 $21,486
Gross margin...................... 12,648 22,739 35,151 7,166 11,688
Income (loss) from operations(1).. (13,933) (9,419) 30 (2,054) 1,320
Net income (loss)................. (13,351) (11,725) (3,403) (2,813) 276
Pro forma net income (loss) per
share(2)......................... $ (1.09) $ (1.04) $ 0.09
Shares used in computing pro forma
net income (loss) per share(2)... 3,133 2,698 3,226
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)........................ $(4,472) $(7,931) $(3,629)
Total assets..................................... 21,794 26,659 42,341
Short-term debt.................................. 2,491 7,581 16,951
Subordinated long-term notes..................... 9,650 16,251 18,065
TSW Redeemable Preferred Stock................... 11,100 13,100 18,100
Total shareholders' deficit...................... (20,089) (31,321) (34,706)
</TABLE>
- --------
(1) Reflects a write-off of goodwill of $688,000 in 1997. See Note 1 of the
Notes to the TSW Consolidated Financial Statement for an explanation of the
write-off of goodwill.
(2) Reflects the conversion of all outstanding shares of TSW Preferred Stock
into Common Stock. See Note 1 of the Notes to the TSW Consolidated
Financial Statements for an explanation of the determination of shares used
calculating pro forma net loss per share.
14
<PAGE>
NEWCO,
INDUS AND TSW COMBINED
SELECTED UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED STATEMENT OF
OPERATIONS DATA:(1)
Total revenues.................. $ 58,105 $101,824 $143,038 $30,412 $43,908
Gross margin.................... 30,441 53,952 79,300 17,376 24,592
Income (loss) from opera-
tions(2)....................... (12,058) (16,010) 14,561 962 5,759
Net income (loss)............... (11,646) (18,545) (875) (7,710) 3,089
Pro forma net income (loss)(3).. (5,403) 5,825 (1,010) 3,089
Pro forma net income (loss) per
share(4)....................... $ (0.23) $ 0.20 $ (0.04) $ 0.10
Shares used in computing pro
forma net income (loss) per
share computations............. 23,218 29,251 23,288 30,034
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1997
---------
<S> <C>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA:
Working capital....................................................... $ 24,975
Total assets.......................................................... 119,044
Long-term capital leases and term loans............................... 2,126
Subordinated long-term notes(5)....................................... --
Redeemable preferred stock(6)......................................... --
Total shareholders' equity(6)......................................... $ 47,555
</TABLE>
- --------
(1) The pro forma combined condensed statement of operations data combines
Indus' historical condensed combined and consolidated statements of
operations for the years ended December 31, 1994, 1995 and 1996 and the
three-months ended March 31, 1996 and 1997 with those for TSW for its
fiscal years ended March 31, 1995, 1996 and 1997 and the three-months ended
March 31, 1996 and 1997, respectively.
(2) Reflects non-recurring expense of $18.9 million incurred in the third
quarter of 1995 in connection with an amendment to the Indus 1992 Plan to
accelerate the exercisability of outstanding stock options, which had
previously been contingent upon the occurrence of certain events. The pro
forma adjustment of $17.9 million is to reduce 1995 compensation expense to
the $1.0 million amount related to options granted in 1995 only. See Note 1
of the Notes to the Indus Combined and Consolidated Financial Statements.
(3) Prior to January 1, 1996, Indus was not subject to federal corporate income
taxation because of its election to be taxed under the provisions of
Subchapter S of the Code. Upon conversion to C Corporation status in 1996,
a $6.7 million charge was recorded for the cumulative effects of deferred
income taxes. Pro forma net loss as adjusted for 1995 has been determined
by assuming that Indus had been taxed as a C Corporation for 1995. Pro
forma net income as adjusted for 1996 reflects the elimination of the $6.7
million nonrecurring charge for the cumulative effect of deferred income
taxes in connection with the termination of Indus' S Corporation status.
See Notes 1 and 12 of the Notes to the Indus Combined and Consolidated
Financial Statements.
15
<PAGE>
NEWCO,
INDUS AND TSW COMBINED
SELECTED UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL DATA--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(4) Pro forma net income per share is computed using pro forma net income and
the weighted-average number of common and preferred and dilutive common
equivalent shares outstanding during the year ended December 31, 1996 and
three months ended March 31, 1997. Dilutive common equivalent shares
consist of incremental common shares issuable upon the assumed exercise of
stock options and warrants (using the treasury stock method). Fully diluted
per share amounts are not presented, as the effect is not material. Pro
forma net loss per share is computed using the weighted-average number of
common and preferred shares outstanding, common equivalent shares from
stock options and warrants are excluded from the computation for the year
ended December 31, 1995 and for the three-months ended March 31, 1996 as
their effect is antidilutive.
(5) Under the Reorganization Agreement, the outstanding subordinated floating
rate notes of TSW ($14.6 million at March 31, 1997) plus accrued interest
of $3.4 million will be exchanged for shares of Newco Common Stock. The
number of shares to be issued will be calculated by dividing the total
amount of the notes outstanding plus accrued and unpaid interest by the
average of the high and low sales price of Indus Common Stock on the ten
trading days prior to the closing.
(6) Pro forma shareholders' equity at March 31, 1997 reflects $12.0 million in
estimated charges to operations expected to be incurred in connection with
the Merger, including $8.1 million in direct transaction costs and $3.9
million in additional anticipated costs associated with integrating the two
companies as well as the issuance by Newco of common stock for the TSW
Redeemable Preferred Stock, TSW Common Stock and TSW Subordinated Notes.
See "RISK FACTORS--Risks Related to the Merger--Non-Recurring Charges" and
"INDUS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS-- Overview."
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Indus
and TSW and unaudited pro forma combined per share data of Newco after giving
effect to the Merger on a "pooling-of-interests" basis assuming that the
equivalent of 2.73 (the TSW Applicable Ratio as of July 25, 1997) shares of
Newco Common Stock are issued in exchange for each outstanding share of TSW
Common Stock and TSW Preferred Stock in the Merger. This data should be read
in conjunction with the selected financial data, the unaudited pro forma
combined condensed financial statements and the separate historical financial
statements of Indus and TSW and notes thereto, included elsewhere in this
Prospectus. For pro forma purposes, information related to Indus for the
fiscal years ended December 31, 1995 and 1996, and for the three months ended
March 31, 1997 have been combined with information relating to TSW for the
fiscal years ended March 31, 1996 and 1997 and for the three months ended
March 31, 1997. The unaudited pro forma combined financial data are not
necessarily indicative of the operating results that would have been achieved
had the Merger been consummated as of the beginning of the periods presented
and should not be construed as representative of future operating results of
financial condition. Indus pro forma net income per share is computed using
pro forma net income and the weighted-average number of common and dilutive
common equivalent shares outstanding during each period. Dilutive common
equivalent shares consist of incremental common shares issuable upon the
assumed exercise of stock options (using the treasury stock method). Fully
diluted per share amounts are not presented, as the effect is not material.
TSW's historical net income (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. For purposes of computing historical net income (loss) per
share information for TSW, cumulative dividends on redeemable preferred stock
of $61,000 and $565,000 in fiscal 1996 and fiscal 1997, respectively, and
$153,000 for the three months ended March 31, 1997 have been included in the
computation. Pro forma net income (loss) per share has been computed using the
weighted average number of common shares outstanding during each period
assuming conversion of preferred stock had occurred as of the date of
issuance.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------- MARCH 31,
1995 1996 1997
------- -------- ------------
<S> <C> <C> <C> <C>
INDUS
Pro forma net income per share...... $ 0.36 $ 0.49 $ 0.14
======= ======== ========
Book value per share (1)............ $ 2.98 $ 3.12
======== ========
<CAPTION>
THREE MONTHS
YEAR ENDED MARCH 31, ENDED
-------------------------- MARCH 31,
1995 1996 1997 1997
------- ------- -------- ------------
<S> <C> <C> <C> <C>
TSW
Historical net income (loss) per
share.............................. $(48.40) $(54.45) $ (14.29) $ 0.44
======= ======= ======== ========
Pro forma net income (loss) per
share.............................. $ (1.09) $ 0.09
======== ========
Book value per share (deficit) (1).. $(117.14) $(117.14)
======== ========
<CAPTION>
PRO FORMA
THREE MONTHS
ENDED
MARCH 31,
1995 1996 1997
------- -------- ------------
<S> <C> <C> <C> <C>
NEWCO
Pro forma combined per share
Net income (loss).................. $ (0.23) $ 0.20 $ 0.10
======= ======== ========
Book value (1) (2) (3)............. $ 1.57 $ 1.66
======== ========
EQUIVALENT PRO FORMA COMBINED PER
TSW SHARE
Net income (loss).................. $ (0.64) $ 0.55 $ 0.28
======= ======== ========
Book value (2) (3)................. $ 4.29 $ 4.53
======== ========
</TABLE>
- -------
(1) Historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock outstanding at the end of
the period. Newco pro forma combined book value per share is computed by
dividing pro forma stockholders' equity by the pro forma number of shares
of Newco Common Stock which would have been outstanding had the Merger
been consummated at the end of the period.
(2) Pro forma book value reflects $12.0 million in estimated charges to
operations expected to be incurred in connection with the Merger,
including $8.1 million in direct transaction costs and $3.9 million in
additional anticipated costs associated with integrating the two
companies. See "RISK FACTORS--Risk Related to the Merger--Non-Recurring
Charges" and "Indus Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."
(3) TSW equivalent pro forma combined amounts are calculated by multiplying
the Indus pro forma combined per share amounts by an assumed TSW
Applicable Ratio of 2.73.
17
<PAGE>
RISK FACTORS
Each Indus shareholder and TSW shareholder should carefully consider and
evaluate the following factors, among others, before voting on the proposed
Merger. These factors should be considered in conjunction with the other
information included or incorporated by reference in this Joint Proxy
Statement/Prospectus, including in conjunction with forward-looking statements
made herein.
RISKS RELATING TO THE MERGER
Integration of Operations. The managements of Indus and TSW have entered
into the Reorganization Agreement with the expectation that the Merger will
result in beneficial synergistic effects for the Combined Company. See "THE
MERGER--Reasons for the Merger." Achieving the anticipated benefits of the
Merger will depend in part upon whether the integration of the two companies'
businesses is achieved in a timely, efficient and effective manner, and there
can be no assurance that this will occur. The combination of the two companies
will require, among other things, integration of the companies' respective
product offerings and coordination of their research and development efforts.
There can be no assurance that such integration and coordination will be
accomplished smoothly or successfully. The integration of the two
organizations will require the dedication of management resources which will
temporarily distract them from attention to the day-to-day business of the
Combined Company. The difficulties of integration may be increased by a
variety of other factors, which could include: the necessity of coordinating
geographically separated organizations; differences between the corporate
cultures of Indus and TSW; and integrating personnel with disparate business
backgrounds. The process of combining the companies may cause an interruption
of, or a loss of momentum in, the activities of either or both of the
companies' businesses and may adversely affect the revenues and results of
operations of the Combined Company, at least in the near term. Furthermore,
the process of combining the companies could have a material adverse effect on
employee morale and on the ability of the Combined Company to retain the key
management, technical and sales and marketing personnel who are critical to
the Combined Company's future operations. There can be no assurance that
employees of TSW and Indus will continue to work for the Combined Company. In
addition, the announcement and consummation of the Merger could cause
customers or potential customers to delay or cancel orders for products as a
result of uncertainty over the integration and continued support of the
Combined Company's products. Failure to effectively accomplish the integration
of the two companies' operations would have a material adverse effect on the
Combined Company's business, operating results and financial condition. See
"--Risks Relating to the Combined Company--Management of Growth; Dependence on
Key Personnel."
Non-Recurring Charges. The Combined Company expects to incur a charge in the
quarter during which the Merger is consummated currently estimated to be in
the range of $10.0 million to $12.0 million to reflect the combination of the
two companies, transaction costs, the write-off of certain assets and other
integration costs. These amounts are preliminary estimates only and therefore
subject to change. In addition, there can be no assurance that the Combined
Company will not incur additional charges in subsequent quarters to reflect
costs associated with the Merger. See "THE REORGANIZATION AGREEMENT--Expenses"
and "UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS."
Additional Shares to be Issued; Shares Eligible for Future Sale. As of July
25, 1997, there were approximately 19,159,214 shares of Indus Common Stock
outstanding, 1,813,610 shares of Indus Common Stock reserved for issuance upon
the exercise of outstanding Indus Options and 3,318 shares of Indus Common
Stock reserved for issuance upon the exercise of Indus Stock Purchase Plan
Options, all of which will be converted in the merger into an equivalent
number of shares of Newco Common Stock and Newco options. If the Merger were
to occur on July 25, 1997, an additional 18,064,930 shares of Newco Common
Stock or options or warrants to purchase Newco Common Stock will be issued to
the former TSW Securityholders. In general, substantially all of these shares
of Newco Common Stock will be freely tradable following the Merger, subject to
certain volume and other resale limitations for affiliates of Newco, Indus or
TSW pursuant to Rules 144 and/or Rule 145. At the Effective Time of the
Merger, approximately 20,889,366 shares of Newco Common Stock will be
18
<PAGE>
beneficially owned by persons who may be deemed to be affiliates of Newco,
Indus or TSW and, therefore, subject to certain volume and other resale
limitations. Of the remaining approximately 8,309,508 shares of Newco Common
Stock to be outstanding upon consummation of the Merger, substantially all of
such shares will be eligible for sale in the public markets. An additional
approximately 9,838,877 shares will be registered for sale pursuant to assumed
Indus Options and TSW Options as well as the additional shares issuable
pursuant to the Indus Plans, the TSW Plans and the Indus ESPP. In addition,
pursuant to the Registration Rights Agreement, Warburg, Mr. Felton, and
certain other Indus shareholders and TSW Securityholders who will beneficially
own approximately 72% of the outstanding shares of Newco Common Stock upon the
Closing, will be granted the right, on up to two occasions, to request that
Newco register for public resale such shares of Newco Common Stock. The sale
of a significant number of the foregoing shares may cause substantial
fluctuations in the market price of Newco Common Stock. Moreover, sales of
substantial amounts of Newco Common Stock (including shares issuable upon
exercise of assumed options) in the public market could materially and
adversely affect the market price of the Newco Common Stock. Such sales may
make it more difficult for Newco to sell equity securities or equity-related
securities in the future at a time and price that Newco deems appropriate.
Rights of Holders of Indus Common Stock and TSW Capital Stock Following the
Merger. Following the Merger, holders of Indus Common Stock and TSW Capital
Stock will become holders of Newco Common Stock. Certain material differences
exist between the rights of holders of Indus Common Stock and TSW Common Stock
under Indus' Articles of Incorporation and Bylaws or TSW's Articles of
Incorporation and Bylaws, respectively, and the rights of holders of Newco
Common Stock under Newco's Certificate of Incorporation and Bylaws. In
addition, certain material differences exist with respect to the rights of
Indus shareholders and TSW shareholders under the CGCL or the GBCC, as the
case may be, as compared with the rights of stockholders under Delaware law.
See "COMPARISON OF RIGHTS OF HOLDERS OF INDUS COMMON STOCK, TSW COMMON STOCK
AND NEWCO COMMON STOCK."
No Effect on Exchange Ratio of Change in Price of Indus Common Stock. The
Reorganization Agreement does not contain any provisions for adjustment of the
TSW Number based on fluctuations in the trading price of Indus Common Stock,
which may decline from the date of this Joint Proxy Statement/Prospectus until
the Closing of the Merger (although the Reorganization Agreement may be
terminated if the average of the high and low sales price of the Indus Common
Stock on each of the ten trading days prior to the closing of the Merger is
less than $9.50 per share or greater than $22.50 per share). Accordingly, the
market value of the consideration to be received by shareholders of TSW upon
the consummation of the Merger will depend on the market price of the Indus
Common Stock at the Effective Time.
Interests of Certain Persons in the Merger. Certain members of the Indus
Board, the TSW Board, the management of Indus and the management of TSW,
respectively, have certain interests in the Merger that are different from, or
in addition to, the interests of Indus shareholders and TSW shareholders in
the Merger generally. These certain interests include: (i) certain of the
current directors and executive officers of Indus and TSW will become
directors and executive officers of Newco; (ii) Newco, Warburg and Messrs.
Felton, MacAlmon, Blend and Oltman will enter into the Registration Rights
Agreement; and (iii) Newco, Warburg and Mr. Felton will enter into the
Nomination Agreement. See "THE MERGER--Interests of Certain Persons in the
Merger."
RISKS RELATING TO THE COMBINED COMPANY
History of TSW Losses. Although TSW's total revenue has increased in each of
the last five fiscal years, TSW 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 TSW'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
TSW's international operations. There can be no assurance that the Combined
Company will be able to achieve or sustain profitability
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in the future. See "TSW MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
Fluctuating Operating Results. Each of Indus' and TSW's operating results
have fluctuated in the past, and the Combined Company's results may fluctuate
significantly in the future depending on a number of factors, including (i)
the relatively long sales cycles for their products, (ii) the variable size
and timing of individual license transactions, (iii) changes in demand for
their products and services, (iv) competitive conditions in the industry, (v)
changes in customer budgets, (vi) the timing of the introduction of new
products or product enhancements by each such company or its competitors,
(vii) their success in and costs associated with developing and introducing
new products, (viii) product life cycles, (ix) the timing of revenue
recognition under the percentage-of-completion method, (x) changes in the
proportion of revenues attributable to license fees versus services, (xi)
changes in the level of operating expenses, (xii) delay or deferral of
customer implementations of their software, (xiii) software defects and other
product quality problems, and (xiv) other economic conditions generally or in
specific process industry segments. Further, the purchase of Indus' and TSW's
products generally involves a significant commitment of capital, with the
attendant delays frequently associated with large capital expenditures and
authorization procedures within large organizations. For these and other
reasons, the sales cycles for Indus' and TSW's products are typically lengthy
and subject to a number of significant risks over which each such company has
little or no control, including customers' budget constraints and internal
authorization reviews. In addition, delays in the completion of a product
implementation may require that the revenues associated with such
implementation be recognized over a longer period than originally anticipated.
Such delays in the implementation or execution of orders has caused, and may
in the future cause, material fluctuations in Indus' and TSW's operating
results. Similarly, customers may cancel implementation projects at any time
without penalty, and such cancellations could have a material adverse effect
on the Combined Company's business or results of operations. Because the
Combined Company's expenses will be relatively fixed, a small variation in the
timing of recognition of specific revenues can cause significant variations in
operating results from quarter to quarter and may in some future quarter
result in losses or have a material adverse effect on the Combined Company's
business or results of operations.
Additional factors that may contribute to future fluctuations in the
Combined Company's quarterly operating results include, but are not limited
to: (i) development and introduction of new operating systems that require
additional development efforts; (ii) introduction or enhancement of products
by the Combined Company or its competitors; (iii) changes in pricing policies
of the Combined Company or its competitors; (iv) increased competition; (v)
technological changes in computer systems and environments; (vi) the ability
of the Combined Company to timely develop, introduce and market new products;
(vii) quality control of products sold; (viii) market acceptance of new
products and product enhancements; (ix) the Combined Company's success in
expanding its sales and marketing programs; (x) personnel changes; (xi)
foreign currency exchange rates; (xii) mix of products sold; (xiii)
acquisition costs; and (xiv) general economic conditions.
The Combined Company's future revenue will also be difficult to predict, and
TSW has, in the past, failed to achieve its revenue expectations for certain
periods. The Combined Company's expense levels will be based, in part, on its
expectations as to future revenue and to a large extent will be fixed in the
short term. The Combined Company will not be able to adjust expenses in the
short term to compensate for any unexpected revenue shortfall. Accordingly,
any significant shortfall of revenue in relation to the Combined Company's
expectations or any material delay of customer orders would have an immediate
adverse effect on its business, operating results and financial condition. As
a result of all of the foregoing factors, Indus and TSW believe that period-
to-period comparisons of Indus', TSW's or the Combined Company's results of
operations are not and will not necessarily be meaningful and should not be
relied upon as any indication of future performance. See "INDUS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
"TSW MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."
Volatility of Stock Prices. The market for Indus Common Stock is highly
volatile. There currently is no public market for TSW Common Stock or TSW
Preferred Stock. The trading price of the Newco Common Stock
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could be subject to wide fluctuations in response to quarterly variations in
operating and financial results, announcements of technological innovations,
new products, new customer relationships or new strategic relationships by the
Combined Company or its competitors, changes in prices of the Combined
Company's or its competitors' products and services, changes in product mix,
changes in revenue and revenue growth rates for the Combined Company, as a
whole, or for the business of Indus or TSW individually, individual geographic
areas, business units, products or product categories, as well as other events
or factors. Statements or changes in opinions, ratings, or earnings estimates
made by brokerage firms or industry analysts relating to the market in which
the Combined Company does business or relating to Indus, TSW or the Combined
Company, specifically, have resulted, and could in the future result, in an
immediate and adverse effect on the market price of Indus or Newco Common
Stock. Statements by financial or industry analysts regarding the extent of
the dilution in Indus' net income per share resulting from the Merger and the
extent to which such analysts expect potential business synergies to offset
such dilution can be expected to contribute to volatility in the market price
of the Newco Common Stock. Furthermore, the issuance of Newco Common Stock in
connection with the Merger is expected to have the effect of initially
reducing Newco's net income per share and could reduce the Newco Common Stock
market price when compared with prior trading prices of the Indus Common
Stock. In addition, the stock market has from time to time experienced extreme
price and volume fluctuations which have particularly affected the market
price for the securities of many high-technology companies and which often
have been unrelated to the operating performance of these companies. These
broad market fluctuations may adversely affect the market price of the Newco
Common Stock.
On June 4, 1997, the trading day immediately prior to the signing of the
Reorganization Agreement, the closing price of Indus Common Stock was $15.75
per share. Since that date, the price of the Indus Common Stock has closed as
high as $20.25 per share and has closed as low as $13.75 per share, and was
$17.25 per share on August 5, 1997, the latest practicable date before the
printing of this Joint Proxy Statement/Prospectus. There can be no assurance
that the trading price of Indus Common Stock will not decline between the date
of this Joint Proxy Statement/Prospectus and the Closing or between the date
of the Meetings and the Closing. Shareholders of Indus and shareholders of TSW
are encouraged to obtain current quotations as to the market price of the
Indus Common Stock prior to voting their proxies. There can be no assurance
that the Indus Common Stock Market Price will not be less than $9.50 per share
or greater than $22.50 per share, or that Indus or TSW will not terminate the
Reorganization Agreement in such event. See "THE REORGANIZATION AGREEMENT--
TERMINATION."
Management of Growth; Dependence on Key Personnel. Indus' business has grown
rapidly in recent periods, with total revenues increasing from $30.6 million
in 1994 to $53.8 million in 1995 and $75.9 million in 1996. The growth of
Indus' business and expansion of Indus' customer base has placed a strain on
Indus' management and operations. Indus' recent expansion has also resulted in
substantial growth in the number of its employees, the scope of its operating
and financial systems and the geographic area of its operations, resulting in
increased responsibility for management personnel. TSW has also recently
experienced a period of significant growth that has placed strain upon its
management control systems and resources. In the third quarter of fiscal 1996,
TSW first recognized license fee revenue associated with EMPAC after a
substantial product development effort. Additionally, TSW recently acquired
operations in Europe and Australia and opened offices in Asia, and TSW has
recently implemented new financial, time management and project reporting
systems. These strains on systems and resources will be exacerbated as a
result of the process of integrating the constituent companies. See "--Risks
Relating to the Merger--Integration of Operations."
In the future, the Combined Company will be required to continue to improve
its financial and management controls, reporting systems and procedures on a
timely basis and to expand, train and manage its employee work force. There
can be no assurance that the Combined Company will be able to effectively
manage such growth. Its failure to do so would have a material adverse effect
on its business, operating results and financial condition. Competition for
qualified sales, technical and other personnel is intense, and there can be no
assurance that the Combined Company will be able to attract, assimilate or
retain additional highly qualified employees in the future. If the Combined
Company is unable to hire and retain such personnel, particularly those in key
positions,
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its business, operating results and financial condition would be materially
adversely affected. The Combined Company's future success also depends in
significant part upon the continued service of its key technical, sales and
senior management personnel. The loss of the services of one or more of these
key employees could have a material adverse effect on its business, operating
results and financial condition. Additions of new and departures of existing
personnel, particularly in key positions, can be disruptive and have a
material adverse effect on the Combined Company's business, operating results
and financial condition. See "--Risks Relating to the Merger--Integration of
Operations."
Intense Competition. The enterprise management software solutions business
is highly competitive, rapidly changing and significantly affected by new
product introductions and other market activities of industry participants.
Indus' primary competition stems from companies offering enterprise software
solutions, vendors offering partial solutions and suppliers of departmental
systems (primarily LAN-based). Indus' competitors include SAP
Aktiengesellschaft ("SAP"), Indus' principal competitor, and other software
vendors such as Marcam Corp. and Project Software & Development, Inc., firms
that provide software products to electric utilities such as Severn Trent
Systems and Synercom, and many other firms. In the future, Indus may also face
competition from Oracle Corp., PeopleSoft, Inc. and SPL WorldGroup B.V.,
through which it has developed or is developing PassBook integration products
to provide interoperability with Oracle's corporate financial applications,
PeopleSoft's corporate financial, payroll and human resources applications and
SPL WorldGroup's customer information applications. In addition, Indus faces
competition from suppliers of custom-developed business application software
that have focused largely on proprietary mainframe- and microcomputer-based
systems with highly customized software, such as the systems consulting groups
of major accounting firms and systems integrators. Indus also faces
competition from systems developed by the internal MIS departments of large
organizations.
TSW competes primarily with software companies that provide computerized
maintenance management systems, software companies that integrate Asset Care
applications into their overall enterprise information management systems,
third-party professional services organizations that develop software, and
information technology departments of potential customers that develop in-
house software. In addition, TSW expects additional competition from other
established or emerging companies if the Asset Care software market continues
to expand.
The businesses in which the Combined Company will compete are intensely
competitive and rapidly changing and, in order to compete, the Combined
Company will have to enhance current products and develop new products in a
timely fashion. Indus and TSW believe that the principal competitive factors
in the Combined Company's businesses will be product performance and
functionality, cost of internal product development as compared with cost of
purchase of products supplied by outside vendors, cost of on-going maintenance
and time-to-market. Many of the Combined Company's competitors will have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and a larger customer base,
than the Combined Company. The Combined Company's success will also depend
significantly on its ability to develop more advanced products more quickly
and less expensively than its existing competitors and potential competitors
and to educate potential customers of the benefits of licensing the Combined
Company's products rather than developing their own products. The Combined
Company's current and future competitors could introduce products with more
features, greater functionality and lower prices than the Combined Company's
products. These competitors could also bundle existing or new products with
other, more established products in order to compete with the Combined
Company. In addition, because there are relatively low barriers to entry for
the software market, the Combined Company expects additional competition from
other established and emerging companies. Increased competition is likely to
result in price reductions, reduced gross margins and loss of sales volume,
any of which could materially and adversely affect the Combined Company's
business, operating results and financial condition. Any material reduction in
the price of the Combined Company's products would negatively affect its gross
revenues and could have a material adverse effect on its business, operating
results and financial condition. There can be no assurance that the Combined
Company will be able to compete successfully against current and future
competitors, and the failure to do so would have a material
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adverse effect upon the Combined Company's business, operating results and
financial condition. See "BUSINESS OF INDUS--Competition" and "BUSINESS OF
TSW--Competition."
Risk of Successfully Integrating Current and Future Products and
Technologies. The Combined Company's product strategy is initially to
integrate selected products and technologies to enhance enterprise management
solutions and to integrate certain products throughout its entire product line
through the availability of a common set of services. Such product and
technology integration activities have not begun and no current schedule
exists. The success of this strategy is dependent in significant part on the
Combined Company's ability to integrate its products as planned and the
resultant products achieving market acceptance by end users. No assurance can
be given that the Combined Company will successfully integrate its products as
planned. If the Combined Company is unable to develop and introduce new
integrated products and technologies, or enhancements to existing products, in
a timely manner, its business, operating results and financial condition would
be materially and adversely affected.
Rapid Technological Change; Need to Develop New Products; Requirement for
Frequent Product Transitions. The businesses in which the Combined Company
will participate are intensely competitive and characterized by rapid
technological change, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products embodying new
technologies, the emergence of new standards or changes in customer
requirements could render the Combined Company's existing products obsolete
and unmarketable. As a result, the Combined Company's success will depend in
part upon its ability to continue to enhance existing and expand its products,
continue to provide enterprise solutions and develop and introduce new
products that keep pace with technological developments, satisfy increasingly
sophisticated customer requirements and achieve customer acceptance. Customer
requirements include, but are not limited to, product operability and support
across distributed and changing heterogeneous hardware platforms, operating
systems, relational databases and networks. There can be no assurance that the
Combined Company's products will achieve customer acceptance or will
adequately address the changing needs of the marketplace or that the Combined
Company will be successful in developing and marketing enhancements to its
existing products or new products incorporating new technology on a timely
basis. Indus and TSW have in the past experienced delays in product
development, and there can be no assurance that the Combined Company will not
experience further delays in connection with its current product development
or future development activities. If the Combined Company is unable to develop
and introduce new products, or enhancements to existing products, in a timely
manner in response to changing market conditions or customer requirements, the
Combined Company's business, operating results and financial condition will be
materially and adversely affected. Because the Combined Company will have
limited resources, the Combined Company must effectively manage and properly
allocate and prioritize its product development efforts and its porting
efforts relating to newer products and operating systems. There can be no
assurance that these efforts will be successful or, even if successful, that
any resulting products or operating systems will achieve customer acceptance.
Risks Associated With International Operations. International revenue (from
sales outside the United States and Canada) accounted for approximately 12%,
22% and 23% of TSW's total revenues in fiscal 1995, 1996 and 1997, and for
approximately 17%, 15% and 17% of Indus' total revenues in 1994, 1995 and
1996, respectively. TSW acquired a United Kingdom software firm, SQL Systems
International plc, in October 1994 and an 80% equity interest in the French
software firm, Socotec Maintenance Services, in July 1995, and expects
international sales to continue to become a more significant component of its
business. Indus and TSW currently have sales offices in Europe, Australia and
Asia. International expansion may require the Combined Company to establish
additional foreign operations and hire additional personnel. This may require
significant management attention and financial resources and could adversely
affect the Combined Company's operating margins. To the extent the Combined
Company is unable to effect these additions efficiently and in a timely
manner, its growth, if any, in international sales will be limited, and its
business, operating results and financial condition could be materially and
adversely affected. There can be no assurance that the Combined Company will
be able to maintain or increase international market demand for its products.
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The Combined Company's international business will also involve a number of
additional risks, including lack of acceptance of localized products, cultural
differences in the conduct of business, longer accounts receivable payment
cycles, greater difficulty in accounts receivable collection, seasonality due
to the slow-down in European business activity during the Combined Company's
third fiscal quarter, unexpected changes in regulatory requirements and
royalty and withholding taxes that restrict the repatriation of earnings,
tariffs and other trade barriers, and the burden of complying with a wide
variety of foreign laws. The Combined Company's international sales will be
generated primarily through its international sales subsidiaries and are
expected to be denominated in local currency, creating a risk of foreign
currency translation gains and losses. To the extent profit is generated or
losses are incurred in foreign countries, the Combined Company's effective
income tax rate may be materially and adversely affected. In some markets,
localization of the Combined Company's products will be essential to achieve
market penetration. The Combined Company may incur substantial costs and
experience delays in localizing its products, and there can be no assurance
that any localized product will ever generate significant revenue. There can
be no assurance that any of the factors described herein will not have a
material adverse effect on the Combined Company's future international sales
and operations and, consequently, its business, operating results and
financial condition.
Dependence on Proprietary Technology; Risks of Infringement. The Combined
Company's success is heavily dependent upon its proprietary technology. The
Combined Company will rely on a combination of the protections provided under
applicable copyright, trademark and trade secret laws, confidentiality
procedures and licensing arrangements, to establish and protect its
proprietary rights. As part of its confidentiality procedures, the Combined
Company will generally enter into non-disclosure agreements with its
employees, distributors and corporate partners, and license agreements with
respect to its software, documentation and other proprietary information.
Despite these precautions, it may be possible for unauthorized third parties
to copy certain portions of the Combined Company's products or to reverse
engineer or obtain and use information that the Combined Company regards as
proprietary the Combined Company's products or technology without
authorization, or to develop similar technology independently. Moreover, the
laws of certain countries do not protect the Combined Company's proprietary
rights to the same extent as do the laws of the United States. Furthermore,
the Combined Company has no patents, and existing copyright laws afford only
limited protection. The Combined Company will make source code available for
certain of its products and the provision of such source code may increase the
likelihood of misappropriation or other misuses of the Combined Company's
intellectual property. Accordingly, there can be no assurance that the
Combined Company will be able to protect its proprietary software against
unauthorized third-party copying or use, which could adversely affect the
Combined Company's competitive position.
Indus and TSW are not aware that any of their products infringe the
proprietary rights of third parties. There can be no assurance that a third
party will not assert that the Combined Company's technology violates its
patents in the future. As the number of software products in the industry
increases and the functionality of these products further overlap, the
Combined Company believes that software developers may become increasingly
subject to infringement claims. Any such claims, with or without merit, can be
time consuming and expensive to defend or could require the Combined Company
to enter into royalty and licensing agreements. Such claims might require the
Combined Company to enter into royalty or license agreements. Such royalty or
license agreements, if required, may not be available on terms acceptable to
the Combined Company or at all, which could have a material adverse effect
upon the Combined Company's business, operating results and financial
condition. See "BUSINESS OF INDUS--Proprietary Rights" and "BUSINESS OF TSW--
Proprietary Rights."
Lengthy Sales and Implementation Cycle; Large Order Size. The purchase and
implementation of the Combined Company's software solutions by a customer will
generally involve 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 Combined 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 Combined Company will have no control. In addition,
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following license sales, the implementation of the Combined Company's products
will involve a lengthy process, including customer training and integration of
the Combined Company's products with the customer's existing information
systems. A successful implementation will require a close working relationship
between the Combined 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 risks
of cancellation or delay of such sales.
Dependence on Licensed Technology. Elements of TSW's products, particularly
in its EMPAC workflow engine, are licensed from third parties under license
agreements. The loss of the Combined Company's right to use and license such
technology could limit the Combined Company's ability to successfully market
certain modules of EMPAC. While Indus and TSW believe that the Combined
Company would be able to either license or develop alternatives to such
component technologies, there can be no assurance that the Combined 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.
Dependence on Third Parties. Implementation and development of TSW'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 TSW's products, or the
failure of Microsoft's operating systems to achieve continued market
acceptance, could adversely affect the market for TSW'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
TSW's products, or the failure of Oracle products to achieve continued market
acceptance, could adversely affect the market for TSW'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 TSW's Windows-based components which operate in
conjunction with the Oracle database management system may be adversely
affected. Although TSW'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 TSW will be able to avoid the obsolescence of
its products due to rapid technological change and evolving industry
standards.
Risk of Software Defects; Product Liability. The sale and support of the
Combined Company's products may entail the risk of product liability claims.
The license agreements of Indus and TSW with their respective customers
typically contain provisions designed to limit their exposure to potential
product liability claims. It is possible, however, that the limitation of
liability provisions contained in such license agreements may not be effective
as a result of federal, state or local laws or ordinances or unfavorable
judicial decisions. A successful product liability claim brought against the
Combined Company could have a material adverse effect upon the Combined
Company's business, operating results and financial condition. See "BUSINESS
OF INDUS--Competition," "--Research and Development" and "BUSINESS OF TSW--
Research and Development."
Past and Future Acquisitions. In addition to the Merger, both Indus and TSW
have made acquisitions in the past. Acquisitions of companies, divisions of
companies or products entail numerous risks, including difficulty in
successfully assimilating acquired operations, diversion of management's
attention and loss of key employees of acquired companies. In the past year
Indus has completed one acquisition. In 1994 and 1995, TSW concluded a total
of three acquisitions of companies, divisions of companies or products. The
Combined Company may make additional acquisitions in the future. Products
acquired by Indus and TSW in the past required significant additional
development before they could be marketed and some failed to generate any
revenue for Indus or TSW. Any problems related to acquisitions could have a
material adverse effect on the Combined Company's business, operating results
and financial condition. In addition, future acquisitions by the Combined
Company may result in dilutive issuances of equity securities, incurring
additional debt, large one-time write-offs and the
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creation of goodwill or other intangible assets that could result in
amortization expense. These factors could have a material adverse effect on
the Combined Company's business, operating results and financial condition.
Concentration of Stock Ownership. Upon completion of the Merger, Robert W.
Felton, the President and Chief Executive Officer of Indus, and Warburg, a
shareholder of TSW, will own approximately 32.5% and 39.2%, respectively, of
the Newco Common Stock on a fully diluted basis. As a result, these
stockholders will be able to exercise significant influence over all matters
requiring stockholder approval (in addition to their right to nominate up to
two directors by each), the election of directors and approval of significant
corporate transactions. Such concentration of ownership may also have the
effect of delaying or preventing a change in control of Newco. See "SECURITY
OWNERSHIP OF THE COMBINED COMPANY," "COMPARISON OF RIGHTS OF HOLDERS OF INDUS
COMMON STOCK, TSW COMMON STOCK AND NEWCO COMMON STOCK" and "CERTAIN RELATED
AGREEMENTS."
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THE INDUS SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE OF INDUS MEETING
The Indus Meeting will be held on August 25, 1997 at 8:30 a.m., local time,
at Indus' corporate headquarters located at 60 Spear Street, San Francisco,
California. At the Indus Meeting, shareholders of Indus at the close of
business on the Indus Record Date will be asked to approve and adopt the Indus
Merger Proposal, including the assumption by Newco of the Indus Options, the
Indus Stock Purchase Plan Options, the TSW Options and the TSW Warrants, and
the termination of the Indus Plans. The Reorganization Agreement and the Indus
Merger Agreement are attached hereto as Appendices A-1 and A-2, respectively.
See "THE MERGER" and "THE REORGANIZATION AGREEMENT."
RECORD DATE AND OUTSTANDING SHARES
Only shareholders of record of Indus Common Stock at the close of business
on the Indus Record Date are entitled to notice of and to vote at the Indus
Meeting. As of the close of business on the Indus Record Date, there were
19,159,214 shares of Indus Common Stock outstanding and entitled to vote, held
of record by approximately 250 shareholders. Each Indus shareholder is
entitled to one vote for each share of Indus Common Stock held as of the Indus
Record Date.
VOTING OF PROXIES
The Indus proxy accompanying this Joint Proxy Statement/Prospectus is
solicited on behalf of the Board of Directors of Indus for use at the Indus
Meeting. Indus shareholders are requested to complete, date and sign the
accompanying proxy and promptly return it in the enclosed envelope or
otherwise mail it to Indus. All properly executed proxies received by Indus
prior to the vote at the Indus Meeting that are not revoked will be voted at
the Indus Meeting in accordance with the instructions indicated on the proxies
or, if no direction is indicated, to approve and adopt the Indus Merger
Proposal. An Indus shareholder who has given a proxy may revoke it at any time
before it is exercised at the Indus Meeting, by (i) delivering to the
Secretary of Indus (by any means, including facsimile) a written notice,
bearing a date later than the date of the proxy, stating that the proxy is
revoked, (ii) signing and so delivering a proxy relating to the same shares
and bearing a later date prior to the vote at the Indus Meeting, or (iii)
attending the Indus Meeting and voting in person (although attendance at the
Indus Meeting will not, by itself, revoke a proxy). Please note, however, that
if a shareholder's shares are held of record by a broker, bank or other
nominee and that shareholder wishes to vote at the Indus Meeting, the
shareholder must bring to the Indus Meeting a letter from the broker, bank or
other nominee confirming that shareholder's beneficial ownership of the
shares.
It is not anticipated that any matter not referred to herein will be
presented for action at the Indus Meeting. If any other matters are properly
brought before the Indus Meeting, the persons named in the proxies will have
discretion to vote on such matters in accordance with their best judgment.
VOTE REQUIRED
Approval and adoption of the Indus Merger Proposal requires the affirmative
vote of the holders of a majority of the outstanding shares of Indus Common
Stock entitled to vote at the Indus Meeting. Since the required voted of Indus
shareholders is based upon the number of outstanding shares of Common Stock
rather than upon the shares actually voted in person or by proxy at the Indus
Meeting, the failure of a holder to submit a proxy or to vote in person at the
Indus Meeting (including abstentions and "broker non-votes") will have the
same effect, for purposes of approval of the Indus Merger Proposal, as a vote
against approval and adoption of the Indus Merger Proposal.
On the Indus Record Date, directors and executive officers of Indus as a
group beneficially owned 11,575,368 shares of Indus Common Stock, or
approximately 63.0% of the outstanding shares of Indus Common Stock on such
date. The Indus Subject Shareholders, who beneficially own in the aggregate
60.3% of the shares of outstanding Indus Common Stock, have executed the Indus
Voting Agreement with TSW, pursuant to which they have agreed to vote such
shares in favor of the Indus Merger Proposal. Accordingly, approval of the
Indus Merger Proposal is assured.
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QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Indus Meeting is
a majority of the shares of Indus Common Stock outstanding on the Indus Record
Date. Abstentions will be included in determining the number of shares present
and voting at the Indus Meeting and will have the same effect as votes against
the Indus Merger Proposal. Broker non-votes will have the same effect as votes
against the Indus Merger Proposal.
SOLICITATION OF PROXIES AND EXPENSES
Indus will bear the cost of the solicitation of proxies in the enclosed form
from its shareholders. In addition to solicitation by mail, the directors,
officers and employees of Indus may solicit proxies from shareholders by
telephone, telegram, letter or in person. Following the original mailing of
the proxies and other soliciting materials, Indus will request brokers,
custodians, nominees and other record holders to forward copies of the proxy
and other soliciting materials to persons for whom they hold shares of Indus
Common Stock and to request authority for the exercise of proxies. In such
cases, Indus, upon the request of the record holders, will reimburse such
holders for their reasonable expenses.
APPRAISAL RIGHTS
If the Indus Merger Proposal is approved by the required vote of Indus
shareholders and is not abandoned or terminated, Indus shareholders who vote
against the Indus Merger Proposal will generally not have appraisal rights
with respect to the Merger unless (i) holders of a total of not less than 5%
of the outstanding shares of Indus Common Stock have voted against the Indus
Merger Proposal and have filed demands for payment pursuant to such rights, or
(ii) the dissenting holder's shares of Indus Common Stock are subject to
restrictions on transfer imposed by Indus or by law or regulation, in which
case, such shareholders voting against the Indus Merger Proposal, may by
complying with Sections 1300 through 1312 of the CGCL be entitled to appraisal
rights as described therein. However, it is a condition to the effectiveness
of the Merger that the number of shares eligible to dissent after the Indus
Meeting shall be less than 5% of the outstanding shares of Indus Common Stock.
See "THE MERGER--Appraisal and Dissenters' Rights."
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THE TSW SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE OF TSW MEETING
The TSW Meeting will be held on August 25, 1997 at 11:30 a.m., local time,
at TSW's principal executive offices located at 3301 Windy Ridge Parkway,
Atlanta, Georgia 30339. At the TSW Meeting, shareholders of TSW at the close
of business on the TSW Record Date will be asked to approve and adopt the TSW
Merger Proposal, including the assumption by Newco of the Indus Options, Indus
Stock Purchase Plan Options, TSW Options and the TSW Warrants and the
termination of the TSW Plans. The Reorganization Agreement and the TSW Merger
Agreement are attached hereto as Appendices A-1 and A-3, respectively. See
"THE MERGER" and "THE REORGANIZATION AGREEMENT."
RECORD DATE AND OUTSTANDING SHARES
At the TSW Meeting, holders of shares of TSW Common Stock and TSW Preferred
Stock, will consider and vote upon a proposal to approve and adopt the TSW
Merger Proposal. Only holders of record of TSW Capital Stock at the close of
business on the TSW Record Date have the right to receive notice of and to
vote at the TSW Meeting. As of the close of business on the TSW Record Date,
there were 306,824 shares of TSW Common Stock outstanding and entitled to vote
held of record by 54 shareholders; 1,897,028 shares of TSW Series A Preferred
Stock outstanding and entitled to vote held of record by one shareholder;
393,965 shares of TSW Series B Preferred Stock outstanding and entitled to
vote held of record by one shareholder; 435,540 shares of TSW Series C
Cumulative Preferred Stock outstanding and entitled to vote held of record by
one shareholder; and 216,685 shares of TSW Series D Cumulative Preferred Stock
outstanding and entitled to vote held of record by one shareholder. Each
shareholder is entitled to one vote for each share of TSW Capital Stock held
as of the TSW Record Date, subject to certain limitations on the voting power
of certain shareholders under the TSW Articles.
VOTING OF PROXIES
The TSW proxy accompanying this Joint Proxy Statement/Prospectus is
solicited on behalf of the TSW Board for use at the TSW Meeting. TSW
shareholders are requested to complete, date and sign the accompanying proxy
and promptly return it in the enclosed envelope or otherwise mail it to TSW.
All properly executed proxies received by TSW prior to the vote at the TSW
Meeting that are not revoked will be voted at the TSW Meeting in accordance
with the instructions indicated on the proxies or, if no direction is
indicated, to approve and adopt the TSW Merger Proposal. A TSW shareholder who
has given a proxy may revoke it at any time before it is exercised at the TSW
Meeting, by (i) delivering to the Secretary of TSW (by any means, including
facsimile) a written notice, bearing a date later than the date of the proxy,
stating that the proxy is revoked, (ii) signing and so delivering a proxy
relating to the same shares and bearing a later date prior to the vote at the
TSW Meeting, or (iii) attending the TSW Meeting and voting in person (although
attendance at the TSW Meeting will not, by itself, revoke a proxy).
It is not anticipated that any matter not referred to herein will be
presented for action at the TSW Meeting. If any other matters are properly
brought before the TSW Meeting, the persons named in the proxies will have
discretion to vote on such matters in accordance with their best judgment.
VOTE REQUIRED
Pursuant to the GBCC, approval of the TSW Merger Proposal requires the
affirmative vote of at least a majority of the outstanding shares of TSW
Capital Stock entitled to vote at the TSW Meeting, voting together as a single
class, and a majority of the outstanding shares of each series of TSW
Preferred Stock. Since the required vote of the TSW shareholders is based upon
the number of outstanding shares of TSW Capital Stock rather than upon the
shares actually voted in person or by proxy at the TSW Meeting, the failure by
the holder of any such shares to submit a proxy or to vote in person at the
TSW Meeting (including abstentions) will have the same effect as a vote
against approval and adoption of the TSW Merger Proposal.
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The TSW Subject Shareholders, who beneficially own an aggregate of
approximately 95% of the issued and outstanding TSW Capital Stock (including
all of the outstanding TSW Preferred Stock), have entered into the TSW Voting
Agreement with Indus and Newco, pursuant to which such shareholders have
agreed to vote all shares of TSW Capital Stock held by them in favor of the
TSW Merger Proposal. Taking into account certain restrictions on the voting
rights of holders TSW Capital Stock set forth in the TSW Articles, such
shareholders beneficially own shares of TSW Capital Stock which will enable
them to cast approximately 81% of the votes which may be cast on the TSW
Merger Proposal at the TSW Meeting (including all of the votes entitled to be
cast by holders of TSW Preferred Stock). Accordingly, approval of the TSW
Merger Proposal by the holders of the TSW Capital Stock at the TSW Meeting is
assured.
QUORUM; ABSTENTIONS
The required quorum for the transaction of business at the TSW Meeting is a
majority of the shares of TSW Capital Stock outstanding on the TSW Record
Date, either present in person or represented by proxy. Abstentions will be
included in determining the number of shares present and voting at the TSW
meeting. If an executed TSW proxy is returned and the shareholder has
specifically abstained from voting on any matter, the shares represented by
such proxy will be considered present at the TSW Meeting for purposes of
determining a quorum. Since the required vote of the TSW shareholders is based
upon the number of outstanding shares of TSW Capital Stock, abstentions will
have the same effect as a vote against approval and adoption of the TSW Merger
Proposal.
SOLICITATION OF PROXIES AND EXPENSES
TSW will bear the cost of the solicitation of proxies in the enclosed form
from its shareholders. In addition to solicitation by mail, the directors,
officers and employees of TSW may solicit proxies from shareholders by
telephone, telegram, letter or in person. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for out-
of-pocket expenses incurred in connection with such solicitation.
APPRAISAL RIGHTS
Under the GBCC, TSW shareholders who comply with certain procedural
requirements of the GBCC are entitled to assert dissenters' rights with
respect to such shareholders' shares upon the Merger. Each record holder of
shares of TSW Common Stock who wishes to assert dissenters' rights (i) must
deliver to TSW, before the TSW Merger Proposal is voted upon at the TSW
Meeting, written notice of his intent to demand payment for his dissenters'
rights and (ii) must not vote in favor of the TSW Merger Proposal. However, it
is a condition to the effectiveness of the Merger that the number of shares
eligible to dissent after the TSW Meeting shall be less than 5% of the
outstanding shares of TSW Capital Stock. See "THE MERGER--Appraisal and
Dissenters' Rights."
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THE MERGER
GENERAL
The Reorganization Agreement provides for, among other things, the merger of
Indus Sub with and into Indus, merger of TSW Sub with and into TSW and the
assumption by Newco of the Indus Options, the Indus Stock Purchase Plan
Options, the TSW Options and the TSW Warrants. As a result of the Indus
Merger, Indus will become a wholly-owned subsidiary of Newco, and as a result
of the TSW Merger, TSW will become a wholly-owned subsidiary of Newco. The
discussion in this Joint Proxy Statement/Prospectus of the Merger and the
description of the principal terms of the Reorganization Agreement, the Indus
Merger Agreement and the TSW Merger Agreement and the other transactions
contemplated thereby are subject to and qualified in their entirety by
reference to the Reorganization Agreement, the Indus Merger Agreement and the
TSW Merger Agreement, copies of which are attached to this Joint Proxy
Statement/Prospectus as Appendices A-1, A-2 and A-3, respectively, and
incorporated herein by reference.
Upon consummation of the Merger, the members of Newco's Board of Directors
will consist of Robert W. Felton, Richard W. MacAlmon and Alan G. Merten, who
are currently members of the Indus Board, Edward R. Koepfler, who is currently
Senior Vice President and Chief Operating Officer of Indus and Christopher R.
Lane, John W. Blend, III, William H. Janeway and Joseph P. Landy, who are
currently members of the TSW Board. The executive officers of Newco will be as
set forth in "MANAGEMENT OF THE COMBINED COMPANY--Executive Officers and
Directors." The shareholders of Indus and of TSW will become stockholders of
Newco, and their rights will be governed by Newco's Certificate of
Incorporation and Bylaws, as well as the DGCL.
BACKGROUND OF THE MERGER
In July 1995, prior to Indus' initial public offering, a preliminary
discussion occurrred concerning a possible business combination between Indus
and TSW. These talks did not advance past the preliminary stage, no financial
terms were proposed, and the talks were discontinued shortly after they began.
In March 1997, following a review of TSW's strategic and financing options,
the TSW Board determined to commence the process of conducting an initial
public offering of TSW shares (the "TSW IPO"). Shortly thereafter, TSW
selected Alex. Brown to serve as lead underwriter for the IPO, and on May 6,
1997, TSW filed a Registration Statement on Form S-1 (the "TSW S-1"). The TSW
IPO has not been completed, and if the Merger is consummated, will not be
completed.
In April 1997, Mr. Felton contacted John R. Oltman, Chairman of the TSW
Board, to inquire whether TSW might be interested in discussing a possible
business combination between the two companies. These contacts were made,
prior to any determination that a consolidation would be beneficial, on the
basis of the belief that a combination of the two companies might yield
strategic benefits. The parties agreed that TSW would review Indus' publicly
available information and Indus would review a preliminary draft of the TSW S-
1 to determine whether further negotiations would be in each party's
interests, and a meeting was scheduled for April 15, 1997.
On April 15, 1997, Messrs. Felton, Lane and Oltman met to discuss the
potential strategic merits of a business combination. Based on their
discussion and on the information contained in Indus' publicly available
information and in the draft TSW S-1, Messrs. Felton and Lane agreed to
consult with their respective management teams and Boards of Directors with a
view to continuing the discussions.
From April 16 through May 5, 1997, senior management of TSW and
representatives of Warburg held exploratory discussions with senior management
of Indus concerning possible structures for a business combination of TSW and
Indus, the potential benefits and opportunities to be created by such a
combination, as well as the potential costs of and obstacles to such a
combination.
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On May 6, 1997, at a regularly scheduled meeting of the Indus Board, Mr.
Felton informed the Board of the contacts with TSW. Cowen, which was retained
on this date to act as Indus' financial advisor in connection with the
transaction, discussed with the Indus Board the potential financial and
business impact of the potential business combination. The Board authorized
Mr. Felton to continue discussions with TSW beyond the exploratory stage.
On May 7, 1997, Indus and TSW executed a mutual nondisclosure agreement,
allowing for the exchange of confidential information. On May 8, TSW retained
Alex. Brown to provide financial advice in connection with the potential
transaction between TSW and Indus.
From May 7 through June 4, 1997, Indus' and TSW's respective legal and
financial advisors conducted extensive legal and financial due diligence of
the other party. During this period, representatives of Cowen and
representatives of Alex. Brown held a series of meetings and telephone
conversations to discuss potential terms and financial aspects of the proposed
transaction, and senior management of TSW and representatives of Warburg held
a series of meetings and telephone conversations with senior management of
Indus to discuss and negotiate the structure and, with the advice of their
financial advisors, the financial terms of the proposed transaction, including
the relative post-merger interests of the former Indus shareholders and former
TSW shareholders in the Combined Company. Also during this period, Indus' and
TSW's legal representatives drafted and negotiated the terms of the
Reorganization Agreement and the other related agreements.
On June 3, 1997, the Indus Board held a special meeting to discuss the
status of negotiations and due diligence. On June 5, 1997, the Indus Board
convened to consider and vote upon the proposed merger and related
transactions. At this specially scheduled meeting, management reported on the
terms of the proposed merger; management responded to questions regarding
various aspects of the proposed merger; Indus' legal counsel reviewed the
proposed definitive terms of the Reorganization Agreement and related
agreements; Cowen made a presentation to the Indus Board regarding the
financial terms of the Merger, and delivered to the Indus Board its oral
opinion (subsequently confirmed in writing as of the same date) with respect
to the financial terms of the Merger, taken as a whole, as of such date; and
the Indus Board, with all directors present, unanimously approved the
Reorganization Agreement and the related transactions and agreements.
On June 4, 1997, the TSW Board held a special telephonic meeting at which
Mr. Lane and senior management of TSW reviewed the reasons for the potential
benefits and risks of the proposed Merger; TSW's legal advisors reviewed the
terms of the Reorganization Agreement and the other related agreements and
also reviewed the TSW Board's obligations with respect to its decisions to
approve the Merger and the related transactions; and TSW's financial advisors
made a presentation of their financial analysis of the proposed transaction.
Following extensive discussions of the factors described below under "--
Reasons for the Merger," the meeting was adjourned until the next day. On June
5, 1997, the TSW Board of Directors reconvened its meeting. At this meeting,
senior management and TSW's legal and financial advisors confirmed that there
had been no significant change to the terms of the Merger or to the
documentation discussed and reviewed with the TSW Board of Directors on June
4, and Alex. Brown delivered its opinion dated June 5, 1997 that, as of such
date, the TSW Number was fair from a financial point of view to the TSW
Securityholders, taken as a whole. (see "--Opinions of Financial Advisors--
Opinion of Alex. Brown"). Following further consideration of the factors
described below under "--Reasons for the Merger," the TSW Board of Directors,
with all directors present, unanimously approved and authorized the execution
of the Reorganization Agreement and the other related agreements.
On June 5, 1997, following final approval by the Indus Board and the TSW
Board, each company executed and delivered the Reorganization Agreement, which
was announced immediately thereafter by issuance of a joint press release.
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REASONS FOR THE MERGER
Joint Reasons for the Merger
Each of the Indus Board and the TSW Board unanimously recommends that the
shareholders of their respective companies vote "FOR" the approval and
adoption of the Indus Merger Proposal or TSW Merger Proposal, as the case may
be, for the reasons set forth below.
Indus and TSW have identified a number of potential mutual benefits of the
Merger that they believe will contribute to the success of the Combined
Company. These potential benefits include:
. The integration of each company's software solutions will create a
Combined Company with the ability to provide solutions to enterprise
customers of all sizes.
. The higher visibility of the Combined Company will enhance its
competitive position with respect to larger competitors offering various
solutions.
. The combination will significantly increase the sales and marketing
capabilities of each company, facilitating future growth.
. The Combined Company may create significant cost synergies and economies
of scale in operations, although the management of the Combined Company
has not yet fully analyzed the potential synergies and economies of scale
that may result from the merger, and there can be no assurance that such
synergies or economies of scale will be achieved by the Combined Company.
In addition to the joint reasons discussed above, the Board of Directors of
each company also considered additional factors concerning the Merger, which
are described below.
Indus' Reasons for the Merger
The Board of Directors of Indus believes that the following are additional
reasons for shareholders of Indus to vote FOR approval and adoption of the
Indus Merger Proposal:
.The Merger will provide Indus entry into new vertical industry segments.
. TSW's strength in international sales, particularly in Europe and Asia,
will enhance Indus' current international presence.
. The Merger will allow the Combined Company to more fully realize the
benefits of Indus' regional services infrastructure.
. Access to TSW's technology will enhance the product offering and hasten
the product development cycle for a broadened product suite.
Recommendation of the Indus Board
In the course of its deliberations, the Indus Board reviewed with Indus'
management a number of other factors relevant to the Merger. In particular,
the Indus Board considered, among other things: (i) the proposed terms of the
Merger; (ii) historical information concerning Indus' and TSW's respective
businesses, prospects, financial performance, financial condition, operations
and technology; (iii) Indus' management's view of the financial condition,
results of operations and businesses of Indus and TSW before and after giving
effect to the Merger; (iv) valuations paid in other comparable merger and
acquisition transactions in the software industry; (v) an analysis of the
respective contributions to revenue, operating income and net income of the
combined companies; (vi) the compatibility of the respective managements and
corporate cultures of Indus and TSW; (vii) the financial presentation by
Cowen, including its opinion that as of the date of the opinion the financial
terms of the Merger, taken as a whole, were fair to Indus from a financial
point of view; (viii) the expectation that the Merger can be accounted for as
a pooling of interests; and (ix) reports from management and legal advisors as
to the results of their due diligence investigations of TSW.
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The Indus Board also considered certain risks arising in connection with the
Merger, including (i) the potential disruption of Indus' business that might
result from employee and customer uncertainty and lack of focus following
announcement of the Merger in connection with integrating the operations of
Indus and TSW; (ii) the possibility that the Merger might not be consummated,
(iii) the effects of the public announcement of the Merger on Indus' sales and
operating results, its ability to attract and retain key management, marketing
and technical personnel and the progress of certain of its development
projects; (iv) the risk that the announcement of the Merger could result in
decisions by customers to defer purchases of products of Indus or TSW; (v) the
substantial charges to be incurred due to the Merger, primarily in the third
quarter of the year; (vi) the risk that the other benefits sought to be
achieved by the Merger will not be achieved; and (vii) other risks described
herein under "RISK FACTORS." In the view of the Indus Board, these
considerations were not sufficient, either individually or in the aggregate,
to outweigh the advantages of the proposed Merger in the manner in which it
was proposed.
In view of the wide variety of factors, both positive and negative,
considered by the Indus Board, the Indus Board did not find it practical to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered. After taking into consideration all of the factors set
forth above, the Indus Board believes that the Merger is in the best interests
of Indus and its shareholders and continues to recommend approval and adoption
of the Indus Merger Proposal by the Indus shareholders.
Recommendation of the TSW Board; TSW's Reasons for the Merger
The TSW Board unanimously has approved the Reorganization Agreement,
unanimously has determined that the Merger is fair to, and in the best
interests of, TSW and its shareholders, and unanimously recommends that TSW
shareholders vote "FOR" approval and adoption of the Reorganization Agreement.
In reaching its determinations and making its recommendations with respect to
the Merger, the TSW Board considered the reasons for the Merger set forth
above under "--Joint Reasons for the Merger" and, among other things, the
following factors: (i) historical information concerning TSW's and Indus'
respective businesses, prospects, financial performance and condition,
operations, technology, management and competitive position, including public
reports concerning results of operations during the most recent fiscal year
and fiscal quarter for each company filed with the Commission; (ii) TSW
management's view as to the financial condition, results of operations and
businesses of Indus and TSW before and after giving effect to the Merger based
on management due diligence and publicly available financial information;
(iii) current financial market conditions and historical market prices,
volatility and trading information with respect to Indus Common Stock; (iv)
considerations of the strategic alternatives available to TSW and of TSW's
future prospects as an independent company, including the prospects for TSW's
proposed initial public offering; (v) the terms and conditions of the
Reorganization Agreement (including the consideration to be received by
holders of TSW securities in exchange for such securities, the representations
and warranties, covenants, conditions to the parties' obligations, and
termination provisions thereof), and the related agreements, including the
Nomination Agreement, Voting Agreement and Registration Rights Agreement,
which were the product of extensive, arms' length negotiations; (vi) the
potential impact of the Merger on TSW's customers and employees; (vii) reports
from TSW management and its legal and financial advisors as to the results of
their due diligence investigation of Indus; (viii) the presentations made by
Alex. Brown at the June 4 and June 5, 1997 meetings of the TSW Board and the
opinion of Alex. Brown dated June 5, 1997 that, as of such date, the TSW
Number was fair, from a financial point of view, to the TSW Securityholders,
taken as a whole (a copy of the Alex. Brown Opinion is attached as Appendix B-
2 hereto, and TSW shareholders are urged to carefully review the Alex. Brown
Opinion); (ix) the expectation that (A) the Merger will be tax-free to holders
of TSW securities and (B) the Merger will be accounted for as a pooling-of-
interests, which would result in no goodwill being created on the books of the
Combined Company, and the provisions of the Reorganization Agreement relating
to the satisfaction of such expectations; and (x) the fact that Warburg, TSW's
largest shareholder, and certain members of TSW's management including Messrs.
Oltman, Lane and Blend, supported the transaction and agreed to vote their
shares in favor of the Merger, thereby assuring that the shareholder approval
of the Merger would be obtained (see "CERTAIN RELATED AGREEMENTS--Voting
Agreements"). The TSW Board took into account that the shareholders who had
committed to vote in
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favor of the Merger were receiving the same consideration for their shares as
TSW's other shareholders. The TSW Board also took into account that TSW would
have representation on the Board of the Combined Company following the Merger.
The TSW Board also identified and considered a number of potentially
negative factors in its deliberations concerning the Merger, including, but
not limited to: (i) the risk that the potential benefits sought in the Merger
might not be fully realized; (ii) the possibility that the Merger would not be
consummated and the effect of the public announcement of the Merger on (a)
TSW's sales and operating results, (b) TSW's ability to attract and retain key
management, marketing and technical personnel, and progress of certain
development projects; (iii) the potential dilutive effect of the issuance of
Newco Common Stock in the Merger, (iv) the substantial charges to be incurred,
primarily in the quarter in which the Merger is completed, in connection with
the Merger, including costs of integrating the businesses and transaction
expenses arising from the Merger; (v) the risk that despite the efforts of the
Combined Company, key technical and management personnel may not remain
employed by the Combined Company; (iv) the difficulty of managing separate
operations at different geographic locations; and (vii) the other risks
described under "RISK FACTORS" herein. The TSW Board believed that the
potential benefits of the Merger outweighed such risks.
The foregoing discussion addresses all the material information and factors
considered by the TSW Board in its consideration of the Merger. In view of the
variety of factors and the amount of information considered, the TSW board did
not find it practicable to provide specific assessments of, quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination. The determination to approve the Merger was made
after consideration of all the factors taken as a whole. In addition,
individual members of the TSW board may have given different weights to
different factors. For discussion of the interest of certain members of TSW's
management, the TSW Board, and Warburg in the Merger, see "--Interests of
Certain Persons in the Merger."
OPINIONS OF FINANCIAL ADVISORS
Opinion of Cowen & Company
Pursuant to an engagement letter dated May 6, 1997 (the "Cowen Engagement
Letter"), the Indus Board retained Cowen to serve as its financial advisor
with respect to the Merger. As part of this assignment, Cowen was asked to
render an opinion to the Indus Board as to the fairness, from a financial
point of view, to Indus of the financial terms of the Merger. The amount of
consideration was determined through negotiations between Indus and TSW and
was not determined by Cowen.
On June 5, 1997, Cowen delivered certain of its written analyses and its
oral opinion to the Indus Board (subsequently confirmed in writing as of the
same date) to the effect that, as of June 5, 1997, the financial terms of the
Merger pursuant to the Reorganization Agreement were fair, from a financial
point of view, to Indus.
THE FULL TEXT OF COWEN'S WRITTEN OPINION DATED JUNE 5, 1997 (THE "COWEN
OPINION"), IS ATTACHED HERETO AS APPENDIX B-1 AND IS INCORPORATED HEREIN BY
REFERENCE. HOLDERS OF INDUS COMMON STOCK ARE URGED TO READ THE OPINION IN ITS
ENTIRETY FOR THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS
CONSIDERED AND LIMITS OF THE REVIEW BY COWEN. THIS SUMMARY OF THE WRITTEN
OPINION OF COWEN SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION. COWEN'S ANALYSES AND OPINION WERE PREPARED FOR
AND ADDRESSED TO THE INDUS BOARD AND ARE DIRECTED ONLY TO THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE FINANCIAL TERMS OF THE MERGER PURSUANT TO THE
REORGANIZATION AGREEMENT AND DO NOT CONSTITUTE AN OPINION AS TO THE MERITS OF
THE MERGER OR A RECOMMENDATION TO ANY HOLDERS OF INDUS COMMON STOCK AS TO HOW
TO VOTE AT THE INDUS MEETING.
Cowen was selected by the Indus Board as its financial advisor, and to
render an opinion to the Indus Board, because Cowen is a nationally recognized
investment banking firm and because certain principals of Cowen have
substantial experience in transactions similar to the Merger and are familiar
with Indus and its businesses. As part of its investment banking business,
Cowen is regularly engaged in the valuation of businesses and their
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securities in connection with mergers and acquisitions and valuations for
corporate and other purposes. On February 29, 1996, Cowen acted as lead
manager in the initial public offering of Indus, for which Cowen received a
customary fee. In addition, in the ordinary course of its business, Cowen and
its affiliates trade the equity securities of Indus for their own account and
for the accounts of their customers, and accordingly, may at any time hold a
long or short position in such securities.
In arriving at its opinion, Cowen (a) reviewed certain information of a
business and financial nature regarding Indus, obtained by Cowen through
publicly available filings of Indus with the Commission or furnished to Cowen
by management of Indus, including consolidated financial statements for the
fiscal years ended December 31, 1993, 1994, 1995 and 1996 and the fiscal
quarter ended March 31, 1997 and certain projected financial data and
operating data for the fiscal years ending December 31, 1997 and 1998,
prepared by the management of Indus based on third-party research reports, (b)
reviewed certain information of a business and financial nature regarding TSW,
furnished to Cowen by management of TSW, including consolidated financial
statements for the fiscal years ended March 31, 1995, 1996 and 1997 and
certain projected financial data and operating data for the fiscal years
ending March 31, 1998 and 1999 prepared by management of TSW (the "TSW
Management Projections"), and, in consultation with management of Indus and
with the consent of the Indus Board, adjusted the financial projections of TSW
to reflect, based upon review of certain assumptions utilized by certain of
the Selected Companies (as defined below) including assumptions related to
revenue growth rates and operating margins as indicated in third-party
research reports, more conservative assumptions (the "TSW Conservative
Projections") and (c) discussed with Indus' management Indus' competitive
position and current and anticipated future conditions in the enterprise
software industry. Cowen held meetings and discussions with representatives of
the management of Indus and TSW to discuss the business, operations,
historical financial results and future prospects of Indus, TSW and the
combined company. In addition, Cowen (i) reviewed the June 3, 1997 draft of
the Reorganization Agreement; (ii) compared certain financial and stock market
information regarding Indus and TSW with similar information regarding certain
other publicly traded companies Cowen deemed relevant; (iii) considered the
financial terms, to the extent publicly available, of selected recent business
transactions deemed to be comparable in whole or in part to the Merger; (iv)
analyzed the potential financial effects of the Merger and pro forma earnings
in the combined company to be "owned" by the holders of shares of Indus Common
Stock; and (v) reviewed historical market prices and trading volumes of Indus
Common Stock from February 29, 1996 to June 4, 1997 and compared those trading
histories with those of other companies deemed relevant. The TSW Conservative
Projections were used to provide the Indus Board with additional information
regarding the potential sensitivity of the TSW Management Projections to
changes in certain of the assumptions relied upon in the TSW Management
Projections. Cowen also reviewed other publicly available information and
conducted such other studies, analyses, inquiries and investigations as it
deemed appropriate. Cowen did not consider the prospect of alternate
transactions involving Indus.
Cowen assumed and relied, upon the advice of Indus' management and with the
consent of the Indus Board, without independent verification, upon the
accuracy and completeness of the financial and other information that was
available to it from public sources, that was provided to it by Indus and TSW
or their respective representatives, or that was otherwise reviewed by it.
Cowen did not assume any responsibility for independent verification of any
such information, including any historical or projected financial information.
In addition, with respect to the stand-alone financial projections furnished
to Cowen by Indus' management, the TSW Management Projections furnished by
TSW's management and the financial pro forma projections for the combined
company furnished by the managements of Indus and TSW jointly, Cowen also
assumed, with the consent of the Indus Board, the attainability of the
financial results therein and that such projections were reasonably prepared
and, in the case of the TSW Management Projections, that they were prepared on
bases reflecting the best currently available estimates and judgments of TSW's
management as to the future financial performance of TSW. Cowen assumed, with
the consent of the Indus Board, that all such projections, including the TSW
Conservative Projections, provide a reasonable basis upon which it could form
its opinion. Because such projections are inherently subject to uncertainty,
none of Indus, TSW, Cowen or any other person assumes responsibility for their
accuracy. Cowen did not make any independent valuation or appraisal of the
assets or liabilities of Indus or TSW, nor has Cowen been furnished with any
such appraisals. Cowen made no independent
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investigations of any legal matters affecting Indus or TSW. Cowen assumed that
there have been no material changes in the assets, financial condition,
results of operation, business or prospects of Indus or TSW since the date of
the last financial statements received by Cowen. Cowen's opinion was
necessarily based on economic, market, financial and other conditions as in
effect on, and the information made available to it as of June 5, 1997. It
should be understood that, although developments subsequent to June 5, 1997
may affect its opinion, Cowen does not have any obligation to update, revise
or reaffirm its opinion.
The following is a summary of certain financial analyses performed by Cowen
to arrive at its opinion. Cowen performed certain procedures, including each
of the financial analyses described below, and reviewed with the management of
Indus the assumptions on which such analyses were based and other factors,
including the historical and projected financial results of Indus and TSW. No
limitations were imposed by the Indus Board with respect to the investigations
made or procedures followed by Cowen in rendering its opinion.
Analysis of Certain Transactions
Cowen reviewed the financial terms, to the extent publicly available, of
forty-five selected transactions (collectively, the "Selected Transactions")
involving the acquisition of companies in the enterprise software industry,
which were announced or completed since February 1995. Cowen reviewed the
market capitalization of common stock plus total debt less cash and
equivalents ("Enterprise Value") paid in the Selected Transactions as a
multiple of latest reported twelve month ("LTM") revenue, earnings before
interest expense, income, taxes, depreciation, and amortization ("EBIDTA") and
earnings before interest expense and income taxes ("EBIT") and also examined
the multiples of equity value paid in the Selected Transactions to LTM
earnings.
Such analyses indicated that (i) on the basis of the Enterprise Value paid,
the Selected Transactions had mean and median valuations of 5.6 and 3.0 times
LTM revenue, 30.6 and 28.2 times LTM EBITDA and 37.7 and 18.8 times LTM EBIT,
and (ii) on the basis of equity value paid, the Selected Transactions had mean
and median valuations of 44.2 and 24.5 times LTM earnings.
The corresponding multiple of TSW's LTM revenue implied by Indus' offer is
4.5 times. In conducting its analyses, Cowen noted that TSW's LTM EBITDA, LTM
EBIT and LTM earnings are negative.
Although the Selected Transactions were used for comparison purposes, none
of such transactions is directly comparable to the Merger, and none of the
companies in such transactions are directly comparable to Indus or TSW.
Accordingly, an analysis of the results of such a comparison is not purely
mathematical but instead involves complex considerations and judgments
concerning differences in historical and projected financial and operating
characteristics of the companies involved and other factors that could affect
the acquisition value of such companies or TSW to which they are being
compared.
Analysis of Certain Publicly Traded Companies
To provide contextual data and comparative market information, Cowen
compared selected historical operating and financial ratios implied by Indus'
offer for TSW to the corresponding data and ratios of certain other companies
(the "Selected Companies") whose securities are publicly traded and which
Cowen believes have operating, market valuation and trading valuations similar
to what might be expected of TSW. These companies included: Applix, Inc.,
Aspen Technology, Inc., Dendrite International Inc., Oracle Corporation,
Pegasystems, Inc., PeopleSoft, Inc., Project Software & Development, Inc.,
Simulation Sciences Inc., Wonderware Corporation, Cambridge Technology
Partners, Inc. and Mastech Corporation. Such data and ratios included the
Enterprise Value of such Selected Companies as multiples of sales, EBITDA and
EBIT for the LTM period, and the market capitalization of common stock of such
Selected Companies as a multiple of the book value. Cowen also examined the
ratios of the current prices to the LTM earnings per share ("EPS") of the
Selected Companies, estimated 1997 calendar year EPS (as estimated by First
Call) and estimated EPS for the following calendar year (as estimated by First
Call) for these companies.
Such analysis indicated that, for the Selected Companies, (i) the mean and
median values of Enterprise Value as a multiple of LTM sales, EBITDA and EBIT
were 5.3 and 2.8 times, 28.8 and 24.5 times and 31.9 and
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27.1 times, respectively; (ii) the mean and median values of market
capitalization of common stock as a multiple of the book value were 7.7 and
6.9 times and (iii) the mean and median values of price per share as a
multiple of LTM EPS were 32.7 and 30.7 times.
The corresponding multiple of TSW's LTM revenue implied by Indus' offer is
4.5 times. In addition, Cowen noted that the corresponding multiple of the
estimated TSW EPS, based on the TSW Management Projections, for the following
calendar year for TSW implied by Indus' offer is below the mean and median
multiples for the Selected Companies. Cowen also noted that the corresponding
multiple of the estimated TSW EPS, based on the TSW Conservative Projections,
for the following calendar year for TSW implied by Indus' offer is above the
mean and median multiples for the Selected Companies, but is within the range
of multiples for the Selected Companies. In conducting its analyses, Cowen
noted that TSW's LTM EBITDA, LTM EBIT, LTM earnings and book value are
negative.
Although the Selected Companies were used for comparison purposes, none of
such companies is directly comparable to TSW. Accordingly, an analysis of the
results of such a comparison is not purely mathematical but instead involves
complex considerations and judgments concerning differences in historical and
projected financial and operating characteristics of the Selected Companies
and other factors that could affect the public trading value of the Selected
Companies or the company to which they are being compared.
Pro Forma Earnings Analysis
Cowen analyzed the potential effect of the Merger on the projected combined
income statement of Indus and TSW for Indus' fiscal year ending December 31,
1998. This analysis was based on pro forma projections for the combined
company prepared by the managements of Indus and TSW jointly. This analysis
concluded that the Merger would result in a combined company pro forma
projected net income for the calendar year ending 1998 that would be slightly
dilutive on a per share basis to the current third-party research estimates
for Indus' calendar year 1998 EPS. This analysis is based on a number of
assumptions, including the cost of integration and prevailing interest rates.
Contribution Analysis
Cowen analyzed the respective contributions of calendar year 1996 and
estimated calendar year 1997 and 1998 revenues, operating income and net
income of Indus and TSW to the combined company based upon the historical and
projected financial results of Indus and TSW provided by managements of Indus
and TSW, respectively. This analysis showed that TSW would contribute to the
combined company approximately 43.8%, 47.0% and 47.6% of revenues, 0%, 29.5%
and 48.2% of operating income and 0%, 21.3% and 45.7% of net income, in each
case for calendar years 1996, 1997 and 1998, respectively. Based on the TSW
Conservative Projections, this analysis showed that TSW would contribute to
the combined company approximately 44.4% and 43.8% of revenues, 26.9% and
36.9% of EBIT, and 17.9% and 33.3% of net income, in each case for calendar
years 1997 and 1998, respectively.
Discounted Cash Flow Analysis
Cowen estimated the range of values for TSW based upon the discounted
present value of the projected after-tax free cash flows of TSW for the
calendar years ended December 31, 1997 through December 31, 2001, and of the
terminal value of TSW at December 31, 2001, based upon multiples of year 2001
revenue. After-tax cash flow was calculated by taking projected EBIT, adding
to such amount projected depreciation and amortization and subtracting from
such amount projected taxes, capital expenditures, changes in working capital
and changes in other assets and liabilities. This analysis was based upon the
TSW Management Projections for calendar years ending December 31, 1997 and
December 31, 1998 and extensions of such projections prepared by Cowen for the
calendar years ending December 31, 1999, 2000 and 2001 using the following
assumptions: (i) annual revenue growth rate of 35% applied to the calendar
year 1998 revenues provided in the TSW Management Projections and applied to
each subsequent calendar year revenue through the calendar year ending
December 31, 2001 and (ii) gross margin percentages, operating margin
percentages and depreciation and
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amortization as a percentage of revenues held constant from percentage margins
indicated in the TSW Management Projections for the calendar year ending
December 31, 1998. In performing this analysis, Cowen utilized discount rates
ranging from 20.0% to 30.0%, which were selected based on the estimated
industry weighted average cost of capital. Cowen utilized terminal multiples
of revenue ranging from 3.0 times to 5.0 times, these multiples approximating
the general median and mean multiples for the Selected Transactions. Utilizing
this methodology, TSW's equity value ranged from $194.2 million to $577.2
million.
Stock Trading History
Cowen reviewed the historical market prices and trading volumes of Indus
Common Stock from February 29, 1996 (the date of the initial public offering
of Indus Common Stock) to June 4, 1997 (the last trading day prior to
announcement of the Merger). Cowen also compared Indus' closing stock price
with an index based on the Selected Companies. This information was presented
solely to provide the Indus Board with background information regarding the
stock prices of Indus over the period indicated. Cowen noted that over the
indicated periods the high and low prices for shares of Indus Common Stock
were $25.75 and $13.00, respectively.
The summary set forth above does not purport to be a complete description of
the analyses performed by Cowen. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant
methods of financial analyses and the application of these methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. Cowen did not
attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, notwithstanding the separate factors
summarized above, Cowen believes, and has advised the Indus Board, that its
analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the process underlying its
opinion. In performing its analyses, Cowen made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of Indus and TSW. These analyses
performed by Cowen are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. In addition, analyses relating to the value of businesses do
not purport to be appraisals or to reflect the prices at which businesses or
securities may actually be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty and none of Indus, TSW, Cowen or
any other person assumes responsibility for their accuracy. As mentioned
above, the analyses supplied by Cowen and its opinion were among several
factors taken into consideration by Indus in making its determination to enter
into the Reorganization Agreement. The analyses of Cowen and its opinion
should not be considered as determinative of the decision of Indus to enter
into the Reorganization Agreement.
Pursuant to the Cowen Engagement Letter, Indus has agreed to pay certain
fees to Cowen for its financial advisory services provided in connection with
the Merger. Indus has paid Cowen a non-refundable retainer fee of $75,000. If
the Merger is consummated, Cowen will be entitled to receive a transaction fee
equal to approximately 0.72% of the aggregate consideration to the TSW
Securityholders in the Merger, depending on the actual amount of such
aggregate consideration (against which transaction fee the retainer fee will
be credited) payable upon consummation of the Merger. Additionally, Indus has
agreed to reimburse Cowen for its out-of-pocket expenses (including the
reasonable fees and expenses of its counsel) incurred or accrued during the
period of or in connection with Cowen's engagement. Indus has also agreed to
indemnify Cowen against certain liabilities, including liabilities under the
federal securities laws, relating to or arising out of services performed by
Cowen as financial advisor to the Indus Board in connection with the Merger,
unless it is finally judicially determined that such liabilities arose out of
Cowen's gross negligence or willful misconduct. The terms of the fee
arrangement with Cowen, which are customary in transactions of this nature,
were negotiated at arm's length between Indus and Cowen, and the Indus Board
was aware of such arrangement, including the fact that a significant portion
of the aggregate fee payable to Cowen is contingent upon consummation of the
Merger.
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Opinion of Alex. Brown, Financial Advisor to TSW
TSW retained Alex. Brown on May 8, 1997 to act as TSW's financial advisor in
connection with the Merger, including rendering its opinion to the Board of
Directors of TSW as to the fairness, from a financial point of view, of the
TSW Number to the TSW Securityholders, taken as a whole.
At the June 4 and June 5, 1997 meetings of the TSW Board, representatives of
Alex. Brown made a presentation with respect to the Merger and at the June 5,
1997 meeting Alex. Brown rendered to the Board its opinion that, as of such
date, and subject to the assumptions made, matters considered and limitations
set forth in such opinion and summarized below, the TSW Number was fair, from
a financial point of view, to the TSW Securityholders, taken as a whole. No
limitations were imposed by the Board upon Alex. Brown with respect to the
investigations made or procedures followed by it in rendering its opinion. The
amount of consideration was determined through negotiations between Indus and
TSW and was not determined by Alex. Brown.
THE FULL TEXT OF ALEX. BROWN'S WRITTEN OPINION DATED JUNE 5, 1997 (THE
"ALEX. BROWN OPINION"), WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED
HERETO AS APPENDIX B-2 AND IS INCORPORATED HEREIN BY REFERENCE. TSW
SHAREHOLDERS ARE URGED TO READ THE ALEX. BROWN OPINION IN ITS ENTIRETY. THE
ALEX. BROWN OPINION IS DIRECTED TO THE BOARD, ADDRESSES ONLY THE FAIRNESS OF
THE TSW NUMBER TO THE TSW SECURITYHOLDERS, TAKEN AS A WHOLE, FROM A FINANCIAL
POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY TSW SHAREHOLDER
AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE TSW MEETING. THE ALEX. BROWN
OPINION WAS RENDERED TO THE TSW BOARD FOR ITS CONSIDERATION IN DETERMINING
WHETHER TO APPROVE THE MERGER AGREEMENT. THE DISCUSSION OF THE ALEX. BROWN
OPINION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE ALEX. BROWN OPINION.
In connection with the Alex. Brown Opinion, Alex. Brown reviewed certain
publicly available financial information and other information concerning TSW
and Indus and certain internal analyses and other information furnished to it
by TSW and Indus. Alex. Brown also held discussions with the members of the
senior managements of TSW and Indus regarding the businesses and prospects of
their respective companies and the joint prospects of a combined company
including potential cost savings which may be realized. In addition,
Alex. Brown (i) reviewed the reported prices and trading activity for the
common stock of Indus, (ii) compared certain financial and (in the case of
Indus) stock market information for TSW and Indus with similar information for
certain other companies whose securities are publicly traded, (iii) reviewed
the financial terms of certain recent business combinations, (iv) reviewed the
financial terms of the Merger Agreement and certain related documents, and (v)
performed such other studies and analyses and considered such other factors as
it deemed appropriate.
In conducting its review and arriving at its opinion, Alex. Brown assumed
and relied upon, without independent verification, the accuracy, completeness
and fairness of the information furnished to or otherwise reviewed by or
discussed with it for purposes of rendering its opinion. With respect to the
information relating to the prospects of TSW and Indus, Alex. Brown assumed
that such information reflected the best currently available judgments and
estimates of the respective managements of TSW and Indus. Alex. Brown assumed,
with the consent of TSW, that the Merger will qualify for pooling-of-interests
accounting treatment and as a tax-free transaction for federal income tax
purposes. Alex. Brown did not make and it was not provided with an independent
evaluation or appraisal of the assets of TSW and Indus, nor has Alex. Brown
been furnished with any such evaluations or appraisals. The Alex. Brown
Opinion is based on market, economic and other conditions as they existed or
as disclosed to Alex. Brown as of the date of such disclosure and could be
evaluated as of the date of the Alex. Brown Opinion.
In arriving at its opinion, Alex. Brown was not authorized to solicit, and
did not solicit, interest from any party with respect to the acquisition of
TSW or any of its assets.
The following is a summary of the analyses performed and factors considered
by Alex. Brown in connection with rendering the Alex. Brown Opinion.
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Historical Financial Analysis
In rendering its opinion, Alex. Brown reviewed and analyzed the historical
and current financial condition of TSW and Indus which included (i) an
assessment of each of TSW's and Indus' recent financial statements; (ii) an
analysis of each of TSW'S and Indus' revenue, growth and operating performance
trends; and (iii) an assessment of each of TSW's and Indus' margin changes and
leverage.
Historical Stock Price Performance
Alex. Brown reviewed and analyzed the daily closing per share market prices
and trading volume for Indus Common Stock from February 29, 1996 to June 3,
1997. Alex. Brown also reviewed the daily closing per share market prices of
the Indus Common Stock and compared the movement of such daily closing prices
with the movement of the Nasdaq composite average and the S&P 500 composite
index. Alex. Brown noted that, on a relative basis, Indus underperformed the
Nasdaq and the S&P 500 during such period. Alex. Brown also reviewed the daily
closing per share market prices of Indus Common Stock and compared the
movement of such closing prices with the movement of a software composite
average (consisting of Aspect Development, Datastream Systems, Industri-
Matematik International, Manugistics Group, Project Software & Development and
SAP (collectively, the "Selected Companies")) over the periods from February
29, 1996 to June 3, 1997. On a relative basis, the Indus Common Stock price
underperformed the software composite average.
Analysis of Certain Other Publicly Traded Companies
This analysis examined a company's valuation in the public market as
compared to the valuation in the public market of other selected publicly
traded companies. Alex. Brown compared certain financial information (based on
the commonly used valuation measurements described below) relating to TSW to
certain corresponding information from the Selected Companies and to such
information from Indus. In particular, Alex. Brown reviewed and compared the
ratios of (i) enterprise value (equity value plus debt less cash) to revenue
on a trailing 12-month basis, (ii) enterprise value to projected 1997 revenue,
(iii) enterprise value to projected 1998 revenue, (iv) enterprise value to
projected 1997 net income, (v) enterprise value to projected 1997 fully taxed
net income and (vi) enterprise value to 1998 fully taxed income for each TSW,
Indus and the Selected Companies. As a result of the foregoing procedures,
Alex Brown noted that the above multiples applied to (i) the trailing 12-month
revenues of TSW implied a range of enterprise values of $111.1 million to
$574.8 million with a mean of $325.0 million and a median of $291.6 million
based on the Selected Companies and implied an enterprise value of $223.4
million based on Indus, (ii) the 1997 projected revenue of TSW implied a range
of enterprise values of $232.1 million to $ 532.9 million with a mean of
$355.6 million and a median of $332.7 million based on the Selected Companies
and an enterprise value of $240.7 million based on Indus, (iii) the projected
1998 revenue of TSW implied a range of enterprise values of $242.8 million to
$456.7 million with a mean of $332.0 million and a median of $323.1 million
based on the Selected Companies and an enterprise value of $246.0 million
based on Indus, (iv) the projected 1997 net income of TSW implied a range of
enterprise values of $101.7 million to $351.0 million with a mean of $206.5
million and a median of $206.1 million based on the Selected Companies and
implied an enterprise value of $140.9 million based on Indus, (v) the
projected 1997 fully taxed net income of TSW implied a range of enterprise
values of $71.2 million to $228.4 million with a mean of $137.3 million and a
median of $137.0 million based on the Selected Companies and an enterprise
value of $96.0 million based on Indus, and (vi) the projected 1998 fully taxed
net income of TSW implied a range of enterprise values of $194.3 million to
$690.6 million with a mean of $408.4 million and a median of $427.8 million
based on the Selected Companies and an enterprise value of $289.8 million
based on Indus.
Analysis of Selected Precedent Transactions
Alex. Brown reviewed the financial terms, to the extent publicly available,
of 12 proposed, pending or completed mergers and acquisitions since September
1993 in the software industry (the "Selected Transactions"). Alex. Brown
calculated various financial multiples based on certain publicly available
information for each of the Selected Transactions and compared them to
corresponding financial multiples for
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the Merger, based on the implied enterprise value of the Merger based on the
most recent closing price of Indus Common Stock. The 12 software industry
transactions reviewed, in reverse chronological order of public announcement
were: Baan Company N.V./Aurum Software (May 13, 1997), Pure Atria
Software/Rational Software Corporation (April 7, 1997), MDL Information
Systems/Reed Elsevier (March 24, 1997), Fractal Design Corporation/MetaTools,
Inc. (February 12, 1997), Security APL/Checkfree Corporation (March 22, 1996),
Bendata Inc./Astea International (February 26, 1996), Servantis Systems
Holding Inc./Checkfree Corporation (January 15, 1996), Renaissance
Software/SunGard Data Systems (September 28, 1995), Delrina
Corporation/Symantec Corporation (July 5, 1995), Lotus/IBM (June 5, 1995),
Logic Modeling Corporation/Synopsys Inc. (January 5, 1994) and ChipSoft
Inc./Intuit Inc. (September 1, 1993). While Alex. Brown calculated various
multiples for each of the Selected Transactions, it only found the ratio of
implied enterprise value to LTM revenue meaningful for the purpose of this
analysis. Applying this ratio for the Selected Transactions to the LTM revenue
of TSW implied a range of enterprise values of $166.9 million to $415.6
million with a mean of $229.3 million and a median of $208.3 million. All
multiples for the Selected Transactions were based on public information
available at the time of announcement of such transaction, without taking into
account differing market and other conditions during the four-year period
during which the Selected Transactions occurred.
Pro Forma Contribution Analysis
Alex. Brown analyzed the relative contributions of TSW and Indus, as
compared to TSW's contribution of approximately 49.81% of the combined
company's enterprise value (and, in the case of relative net income
contribution, to TSW's contribution of approximately 45.29% of the combined
company's equity value) to the pro forma income statement of the combined
company, based on management's projections for TSW and Indus 1997 results and
on publicly available analyst forecasts for 1998 Indus results. This analysis
showed that on a pro forma combined basis (excluding (i) the effect of any
synergies that may be realized as a result of the Merger and (ii) non-
recurring expenses relating to the Merger) TSW would account for approximately
43.8% of the combined company's pro forma 1996 revenue, approximately 41.0% of
the combined company's pro forma 1996 gross profit, approximately 47.0% of the
combined company's pro forma 1997 revenue, approximately 46.3% of the combined
company's pro forma 1997 gross profit, approximately 29.5% of the combined
company's pro forma 1997 income from operations, approximately 19.4% of the
combined company's pro forma 1997 net income, approximately 47.6% of the
combined company's pro forma 1998 revenue, approximately 49.5% of the combined
company's 1998 pro forma gross profit, approximately 48.2% of the combined
company's pro forma 1998 income from operations and approximately 45.1% of the
combined company's pro forma 1998 net income.
Pro Forma Financial Analysis
Alex. Brown analyzed certain pro forma effects of the Merger. Based on such
analysis, Alex. Brown computed the resulting dilution/accretion to the
combined company's EPS estimate for the calendar years 1997 and 1998, pursuant
to the Merger before taking into account any potential cost savings and other
synergies that TSW and Indus could achieve if the Merger were consummated and
before nonrecurring costs relating to the Merger (and assuming an
approximately $262 million equity purchase price based on Indus's then current
stock price). Alex. Brown calculated that before taking into account any
potential cost savings and other synergies and before certain nonrecurring
costs relating to the Merger, the Merger would be approximately 36.8% dilutive
to Indus' standalone EPS for the calendar year 1997 and 8.6% dilutive to
Indus' EPS for the calendar year 1998. Alex. Brown also performed a
sensitivity analysis of the 1998 EPS accretion/dilution at different levels of
achieved synergies, which analysis indicated approximately 1.0% accretion at
$5 million in pretax synergies, approximately 10.6% accretion at $10 million
in pretax synergies, approximately 20.1% accretion at $15 million in pretax
synergies and approximately 29.7% accretion at $20 million in pretax
synergies.
Discounted Cash Flow Analysis
Alex. Brown performed a discounted cash flow analysis for TSW. The
discounted cash flow approach values a business based on the current value of
the future cash flow that the business will generate. To establish a current
value under this approach, future cash flow must be estimated and an
appropriate discount rate determined. Alex.
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Brown used estimates of projected financial performance for TSW for the years
1998 through 2002 prepared by TSW's management. Alex. Brown aggregated the
present value of the cash flows through 2002 with the present value of a range
of terminal values. Alex. Brown discounted these cash flows at discount rates
ranging from 19% to 23%. The terminal value was computed based on projected
net income in calendar year 2002 and a range of terminal revenue multiples of
15x and 25x. This analysis indicated a range of implied enterprise value from
$149.9 million to $289.0 million.
Relevant Market and Economic Factors
In rendering its opinion, Alex. Brown considered, among other factors, the
condition of the U.S. stock markets, particularly in the software industry,
and the current level of economic activity.
No company used in the analysis of other certain publicly traded companies
nor any transaction used in the analysis of selected precedent transactions
summarized above is identical to TSW, Indus or the Merger. Accordingly, such
analyses must take into account differences in the financial and operating
characteristics of the Selected Companies and the companies in the Selected
Transactions and other factors that would affect the public trading value and
acquisition value of the Selected Companies and the Selected Transactions,
respectively.
While the foregoing summary describes all analyses and factors that Alex.
Brown deemed material in its presentation to the TSW Board of Directors, it is
not a comprehensive description of all analyses and factors considered by
Alex. Brown. The preparation of a fairness opinion is a complex process that
involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Alex. Brown believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
of the factors considered by it, without considering all analyses and factors,
would create an incomplete view of the evaluation process underlying the Alex.
Brown Opinion. In performing its analyses, Alex. Brown considered general
economic, market and financial conditions and other matters, many of which are
beyond the control of TSW and Indus. The analyses performed by Alex. Brown are
not necessarily indicative of actual values for future results, which may be
significantly more or less favorable than those suggested by such analyses.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. Additionally, analyses relating to the value of a business do not
purport to be appraisals or to reflect the prices at which the business
actually may be sold. Furthermore, no opinion is being expressed as to the
prices at which shares of Newco Common Stock may trade at any future time.
Pursuant to a letter agreement dated May 8, 1997 between TSW and Alex.
Brown, the fees to date payable to Alex. Brown for rendering the Alex. Brown
Opinion have been $500,000, which amount will be credited against a final fee
equal to 0.7% of the aggregate consideration to the TSW Securityholders in the
Merger, payable upon consummation of the Merger. In addition, TSW has agreed
to reimburse Alex. Brown for its out-of-pocket expenses incurred in connection
with rendering financial advisory services, including fees and disbursements
of its legal counsel. TSW has agreed to indemnify Alex. Brown and its
directors, officers, agents, employees and controlling persons, for certain
costs, expenses, losses, claims, damages and liabilities related to or arising
out of its rendering of services under its engagement as financial advisor.
The Board of Directors of TSW retained Alex. Brown to act as its advisor
based upon Alex. Brown having been selected as the lead-managing underwriter
in TSW's planned 1997 initial public offering and based upon Alex. Brown's
qualifications, reputation, experience and expertise. Alex. Brown is an
internationally recognized investment banking firm and, as a customary part of
its investment banking business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. Alex. Brown may actively trade the equity securities of Indus for
its own account and for the account of its customers and accordingly may at
any time hold a long or short position in such securities. Alex. Brown
regularly publishes research reports regarding the enterprise systems software
industry and the businesses and securities of publicly owned companies in the
enterprise
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systems software industry. In addition, Alex. Brown has provided financial
advisory services to Indus in the past, for which Alex. Brown received a
customary fee for its services.
FEDERAL SECURITIES LAW CONSEQUENCES
The shares of Newco Common Stock to be issued in the TSW Merger will have
been registered under the Securities Act pursuant to the Registration
Statement and will be freely transferable except that shares of Newco Common
Stock to be received by former holders of TSW Capital Stock or Indus Common
Stock who are deemed to be "affiliates" of Indus or TSW prior to the Merger
(as "affiliates" is defined for purposes of Rule 145) may be resold by them
only in transactions permitted by the resale provisions of Rule 145 (or Rule
144 in the case of such persons who become affiliates of the Combined
Company). Persons who may be deemed to be affiliates of TSW, Indus or the
Combined Company generally include individuals or entities that control, are
controlled by, or are under common control with, such party and may include
certain officers and directors of such party as well as principal shareholders
or stockholders of such party.
The Reorganization Agreement requires each of Indus and TSW to cause its
respective affiliates to enter into agreements not to make any public sale of
any Newco Common Stock received upon consummation of the Merger, except in
compliance with Rule 145, pursuant to another exemption from the registration
requirements of the Securities Act or in a registered offering. See "CERTAIN
RELATED AGREEMENTS--Affiliate Agreements." In general, Rule 145, as currently
in effect, imposes restrictions on the manner in which such affiliates may
make resales of Newco Common Stock and also on the number of shares of Newco
Common Stock that such affiliates, and others (including persons with whom the
affiliates act in concert), may sell within any three-month period. These
restrictions will generally apply for at least a period of one year after the
Merger (or longer if the person is an affiliate of Newco).
As a condition to Indus' and TSW's obligation to effect the Merger, Newco is
required to enter into the Registration Rights Agreement with Warburg, Mr.
Felton and certain other Indus shareholders and TSW shareholders, which
provides that Warburg and Mr. Felton will have, subject to certain conditions,
"demand" registration rights and that all parties to Registration Rights
Agreement will have, subject to certain conditions, "piggyback" registration
rights to require Newco to register all or a portion of the Newco Common Stock
issued to Warburg, Mr. Felton and certain other Indus shareholders and certain
TSW Securityholders in the Merger. See "CERTAIN RELATED AGREEMENTS--
Registration Rights Agreement."
NASDAQ LISTING
The Newco Common Stock will be traded on the Nasdaq National Market under
the symbol "IINT." It is a condition to the consummation of the Merger that
the shares of Newco Common Stock to be issued to TSW shareholders and Indus
shareholders in the Merger shall have been approved for listing on Nasdaq,
subject to official notice of issuance.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
considerations of the TSW Merger and the Indus Merger that are generally
applicable to holders of Indus Common Stock and TSW Capital Stock. This
discussion is based on provisions of the Code, existing and proposed Treasury
Regulations thereunder and current administrative rulings and court decisions
in effect on the date hereof, all of which are subject to change and differing
interpretations. Any such change, which may or may not be retroactive, could
alter the tax consequences to Newco, Indus, TSW or Indus' or TSW's
shareholders as described herein.
Holders of Indus Common Stock and TSW Capital Stock should be aware that
this discussion is for general information only and does not address all
federal income tax considerations that may be relevant to particular holders
in light of their particular investment circumstances or to holders subject to
special treatment under the Code, such as dealers in securities or foreign
currency, holders are subject to the alternative minimum tax
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provisions of the Code, or holders are foreign persons or who acquired their
shares in connection with stock option or stock purchase plans or in other
compensatory transactions. In addition, the following discussion does not
address the tax consequences of the Merger under foreign, state or local tax
laws or the tax consequences of transactions effectuated prior to or after the
Merger (whether or not such transactions are in connection with the Merger),
including without limitations transactions in which shares of Indus Common
Stock or TSW Capital Stock are acquired or in which shares of Newco Common
Stock are disposed. This discussion also does not address the tax treatment of
the Merger to holders of Indus Options, Indus Stock Purchase Plan Options, TSW
Options, TSW Subordinated Notes or TSW Warrants.
HOLDERS OF INDUS COMMON STOCK AND TSW CAPITAL STOCK ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES OF THE MERGER,
INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO
THEM OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES AND THE RECENTLY ENACTED
TAXPAYER RELIEF ACT OF 1997.
Consummation of the Merger is conditioned upon the receipt by TSW of the
opinion of Wachtell, Lipton, Rosen & Katz, special counsel to TSW, dated as of
the Effective Time, on the basis of facts, representations and assumptions set
forth or referred to in such opinion, substantially to the effect that (i) the
TSW Merger will constitute a "reorganization" for United States federal income
tax purposes within the meaning of Section 368(a) of the Code, and TSW and
Newco will each be a party to such reorganization within the meaning of
Section 368(b) of the Code and (ii) no gain or loss will be recognized by TSW
or Newco as a result of the TSW Merger. Consummation of the Merger is also
conditioned upon the receipt by Indus of the opinion of Wilson Sonsini
Goodrich & Rosati, counsel to Indus, dated as of the Effective Time, on the
basis of facts, representations and assumptions set forth or referred to in
such opinion, substantially to the effect that (i) the Indus Merger will
constitute a "reorganization" for United States federal income tax purposes
within the meaning of Section 368(a) of the Code, and Indus and Newco will
each be a party to such reorganization within the meaning of Section 368(b) of
the Code and (ii) no gain or loss will be recognized by Indus or Newco as a
result of the Indus Merger.
Subject to the limitations and qualifications referred to herein, and as a
result of the TSW Merger and Indus Merger each qualifying as a reorganization,
the following federal income tax consequences would result:
(a) No gain or loss will be recognized by the holders of Indus Common
Stock, TSW Common Stock and TSW Preferred Stock upon the receipt of Newco
Common Stock solely in exchange for such shares of Indus Common Stock, TSW
Common Stock or TSW Preferred Stock (including Newco Common Stock received
by holders of TSW Preferred Stock attributable to the TSW Unpaid Dividends)
in the Merger (except to the extent of cash received in lieu of fractional
shares or as a result of exercising dissenters' or appraisal rights).
(b) The aggregate tax basis of the Newco Common Stock so received by
holders of Indus Common Stock, TSW Common Stock and TSW Preferred Stock in
the Merger (including any fractional share of Newco Common Stock for which
cash is received) will be the same as the aggregate tax basis of the Indus
Common Stock, TSW Common Stock or TSW Preferred Stock so surrendered in
exchange therefor.
(c) The holding period of the Newco Common Stock so received by holders
of Indus Common Stock, TSW Common Stock and TSW Preferred Stock in the
Merger will include the period for which the Indus Common Stock, TSW Common
Stock and TSW Preferred Stock surrendered in exchange therefor was
considered to be held, provided that the Indus Common Stock, TSW Common
Stock or TSW Preferred Stock so surrendered is held as a capital asset at
the time of the Merger.
(d) Cash payments received by holders of TSW Common Stock and TSW
Preferred Stock in lieu of fractional shares will be treated as if such
fractional share of Newco Common Stock had been issued in the TSW Merger
and then redeemed by Newco. A TSW shareholder receiving such cash will
recognize gain or loss, upon such payment, measured by the difference (if
any) between the amount of cash received and the basis allocated to such
fractional share.
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(e) A TSW shareholder or an Indus shareholder who exercises dissenters'
rights or appraisal rights under applicable law with respect to a share of
TSW Capital Stock or Indus Common Stock and who receives payments for such
shares in cash will recognize gain or loss measured by the difference
between the amount of cash received and the basis in such share.
(f) Neither Indus nor TSW will recognize gain solely as a result of the
Merger.
The tax opinions of Wachtell, Lipton, Rosen & Katz and Wilson Sonsini
Goodrich & Rosati, Professional Corporation, will each be subject to certain
limitations and qualifications and will be based on, among other things,
certain representations of TSW, Indus and Newco. The tax opinions are not
binding on the IRS and do not preclude the IRS from adopting a contrary
position. Neither Indus nor TSW has requested or will request a ruling from
the IRS with regard to any of the federal income tax consequences of the
Merger.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for financial
reporting purposes in accordance with generally accepted accounting
principles. Under this accounting treatment, the recorded assets and
liabilities and the operating results of both Indus and TSW are carried
forward to the combined operations of the surviving corporation at their
recorded amounts. No recognition of goodwill in the combination is required of
either party to the Merger. To support the treatment of the Merger as a
pooling of interests, affiliates of Indus and TSW have entered into agreements
imposing certain resale limitations on their stock. See "CERTAIN RELATED
AGREEMENTS--Affiliate Agreements." Consummation of the Merger is conditioned
upon (i) receipt by TSW of a letter from its independent auditors to the
effect that TSW qualifies as an entity that may be a party to a business
combination for which the pooling-of-interests method of accounting would be
available and (ii) receipt by Indus of a letter from its independent auditors
regarding concurrence with Indus management's conclusion as to the
appropriateness of pooling-of-interests accounting treatment for the Merger
under APB No. 16, if consummated in accordance with the Reorganization
Agreement.
GOVERNMENTAL AND REGULATORY APPROVALS
Under the HSR Act and the rules promulgated thereunder by the FTC, the
Merger may not be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division and
specified waiting period requirements have been satisfied. All required
filings under the HSR Act have been made and the applicable waiting period
under the HSR Act has expired.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. Despite the expiration
of the requisite waiting period under the HSR Act, at any time before or after
the consummation of the Merger, the FTC, the Antitrust Division, state
attorneys general or others could take action under antitrust laws with
respect to the Merger, including seeking to enjoin consummation of the Merger,
seeking to cause the divestiture of significant assets of Indus or TSW or
their subsidiaries or seeking to impose conditions on the Combined Company
with respect to the business operations of the combined companies. There can
be no assurance that a challenge to the Merger on antitrust grounds will not
be made, or if such challenge if made, that Indus and TSW would prevail or
would not be required to terminate the Reorganization Agreement, to divest
certain assets, to license certain proprietary technology to third parties or
to accept certain conditions in order to consummate the Merger.
APPRAISAL AND DISSENTERS' RIGHTS UNDER THE CGCL
THE FOLLOWING IS A SUMMARY OF THE PROVISIONS OF CHAPTER 13 OF THE CGCL,
WHICH PROVIDES SHAREHOLDERS OF INDUS WITH CERTAIN DISSENTERS' RIGHTS. ALL
REFERENCES TO AND SUMMARIES OF THE RIGHTS OF DISSENTING SHAREHOLDERS ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE FULL TEXT OF CHAPTER 13 OF THE
CGCL, WHICH IS ATTACHED TO THIS JOINT PROXY STATEMENT/PROSPECTUS AS APPENDIX
C-1.
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Subject to certain conditions, Chapter 13 of the CGCL grants shareholders of
Indus who are entitled to vote, and who vote all of their shares against the
Merger, the right to require Indus to purchase for cash at fair market value
the shares of Indus Common Stock which qualify as Dissenting Shares.
Shareholders who do not follow the statutory procedures of Chapter 13 of the
CGCL, however, will lose their rights to dissent from the Merger. Dissenting
shareholders will have no interest in Indus after they surrender their
certificates representing the Dissenting Shares and receive payment therefor.
Surrendered shares will resume the status of authorized but unissued shares.
If the Indus Merger Proposal is approved by the required vote of Indus
shareholders, Indus shareholders who vote against the Indus Merger Proposal
will generally not have appraisal rights with respect to the Merger unless (i)
such shares are subject to a restriction on transfer imposed by Indus or any
law or regulation, or (ii) demands for payment (as described below) are filed
with respect to 5% or more of the outstanding shares of Indus Common Stock. It
is a condition to the effectiveness of the Merger that holders of less than 5%
of the outstanding shares of Indus Common Stock or TSW Capital Stock,
respectively, shall be eligible to exercise dissenters' rights after the
Meetings. Any shareholder entitled to vote at the Indus Meeting who desires to
exercise dissenters' rights must vote his, her or its shares against the
approval of the Indus Merger Proposal. In addition, the shareholder must
demand in writing that Indus purchase such shares and pay the shareholder the
fair market value of such shares in cash. The demand for payment must state
the number and class of the shares held of record by the shareholder that the
shareholder wants Indus to purchase, and shall also state what the shareholder
claims to be the fair market value of the shares as of the day before the
announcement of the definitive terms of the Merger, which in this case, was
June 4, 1997. The statement of fair market value will constitute an offer by
the shareholder to sell such shares at such price. Such demand must be
received by Indus at its principal executive offices at 60 Spear Street, San
Francisco, California 94105, or by a transfer agent designated by Indus, not
later than the date of the Indus Meeting. A shareholder may not withdraw a
demand for payment unless Indus consents thereto.
Within ten days (10) after the date of the Indus Meeting, Indus must mail to
any shareholder who could qualify as possessing Dissenting Shares a Notice of
Approval. Indus' statement of fair market value contained in the Notice of
Approval will constitute an offer by Indus to purchase the shareholder's
shares at the price stated in the Notice of Approval, provided that such
shares qualify as Dissenting Shares and do not lose their status as Dissenting
Shares, as outlined below.
Within 30 days after the date on which the Notice of Approval was mailed,
the shareholder must submit to Indus or a designated transfer agent the
certificates representing any shares which the shareholder demands that Indus
purchase. Such shares will be stamped or endorsed with a statement that the
shares are Dissenting Shares or will be exchanged for share certificates so
stamped or endorsed.
If a dissenting shareholder and Indus agree that the shares are Dissenting
Shares and agree upon the price of the shares, Indus will pay the dissenting
shareholder the agreed price with interest at the legal rate on judgments from
the date of such agreement, within 30 days after the date of the agreement or
within 30 days after any statutory or contractual conditions to the Merger are
satisfied, whichever is later. If Indus denies that the shares are Dissenting
Shares, or Indus and the shareholder fail to agree upon the fair market value
of the Dissenting Shares, then the shareholder or Indus may seek a court
determination of whether the shares are Dissenting Shares, the fair market
value of the Dissenting Shares, or both. The shareholder may intervene in any
action pending on such a complaint. The shareholder or Indus must file a
complaint or intervene in a pending action within six months after the date on
which the Notice of Approval was mailed. In determining the fair market value
of the Dissenting Shares, the court may, but is not required to, appoint one
or more appraisers. If the court appoints appraisers it may accept the
appraisers' valuation or make its own determination of the fair market value
of the Dissenting Shares and enter judgment accordingly. Any party may appeal
from the judgment. The costs of the action, including reasonable compensation
for the appraisers, shall be assessed as the court considers equitable, but if
the judgment exceeds the amount offered by Indus, Indus shall pay such costs
(including, in the court's discretion, attorneys' fees, fees of expert
witnesses, and interest at the legal rate on judgments from the date of the
shareholder's compliance with the foregoing procedures for demanding payment
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of Dissenting Shares if the value awarded by the court is more than 125% of
the amount Indus states as the fair market value in the Notice of Approval).
The shareholder may recover the amount the court determines to be the fair
market value of each Dissenting Share multiplied by the number of Dissenting
Shares Indus must purchase, with interest thereon at the legal rate from the
date of judgment. The judgment is payable only upon endorsement and delivery
to Indus of the certificates for the shares described in the judgment.
Dissenting Shares may lose their status as Dissenting Shares and the
dissenting shareholder will cease to be entitled to require Indus to purchase
such shares if (i) the parties abandon the Merger, (ii) the shareholder
transfers the shares before submitting them to Indus or the designated
transfer agent, (iii) the shareholder withdraws the demand that Indus purchase
the Dissenting Shares, or (iv) if Indus and the shareholder do not agree on
the status of the shares as Dissenting Shares or upon the fair market value of
such shares and neither has filed a court petition as set forth above within
six months after the mailing of the Notice of Approval.
A vote in favor of the Merger constitutes a waiver of dissenters' rights
under Chapter 13 of the CGCL. Furthermore, a vote against approval of the
Merger does not satisfy the requirement of a written demand for payment or the
other actions required by Chapter 13 to perfect dissenters' rights. Such
written demand for payment must be in addition to and separate from any proxy
regarding the Merger. Failure to follow the provisions of Chapter 13 of the
CGCL will result in a loss of all dissenters' rights.
APPRAISAL AND DISSENTERS' RIGHTS UNDER THE GBCC
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO DISSENTERS' RIGHTS UNDER THE GBCC AND IS QUALIFIED IN ITS ENTIRETY BY THE
FULL TEXT OF ARTICLE 13 OF THE GBCC, WHICH IS ATTACHED TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AS APPENDIX C-2. ALL REFERENCES IN ARTICLE 13 OF THE GBCC
AND IN THIS SUMMARY TO A "SHAREHOLDER" OR "HOLDER" ARE TO THE RECORD HOLDER OF
TSW COMMON STOCK AS TO WHICH DISSENTERS' RIGHTS ARE ASSERTED.
Holders of TSW Common Stock will be entitled to assert dissenters' rights
with respect to the TSW Merger under and in accordance with Article 13 of the
GBCC. This Joint Proxy Statement/Prospectus constitutes notice to holders of
TSW Common Stock of the applicable statutory provisions of Article 13 of the
GBCC. Any shareholder who wishes to assert such dissenters' rights or who
wishes to preserve the right to do so should review the following discussion
and Appendix D carefully because failure to comply timely and properly with
the procedures specified will result in the loss of dissenters' rights under
Article 13 of the GBCC.
A shareholder of TSW is entitled to dissent, and obtain payment of the Fair
Value (as hereinafter defined) of shares of TSW Common Stock ("Dissenting
Shares") held by such shareholder, if the TSW Merger is consummated. For
purposes of Article 13 of the GBCC, "Fair Value" means the value of the
Dissenting Shares immediately before the consummation of the TSW Merger,
excluding any appreciation or depreciation in anticipation of the TSW Merger.
Each record holder of Dissenting Shares who wishes to assert dissenters'
rights (i) must deliver to TSW, before the TSW Merger Proposal is voted upon
at the TSW Meeting, written notice of his intent to demand payment for his
Dissenting Shares if the TSW Merger is consummated (a "Notice of Intent") and
(ii) must not vote his Dissenting Shares in favor of the TSW Merger Proposal
(any such holder, a "Dissenting TSW Holder"). A shareholder of TSW who does
not satisfy such requirements is not entitled to payment for his Dissenting
Shares under Article 13 of the GBCC. All Notices of Intent should be sent or
delivered to TSW at 3301 Windy Ridge Parkway, Atlanta, Georgia 30339,
Attention: Secretary.
A TSW shareholder entitled to dissent and obtain payment for shares of TSW
Common Stock held by such shareholder under Article 13 of the GBCC may not
challenge the TSW Merger unless the TSW Merger fails to comply with certain
procedural requirements of the GBCC or the TSW Articles or the TSW Bylaws or
the vote required to obtain approval of the TSW Merger was obtained by
fraudulent and deceptive means, regardless of whether such shareholder has
exercised dissenters' rights.
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A shareholder of record of TSW may assert dissenters' rights as to fewer
than all shares of TSW Common Stock registered in such shareholder's name only
if such shareholder dissents with respect to all shares of TSW Common Stock
beneficially owned by any one beneficial shareholder and notifies TSW in
writing of the name and address of each person on whose behalf such
shareholder asserts dissenters' rights. The rights of such a partial dissenter
are determined as if the shares of TSW Common Stock as to which such
shareholder dissents and such shareholder's other shares of TSW Common Stock
were registered in the names of different shareholders. A beneficial owner of
shares of TSW Common Stock that are held of record in the name of another
person, such as a nominee, must act promptly to cause the record holder to
follow the steps summarized herein properly and in a timely manner to assert
any dissenters' rights on behalf of such beneficial owner.
If the TSW Merger is authorized at the TSW Meeting, TSW must deliver a
written dissenters' notice (the "Dissenters' Notice") to all Dissenting TSW
Holders. The Dissenters' Notice must be sent no later than ten days after
consummation of the TSW Merger and must (i) state where the payment demand
must be sent and where and when certificates for certificated Dissenting
Shares must be deposited, (ii) set a date by which TSW must receive the
payment demand, which date may not be fewer than 30 nor more than 60 days
after the date the Dissenters' Notice is delivered, and (iii) be accompanied
by a copy of Article 13 of the GBCC.
A Dissenting TSW Holder to whom a Dissenters' Notice is sent must demand
payment and deposit his certificates representing Dissenting Shares in
accordance with the terms of the Dissenters' Notice. Upon consummation of the
TSW Merger, the rights of a Dissenting TSW Holder are limited to the right to
receive the Fair Value of his Dissenting Shares, assuming compliance with
Article 13 of the GBCC. A Dissenting TSW Holder who does not demand payment or
deposit his certificates representing Dissenting Shares where required, each
by the date set in the Dissenters' Notice, will not be entitled to payment for
his Dissenting Shares under Article 13 of the GBCC and, thereafter, will no
longer be deemed a Dissenting TSW Holder.
Except as described below, within ten days of the later of consummation of
the TSW Merger or receipt of a payment demand, TSW must by written notice (the
"Offer of Payment") offer to pay to each Dissenting TSW Holder, who complied
with the payment demand and deposit requirements specified in the Dissenters'
Notice, the amount TSW estimates to be the Fair Value of his Dissenting
Shares, plus accrued interest from the date of consummation of the TSW Merger.
The Offer of Payment must be accompanied by certain recent TSW financial
statements and certain other prescribed information. If such Dissenting TSW
Holder accepts TSW's Offer of Payment by written notice to TSW within 30 days
after TSW's Offer of Payment or is deemed to have accepted the Offer of a
Payment by failure to respond within such 30-day period, payment by TSW for
such Dissenting TSW Holder's Dissenting Shares must be made within 60 days
after the later of the making of the Offer of Payment or the consummation of
the TSW Merger.
If the TSW Merger is not consummated within 60 days after the date set in
the Dissenters' Notice for demanding payment and depositing certificates
representing Dissenting Shares, TSW must return the deposited certificates.
If, after such return, the TSW Merger is consummated, TSW must send a new
Dissenters' Notice and repeat the payment demand procedure described above.
A Dissenting TSW Holder may notify TSW in writing of his own estimate of the
Fair Value of his Dissenting Shares and amount of interest due, and demand
payment of such estimate (a "Dissenting TSW Holder Demand"), if (i) such
Dissenting TSW Holder believes that the amount offered by TSW in the Offer of
Payment is less than the Fair Value of such shareholder's Dissenting Shares or
that the interest is incorrectly calculated or (ii) TSW, having failed to
consummate the TSW Merger, does not return the deposited certificates within
60 days after the date set in the Dissenter's Notice for demanding payment. A
Dissenting TSW Holder waives such shareholder's right to demand payment
pursuant to a Dissenting TSW Holder Demand and is deemed to have accepted
TSW's Offer of Payment for such shareholder's Dissenting Shares unless such
shareholder notifies TSW of the demand in writing within 30 days after TSW's
Offer of Payment for such shareholder's Dissenting Shares. If TSW does not
make an Offer of Payment to any Dissenting TSW Holder within ten days of the
later of the consummation of the TSW Merger or receipt of a payment demand,
then (i) such Dissenting TSW Holder may demand the financial statements and
other information required to accompany the Offer of Payment, and
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TSW must provide such information within ten days after receipt of written
demand for such information, and (ii) such Dissenting TSW Holder may, at any
time within three years after the TSW Merger is consummated, notify TSW of his
own estimate of the Fair Value of his Dissenting Shares and the amount of
interest due and demand payment of such estimate.
If a Dissenting TSW Holder Demand remains unsettled, TSW must commence a
nonjury equitable valuation proceeding (the "Appraisal Proceeding") within 60
days after receiving such Dissenting TSW Holder Demand and must petition the
court to determine the Fair Value of the Dissenting Shares (and accrued
interest thereon) held by all Dissenting TSW Shareholders whose demands remain
unsettled. The court may appoint one or more persons as appraisers to receive
evidence and recommend a decision on the Fair Value of the Dissenting Shares.
Each Dissenting TSW Holder made a party to the Appraisal Proceeding will be
entitled to judgment for the amount that the court finds to be the Fair Value
of such holder's Dissenting Shares plus interest to the date of judgment.
Under existing Georgia case law, claims arising by virtue of a person's status
as a shareholder, including claims relating to breaches by directors of a
Georgia corporation of their fiduciary duties to shareholders, are generally
not maintainable following consummation of a transaction to which dissenters'
rights apply except as an element of the determination of the fair value of
the Dissenting Shares in an Appraisal Proceeding.
The court in the Appraisal Proceeding will determine all costs of the
Appraisal Proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court, but not including fees and expenses of
attorneys and experts for the respective parties. The court will assess such
costs against TSW, except that the court may assess the costs against all or
some of the Dissenting TSW Holders, in amounts the court finds equitable, to
the extent the court finds they acted arbitrarily, vexatiously or not in good
faith in making a Dissenting TSW Holder Demand. The court also may assess the
fees and expenses of attorneys and experts for the respective parties against
TSW and in favor of all Dissenting TSW Holders if the court finds that TSW did
not substantially comply with the requirements of certain provisions of
Article 13 of the GBCC, or against either TSW or a Dissenting TSW Holder, in
favor of the other party, if the court finds that the party against whom such
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by Article 13 of the GBCC.
If the court finds that the services of attorneys for any Dissenting TSW
Holder were of substantial benefit to other Dissenting TSW Holders similarly
situated, and that the fees for those services should not be assessed against
TSW, the court may award such attorneys reasonable fees to be paid out of the
amounts awarded the Dissenting TSW Holders who were benefited. No action by
any Dissenting TSW Holder to enforce dissenters' rights may be brought more
than three years after consummation of the TSW Merger, regardless of whether
notice of the Transaction and of the right to dissent was given by TSW in
accordance with the relevant provisions of Article 13 of the GBCC. Any
Dissenting TSW Holder who has duly asserted dissenters' rights in compliance
with Article 13 of the GBCC will not, after the consummation of the TSW
Merger, be entitled to vote the Dissenting Shares subject to such demand for
any purpose or be entitled to the payment of dividends or other distributions
on those Dissenting Shares (except dividends or other distributions payable to
holders of record of Dissenting Shares as of a record date prior to the
consummation of the TSW Merger).
If any shareholder who properly asserts dissenters' rights under Article 13
of the GBCC fails to perfect such rights, or effectively withdraws such
assertion or loses such rights, as provided in Article 13 of the GBCC, the
Dissenting Shares of such shareholder will be converted into the right to
receive the consideration receivable with respect to such Dissenting Shares in
accordance with the Reorganization Agreement.
FAILURE TO FOLLOW THE STEPS REQUIRED BY ARTICLE 13 OF THE GBCC FOR ASSERTING
DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. IN VIEW OF THE
COMPLEXITY OF THE PROVISIONS OF ARTICLE 13 OF THE GBCC, SHAREHOLDERS OF TSW
WHO ARE CONSIDERING DISSENTING FROM THE TSW MERGER PROPOSAL SHOULD CONSULT
THEIR OWN LEGAL ADVISORS.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Indus Board, the TSW Board, the management of Indus
and the management of TSW, respectively, have certain interests in the Merger
that are different from, or in addition to, the interests in the Merger of
Indus shareholders and TSW shareholders generally. These certain interests
include:
Pursuant to the Reorganization Agreement, Robert W. Felton, President and
Chief Executive Officer and a director of Indus, Edward R. Koepfler, Chief
Operating Officer of Indus, Richard MacAlmon, Senior Vice President and a
director of Indus, and Alan G. Merten, a director of Indus, as well as
Christopher R. Lane, the President and a director of TSW, John W. Blend, III,
Executive Vice President and a director of TSW, and William H. Janeway and
Joseph P. Landy, each a director of TSW, will become directors of Newco.
Certain executive officers of Indus and certain executive officers of TSW will
become executive officers of Newco. See "MANAGEMENT OF THE COMBINED COMPANY."
At the Closing of the Merger, Newco, Warburg and Mr. Felton will enter into
the Nomination Agreement and Newco, TSW, Warburg and Messrs. Felton, MacAlmon,
Blend and Oltman will enter into the Registration Rights Agreement. See
"CERTAIN RELATED AGREEMENTS--Nomination Agreement" and "--Registration Rights
Agreement" for a description of the material terms of such agreements. See
"RISK FACTORS--Risks Relating to the Merger--Interests of Certain Persons in
the Merger."
George D. Busbee, a director of TSW, holds options to purchase an aggregate
of 13,500 shares of TSW Common Stock, of which options to purchase an
aggregate of 8,750 shares will be unvested immediately prior to the
consummation of the Merger. Vesting of all such unvested options will
accelerate and the options will become fully exercisable upon the approval by
the TSW shareholders of the TSW Merger Proposal. John F. Bartels, Senior Vice
President and Chief Financial Officer of TSW, holds options to purchase an
aggregate of 170,000 shares of TSW Common Stock, of which options to purchase
an aggregate of 130,266 shares will be unvested immediately prior to the
consummation of the Merger. Vesting of 106,200 of such unvested options will
accelerate and such options will be become fully exercisable upon the
consummation of the Merger.
John R. Oltman, Chairman of the Board of TSW, is the principal of JRO
Consulting, Inc. ("JRO Consulting"), which holds options to purchase an
aggregate of 186,010 shares of TSW Common Stock, of which options to purchase
an aggregate of 62,003 shares will be unvested immediately prior to the
consummation of the Merger. Vesting of all such unvested options will
accelerate and the options will be become fully exercisable upon the
occurrence of a "Liquidity Event," as defined in the agreements relating to
such options. The Merger will be a Liquidity Event. In addition, JRO
Consulting is party to a Consulting Agreement with Warburg pursuant to which
JRO Consulting has agreed to provide consulting services to Warburg with
respect to its investment in TSW and has agreed that Mr. Oltman will serve as
TSW's Chairman. Under the terms of such Consulting Agreement, upon completion
of the Merger Warburg will be obligated to deliver to JRO Consulting, as
payment of a bonus due thereunder, securities of the Combined Company having a
value which will be determined on the basis of the value of the consideration
to be received by all TSW shareholders in the Merger.
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THE REORGANIZATION AGREEMENT
The following is a brief summary of the material provisions of the
Reorganization Agreement, a copy of which is attached as Appendix A-1 to this
Joint Proxy Statement/Prospectus and is incorporated herein by reference. This
summary is qualified in its entirety by reference to the full and complete
text of the Reorganization Agreement.
THE MERGER
Pursuant to the Reorganization Agreement and subject to the terms and
conditions thereof, Indus Sub will be merged with and into Indus with Indus
becoming a wholly-owned subsidiary of Newco and TSW Sub will be merged with
and into TSW with TSW becoming a wholly-owned subsidiary of Newco.
Subject to the terms and conditions of the Reorganization Agreement, the
Closing will take place at a time to be mutually agreed upon by Indus and TSW,
which date shall be as soon as practicable after the Indus Meeting and the TSW
Meeting and, in any event, no later than the third business day after all
conditions to Closing thereunder are satisfied or waived. The Merger will
become effective upon both the filing of the TSW Merger Agreement or a
Certificate of Merger with respect to the TSW Merger with the Secretary of
State of the State of Georgia with respect to the TSW Merger and the filing of
the Indus Merger Agreement with the Secretary of State of the State of
California with respect to the Indus Merger. The date on which the Merger have
both become effective is referred to as the Effective Time.
MERGER CONSIDERATION
Conversion of Indus Securities
Upon the consummation of the Merger, each then outstanding share of Indus
Common Stock will be converted into one share of Newco Common Stock and each
Indus Option and each Indus Stock Purchase Plan Option will be converted into
an option to purchase an equivalent number of shares of Newco Common Stock at
an exercise price or purchase price per share, as the case may be, equal to
that of such Indus Option or Indus Stock Purchase Plan Option. No fractional
shares of Newco Common Stock will be issued in exchange for Indus securities.
Instead, each Indus shareholder who would otherwise be entitled to receive a
fraction of a share of Newco Common Stock will receive an amount of cash
(rounded to the nearest whole cent) equal to such shareholder's proportionate
interest in the net proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such shareholders, of the aggregate
fractional Newco Common Stock issued pursuant to the Reorganization Agreement.
As of July 25, 1997, an aggregate of 19,159,214 shares of Indus Common Stock
was outstanding. Based on the capitalization of Indus as of such date,
shareholders and optionholders of Indus will own approximately 53.75% of the
shares of Newco Common Stock on a fully diluted basis immediately after the
consummation of the Merger.
Conversion of TSW Securities
The total number of shares of Newco Common Stock to be issued in the Merger
to TSW shareholders and holders of TSW Subordinated Notes and to become
issuable following the Merger to holders of TSW Options and Warrants, will be
equal to the number of shares of Newco Common Stock to be issued or to become
issuable to Indus shareholders and holders of Indus Options and Indus Stock
Purchase Plan Options multiplied by 0.86047 (the "TSW Number"). The
outstanding TSW securities will be converted or exchanged as follows:
(i) Each share of TSW Common Stock and TSW Preferred Stock will be
converted into a number of shares of Newco Common Stock equal to a
fraction, the numerator of which will be the TSW Number minus the New
Warburg Shares and the denominator of which will be the total number of
shares of TSW Common Stock and Preferred Stock outstanding immediately
prior to the Closing plus the total number of shares of TSW Common
Stock issuable upon exercise of TSW Options and TSW Warrants
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outstanding immediately prior to the Closing (the "TSW Applicable
Ratio"). As of July 25, 1997, based on (a) the number of shares of Indus
Common Stock, Indus Options, Indus Stock Purchase Plan Options, TSW
Common Stock, TSW Preferred Stock, TSW Options and TSW Warrants
outstanding on such date and (b) the Indus Common Stock Market Price on
such date, the TSW Applicable Ratio would be approximately 2.73 shares
of Newco Common Stock for each outstanding share of TSW Capital Stock.
(ii) Each TSW Subordinated Note (and all accrued interest thereon) will be
exchanged for a number of shares of Newco Common Stock equal to a
fraction, the numerator of which will be the aggregate principal
balance of such TSW Subordinated Note as of the Effective Time of the
Merger plus all accrued and unpaid interest, and the denominator of
which will be the average of the high and low sales prices of the
Indus Common Stock on each of the ten consecutive trading days prior
to the Closing.
(iii) All unpaid dividends on any series of TSW Preferred Stock will be
converted into a number of shares of Newco Common Stock equal to a
fraction, the numerator of which will be the aggregate amount of such
unpaid dividends and the denominator of which will be the Indus
Common Stock Market Price.
(iv) Each outstanding TSW Option and TSW Warrant will be converted into an
option or warrant, as applicable, to purchase a number of shares of
Newco Common Stock equal to the TSW Applicable Ratio multiplied by the
number of shares purchasable under each TSW Option or TSW Warrant, as
applicable, rounded down to the nearest whole share, at an exercise
price equal to the exercise price of such TSW Option or TSW Warrant at
the Effective Time divided by the TSW Applicable Ratio, rounded up to
the nearest cent.
As of July 25, 1997, 1,560,661 and 1,379,001 shares of TSW Common Stock were
issuable upon exercise of the TSW Options and TSW Warrants, respectively.
Assuming that the same number of shares of TSW Common Stock are subject to such
securities upon consummation of the Merger, and the same number of TSW Options
and TSW Warrants are outstanding and also assuming a TSW Applicable Ratio of
2.73, approximately 4,260,604 and 3,764,672 shares of Newco Common Stock will
be issuable upon exercise of assumed TSW Options and TSW Warrants,
respectively. Based on the capitalization of TSW as of such date, shareholders,
optionholders and warrantholders of TSW will own approximately 46.25% of the
shares of Newco Common Stock on a fully diluted basis immediately after the
consummation of the Merger.
Exchange of Shares
As soon as practicable after the Effective Time, the Exchange Agent will mail
to the registered holders of Indus Common Stock and TSW Capital Stock as of the
Effective Date: (i) a Letter of Transmittal and (ii) instructions for use of
the Letter of Transmittal in effecting the surrender of Indus and TSW stock
certificates in exchange for certificates representing Newco Common Stock. Upon
surrender of a stock certificate to the Exchange Agent for exchange, together
with a duly executed Letter of Transmittal and such other documents as may be
reasonably required by the Exchange Agent or Newco, the holder of such
certificate shall be entitled to receive in exchange therefor a certificate
representing the whole number of shares of Newco Common Stock that such holder
has the right to receive. No fractional shares of Newco Common Stock will be
issued in connection with the Merger and no certificates for any such
fractional shares will be issued. See "THE REORGANIZATION AGREEMENT--Merger
Consideration."
If any stock certificate has been lost, stolen or destroyed, Newco, Indus or
TSW may require the owner of such lost, stolen or destroyed stock certificate
to provide an appropriate affidavit and to deliver a bond as indemnity against
any claim that may be made against the Exchange Agent, Newco, Indus or TSW with
respect to stock certificate.
HOLDERS OF INDUS COMMON STOCK AND TSW CAPITAL STOCK SHOULD NOT SURRENDER
THEIR SHARE CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE A LETTER OF
TRANSMITTAL.
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At the Effective Time, (i) all shares of Indus Common Stock outstanding
immediately prior to the Effective Time and all shares of Indus Common Stock,
TSW Common Stock and TSW Preferred Stock, respectively, outstanding
immediately prior to the Effective Time will automatically be canceled and
will cease to exist, and all holders of certificates representing shares of
Indus Common Stock, TSW Common Stock and TSW Preferred Stock that were
outstanding immediately prior to the Effective Time will cease to have any
rights as stockholders of Indus or TSW, as applicable and (ii) the stock
transfer books of Indus and TSW will be closed with respect to all shares of
Indus Common Stock and TSW Common Stock and TSW Preferred Stock, respectively,
outstanding immediately prior to the Effective Time. No further transfer of
any such shares of Indus Common Stock, TSW Common Stock and TSW Preferred
Stock will be made on such stock transfer books after the Effective Time. If,
after the Effective Time, an Indus stock certificate or a TSW stock
certificate is presented to the Exchange Agent (or to Newco, Indus or TSW),
such stock certificate will be canceled and will be exchanged as provided
above.
STOCK OPTION AND BENEFIT PLANS
Upon consummation of the Merger, the Indus Plans and the TSW Plans will
terminate, except that, as described above in "--Merger Consideration," each
outstanding option under the Indus Plans and TSW Plans, as well as any
individual non-plan options of TSW, will be assumed and converted into an
option to purchase Newco Common Stock. A vote in favor of the Indus Merger
Proposal and the TSW Merger Proposal will be deemed to constitute approval of
the assumption and conversion of the Indus Options, the Indus Stock Purchase
Plan Options and TSW Options.
The TSW and Indus employee plans and TSW and Indus benefit arrangements that
are in effect at the date of the Reorganization Agreement shall, to the extent
practicable, remain in effect until TSW and Indus employees are allowed to
participate in comparable Newco employee plans and Newco benefit arrangements.
Newco is obligated to use reasonable efforts to arrange that, as soon as
practicable after the Effective Time, the Newco benefit arrangements and Newco
employee plans provide the same or a comparable benefit or plan to each
employee of TSW or Indus, as the case may be, as is currently provided to such
employee by TSW or Indus, as the case may be, provided that all similarly
situated employees of Newco, Indus and TSW shall enjoy substantially similar
benefits regardless of whether such employees are employed by Newco, Indus or
TSW. Such Newco benefit arrangements and Newco employee plans shall give full
credit for each participant's period of service with TSW or Indus, as the case
may be, and each ERISA Affiliate of TSW or Indus, as the case may be, prior to
the Effective Time. From and after the Effective Time, Newco is obligated to
provide all employees of TSW and its ERISA Affiliates with the opportunity to
participate in any employee stock option or other incentive compensation plan
of Newco and its ERISA Affiliates on substantially the same terms and subject
to substantially the same conditions as are available to similarly situated
employees of Indus, and vice versa.
CONDITIONS TO THE MERGER
The obligations of either TSW or Newco and Indus to effect the Merger and
otherwise consummate the transactions contemplated by the Reorganization
Agreement are subject to the satisfaction of a number of conditions,
including: (i) the accuracy, in all material respects of the representations
and warranties of the other party contained in the Reorganization Agreement;
(ii) compliance in all material respects with their respective covenants
contained in the Reorganization Agreement; (iii) the absence of a Substantial
Material Adverse Change with respect to the other party since the date of the
Reorganization Agreement; (iv) the absence of any order, decree or ruling by
any governmental agency which would prohibit or render illegal the
transactions contemplated by the Reorganization Agreement; (v) the other party
shall have obtained on or before the Closing, the permits, authorizations,
written consents, assignments, waivers, authorizations, and other certificates
required to be obtained pursuant to the Reorganization Agreement; (vi) the
Registration Statement shall have become effective under the Securities Act
and shall not be the subject of any stop-order or proceedings seeking a stop-
order and the Joint Proxy Statement/Prospectus shall on the Closing not be
subject to any proceedings commenced or overtly threatened by the Commission;
(vii) each party shall have received an opinions of counsel from counsel to
the other party; (viii) the principal terms of the Reorganization Agreement
and the Merger shall have been approved and adopted by both the Indus
shareholders and TSW shareholders and holders of less than 5% of the
outstanding shares of Indus Common Stock or TSW Capital Stock, respectively,
shall be eligible to exercise dissenter's rights; (ix) no temporary
restraining order, preliminary injunction or permanent injunction or
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other order preventing the consummation of the Merger shall have been issued
by any federal or state court which remains in effect; (x) receipt of
satisfactory tax opinions from each party's respective counsel; (xi) receipt
from Ernst & Young LLP of the Pooling Letter; (xii) the Newco Common Stock to
be issued in the Merger shall have been approved for quotation on Nasdaq,
subject to notice of issuance; (xiii) Indus Sub and TSW Sub shall be duly
organized, validly existing and in good standing and such corporations shall
not have engaged in any business activities during the period from
incorporation to the Closing; and (ix) the waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and any authorization, consent or approval required under any
Antitrust Law shall have been obtained or any waiting period applicable to the
review of the Merger shall have expired or been terminated.
Pursuant to the terms of the Reorganization Agreement, any of the conditions
to the obligations of TSW, on the one hand, and Indus and Newco, on the other,
may be waived by Indus or TSW, respectively. However, neither Indus nor TSW
intend to waive any condition that would prevent the Merger from being treated
as a Reorganization and accounted for as a pooling of interests.
REPRESENTATIONS AND WARRANTIES
The Reorganization Agreement contains certain representations and
warranties, including without limitation, representations and warranties by
Indus and Newco, on the one hand and TSW on the other hand, as to: (i) due
organization, good standing and subsidiaries; (ii) capital structure; (iii)
corporate authority and related agreements, no conflicts with charter
documents and certain agreements and governmental consents; (iv) filings with
the Commission and financial statements; (v) the accuracy of information
supplied for this Joint Proxy Statement/Prospectus; (vi) compliance with
applicable laws; (vii) litigation; (viii) ERISA and other compliance; (ix)
absence of undisclosed liabilities; (x) absence of certain changes or events;
(xi) certain contracts and agreements of each of the parties; (xii) no
defaults under contracts or agreements; (xiii) certain agreements with respect
to benefits; (xiv) taxes; (xv) intellectual property; (xvi) fees and expenses
relating to the Merger; (xvii) insurance; (xviii) ownership of property; (xix)
environmental matters; (xx) interested party transactions; (xxi) Board of
Directors' approvals; (xxii) shareholder vote required; (xxiii) applicability
of state takeover laws; (xxiv) disclosure of all material information; (xxv)
operations of Newco, Indus Sub and TSW Sub prior to the Effective Time, and
(xxvi) fairness opinions issued by financial advisors.
COVENANTS
Pursuant to the Reorganization Agreement, TSW, on the one hand, and Indus
and Newco, on the other hand, have agreed to various customary covenants,
including that from the period from June 5, 1997 until the Effective Time; (i)
each party will promptly advise the other in writing, (a) of any event that
would reasonably be likely to render any representation or warranty of TSW or
Indus, as the case may be, contained in the Reorganization Agreement, untrue
or inaccurate in any material respect, (b) of any event that would reasonably
be likely to have a material adverse effect (as defined in the Reorganization
Agreement) on TSW or Indus or Newco, and (c) of any material breach by the
other party of any covenant or agreement contained in the Reorganization
Agreement; (ii) each party will use its best efforts (a) to carry on and
preserve its business and its relationships with customers, suppliers,
employees and others in substantially the same manner as it has prior to the
date of the Reorganization Agreement, and (b) to execute on its existing
operating plan through the date of the Closing; (iii) each party will continue
to conduct its business and maintain its business relationships in the
ordinary and usual course of business; and (iv) each party will allow each
other and its agents reasonable access to its files, books, records,
technology and offices.
In addition, each of TSW, on the one hand, and Indus and Newco, on the
other, have agreed that, during the period from June 5, 1997 until the
Effective Time, it or they will not, without the prior consent of the other
party, (i) borrow any money except for amounts not exceeding $3,000,000 in the
aggregate (except that TSW may borrow from Warburg); (ii) enter into any
transaction not in the ordinary course of its business; (iii) encumber or
permit to be encumbered any of its assets except in the ordinary course of its
business consistent
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with past practice and to an extent which is not material; (iv) dispose of any
of its assets except in the ordinary course of business, consistent with past
practice; (v) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the ordinary
course of business, consistent with past practice; (vi) fail to maintain its
equipment and other assets in good working condition and repair (subject to
ordinary wear and tear); (vii) pay or make any commitment to pay any bonus,
increased salary or special remuneration to any officer, employee or
consultant (except for bonuses and salary increases in amounts consistent with
past practices) or enter into or vary the terms of any employment, consulting
or severance agreement with any such person, pay any severance or termination
pay (other than payments in amounts consistent with past practice or made in
accordance with plans or agreements existing on the date of the Reorganization
Agreement), grant any stock option (except for normal grants to employees
consistent with past practices) or issue any restricted stock, or enter into
or modify certain agreements or plans or increase certain benefits; (viii)
except as required by GAAP, change accounting methods; (ix) declare, set aside
or pay any cash or stock dividend or other distribution in respect of capital
stock, or redeem or otherwise acquire any of its capital stock (other than
pursuant to arrangements with terminated employees or consultants in the
ordinary course of business, consistent with past practice); (x) amend or
terminate any contract, agreement or license to which it is a party except
those amended or terminated in the ordinary course of its business, consistent
with past practice, and which are not material in amount or effect; (xi) with
certain exceptions, lend any amount to any person or entity; (xii) guarantee
or act as a surety for any obligation except for obligations of certain
subsidiaries in amounts that are not material to the consolidated financial
condition of such party; (xiii) waive or release any right or claim except for
the waiver or release of non-material claims in the ordinary course of
business, consistent with past practice, or the waiver or release of rights or
claims previously disclosed; (xiv) issue or sell any shares of its capital
stock of any class (except upon the exercise of an option, stock purchase
right or warrant currently outstanding or permitted to be granted under
(vii)), or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options (except as expressly permitted under
(vii)), convertible securities or other commitments to issue shares of capital
stock, or accelerate the vesting or change any other term of any outstanding
option or other security; (xv) split or combine the outstanding shares of its
capital stock of any class or enter into any recapitalization or agreement
affecting the number or rights of outstanding shares of its capital stock of
any class or affecting any other of its securities; (xvi) merge, consolidate
or reorganize with, or acquire any entity; (xvii) amend its respective
Certificate or Articles of Incorporation or Bylaws; (xviii) license any
intellectual property except in the ordinary course of business, consistent
with past practice, or grant any exclusive rights, subject to certain
exceptions, or agree to perform any development projects with respect to
intellectual property; (xix) agree to any audit assessment by any tax
authority, except amounts not exceeding $300,000 with prior notice to the
other party; (xx) change any insurance coverage or issue any certificates of
insurance except in the ordinary course of business, consistent with past
practice; (xxi) take any action, or permit any action within its control or
fail to use its reasonable best efforts to prevent any of its officers or
directors from taking or permitting any such action which would (a) prevent
the Merger from qualifying as a Reorganization or, (b) prevent the Merger from
qualifying for accounting purposes as a pooling of interests, or (xxii)
provide or publish to their shareholders any material which might constitute
an unauthorized "prospectus" within the meaning of the Securities Act.
The Reorganization Agreement also contains certain additional covenants of
the parties including covenants relating to: (i) regulatory approvals; (ii)
permits, governmental consents, approval and authorization, written consents,
assignments, waivers and other certificates; (iii) indemnification of officers
and directors; (iv) Affiliate Agreements; (v) Voting Agreements; (vi)
preparation and mailing of this Joint Proxy Statement/Prospectus; (vii)
qualification of the Newco Common Stock under applicable state "blue sky"
laws; (viii) delivery of the Pooling Letter and a letter from Ernst & Young
LLP with respect to the Registration Statement; and (ix) Indus and TSW
employee benefit arrangements; (x) the Registration Rights Agreements, (xi)
employee matters and (xii) the Nomination Agreement.
Indus and TSW have also agreed to use all reasonable efforts to take, or
cause to be taken, all actions necessary to consummate the Merger and make
effective the other transactions contemplated by the Reorganization Agreement.
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NON-SOLICITATION
Pursuant to the Reorganization Agreement, each of Indus and TSW has agreed
that it will not, directly or indirectly, (i) solicit or initiate discussions,
engage in negotiations with any person or take any other action intended,
designed or reasonably likely to facilitate the efforts of any person, other
than the other party to the Reorganization Agreement, relating to a Third
Party Acquisition, (ii) provide non-public information with respect to TSW or
Indus, as the case may be, to any person, other than the other party to the
Reorganization Agreement, relating to a Third Party Acquisition, or (iii)
enter into an agreement with any person, other than the other party to the
Reorganization Agreement, providing for a Third Party Acquisition.
INDEMNIFICATION
The Articles of Incorporation and Bylaws of the TSW Surviving Corporation
and the Articles of Incorporation and Bylaws of the Indus Surviving
Corporation are required to contain provisions with respect to indemnification
and limitation of liability for monetary damages set forth in the Articles of
Incorporation and Bylaws of TSW or Articles of Incorporation or Bylaws of
Indus, as applicable, on the date of the Reorganization Agreement, which
provisions are not permitted to be amended, repealed or otherwise modified for
a period of ten years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at the Effective
Time were directors, officers, employees or agents of Indus or TSW, as
applicable, unless such modification is required by law.
From and after the Effective Time, Newco and the Indus Surviving Corporation
or the TSW Surviving Corporation, as the case may be, are required to honor,
in all respects, all of the indemnity agreements entered into prior to the
Effective Time by Indus or TSW, as applicable, with their respective officers
and directors, whether or not such persons continue in their positions with
Newco or the Indus Surviving Corporation or the TSW Surviving Corporation, as
applicable, following the Effective Time.
After the Effective Time, Newco and the Indus Surviving Corporation or the
TSW Surviving Corporation, as applicable, will, jointly and severally, to the
fullest extent permitted under applicable law, indemnify and hold harmless,
each Indemnified Party against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal administrative or investigative, to the
extent arising out of or pertaining to any action or omission in his or her
capacity as a director or officer of Indus or TSW, as applicable, arising out
of or pertaining to the transactions contemplated by the Reorganization
Agreement for a period of six years after the date of the Reorganization
Agreement. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (a) any
counsel retained for the defense of the Indemnified Parties for any period
after the Effective Time must be reasonably satisfactory to the Indemnified
Parties, (b) after the Effective Time, the Indus Surviving Corporation or the
TSW Surviving Corporation, as applicable, will pay the reasonable fees and
expenses of such counsel promptly after statements therefor are received, and
(c) the Indus Surviving Corporation or TSW Surviving Corporation, as
applicable, will cooperate in the defense of any such matter; provided,
however, that the Indus Surviving Corporation or TSW Surviving Corporation, as
applicable, will not be liable for any settlement effected without its written
consent (which consent will not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for indemnification are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims will continue until the disposition of any
and all such claims. The Indemnified Parties as a group may be defended by
only one law firm (in addition to local counsel) with respect to any single
action unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties.
Until the sixth anniversary of the Effective Time, and subject to certain
limitations, Newco will cause each of the Indus Surviving Corporation and the
TSW Surviving Corporation to use its commercially reasonable efforts to
maintain in effect, for the benefit of the persons currently covered by the
current directors' and officers'
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liability insurance policies of Indus or TSW, as applicable, with respect to
acts or omissions occurring prior to the Effective Time, directors' and
officers' liability insurance policy with comparable coverage to the policies
of Indus and TSW, as applicable.
TERMINATION
The Reorganization Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the
shareholders of Indus or stockholders of TSW:
(i) by mutual written agreement of TSW and Indus;
(ii) by TSW or Indus, if there has been a breach by Indus or Newco (in the
case of a termination by TSW) or TSW (in the case of a termination by Indus)
of any representation or warranty set forth in the Reorganization Agreement on
the part of the other party and which breach remains uncured for 10 business
days following written notice thereof (except that no cure period shall be
provided for a breach which by its nature cannot be cured), and, as a result
of such breach, the representations and warranties of the other party would
not be true and accurate on and as of the Closing;
(iii) by TSW or Indus, if there has been a breach by Indus or Newco (in the
case of a termination by TSW) or TSW (in the case of a termination by Indus)
of any covenant or agreement set forth in the Reorganization Agreement on the
part of the other party and as a result of such breach, the other party shall
not have complied in all material respects with all of its covenants to be
complied with by it prior to the Closing, and which breach remains uncured for
10 business days following written notice thereof (except that no cure period
shall be provided for a breach which by its nature cannot be cured);
(iv) by Indus or TSW, if all the conditions for Closing the Merger shall
not have been satisfied or waived on or before the Final Date other than as a
result of a breach of the Reorganization Agreement by the terminating party;
(v)by Indus or TSW, if a permanent injunction or other order by any federal
or state court which would make illegal or otherwise restrain or prohibit the
consummation of the Merger shall have been issued and shall have become final
and nonappealable;
(vi)by Indus or TSW, if the TSW shareholder approval is not granted at the
TSW Meeting;
(vii)by Indus or TSW, if the Indus shareholder approval is not granted at
the Indus Meeting;
(viii)by Indus, if the Pooling Letter cannot be delivered for any reason
related to TSW;
(ix)by TSW, if the Pooling Letter cannot be delivered for any reason related
to Indus;
(x)by TSW, if the Indus Common Stock Market Price is less than $9.50 per
share; or
(xi)by Indus, if the Indus Common Stock Market Price is greater than $22.50
per share.
To the extent that TSW is entitled to terminate the Reorganization Agreement
as a result of the Indus Common Stock Market Price being less than $9.50 per
share, the TSW Board, in the exercise of its fiduciary duties, will determine
at that time whether to exercise the termination right. The TSW Board's
determination will be made in light of the facts and circumstances existing at
that time, including stock market conditions for technology companies and
recent financial performances of TSW and Indus, and will take into account the
potential benefits of the Merger and the potential negative factors described
under "THE MERGER--Reasons for the Merger," as well as any recent developments
affecting such benefits and factors, plus any new events or developments that
the TSW Board deems relevant to its determination in the exercise of its
fiduciary duties.
To the extent that Indus is entitled to terminate the Reorganization
Agreement as a result of the Indus Common Stock Market Price being more than
$22.50 per share, the Indus Board, in the exercise of its fiduciary duties,
will determine at that time whether to exercise the termination right. The
Indus Board's determination will be made in light of the facts and
circumstances existing at that time, including stock market conditions for
58
<PAGE>
technology companies and recent financial performances of Indus and Indus, and
will take into account the potential benefits of the Merger and the potential
negative factors described under "THE MERGER--Reasons for the Merger," as well
as any recent developments affecting such benefits and factors, plus any new
events or developments that the Indus Board deems relevant to its
determination in the exercise of its fiduciary duties.
It is not anticipated that proxies of either party's shareholders will be
resolicited in the event that either party becomes entitled to exercise a
right to terminate pursuant to the Reorganization Agreement.
EXPENSES
If the Merger is consummated, the Combined Company will bear all costs and
expenses in connection with the Reorganization Agreement and the transactions
provided for therein. If the Merger is not consummated, each of TSW and Indus
will bear its own costs and expenses with respect to the Reorganization
Agreement and the transactions contemplated thereby, provided that TSW and
Indus shall share equally all fees and expenses, other than attorneys',
accountants'; and financial advisors' fees incurred in connection with the
printing and filing of the Registration Statement and this Joint Proxy
Statement/Prospectus.
NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES
None of the representations and warranties of Indus, Newco or TSW contained
in the Reorganization Agreement or in any certificate delivered pursuant to
the Reorganization Agreement will survive the Merger.
AMENDMENT; WAIVER
The Reorganization Agreement may be amended by Indus and TSW at any time
before or after adoption and approval of the Reorganization Agreement by the
shareholders of Indus and TSW. However, after any such adoption and approval
of the Reorganization Agreement and the Merger, no amendment may be made which
by law requires further approval of the shareholders of Indus or TSW without
the further approval of such shareholders. The Reorganization Agreement may
not be amended except by an instrument in writing signed on behalf of the
party or the parties to be bound by such amendment.
59
<PAGE>
CERTAIN RELATED AGREEMENTS
Affiliate Agreements
To ensure that the Merger will be accounted for as a "pooling of interests,"
the Indus Affiliates and TSW Affiliates have executed the Affiliate Agreements
which prohibit such persons from disposing of their shares of Indus Common
Stock or TSW Capital Stock, respectively, and Newco Common Stock received in
exchange thereof in connection with the Merger (i) during the 30-day period
prior to the Closing, and (ii) until the Combined Company publicly releases
its first report including the combined financial results of Newco, Indus and
TSW for a period of at least 30 days of "combined operations," as defined by
the Commission. Pursuant to such agreements, the Indus Affiliates and TSW
Affiliates have also acknowledged the resale restrictions imposed by Rule 145
on shares received by them in the Merger and have made certain representations
pertaining to the "continuity of interest" requirements for a Reorganization.
Voting Agreements
Indus Subject Shareholders, who beneficially own approximately 60.3% of the
outstanding shares of Indus Common Stock, in the aggregate, and TSW Subject
Shareholders, who beneficially own approximately 95% of the outstanding shares
of TSW Capital Stock (including all of the TSW Preferred Stock), have entered
into Voting Agreements with TSW (in the case of Indus Subject Shareholders) or
Indus (in the case of TSW Subject Shareholders), pursuant to which such
persons or entities have agreed to vote their shares of Indus Common Stock or
TSW Capital Stock, as applicable, in favor of the Merger.
Nomination Agreement
Newco, Robert W. Felton and Warburg will enter into a Nomination Agreement
at the Closing which provides that for so long as Warburg continues to own
more than 15% of the outstanding shares of Newco Common Stock, Warburg will be
permitted to nominate two members to the Newco Board, and that for so long as
Warburg continues to own between 7% and 15% of the outstanding shares of Newco
Common Stock, Warburg will be permitted to nominate one nominee to the Newco
Board. The Nomination Agreement also provides that for so long as Mr. Felton
continues to own more than 15% of the outstanding shares of Newco Common
Stock, Felton will be permitted to nominate two members to the Newco Board,
and that for so long as Mr. Felton continues to own between 7% and 15% of the
outstanding shares of Newco Common Stock, Mr. Felton will be permitted to
nominate one nominee to the Newco Board, which nominee in each instance may be
Felton. Under the Nomination Agreement, Newco will be obligated to use its
best efforts to cause to be voted the shares for which Newco's management or
Board of Directors holds proxies or is otherwise entitled to vote in favor of
the election of Warburg's and Felton's designees and to cause the Newco Board
to unanimously recommend to its stockholders to vote in favor of the Warburg
and Felton designees. See "THE MERGER--Interests of Certain Persons in the
Merger."
Registration Rights Agreement
Newco, Warburg, Mr. Felton and certain holders of Indus Common Stock and TSW
Capital Stock will enter into the Registration Rights Agreement, which grants
Warburg and Mr. Felton the right to request Newco, on up to two occasions
each, to register the shares of Newco Common Stock to be received by Warburg
and Mr. Felton in exchange for Mr. Felton's Indus Common Stock, Warburg's TSW
Common Stock, TSW Preferred Stock and TSW Warrants pursuant to the Merger. All
parties to the Registration Rights Agreement also have "piggyback"
registration rights with respect to such shares of Newco Common Stock. See
"THE MERGER--Interests of Certain Persons in the Merger."
60
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
assume a business combination between Indus and TSW accounted for on a
"pooling of interests" basis. The unaudited pro forma condensed combined
financial statements are based upon the respective historical financial
statements of Indus and TSW and should be read in conjunction with such
historical financial statements and the notes thereto, which are included
elsewhere in this Joint Proxy Statement/Prospectus. The unaudited pro forma
condensed combined balance sheet combines Indus' March 31, 1997 unaudited
condensed consolidated balance sheet with TSW's March 31, 1997 unaudited
condensed consolidated balance sheet. The unaudited pro forma condensed
combined statements of operations combine Indus' historical condensed
consolidated statements of operations for the fiscal years ended December 31,
1994, 1995 and 1996 and the three months ended March 31, 1996 and 1997 with
those of TSW for the fiscal years ended March 31, 1995, 1996 and 1997 and the
three months ended March 1996 and 1997 of TSW respectively.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated as presented in the
accompanying unaudited pro forma condensed combined financial information, nor
is it necessarily indicative of future operating results or financial
position.
These unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
the related notes thereto of Indus and TSW included elsewhere herein.
61
<PAGE>
NEWCO
INDUS AND TSW COMBINED
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
INDUS TSW
MARCH 31, MARCH 31, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.... $ 5,666 $ 549 $ 6,215
Marketable securities........ 27,422 -- 27,422
Billed accounts receivable
net of allowance for
doubtful accounts........... 16,065 18,972 35,037
Unbilled accounts receiv-
able........................ 6,292 13,764 20,056
Other current assets......... 3,766 1,842 5,608
-------- -------- ---------
Total current assets....... 59,211 35,127 94,338
Marketable securities matur-
ing beyond one year......... 2,111 -- 2,111
Property and equipment, net.. 7,174 5,933 13,107
Purchased software, net...... -- 294 294
Investment................... 7,997 -- 7,997
Employee notes receivable.... 210 396 606
Other assets................. -- 591 591
-------- -------- ---------
Total assets............... $ 76,703 $ 42,341 $ 119,044
======== ======== =========
LIABILITIES AND SHAREHOLDER'S
EQUITY
Current liabilities:
Revolving line of credit.... $ -- $ 15,991 $ 15,991
Current portion of
obligations under capital
leases..................... -- 960 960
Accounts payable............ 2,823 4,841 7,664
Accrued compensation........ -- 6,191 6,191
Deferred income taxes....... 4,233 -- 4,233
Other accrued liabilities... 3,495 -- 12,000(3) 15,495
Deferred revenue............ 8,056 10,773 18,829
-------- -------- ---------
Total current liabilities.. 18,607 38,756 69,363
Obligations under capital
leases and term loans....... -- 2,126 2,126
Subordinated long-term
notes....................... -- 18,065 (18,065)(6) --
Commitments..................
Redeemable preferred stock... -- 18,100 (18,100)(7) --
Shareholders' equity:
Common stock................ 46,467 2,223 36,165(6)(7) 84,855
Other....................... (412) (299) (711)
Retained earnings
(deficit).................. 12,041 (36,630) (12,000)(3) (36,589)
-------- -------- ---------
Total shareholders'
equity.................... 58,096 (34,706) 47,555
-------- -------- ---------
$ 76,703 $ 42,341 $ 119,044
======== ======== =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Consolidated Financial Statements.
62
<PAGE>
NEWCO
INDUS AND TSW
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
1994 1995 1996 1996 1997
--------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
License fees............. $ 15,380 $ 32,816 $ 43,060 $ 11,431 $ 12,806
Service and maintenance.. 41,901 67,824 97,515 18,730 30,002
Other.................... 824 1,184 2,463 251 1,100
--------- -------- -------- --------- ---------
Total revenues........... 58,105 101,824 143,038 30,412 43,908
Cost of revenues......... 27,664 47,872 63,738 13,036 19,316
OPERATING EXPENSES:
Research and develop-
ment.................... 19,063 18,151 21,110 5,774 5,459
Sales and marketing...... 13,084 19,915 26,523 6,103 8,665
General and administra-
tive.................... 10,352 12,996 16,418 4,537 4,709
Compensation change--op-
tions................... -- 18,900 -- -- --
Write-off goodwill....... -- -- 688 -- --
--------- -------- -------- --------- ---------
Total operating ex-
penses.................. 42,499 69,962 64,739 16,414 18,833
Income (loss) from opera-
tions................... (12,058) (16,010) 14,561 962 5,759
Interest and other in-
come, net............... 36 213 1,391 69 425
Interest expense......... (819) (2,325) (3,278) (683) (957)
--------- -------- -------- --------- ---------
Income (loss) before in-
come taxes.............. (12,841) (18,122) 12,674 348 5,227
Provision (benefit) for
income taxes............ (1,195) 423 6,849 1,358 2,138
Cumulative effect of
deferred income taxes
provided upon conversion
by Indus to C
Corporation............. -- -- 6,700 6,700 --
--------- -------- -------- --------- ---------
Net income (loss)........ $ (11,646) $(18,545) $ (875) $ (7,710) $ 3,089
========= ======== ======== ========= =========
Pro forma statement of
operations as adjusted:
Income (loss) before in-
come taxes, as above.... $(18,122) $ 12,674 $ 348 $ 5,227
Add back portion of com-
pensation charge........ 17,900 -- -- --
-------- -------- --------- ---------
Income before income
taxes as adjusted....... (222) 12,674 348 5,227
Provision for income tax-
es...................... 5,181 6,849 1,358 2,138
-------- -------- --------- ---------
Pro forma net income
(loss).................. $ (5,403) $ 5,825 $ (1,010) $ 3,089
======== ======== ========= =========
Pro forma net income
(loss) per share....... $ (0.23) $ 0.20 $ (0.04) $ 0.10
======== ======== ========= =========
Equivalent shares used
in computing net income
(loss) per share....... 23,180 29,196 23,350 30,121
======== ======== ========= =========
</TABLE>
63
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
1. The pro forma combined condensed financial statements reflect the issuance
by Newco of the equivalent of 2.73 shares of Newco Common Stock for each
outstanding share of TSW Common Stock and TSW Preferred Stock.
2. There were no material transactions between Indus and TSW during any period
presented.
3. The Combined Company expects to incur charges to operations currently
estimated to be between $10.0 million and $12.0 million, primarily in the
quarter in which the Merger is consummated, to reflect direct transaction
fees and costs incident to the Merger of $8.1 million, and additional
anticipated costs of $3.9 million associated with integrating the two
companies. Integration costs of merging the companies are expected to
include severance costs associated with any employee terminations, costs
associated with conforming employee benefits plans, charges associated with
duplicate facilities and asset writedowns related to duplicate business
systems. The final amounts associated with each of these items has not yet
been determined. An estimated charge of $12.0 million is reflected in the
pro forma combined condensed balance sheet as a reduction to retained
earnings and an increase to accrued liabilities. The estimated charge is
not reflected in the pro forma combined condensed statement of operations
data. The amount of this charge is a preliminary estimate and therefore is
subject to change.
4. For the three-months ended March 31, 1997, TSW reported net income of
$276,000 ($0.09 per share) on total revenues or $21.5 million compared to
net loss of $2.8 million ($1.04 per share) on total revenues $13.6 million
for the comparable 1996 quarter.
5. Pro forma net income per share has been provided for periods ending on and
after December 31, 1995 to reflect provisions for taxes and a non-recurring
compensation charge resulting from Indus' change from an S Corporation to a
C Corporation on January 1, 1995 (refer to Note 1 of the Indus historical
financial statements for further information). Accordingly, there is no pro
forma information to present for the 1994 fiscal year.
Pro forma net income per share is computed using pro forma net income and
the weighted-average number of common and preferred and dilutive common
equivalent shares outstanding during the year ended December 31, 1996 and
three months ended March 31, 1997. Dilutive common equivalent shares
consist of incremental common shares issuable upon the assumed exercise of
stock options and warrants (using the treasury stock method). Fully diluted
per share amounts are not presented, as the effect is not material. Pro
forma net loss per share is computed using the weighted-average number of
common and preferred shares outstanding, common equivalent shares from
stock options and warrants are excluded from the computation for the year
ended December 31, 1995 and for the three months ended March 31, 1996 as
their effect is antidilutive.
6. A pro forma adjustment has been made for the exchange of the TSW
Subordinated Notes for Common Stock in accordance with the Merger
Agreements.
7. A pro forma adjustment has been made for the conversion of the TSW
Redeemable Preferred Stock into common stock in accordance with the Merger
Agreements.
<TABLE>
<CAPTION>
1995 1996 THREE MONTHS ENDED THREE MONTHS ENDED
PRO FORMA PRO FORMA MARCH 31, 1996 MARCH 31, 1997
COMBINED COMBINED PRO FORMA COMBINED PRO FORMA COMBINED
--------- --------- ------------------ ------------------
<S> <C> <C> <C> <C>
CALCULATION OF WEIGHTED
AVERAGE SHARES
OUTSTANDING
(IN THOUSANDS):
Shares outstanding, on
an as converted basis.. 15,611 18,182 16,620 19,402
Conversion of preferred
stock, on an as
converted basis........ 6,416 7,794 6,730 8,034
Other, including common
stock equivalents net
of treasury effect..... 1,153 3,220 0 2,685
------ ------ ------ ------
23,180 29,196 23,350 30,121
====== ====== ====== ======
</TABLE>
64
<PAGE>
SELECTED HISTORICAL COMBINED AND CONSOLIDATED FINANCIAL DATA OF INDUS
The following selected financial information is qualified by reference to
and should be read in conjunction with Indus' Combined and Consolidated
Financial Statements and notes thereto and Indus' Management's Discussion and
Analysis of Financial Condition and Results of Operations appearing elsewhere
in this Joint Proxy Statement/Prospectus. The combined statements of
operations data for the years ended December 31, 1994 and 1995 and combined
balance sheet data as of December 31, 1995 of Indus and its wholly-owned
subsidiary, Indus International, Inc., and the consolidated statement of
operations data for the year ended December 31, 1996 and consolidated balance
sheet data as of December 31, 1996 are derived from and qualified by reference
to financial statements of Indus that have been audited by Ernst & Young LLP,
independent auditors, and are included elsewhere herein. The combined balance
sheet data as of December 31, 1992 and 1993 and the combined statement of
operations data for the years ended December 31, 1992 and 1993 are derived
from the financial statements of Indus that have been audited by Ernst & Young
LLP that are not included herein. The consolidated statement of operations
data for the three months ended March 31, 1997 have been derived from
unaudited consolidated financial statements that have been prepared on the
same basis as the audited consolidated financial statements and, in the option
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations of
Indus for the unaudited interim period. The results of operations for the
three months ended March 31, 1997 are not indicative of results for the entire
calendar year or any other period.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------ -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
REVENUES:
Software licensing
fees................. $ 6,112 $ 6,514 $ 7,547 $10,676 $ 16,208 $ 3,958 $ 3,722
Services and
maintenance.......... 16,681 20,978 23,044 43,115 59,731 12,901 18,700
------- ------- ------- ------- -------- -------- -------
Total revenues........ 22,793 27,492 30,591 53,791 75,939 16,859 22,422
Cost of revenues....... 9,127 10,395 12,798 22,578 31,790 6,649 9,518
------- ------- ------- ------- -------- -------- -------
Gross margin........... 13,666 17,097 17,792 31,213 44,149 10,210 12,904
------- ------- ------- ------- -------- -------- -------
OPERATING EXPENSES:
Research and
development.......... 4,295 6,910 7,120 8,306 12,493 3,415 2,931
Sales and marketing... 1,856 3,533 4,144 5,680 9,306 1,936 3,238
General and
administrative....... 3,988 3,595 4,654 4,918 7,819 1,843 2,296
Compensation charge--
stock options(1)..... -- -- -- 18,900 -- -- --
------- ------- ------- ------- -------- -------- -------
Total operating
expenses............. 10,139 14,038 15,918 37,804 29,618 7,194 8,465
------- ------- ------- ------- -------- -------- -------
Income (loss) from
operations............ 3,527 3,059 1,874 (6,591) 14,531 3,016 4,439
Other income (expense),
net................... 83 83 (100) 96 1,251 47 411
------- ------- ------- ------- -------- -------- -------
Income (loss) before
income taxes.......... 3,610 3,142 1,774 (6,495) 15,782 3,063 4,850
Provision for income
taxes (state and
foreign only)......... 90 55 69 325 6,554 1,260 2,037
Cumulative effect of
deferred income taxes
provided upon January
1, 1996 conversion to
C Corporation
status(2)............. -- -- -- -- 6,700 6,700 --
------- ------- ------- ------- -------- -------- -------
Net income (loss)...... $ 3,520 $ 3,087 $ 1,705 $(6,820) $ 2,528 $ (4,897) $ 2,813
======= ======= ======= ======= ======== ======== =======
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------ -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- -------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF
OPERATIONS DATA FOR
1995 AND 1996:
Income (loss) before
income taxes, as
above................. $ (6,495) $ 15,782 $ 3,063 $ 4,850
Add back portion of
compensation charge--
stock options(1)...... 17,900 -- -- --
Income before income
taxes, as adjusted.... 11,405 15,782 3,063 4,850
Provision for income
taxes (federal, state
and foreign)(2)....... 5,083 6,554 1,260 2,037
======== ======== ======= =======
Pro forma net income... $ 6,322 $ 9,228 $ 1,803 $ 2,813
======== ======== ======= =======
Pro forma net income
per share(3).......... $ 0.36 $ 0.49 $ 0.10 $ 0.14
======== ======== ======= =======
Shares used in
computing pro forma
net income per
share(3).............. 17,490 18,924 17,686 19,609
======== ======== ======= =======
<CAPTION>
DECEMBER 31,
------------------------------------------ MARCH 31,
1992 1993 1994 1995 1996 1997
------- ------- ------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 6,789 $ 4,179 $ 4,698 $ 7,640 $ 46,693 $40,604
Total assets............ 14,914 13,080 18,063 31,075 75,514 76,703
Short-term debt......... 1,700 1,833 2,005 8,900 -- --
Long-term debt.......... -- -- -- -- -- --
Total shareholders'
equity................. 9,641 8,123 8,243 10,848 55,372 58,096
</TABLE>
- --------
(1) Reflects nonrecurring expense incurred in the third quarter of 1995 in
connection with an amendment to the Indus 1992 Plan to accelerate the
exercisability of outstanding stock options, which had previously been
contingent upon the occurrence of certain events. The pro forma adjustment
of $17,900,000 is to reduce 1995 compensation expense to the amount
related to options granted in 1995 only. See Note 1 of the Notes to the
Indus Combined and Consolidated Financial Statements.
(2) Prior to January 1, 1996, Indus was not subject to federal corporate
income taxation because of its election to be taxed under the provisions
of Subchapter S of the Code. Pro forma net income for 1995 has been
determined by assuming that Indus had been taxed as a C Corporation for
1995. Pro forma net income for 1996 reflects the elimination of a
nonrecurring charge for the cumulative effect of deferred income taxes
incurred in the first quarter of 1996 in connection with the termination
of Indus' S Corporation status. See Notes 1 and 12 of Notes to the Indus
Combined and Consolidated Financial Statements.
(3) See Note 1 of Notes to the Indus Combined and Consolidated Financial
Statements for a more complete explanation of the determination of the
number of shares used in computing pro forma net income per share.
66
<PAGE>
INDUS MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Indus develops, markets, and supports a proprietary line of enterprise
management software and implementation services for process industry customers
worldwide. Taking advantage of the client/server model of networked computing,
PassPort Software Solutions contain "best business practices" which serve as
the catalyst for improving core operational business functions for electric
utilities, oil and gas, chemical refining, forest products, nuclear and steel
producing industries. ABACUS, Indus' proprietary methodology, accelerates the
realization of benefits by delivering a reliable cost and time-efficient
approach to implementation across the enterprise.
Indus derives its revenues primarily from software licenses, implementation
and training services and maintenance fees. While Indus has derived the
majority of its revenues from electric utilities, it also derives revenues
from customers in other process industries, including oil and gas, chemical
refining, nuclear, steel and forest product industries.
Indus provides its software to customers under contracts which provide for
software license fees, system implementation services and the first year of
software maintenance. Revenues from application software licenses, which
typically have ranged from approximately $1 million to $5 million per
enterprise license, are recognized as earned revenue over the estimated time
period to complete the implementation of the software, which generally is
twelve to fourteen months. Revenues from client workstation software are
recognized as billed. Revenues from system implementation services, which
generally are time- and material-based, are recognized as direct contract
costs are incurred and typically range from one to three times the license
fees.
Accordingly, revenues for each quarter depend in part on revenues from the
closing of new contracts during the quarter as well as revenue from contracts
under implementation that were executed in prior quarters. A portion of
license fees is deferred initially and subsequently recognized over the one-
year period during which continuing maintenance and support services are
provided to customers under the contracts. After an initial contract period,
additional maintenance and support services, for which Indus typically charges
15-18% of the original license fee per year, are subject to separate
agreements whereby revenue is recognized ratably over the agreement period.
Indus has in the past and may in the future acquire complementary products
or businesses. Risks associated with such transactions include difficulty in
retaining and assimilating the personnel of the combined companies, difficulty
in integrating the operations of the combined companies, disruption of Indus'
ongoing business, expenses associated with completing the transaction and
amortizing acquired intangible assets, and dilution of existing equity
holders. There can be no assurance that such transactions will not materially
adversely affect Indus' business, financial condition or operating results.
67
<PAGE>
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED 1994, 1995 AND 1996
The following table sets forth Indus' results of operations for the periods
indicated expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL REVENUES
-----------------
YEARS ENDED
DECEMBER 31,
-----------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Software licensing fees.................................... 25% 20 % 21%
Services and maintenance................................... 75 80 79
Total revenues............................................ 100 100 100
Cost of revenues............................................ 42 42 42
Gross margin................................................ 58 58 58
OPERATING EXPENSES:
Research and development................................... 23 15 16
Sales and marketing........................................ 14 11 12
General and administrative................................. 15 9 10
Compensation charge-stock options.......................... -- 35 --
Total operating expenses.................................. 52 70 38
Income (loss) from operations............................... 6 (12) 20
Other income (expense), net................................. -- -- 1
Income (loss) before income taxes........................... 6 (12) 21
Provision for income taxes.................................. -- -- 9
Cumulative effect of deferred income taxes provided upon
January 1, 1996
conversion to C Corporation status......................... -- -- 9
Net income (loss)........................................... 6% (12)% 3%
PRO FORMA STATEMENT OF OPERATIONS DATA FOR 1995 AND 1996:
Income (loss) before taxes, as above....................... (12)% 21%
Add back portion of compensation charge--stock options..... 33 --
Income before income taxes, as adjusted.................... 21 21
Provision for income taxes................................. 9 9
Pro forma net income....................................... 12 % 12%
</TABLE>
Revenues. Indus' revenues are derived from software licensing fees and from
services, which include implementation and training services coupled with
maintenance fees. Total revenues increased 76% from $30.6 million in 1994 to
$53.8 million in 1995, and 41% to $75.9 million in 1996. The increase in 1995
resulted from increased licensing activity in the latter half of 1994 and the
associated increase in demand for Indus' implementation and training services.
The growth in 1996 was attributable to increased licensing activity combined
with new customer licenses and subsequent implementation and training
services. Indus does not believe the revenue growth experienced in 1996 is
necessarily indicative of any revenue growth that may occur in future periods.
Cost of Revenues. Cost of revenues consists primarily of: (i) personnel and
related costs for implementation, including the costs of Indus' Account
Executives, and (ii) personnel and related costs for training and customer
support services. Substantially all of the cost of revenues is attributable to
providing services and maintenance. Costs of software license fees, which
consist primarily of packaging and production costs, are not significant and
are not segregated in Indus' accounting records. All software development
costs are expensed to research and development as incurred. Cost of revenues
increased 76% from $12.8 million in 1994 to $22.6 million in 1995 and 41% to
$31.8 million in 1996, and represented 42% of total revenues in each of those
years. The 1995 and 1996 increases resulted from the cost of increased
services associated with major new license agreements as well as the cost of
additional services associated with the expansion of existing projects.
68
<PAGE>
Research and Development. Research and development expenses consist
primarily of: (i) personnel and related costs and (ii) computer timeshare
costs directly attributable to the development of new software application
products, enhancements to existing products and the costs of porting Indus'
products to different platforms. Research and development expenses increased
by 17% from $7.1 million in 1994 to $8.3 million in 1995 and increased by 50%
to $12.5 million in 1996, and represented 23%, 15% and 16% respectively, of
total revenues in those years. The decline in research and development as a
percentage of total revenues in 1995 was due to the increase in total
revenues. Research and development investment increased in absolute dollars
and as a percentage of total revenues in 1996 as compared to 1995 due to Indus
committing substantial development resources towards incorporating new
technologies into PASSPORT and designing additional PASSPORT applications.
Indus believes that a significant level of research and development is
essential to remain competitive and will continue to invest development
resources towards incorporating new technologies into PASSPORT and designing
additional PASSPORT functionality. The level of these expenditures for a
particular period may vary depending on the projects in progress.
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, Indus has expensed all software development costs
because development costs incurred subsequent to the establishment of
technological feasibility have not been material.
Sales and Marketing. Sales and marketing expenses increased by 39% from $4.1
million in 1994 to $5.7 million in 1995 and increased by 64% to $9.3 million
in 1996, and represented 14%, 11% and 12%, respectively, of total revenues in
those years. The 1995 and 1996 increases in absolute dollars resulted from
increased staffing levels and increased commissions expenses associated with
increased revenues. Indus believes that sales and marketing expenses as a
percentage of total revenues will increase in 1997 due to the reallocation of
certain expenditures originally intended for research and development to sales
and marketing efforts, and will increase as Indus expands its presence in the
domestic market, initiates operations in additional international markets,
develops new and existing marketing and product strategic alliances and
increases focus on vertical markets.
General and Administrative. General and administrative expenses increased by
4% from $4.7 million in 1994 to $4.9 million in 1995 and increased by 59% to
$7.8 million in 1996. These expenses represented 15%, 9% and 10%,
respectively, of total revenues in those years. The increase in 1996 primarily
resulted from incremental expenditures related to becoming a public company
and expansion in staffing to support Indus' growth.
Compensation Charge--Stock Options. Indus amended its 1992 Stock Option Plan
effective in September 1995 to accelerate the exercisability of all
outstanding stock options (covering 1,788,570 shares of Common Stock).
Exercisability had previously been contingent upon certain "liquidity events"
such as an initial public offering or an acquisition of Indus. As a result of
this amendment, Indus recognized a non-recurring compensation charge of $18.9
million in the third quarter of 1995.
Provision for Income Taxes. Effective upon its incorporation in 1990, Indus
elected to have its United States income taxed under Subchapter S of the Code.
Accordingly, income tax provisions prior to 1996 were principally attributable
to state taxes and taxes imposed by governments on Indus' foreign operations.
Indus' S Corporation status terminated effective January 1, 1996, and Indus
was subject to federal income taxation at the corporate level thereafter. In
connection with the termination of S Corporation status as of January 1, 1996,
a one-time charge representing a cumulative net federal and state deferred
income tax liability of $6.7 million was recorded during the first quarter of
1996.
Net Income (Loss). Indus' net income of $2.5 million in 1996 increased from
the net loss recorded in 1995, primarily due to increased revenues. The effect
of the increased revenues was partially offset by the factors described above
and by a one-time charge representing a cumulative net federal and state
deferred income tax liability associated with Indus' conversion to C
Corporation status. The loss in 1995 was a result of the non-recurring
compensation charge upon elimination of the contingency related to stock
options.
69
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1997
In March 1997, Indus acquired a 10% interest in TenFold Corporation, a
private software company for approximately $8 million in cash. Indus will
receive a perpetual, unlimited license for future applications and tools
developed with TenFold's technology. Subsequent to March 31, 1997, Indus
acquired Prism Consulting, a private management consulting firm, for $4.75
million in Indus Common Stock at the current market value and $250,000 in
cash. Indus has not and does not anticipate any material consequences on its
results of operations for the calendar year 1997 as a result of these
acquisitions.
The following table sets forth for the periods indicated the percentage of
total revenues represented by certain line items in Indus' statements of
operations:
PERCENT OF TOTAL REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
--------- ---------
<S> <C> <C>
REVENUES:
Software licensing fees.................................. 16.6% 23.5%
Services and maintenance................................. 83.4 76.5
-------- ---------
Total revenues.......................................... 100.0 100.0
Cost of revenues.......................................... 42.4 39.4
-------- ---------
Gross margin.............................................. 57.6 60.6
OPERATING EXPENSES:
Research and development.................................. 13.1 20.2
Sales and marketing...................................... 14.4 11.5
General and administrative............................... 10.2 10.9
-------- ---------
Total operating expenses................................ 37.8 42.6
-------- ---------
Income (loss) from operations............................. 19.8 18.0
Other income, net......................................... 1.8 0.3
Income (loss) before income taxes......................... 21.6 18.3
Provision for income taxes (state and foreign only in
1995).................................................... 9.1 7.5
Cumulative effect of deferred income taxes provided upon
January 1, 1996
conversion to C-Corporation status....................... -- 40.0
-------- ---------
Net income (loss)......................................... 12.5% (29.2%)
======== =========
PRO FORMA STATEMENT OF OPERATIONS:
Income (loss) before income taxes, as above.............. 21.6% 18.3%
Provision for income taxes (federal, state and foreign).. 9.1 7.5
-------- ---------
Pro forma net income..................................... 12.5% 10.8%
======== =========
</TABLE>
Revenues. Total revenues increased 33% to $22.4 million in the first quarter
in 1997 from $16.9 million in the first quarter of 1996. The increase was due
to a significant growth in service revenues. Revenue from international
customers (excluding Canada and Mexico) accounted for 11% and 20% of revenues
for the first quarter of 1997 and 1996, respectively. The decrease in the
percentage of international revenue was due to the lack of new international
customers. As most of Indus' contracts are denominated in U.S. dollars,
foreign currency fluctuations have not impacted the results of operations. The
top five customers of Indus have accounted for approximately 40-45% of
revenues for the periods presented. The composition of the top five customers
has changed from year to year, with the exception of two of the customers
whose combined revenues accounted for 12% of total revenue for the first
quarter of 1997 and 19% of total revenue for the first quarter of 1996.
70
<PAGE>
Revenues from licensing fees decreased by 6% to $3.7 million in the first
quarter in 1997 from $4 million in the first quarter of 1996 due to delays in
the closing of new contracts. A number of factors have contributed to these
delays including reorganizations within potential customers and delays in the
decision process by potential customers. Revenues from services and
maintenance increased by 45% to $18.7 million in the first quarter in 1997
from $12.9 million in 1996. The service and maintenance revenue growth from
1996 to 1997 resulted primarily from implementation services generated by
several new significant domestic contracts, and additional implementation
projects with existing customers. Indus does not believe that the revenue
growth experienced in the first quarter of 1997 is necessarily indicative of
any revenue growth that may occur in future periods.
Indus' domestic and foreign markets have not been affected by inflation or
fluctuations in interest rates and costs. Indus has not experienced any
material seasonality in its operating results.
Cost of Revenues. Cost of revenues consists primarily of: (i) personnel and
related costs for implementation (including account executive personnel), and
(ii) personnel and related costs for training and customer support services.
Substantially all of the cost of revenues is attributable to providing
services and maintenance. Costs of software license fees, which consist
primarily of packaging and production costs, are not significant and are not
segregated in Indus' accounting records. All software development costs are
expensed to research and development as incurred.
Cost of revenues increased 43% to $9.5 million in the first quarter in 1997
from $6.6 million in 1996 and was due principally to the need for additional
personnel to service Indus' customers. As a percent of total revenue, cost of
revenues increased to 42.4% for the first quarter in 1997 from 39.4% in 1996.
The increase in the cost of sales percentage is partially due to the increase
in the level of low-margin reimbursable expenses. Indus' accounting policy is
to record direct reimbursable costs as revenue when billed to the customer,
which is then offset by the related cost of revenues. Since the direct
reimbursable costs have little or no margin, they have the effect of
decreasing Indus' gross margin.
Research and Development (R&D). Research and development expenses consist
primarily of: (i) personnel and related costs and (ii) computer timeshare
costs directly attributable to the development of new software application
products, enhancements to existing products and the costs of porting Indus'
products to different platforms.
Research and development expenses decreased 14% to $2.9 million in the first
quarter in 1997 from $3.4 million in 1996. Indus continues to invest research
and development efforts for modifications of existing applications and
development of new technologies, including the capability to support
additional platforms, databases, graphical user interfaces, toolsets and
emerging technologies. Indus believes that a significant level of R&D is
essential to remain competitive and will continue to invest development
resources towards incorporating new technologies into PassPort and designing
additional PassPort functionality. The amount for a particular period may vary
depending on the projects in progress.
Indus has historically developed its own applications. During 1996, Indus
devoted R&D resources to the development of General Ledger, Asset Management
and Financial Planning applications. In response to time-to-market demands,
Indus recently formalized strategic product relationships with third party
vendors, including PeopleSoft, Oracle and SPL WorldGroup, who will blend their
financial and customer information/order entry applications with PassPort. As
a result, Indus has halted the development of the General Ledger, Asset
Management and Financial Planning applications. A portion of the R&D
expenditures intended for the financial application project were reallocated
to (i) the software integration development necessary to provide seamless
integration with Indus' strategic partners' offerings and (ii) sales and
marketing efforts. In 1997, Indus expects to shift, as a percentage of total
revenues, at least 3% from R&D expenditures to sales and marketing
expenditures.
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, Indus has expensed all software development costs
because development costs incurred subsequent to the establishment of
technological feasibility have not been material.
71
<PAGE>
Sales and Marketing. Sales and marketing expenses increased 67% to $3.2
million in the first quarter in 1997 from $1.9 million in 1996. As a percent
of total revenue, sales and marketing expenses increased to 14.4% the first
quarter ended in 1997 from 11.5% in 1996. The growth in sales and marketing
expenses is primarily due to: (i) the addition of personnel, (ii) expansion
into new international sectors, (iii) changes in the mix of the revenue base
on which commission expense is generated and (iv) the new vertical business
programs. Indus believes that sales and marketing expenses as a percentage of
total revenues may increase as it (i) expands its presence in the marketplace,
(ii) initiates operations in additional international markets, (iii) develops
new and existing marketing and product strategic alliances and (iv) increases
focus on specific vertical markets, such as Transmission and Distribution.
General and Administrative. General and administrative expenses increased
25% to $2.3 million in the first quarter in 1997 from $1.8 million in 1996.
The growth in general and administrative expenses is primarily a result of:
(i) incremental expenditures related to being a public company and (ii) an
expansion in staffing to support Indus' growth.
Provision for Income Taxes. Effective upon its incorporation in 1990, Indus
elected to have its United States income taxed under Subchapter S of the Code.
Accordingly, income tax provisions prior to 1996 were principally attributable
to state taxes and taxes imposed by foreign governments on Indus' foreign
operations. Indus' S Corporation status terminated effective January 1, 1996,
and Indus will be subject to federal income taxation at the corporate level
thereafter. In relation to the termination of S Corporation status as of
January 1, 1996, a one-time charge representing a cumulative net federal and
state deferred income tax liability of $6.7 million was recorded.
Net Income (Loss). The net loss for the three months ended March 31, 1996
was the result of the $6.7 million cumulative deferred income tax liability
charge upon elimination of the S Corporation status.
Pro Forma Net Income. For purposes of presenting comparative earnings and
calculating earnings per share data, pro forma net income for the three months
ended March 31, 1996 reflects the elimination of the $6.7 million nonrecurring
cumulative deferred income tax charge upon converting from an S Corporation to
a C Corporation.
THREE MONTHS ENDED JUNE 30, 1997
For the three months ended June 30, 1997, Indus reported revenue of $23.5
million, an increase of 34% over revenue of $17.6 million for the same period
of 1996. Net income increased to $2.9 million for the three months ended
June 30, 1997, compared with $2.1 million for the same period of 1996.
Earnings per share for the three months ended June 30, 1997 were $.15, up from
earnings per share of $.11 for the same period of 1996.
72
<PAGE>
QUARTERLY INFORMATION
The following table sets forth certain unaudited quarterly financial
information for each of the eight quarters in the period ended December 31,
1996 and such information expressed as a percentage of Indus' total revenues.
This unaudited quarterly information has been prepared on the same basis as
the annual information presented elsewhere herein and, in management's
opinion, includes all adjustments (consisting only of normal recurring
accruals except for (i) an $18.9 million compensation charge recorded in
September 1995 in connection with the elimination of a contingency feature,
which had precluded exercise of stock options, and (ii) a $6.7 million charge
in connection with Indus' election effective January 1, 1996 of C Corporation
status for income tax purposes) necessary for a fair presentation of the
information for the quarters presented. The operating results for any quarter
are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
REVENUES:
Software licensing
fees................. $ 3,731 $ 1,988 $ 2,585 $ 2,372 $ 3,958 $ 3,793 $ 4,277 $ 4,180
Services and
maintenance.......... 8,994 10,580 10,717 12,824 12,901 13,806 15,728 17,296
------- ------- --------- ------- -------- ------- ------- -------
Total revenues........ 12,725 12,568 13,302 15,196 16,859 17,599 20,005 21,476
------- ------- --------- ------- -------- ------- ------- -------
Cost of revenues...... 5,008 5,151 5,883 6,536 6,649 7,388 8,562 9,191
------- ------- --------- ------- -------- ------- ------- -------
Gross margin.......... 7,717 7,417 7,419 8,660 10,210 10,211 11,443 12,285
OPERATING EXPENSES:
Research and
development.......... 1,593 2,080 2,311 2,322 3,415 3,293 2,905 2,880
Sales and marketing... 1,121 1,461 1,414 1,684 1,936 1,995 2,352 3,023
General and
administrative....... 1,100 854 1,116 1,848 1,843 1,846 1,979 2,151
Compensation charge--
stock options........ -- -- 18,900 -- -- -- -- --
------- ------- --------- ------- -------- ------- ------- -------
Total operating
expenses............. 3,814 4,395 23,741 5,854 7,194 7,134 7,236 8,054
------- ------- --------- ------- -------- ------- ------- -------
Income (loss) from
operations........... 3,903 3,022 (16,322) 2,806 3,016 3,077 4,207 4,231
Other income
(expense), net....... 87 -- 31 (22) 47 381 384 439
------- ------- --------- ------- -------- ------- ------- -------
Income (loss) before
income taxes......... 3,990 3,022 (16,291) 2,784 3,063 3,458 4,591 4,670
Provision for income
taxes (state and
foreign only)........ 131 81 31 82 1,260 1,407 1,927 1,960
Cumulative effect of
deferred income taxes
upon conversion to C
Corporation status... -- -- -- -- 6,700 -- -- --
------- ------- --------- ------- -------- ------- ------- -------
Net income (loss)..... $ 3,859 $ 2,941 $ (16,322) $ 2,702 $ (4,897) $ 2,051 $ 2,664 $ 2,710
======= ======= ========= ======= ======== ======= ======= =======
PRO FORMA STATEMENT OF
OPERATIONS
DATA FOR 1995 AND 1996:
Income (loss) before
income taxes, as
above................ $ 3,990 $ 3,022 $ (16,291) $ 2,784 $ 3,063 $ 3,458 $ 4,591 $ 4,670
Compensation charge--
stock options........ -- (1,000) -- -- -- -- -- --
Add back compensation
charge--stock
options.............. -- -- 18,900 -- -- -- -- --
------- ------- --------- ------- -------- ------- ------- -------
Income before income
taxes, as adjusted... 3,990 2,022 2,609 2,784 3,063 3,458 4,591 4,670
Provision for income
taxes (federal, state
and foreign)......... 1,679 850 1,097 1,457 1,260 1,407 1,927 1,960
------- ------- --------- ------- -------- ------- ------- -------
Pro forma net income.. $ 2,311 $ 1,172 $ 1,512 $ 1,327 $ 1,803 $ 2,051 $ 2,664 $ 2,710
======= ======= ========= ======= ======== ======= ======= =======
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
THREE MONTHS ENDED
-------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
REVENUES:
Software licensing
fees................. 29% 16% 19% 16% 23% 22% 21% 19%
Services and
maintenance.......... 71 84 81 84 77 78 79 81
--- --- ----- --- ---- --- --- ---
Total revenues........ 100 100 100 100 100 100 100 100
--- --- ----- --- ---- --- --- ---
Cost of revenues...... 39 41 44 43 39 42 43 43
--- --- ----- --- ---- --- --- ---
Gross profit.......... 61 59 56 57 61 58 57 57
OPERATING EXPENSES:
Research and
development.......... 13 16 18 16 20 19 15 13
Sales and marketing... 9 12 11 11 11 11 12 14
General and
administrative....... 8 7 8 12 11 10 10 10
Compensation charge--
stock options........ -- -- 142 -- -- -- -- --
--- --- ----- --- ---- --- --- ---
Total operating
expenses............. 30 35 179 39 43 41 36 38
--- --- ----- --- ---- --- --- ---
Income (loss) from
operations........... 31 24 (123) 18 18 17 21 20
Other income
(expense), net....... -- -- -- -- -- 2 2 2
--- --- ----- --- ---- --- --- ---
Income (loss) before
income taxes.......... 31 24 (123) 18 18 20 23 22
Provision for income
taxes (state and
foreign only)......... 1 1 -- 1 7 8 10 9
--- --- ----- --- ---- --- --- ---
Cumulative effect of
deferred income taxes
upon conversion to C
Corporation........... -- -- -- -- 40 -- -- --
--- --- ----- --- ---- --- --- ---
Net income (loss)...... 30% 23% (123)% 18% (29)% 12% 13% 13%
=== === ===== === ==== === === ===
PRO FORMA STATEMENT OF
OPERATIONS DATA
FOR 1995 AND 1996:
Income (loss) before
income taxes, as
above................. 31% 24% (123)% 18% 18% 20% 23% 22%
Compensation charge--
stock options......... -- (8) -- -- -- -- -- --
Add back compensation
charge--stock
options............... -- -- 142 -- -- -- -- 7
--- --- ----- --- ---- --- --- ---
Income before income
taxes, as adjusted.... 31 16 19 18 18 20 23 22
Provision for income
taxes (federal, state
and foreign).......... 13 6 8 10 7 8 10 9
--- --- ----- --- ---- --- --- ---
Pro forma net income... 18% 10% 11% 8% 11% 12% 13% 13%
=== === ===== === ==== === === ===
</TABLE>
Revenues. Total revenues increased beginning with the third quarter of 1995
through 1996 reflecting increased license fees to new and existing
international and domestic customers. Services associated with these new
customers, together with the maturation of Indus' Account Executive program,
resulted in a growth in service revenue in the fourth quarter of 1995 and
throughout 1996. In 1996, service revenues also increased as a result of
implementation and training associated with new customers who purchased
applications during the end of 1995 and the first half of 1996. License
revenues declined in the second quarter of 1995 as revenue recognition from
contracts signed in 1994 was completed, but increased again in the third
quarter as licenses were signed with new customers. License revenues were
relatively constant in absolute dollars in 1996 which reflected Indus' revenue
recognition on the contracts signed during the end of 1995 and the first half
of 1996. Indus' does not believe the revenue growth experienced in 1996 is
necessarily indicative of any revenue growth that may occur in future periods.
Cost of Revenues. Cost of revenues remained fairly consistent as a
percentage of total revenues throughout 1995 and 1996.
74
<PAGE>
Research and Development. Research and development expenses in absolute
dollars increased significantly during each quarter of 1996 when compared to
the same quarter in 1995. These increases related to resources devoted towards
incorporating new technologies into PASSPORT and designing additional PASSPORT
applications. The research and development growth in the first quarter of 1996
was partially due to the timing of the completion of PASSPORT Release 5.0.
Sales and Marketing. Sales and marketing expenses increased in the second
quarter of 1995 due to the addition of sales personnel. These expenses
remained relatively constant as a percentage of revenues during the first two
quarters of 1996, but increased during the third and fourth quarters due to
the addition of sales people, expansion into international markets and
additional costs associated with the annual International PASSPORT Users Group
conference.
General and Administrative. General and administrative expenses were
relatively constant as a percentage of revenues in the first three quarters of
1995 and increased in the fourth quarter of 1995. These expenses remained
constant in absolute dollars through 1996. As a percentage of total revenue,
general and administrative expenses were slightly higher in 1996 than in 1995
due to incremental expenditures related to becoming a public company and the
expansion in staffing to support Indus' growth.
Compensation Expense--Stock Options. Indus' amended its 1992 Stock Option
Plan effective in September 1995 to accelerate the exercisability of all
outstanding stock options (covering 1,788,570 shares of Common Stock), which
had previously been contingent upon certain "liquidity events" such as an
initial public offering or an acquisition of Indus'. As a result of this
amendment, Indus' recognized a non-recurring compensation expense of $18.9
million in the third quarter of 1995.
Cumulative Effect of Deferred Income Taxes Upon Conversion to C
Corporation. In connection with the termination of Indus' S Corporation status
as of January 1, 1996, a one-time charge representing a cumulative net federal
and state deferred income tax liability of $6.7 million was recorded in the
first quarter of 1996.
Indus has experienced, and may in the future experience, significant
fluctuations in quarterly revenues and operating results. Indus' revenues and
operating results in general, and in particular its revenues from new
licenses, are relatively difficult to forecast for a number of reasons,
including (i) the relatively long sales cycles for Indus' products, (ii) the
variable size and timing of individual license transactions, (iii) changes in
demand for Indus' products and services, (iv) competitive conditions in the
industry, (v) changes in customer budgets, (vi) the timing of new products or
product enhancements by Indus or its competitors, (vii) Indus' success in and
costs associated with developing and introducing new products, (viii) product
life cycles, (ix) the timing of revenue recognition, (x) changes in the
proportion of revenues attributable to license fees versus services,
(xi) changes in the level of operating expenses, (xii) delay or deferral of
customer implementations of Indus' software, (xiii) software defects and other
product quality problems, and (xiv) other economic conditions generally or in
specific process industry segments. Further, the purchase of Indus' products
generally involves a significant commitment of capital, with the attendant
delays frequently associated with large capital expenditures and authorization
procedures within large organizations. For these and other reasons, the sales
cycles for Indus' products are typically lengthy and subject to a number of
significant risks over which Indus has little or no control, including
customers' budget constraints and internal authorization reviews. In addition,
delays in the completion of a product implementation may require that the
revenues associated with such implementation be recognized over a longer
period than originally anticipated. Such delays in the implementation or
execution of orders have caused, and may in the future cause, material
fluctuations in Indus' operating results. Similarly, customers may cancel
implementation projects at any time, and such cancellation could have a
material adverse effect on Indus' business or results of operations. Because
Indus' expenses are relatively fixed, a small variation in the timing of
recognition of specific revenues can cause significant variations in operating
results from quarter to quarter and may in some future quarter result in
losses or have a material adverse effect on Indus' business or results of
operations.
75
<PAGE>
As a result, it is possible that in some future quarter Indus' results of
operations could fail to meet the expectations of public market analysts or
investors. In such event, or in the event that adverse conditions prevail or
are perceived to prevail generally or with respect to Indus' business, the
price of Indus' Common Stock would likely be materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Indus had total assets of $76.7 million and $75.5 million at March 31, 1997
and December 31, 1996, respectively. Historically, Indus has financed its
operations primarily through cash provided by operations, borrowings under its
line of credit and, to lesser extent, through borrowings from its Chief
Executive Officer and principal shareholder. In March 1996, Indus received
$33.9 million (net of underwriting commissions and offering costs) from an
initial public offering of 2,500,000 shares of its Common Stock. These
proceeds were used to purchase marketable securities (comprised of municipal
and U.S. government obligations) and certain cash equivalent instruments.
As of March 31, 1997, Indus' principal sources of liquidity consisted of
approximately $5.7 million in cash and cash equivalents and $27.4 million in
marketable securities. In addition, Indus has an unsecured revolving bank line
of credit agreement which permits borrowings, including stand-by letters of
credit, of up to $15 million. The facility expires in May 1997, however, Indus
believes it will be able to renew this agreement or replace it on terms
acceptable to Indus. No borrowings were outstanding under this line at March
31, 1997.
In the three months ended March 31, 1997, cash, cash equivalents and
marketable securities decreased as a result of the cash investment in a 10%
interest in TenFold Corporation ($8 million), the purchase of property and
equipment ($1.6 million) and the purchase of marketable securities ($0.9
million) offset by cash generated from operations ($2.9 million).
Cash requirements are expected to continue to increase in order to fund: (i)
personnel and salary costs, (ii) investment in additional technical equipment,
and (iii) working capital requirements. Indus presently anticipates additional
capital expenditures for the remainder of 1997 of approximately $3.0 million.
Indus' principal commitments at March 31, 1997, consisted of obligations under
operating leases for facilities and computer equipment.
Indus believes that its existing cash and marketable securities, together
with anticipated cash flow from operations and available bank borrowings, will
be sufficient to meet its cash requirements during the next 12 months. The
foregoing statement regarding Indus' expectations for continued liquidity is a
forward-looking statement, and actual results may differ materially depending
on a variety of factors, including variable operating results or presently
unexpected usage's of cash, such as acquisitions.
76
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF TSW
The selected consolidated financial data of TSW 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 TSW 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, "TSW
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information of TSW included herein.
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------------------------
1993 1994 1995 1996 1997
------- ------- -------- -------- --------
(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
(expenses), 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).......................... $ (1.09)
========
Pro forma weighted average
shares outstanding (2)....... 3,133
========
<CAPTION>
MARCH 31,
----------------------------------------------
1993 1994 1995 1996 1997
------- ------- -------- -------- --------
(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
TSW 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 TSW Consolidated Financial Statement for an
explanation of the write-off of goodwill.
(2) Reflects the conversion of all outstanding shares of TSW Preferred Stock
into Common Stock. See Note 1 of the Notes to the TSW Consolidated
Financial Statements for an explanation of the determination of shares
used calculating pro forma net loss per share.
77
<PAGE>
TSW 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. TSW was founded in 1976 as a sole proprietorship. TSW
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. TSW
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, TSW 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, TSW acquired Communix, securing the rights to the
intellectual property used in the design, development, deployment and support
of MPAC-2000. In October 1994, TSW 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 TSW's software products
portfolio and its distribution network, forming the basis of TSW's European,
Far Eastern and Middle Eastern operations. Effective July 1995, TSW 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 TSW's international
market presence. TSW's "heritage" products described above are supported by
TSW, but no longer represent significant license fee revenue.
TSW 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 TSW began recognizing
license fee revenue from EMPAC at that time. The expenses associated with the
development of EMPAC were the primary cause of TSW's operating loss in fiscal
1995 and contributed to the operating loss in fiscal 1996. During the third
quarter of fiscal 1996, TSW experienced a substantial increase in license fee
revenue associated with the introduction of EMPAC. During fiscal 1997,
approximately 94% of TSW's license fee revenue was derived from new customer
purchases of, and existing customer migration to, EMPAC.
OVERVIEW
TSW 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 TSW's
revenue in fiscal 1997, consist primarily of license fees for EMPAC.
Typically, customers pay an up-front, one-time license fee for TSW'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
TSW is not subject to any significant remaining obligations and collection of
the resulting receivable is deemed probable. If TSW 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. EMPAC customers typically make an initial payment
upon license contract signing followed by periodic payments on dates specified
in the contract. All payments are required to be made within one year of the
contract date.
78
<PAGE>
Services and support revenue, which accounted for approximately 56% of TSW's
revenue in fiscal 1997, consists principally of revenue derived from
professional services associated with the implementation and deployment of
TSW'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.
TSW 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. TSW has experienced a support agreement
renewal rate that has averaged 95% for the past three fiscal years. Pursuant
to these agreements, TSW 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 TSW's products are very short and, consequently,
substantially all of TSW's license fee revenue in each quarter results from
the orders received in that quarter. Accordingly, TSW only maintains a
significant backlog for its professional services and support activities, and
TSW 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 TSW's results of operations. See "Risk Factors--
Fluctuations in Quarterly Operating Results."
TSW's other revenue consists primarily of occasional sales of hardware and
third-party application software. These sales are provided as an accommodation
to TSW's customers and accounted for 3.7% of total revenue in fiscal 1997.
Margins to TSW 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, TSW has expensed all software development costs
because development costs incurred subsequent to the establishment of
technological feasibility have been minimal.
79
<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,
------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
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. TSW does
not expect future license fee revenue from its heritage products to be
significant.
Certain of the modules in TSW's EMPAC product (particularly modules in its
electronic document management system) contain software developed and owned by
third parties. TSW pays sublicense fees to such third parties upon the sale of
TSW'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 TSW 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, TSW 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 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
80
<PAGE>
EMPAC. However, approximately 79% of TSW's support revenue in fiscal 1997 was
comprised of support revenue from its heritage products. In future years, TSW
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 TSW of hardware and third-party application software to
its customers. TSW 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. TSW 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.
TSW 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 TSW'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 TSW 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 TSW's EMPAC
product. These modules (particularly certain modules in its electronic
document management system) contain software developed and owned by third
parties. TSW pays sublicense fees, which are included in costs of license
fees, to the third parties upon the sale of TSW'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 TSW'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 TSW 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 TSW does not actively pursue the sale of such items and 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 TSW'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
81
<PAGE>
$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 TSW'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 TSW'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, TSW
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, TSW's French subsidiary,
TSW wrote off goodwill of $688,000 associated with the Socotec acquisition.
See "Goodwill" in Note 1 of the Notes to the TSW Consolidated Financial
Statements.
Income (loss) from operations. As the result of the above factors, TSW'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
TSW's principal shareholder. See "Liquidity and Capital Resources" and Notes
4, 5 and 6 of the Notes to the TSW 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 TSW Consolidated Financial Statements.
Net Loss. As a result of the above factors, TSW'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 TSW 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
82
<PAGE>
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 TSW 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.
TSW 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 TSW'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 TSW 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 a percentage of services and support revenue,
these costs increased to 77.7% in fiscal 1996, compared to 64.2% in fiscal
1995, because TSW 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 TSW 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
83
<PAGE>
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 TSW'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, TSW'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 TSW's credit facilities
as well as additional subordinated debt borrowings from TSW's principal
shareholder. See "Liquidity and Capital Resources" below and Notes 4, 5 and 6
of the Notes to the TSW 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 TSW Consolidated
Financial Statements.
Net Loss. As a result of the above factors, TSW'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.
84
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited consolidated statements of
operations data for each of TSW's last eight quarters in the period ending
March 31, 1997, as well as the percentage of TSW's total revenue represented
by each item. The information has been derived from TSW'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 TSW considers
necessary to present fairly this information when read in conjunction with the
TSW Consolidated Financial Statements and notes thereto appearing elsewhere in
this Joint Proxy Statement/Prospectus. TSW's operating results for any one
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996 1996 1996 1996 1997
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <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 $ 9,084
Services and Support... 6,088 6,883 5,909 5,829 6,585 9,728 10,169 11,302
Other revenue.......... 138 -- 795 251 131 921 311 1,100
-------- -------- -------- -------- -------- ------- ------- -------
Total revenue......... 9,078 9,601 15,801 13,553 11,088 17,214 17,311 21,486
OPERATING EXPENSES:
Costs of license fees.. 388 636 2,264 1,511 472 858 637 950
Costs of services and
support............... 4,644 4,708 5,179 4,672 5,050 6,654 7,183 8,080
Costs of other
revenue............... 29 47 1,012 204 161 787 348 768
Sales and Marketing.... 2,945 2,936 4,187 4,167 3,527 3,823 4,440 5,427
General and
Administrative........ 1,273 1,845 2,266 2,694 2,031 2,220 1,935 2,413
Product Development.... 2,738 2,568 2,180 2,359 1,933 1,874 2,282 2,528
Write-off of
goodwill(2)........... -- -- -- -- -- 688 -- --
-------- -------- -------- -------- -------- ------- ------- -------
Total operating
expenses............. 12,017 12,740 17,088 15,607 13,174 16,904 16,825 20,166
-------- -------- -------- -------- -------- ------- ------- -------
Income (loss) from
operations............. (2,939) (3,139) (1,287) (2,054) (2,086) 310 486 1,320
INTEREST INCOME
(EXPENSE):
Interest income........ 13 6 5 22 4 9 8 14
Interest expense....... (426) (476) (669) (683) (608) (804) (804) (957)
-------- -------- -------- -------- -------- ------- ------- -------
Total interest income
(expense), net....... (413) (470) (664) (661) (604) (795) (796) (943)
-------- -------- -------- -------- -------- ------- ------- -------
Income (loss) before
taxes.................. (3,352) (3,609) (1,951) (2,715) (2,690) (485) (310) 377
Income tax expense
(benefit)............ -- -- -- 98 60 91 43 101
-------- -------- -------- -------- -------- ------- ------- -------
Net income (loss)....... $ (3,352) $ (3,609) $ (1,951) $ (2,813) $ (2,750) $ (576) $ (353) $ 276
======== ======== ======== ======== ======== ======= ======= =======
</TABLE>
- --------
(1) TSW 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 TSW Consolidated Financial Statements for
an explanation of the write-off of goodwill.
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<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1996 1996 1996 1996 1997
-------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
(2)................... -- -- -- -- -- 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>
TSW'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; TSW's success in expanding its sales and marketing programs; and
general economic conditions. Further, TSW's operating results have been, and
are expected to continue to be, highly sensitive to the receipt, timing and
payment of large orders. Moreover, TSW 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. TSW believes that
this concentration of licensing activity is caused primarily by TSW's sales
commission policies, which compensate sales personnel for meeting or exceeding
annual performance quotas. Any change in TSW'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, TSW 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.
TSW began recognizing license fee revenue from EMPAC in December 1995 when
it first became operational at a customer site. As a result, total revenue
increased in the December 31, 1995 and March 31, 1996 quarters as compared to
prior quarters. The decline in revenue in the June 30, 1996 quarter reflects
the historical decline in TSW's first quarter as discussed above. Subsequent
quarter revenues reflect the growth and market acceptance of EMPAC.
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The variance in the cost of license fees between quarters results from
variances in the percentage of license fees in each quarter derived from
modules which have third-party sublicense fees associated with them. Costs of
other revenue vary by quarter depending upon the amount of hardware and third-
party applications software sales made by TSW during the quarter as
accommodations to its customers. Sales and marketing expenses reflect
increased personnel and promotional costs and will vary depending upon
commission earned in the quarter. General and administrative expense included
$330,000 in the March 31, 1996 quarter related to expenses associated with a
proposed initial public offering. Higher product development expenses in the
September 30, 1995 and prior quarters reflect the higher costs of the
accelerated development effort associated with EMPAC prior to its first
operational use at a customer site in December 1995.
TSW's future revenue is difficult to predict, and TSW has in certain
instances in the past not achieved its revenue expectations. Because TSW
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, TSW
typically enters into a significant portion of its new license contracts in
the last two weeks of a quarter. TSW'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. TSW 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 TSW'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 TSW's ability to
achieve or maintain profitability.
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years, TSW has financed its operations and
growth primarily through funds generated through operations, sales of TSW
Preferred Stock to its principal shareholder, and funds borrowed from lending
institutions and its principal shareholder. At March 31, 1997, TSW'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 TSW.
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, TSW increased
the maximum size of this facility to $20.0 million.
TSW'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 TSW's net loss of $3.4 million coupled with an
increase in working capital, principally billed and unbilled accounts
receivable, resulting from TSW'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. TSW's capital expenditures relate primarily to purchases of
personal computers for internal use to support TSW's growth, as well as
furniture, fixtures and leasehold improvements. TSW expects that the rate of
its purchases of property and equipment will increase if TSW'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
TSW's credit facility and related term note. In addition, $5.0 million of cash
was provided by the sale of TSW Preferred Stock to TSW's principal
shareholder. During fiscal 1996 and 1995, financing activities provided $13.3
million and $7.9 million, respectively. In addition to borrowings under TSW's
credit facility and the sale of TSW Preferred Stock to TSW's principal
shareholder during fiscal 1996 and 1995, TSW also issued subordinated notes
with warrants to its principal shareholder. See Notes 4, 5, 6 and 9 of the
Notes to the TSW Consolidated Financial Statements.
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<PAGE>
As of March 31, 1997, TSW 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 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.
Trade accounts receivable increased from $12.3 million to $19.0 million
while unbilled accounts receivable increased from $7.8 million to $13.8
million at March 31, 1996 and March 31, 1997 respectively, due to the
significant increase in EMPAC license fee revenue during the year. The
Company's EMPAC license contracts typically have payment terms that include an
initial payment upon contract signing followed by periodic payments on certain
dates specified in the contract. Amounts are included as unbilled accounts
receivable until they are invoiced, generally 30 days prior to payment due
date. These factors have caused TSW 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. TSW believes that its current cash balances, cash available under
its credit facility and cash flow from operations and commitments from its
principal shareholder will be sufficient to meet its working capital and
capital expenditure requirements for at least the next twelve months.
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<PAGE>
BUSINESS OF THE COMBINED COMPANY
Newco has not conducted any substantial business activities to date, other
than those incident to its formation, its execution of the Reorganization
Agreement and related agreements and its participation in the preparation of
this Joint Proxy Statement/Prospectus. Immediately following the consummation
of the Merger, Indus and TSW will become wholly-owned subsidiaries of Newco.
Accordingly, the business of Newco will be substantially similar to the
businesses currently conducted by Indus and TSW. See "BUSINESS OF INDUS" and
"BUSINESS OF TSW."
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<PAGE>
BUSINESS OF INDUS
GENERAL
Indus develops, markets, implements and supports client/server enterprise
management software solutions for process industries worldwide. Indus'
PassPort Software Solutions consist of 17 business applications in such
functional areas as Work Management Systems, Materials & Procurement Systems,
Safety & Compliance Systems. PassPort Software Solutions are designed to
interoperate, through Indus' PassBook integration products, with popular
third-party applications that provide basic business functions such as
corporate finance, payroll, human resources and customer information
integration. Indus has entered into strategic relationships with Oracle Corp.,
PeopleSoft, Inc. and SPL WorldGroup B.V. (the "Alliance Partners"), through
which it has developed or is developing PassBook integration products to
provide interoperability with Oracle's corporate financial applications,
PeopleSoft's corporate financial, payroll and human resources applications and
SPL WorldGroup's customer information applications. Indus and its Alliance
Partners seek to provide complete enterprise-wide solutions that enable Indus'
customers to improve operating efficiencies, reduce costs and comply with
governmental regulation. Indus focuses primarily on the energy industry and
processing companies, including electric utilities, oil, gas and chemical
refineries, and steel and forest products producers. PassPort Software
Solutions are based on an open, client/server architecture featuring a layered
software design that enables customers to use various operating systems,
operate on multiple hardware platforms and interoperate with many third-party
software applications and legacy systems. Proprietary software tools and
implementation methodology, marketed under the name ABACUS, facilitate rapid
and effective deployment and utilization of its PassPort applications. Indus
markets and sells its products and services primarily through a direct sales
force in the United States and directly and indirectly in other parts of the
world.
PRODUCTS AND SERVICES
Indus' PassPort Software Solutions, ABACUS tools and implementation
methodology and PassPort Workbenches operate as a flexible, fully integrated
enterprise management software solution. PassPort Software Solutions consist
of 17 business applications grouped into three functional areas. ABACUS tools
and implementation methodology allow for rapid implementation and
configuration of PassPort Software Solutions. PassPort Workbenches are a set
of software tools which support application development, data migration and
installation support used by Indus and its customers to develop, install and
configure PassPort Software Solutions. PassBook integration products are
intended to enable PassPort Software Solutions to interoperate with corporate
financial, payroll, human resources and customer information applications
systems available from its Alliance Partners.
PassPort Software Solutions
PassPort Software Solutions are offered in three functional areas: Work
Management Systems, Materials & Procurement Systems, and Safety & Compliance
Systems. Indus has designed its PassPort applications to provide
interoperability with basic business function applications developed by its
Alliance Partners. Although most customers license multiple applications in
two or more functional areas, Indus believes that the majority of its license
revenues has been derived from licenses of Work Management Systems
applications. Each PassPort application can operate on a stand-alone basis or
interoperate with other PassPort applications or with many third-party
software applications and legacy systems. PassPort applications incorporate
adaptable workflow methods that enable end-users to easily tailor workflow to
correspond to their business practices.
The license fees for PassPort applications vary depending on either the
number of users or facilities and the number and type of applications
licensed. Typical enterprise license fees have generally ranged from
approximately $1 million to approximately $5 million. Licenses generally have
a perpetual term.
Software maintenance and support for the first year of the customer contract
are included in the license fee. Thereafter, maintenance and support services
are subject to an initial two-year term followed by separate renewable one-
year contracts. Software updates are included in the maintenance fee.
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Indus' PassPort applications consist of Work Management Systems, Materials &
Procurement Systems and Safety & Compliance Systems. Work Management Systems
communicate discrete work task requirements and priorities to all affected
departments and disciplines in the enterprise, actively informing individuals
of work progress and cost and schedule impacts of unforeseen daily events.
These applications allow managers to modify strategic management objectives
and adjust priorities, work plans, schedules and associated documentation.
Materials & Procurement Systems improve overall plant performance by
streamlining the procurement cycle and enhancing the enterprise's ability to
respond efficiently to planned supply-cycle replenishment and react quickly to
unplanned demand for spare parts, materials and contract services. Safety &
Compliance Systems interoperate with other systems to improve regulatory
compliance and reporting in order to reduce safety and environmental
violations and minimize inspections and audit interruptions by local, state
and federal regulatory agencies.
The complementary Alliance Partner Systems available via PassBook
Integration Products include Corporate Financial Systems and Customer
Information Systems. Corporate Financial Systems are on-line, activity-based
decision support tools designed to keep managers and plant personnel
throughout the enterprise aware of costs controlled by other PassPort
applications and legacy systems so that informed decisions may be made to
improve financial results. Customer Information Systems are on-line
applications designed to provide energy delivery companies with a link between
their customers, associated revenue cycle requirements and in-field work and
materials management functions controlled within PassPort applications.
PassPort applications are based on an open, client/server architecture
featuring a layered software design that enables customers to use various
operating systems, operate on multiple hardware platforms and interoperate
with many third-party software applications and legacy systems. This
capability permits customers to integrate their existing computing resources
with a wide variety of emerging technologies. The portability and scalability
of PassPort Software Solutions allows users to extend their systems to
accommodate facility expansion or acquisitions. Indus' PORTAL/95 client
workstation software provides a Windows 95 "look and feel" to its PassPort
applications.
Indus' layered software architecture features an adapter code layer that
isolates PassPort applications from the systems environment, including
hardware, operating systems, databases, networks and user interfaces. This
adapter code layer permits a single repository of application code to operate
across all supported platforms in their native runtime environments and allows
PassPort applications to be implemented on multiple platforms with no
significant loss of efficiency. Only the adapter code layer, and not the
application code, need be reconfigured to enable PassPort applications to
operate on additional platforms. This layered architecture allows customers to
protect their large investments in information systems while positioning them
to adapt to emerging operating system, server and database management system
technologies. The architecture supports seamless integration of alliance
partner programs via the PassBook series of interfaces which allows PassPort
controlled information to interoperate with these select third party programs.
PassPort applications operate on UNIX servers provided by Hewlett-Packard
Company, Digital Equipment Corporation and IBM utilizing the Oracle RDBMS.
PassPort applications also operate on IBM mainframe or plug compatible
hardware used in conjunction with the IBM/DB2 RDBMS. The server offering
supporting Indus' products is being expanded to include NT Servers which will
be made commercially available in the third quarter of 1997. Indus believes
that PassPort applications offer the only enterprise client/server business
solutions currently available that are portable among these UNIX/Oracle and
IBM/DB2 platforms. PassPort applications provide direct access to electronic
mail systems and, via object linking and embedding (OLE 2.0), to desktop word
processing and spreadsheet programs such as those included in the Microsoft
Office application suite. PassPort applications may be image-enabled by Indus'
VIEWPORT image processing software, allowing users to view associated source
documents and other digitized media upon demand.
ABACUS Tools, Implementation Methodology and Related Services
PassPort Software Solutions are implemented through Indus' proprietary
ABACUS tools and implementation methodology. ABACUS consists of software-
driven analytical tools, implementation plans and
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educational tools that encapsulate Indus' extensive experience in implementing
enterprise management software solutions. ABACUS provides a step-by-step
implementation life cycle framework for all installation, integration,
education and business review activities. In addition, ABACUS enhances the
ongoing effectiveness of PassPort Software Solutions and assists customers in
improving their business processes.
ABACUS software tools use a time-sensitive and track-oriented approach to
help customers and Indus' business experts, technical specialists and training
professionals implement PassPort applications. In addition to interactively
identifying implementation procedures, ABACUS contains over 400 "best
practice" examples of how such procedures were performed by other process
industry companies, drawn from Indus' extensive experience in implementing
enterprise management software solutions. Indus currently licenses ABACUS
software tools in conjunction with PassPort Software Solutions which includes
the use of the ABACUS Workbench, a version of the ABACUS software that allows
customers to tailor their internal project goals and objectives with other
corporate initiatives, modify implementation plans and associated
deliverables, supporting specific project/progress reporting, etc.
Indus offers standardized service packages that correspond to "tracks" in
the ABACUS implementation software. The Management Track defines the scope of
the solution, helps ensure that strategic goals are addressed, communicates
executive sponsorship of PassPort applications to the organization and
provides for budgeting and progress reporting. The Technical Track validates
the overall information strategy, defines the technology upgrade path
utilizing PassPort and provides for operational support. The Business Process
Improvement Track engages change management techniques to reengineer processes
to embody PassPort best practices in a cost-effective manner to improve
overall company efficiency. The Integration Track incorporates software tools
to rapidly establish the enterprise-wide information resource which provides
interoperability between PassPort and other systems. The Education Track helps
ensure user acceptance of both PassPort and new procedures utilizing a
comprehensive education program, computer-based training tools and courseware
tailored to the organization's training environment and specific operational
needs.
PassPort Workbenches
PassPort applications are developed using PassPort Workbenches, a set of
integrated application development and support tools designed to make
analytical, programming, documentation, quality assurance and data loading,
migration and archiving tasks more efficient. PassPort Workbenches include the
following: the Analyst Workbench, which allows the developer to translate
business requirements into electronic design specifications; the Programmer
Workbench, which generates application code and guides the developer through
the calculations needed to meet the requirements of the application and the
target platform; and the Documentation Workbench, which translates the
specifications into documentation including on-line tutorials, hard copy user
guides, reference and training materials, test scripts and systems
administration guides. A fourth post-development tool, the Data Services
Workbench, helps perform data load and system interface exercises, facilitates
data migration (from release to release) and supports archiving and data
warehousing facilities. PassPort Workbenches are centered around a shared
repository of design information known as the PassPort Data Dictionary. The
accumulated knowledge base stored in the Data Dictionary promotes a high
degree of design consistency, integrity and quality across the PassPort
product line. By using PassPort Workbenches to design, prototype, build,
document and maintain its application products, Indus believes it has
demonstrated that it can rapidly develop high quality, highly functional
applications on predictable schedules and within established budgets.
Indus licenses PassPort Workbenches to customers desiring the ability to
modify PassPort applications to suit internal needs and to perform system
administration and maintenance over the application life cycle.
The statements made herein regarding scheduled release dates for Indus'
products under development and proposed enhancements are forward-looking
statements, and the actual release dates for such products or enhancements
could differ materially from those projected as a result of a variety of
factors, including the ability of Indus' engineers to solve technical problems
and test products, Company priorities and the availability of
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development and other resources, and other factors, including factors outside
the control of Indus. There can be no assurance that Indus will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of new products, or that new products and product
enhancements will meet the requirements of the marketplace or achieve market
acceptance.
CUSTOMER SUPPORT, SOFTWARE MAINTENANCE AND TRAINING
In addition to the standardized services offered through ABACUS, Indus
offers systems integration, customer support, software maintenance and
training. Indus provides systems integration and customer support on a time
and materials basis. Indus provides software maintenance for a fixed fee based
on the number and types of applications licensed.
The customer support team provides a help desk, warranty support and post-
implementation services which are widely used by its customers. The help desk
is staffed by experienced product specialists who have direct access to
product development teams and technology specialists. A computerized system is
used to log, track, close and analyze all customer calls.
The Indus Institute, a training division of Indus, designs, manages, and
implements comprehensive education and training solutions for the PassPort
user community. The Indus Institute's team of training and technical
professionals provides instructional design and courseware development
services, training coordination support, train-the-trainer and end-user
programs, as well as technical training for customer installations worldwide.
In addition, Indus has developed a comprehensive set of training courseware
which it uses to educate and train customers and internal staff. Subjects
covered by the courseware range from application product basics to conducting
business process reviews. Open enrollment training courses are provided at
Indus' training centers in San Francisco, Dallas, Pittsburgh, and
internationally in London. In addition, training is also provided at customer
sites at the customer's option.
CUSTOMERS
Indus provides enterprise management software solutions to large process
industry customers primarily in the electric utility, petrochemical, chemical
refining, steel and forest products industries. As of December 31, 1996, Indus
had more than 2,000 site implementations at more than 60 companies.
Revenues from Ontario Hydro-Nuclear and PECO Energy accounted for 11% and
10%, respectively, of Indus' total revenues in 1996. Revenues from Duke Power,
and Occidental Chemical Corporation accounted for 12% and 11% respectively, of
total revenues in 1995. No customer accounted for more than 10% of total
revenue in 1994.
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SALES AND MARKETING
The corporate marketing function is organized into vertical business areas
which comprise the process industries targeted by Indus. By segmenting the
market into six vertical business areas, Indus can package and deliver its
products effectively to the industries it serves. The vertical business
segments comprising the market include:
<TABLE>
<C> <S>
Power Generation Addresses electric utilities with generating
capacity comprised of fossil, hydro, wind, solar
or geothermal power generation. Power Generation
addresses a trend in the industry where
disparate generation groups are being aggregated
into a single business unit within the utility
structure.
Nuclear Power Generation Recognizes the unique requirements of nuclear
generating stations in the areas of special
materials, heath physics, safety and nuclear
regulatory reporting and compliance issues.
Energy Delivery Includes the Transmission & Distribution
business units of utilities, coupled with the
revenue cycle components from Customer
Information Systems for electric, gas, water
utilities.
Oil, Gas, & Chemical Refining Comprised of the upstream' companies charged
with prospecting and developing new oil & gas
sources (both on and offshore), as well as
downstream' operating companies charged with
refining, packaging and distribution processing.
Integrated-Process Industries Represents steel making, pulp and paper and
others whose process involves moving from crude
raw materials through secondary operations to
finished goods.
DOE/Facilities Management Focuses on facilities maintained by the
Department of Energy and others in facilities
management that serve large facility complexes,
maintain high rise facilities and the
distributed needs of large consumer retailers,
insurance companies and other facility-intense
organizations.
</TABLE>
Indus markets and sells its products and services primarily through a direct
sales force in the United States and directly and indirectly in other parts of
the world. As of March 31, 1997, Indus' sales and marketing organization
consisted of 38 employees. The marketing staff is based at Indus' corporate
headquarters in San Francisco, while the sales organization is decentralized
and positioned in North America in seven regions: Northeast, North Central,
Pacific Northwest, Southwest, South Central, Southeast and Canada.
Internationally the regional model will be extended during 1997 to recognize
the special marketing needs of Europe and South America, the Middle East and
Africa, and Pacific Rim countries.
The direct sales cycle begins with the generation of a sales lead, or the
receipt of a request for proposal from a prospect, which is followed by
qualification of the lead, an analysis of the customer's needs, response to a
request for proposal, one or more presentations to the customer utilizing the
special knowledge of the industry vertical pre-sales staff, customer internal
sign-off activities and contract negotiation and finalization. While the sales
cycle from customer to customer varies substantially, the sales cycle
generally requires three to nine months.
In support of its sales force, Indus conducts comprehensive industry-
specific vertical marketing programs which include public relations, trade
advertising, industry seminars, trade shows and on-going customer
communication programs through the International Passport User Group. In
addition, Indus' Account Executive Program provides regional support and
specialized attention for each of its customers. Account Executives assist in
implementing licensed applications over multi-year engagements, promote
licensing of additional applications and encourage existing customers to
identify and help fund new applications.
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STRATEGIC RELATIONSHIPS
Through its PassPort Alliance and PassPort Partner programs, Indus intends
to continue to develop new products, to keep pace with the latest
technological developments, and to extend its marketing, sales and support
efforts by building synergy between Indus' products and services and those
available from complementary third party providers. Indus has entered into
strategic alliances and other formal and informal relationships with major
software and hardware vendors and with consulting firms, service providers and
systems integrators. Members of Indus' Alliance and Partner programs assist
Indus with sales and support activities and with product localization in
foreign countries.
PassPort Alliance Program
The PassPort Alliance Program is comprised of third party providers of
complementary software products which interoperate with PassPort Software
Solutions through PassBook integrator products to provide additional license
revenues and services to Indus while delivering a broad suite of enterprise-
wide software capabilities. Membership in this program includes Oracle
Corporation for corporate financial systems, PeopleSoft, Inc. for corporate
financial, human resources and payroll systems, SPL WorldGroup for customer
information systems and Nuclear Fuels Services/Radiation Protection Systems
for jointly developed Nuclear Health Physics Systems marketed as Total
Exposure. Other third party integration alliance partners are currently under
consideration by Indus.
PassPort Partner Program
The PassPort Partner Program consists of three classes of members including:
PassPort Associates (foreign and domestic), PassPort Platform Partners, and
partners in the PassPort Extension Program.
PassPort Associates are third party consultants and system integration firms
which help deliver the services required to implement PassPort Software
Solutions. These recognized firms add specialty knowledge to assist in
training and reengineering services, help provide staffing levelization and
supply peak load project resources to the regional operators. These resources
assist in the delivery of ABACUS services and those performed by the Indus
Institute on an as-needed basis. Domestically, firms providing such services
for Indus include: PCS, Software Consulting Group, PRC Engineering Services,
Transcend Data Systems, Dublin Group, and General Physics. Internationally,
the partners provides national language support and an ability to deliver
regional customer service to international customers without the need for
complete facility and infrastructure costs associated with local offices.
International implementation partners include: Euriware Reseau Eurisys,
supporting France and French speaking regions; EniData supporting Italy and
providing additional worldwide support for projects within the ENI Group of
Companies and their subsidiaries; Gulf Data International, providing Arabic
language support and services in the United Arab Emirates for customers in Abu
Dhabi; ISSC/Australia and Westinghouse Corporation with emphasis in Eastern
Europe and the Spanish nuclear market.
PassPort Platform Partners are computer hardware providers and operating
system software providers that help Indus remain technologically current and
in step with evolving releases of software and hardware upgrades. Cooperative
marketing, joint trade show participation, vendor fair participation at the
Annual Conference of the International Passport User Group are extended to
this cooperative group of vendors. Indus participates in the Hewlett-Packard
Channel Program, Digital Equipment's Business Partner Program, the IBM
Business Partner Program as well as the Microsoft's Solution Provider Program
and Oracle's Cooperative Applications Initiative.
The PassPort Extension Program is comprised of third party vendors with
products which provide value-added product extensions or specialty services,
taking PassPort data beyond the specified scope of Indus' application systems.
Both specialty hardware and specialty point solution software vendors are
recognized in this program which include offerings from: Meridium Corporation,
Dolphin Software, Telxon, Zebra Printers, Intermat, MAC, GDS, MapFrame, Trimco
and InterGraph.
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RESEARCH AND DEVELOPMENT
Indus has a dedicated research and development and engineering organization
and has regularly released new products and enhancements to existing products.
Research and development efforts are directed at increasing product
functionality, improving product performance and expanding the capabilities of
the products to interoperate with selected third-party software products
available from its alliance partners such as Oracle, PeopleSoft and SPL
WorldGroup. In particular, Indus is devoting substantial development resources
in its next Release 6.0 scheduled for the third quarter of 1997. These efforts
include developing new PassPort applications that address energy delivery, a
new targeted vertical market, and enhancing to Indus' nuclear offerings. To
assist international customers, all application products are incurring
significant changes to support national language support. Indus expects that
Release 6.0 will also include support for new Windows NT servers to create
pre-packaged "turn-key" product offerings, and enhanced electronic commerce
features via Internet integration.
Indus believes that research and development is most effectively
accomplished if customers are involved in the process. Through direct customer
involvement and consensus input from its International Passport User Group,
product content is improved and the customer acceptance threshold usually
associated with new software deployment significantly lowered. In addition,
the interactive development process promotes increased customer awareness of
the technological features of the product and fosters greater product loyalty.
There can be no assurance that Indus will be successful in developing and
marketing product enhancements or new products that respond to technological
change, changes in customer requirements, or emerging industry standards, that
Indus will not experience difficulties that could delay or prevent the
successful development, introduction or marketing of such products and
enhancements, or that any new products or enhancement that it may introduce
will achieve market acceptance. The inability of Indus, for technological or
other reasons, to develop and introduce new products or enhancements in a
timely manner in response to changing customer requirements, technological
change or emerging industry standards, would have a material adverse effect on
Indus' business or results of operations.
As of March 31, 1997, Indus had 117 employees engaged in research and
development. Indus' research and development expenses were approximately $7.1
million, and $8.3 million and $12.5 million in 1994, 1995 and 1996
respectively. Development costs funded by customers as part of license and
service contracts is included as part of cost of revenues. In the future,
Indus may also face competition from Oracle Corp., PeopleSoft, Inc. and SPL
WorldGroup B.V., through which it has developed or is developing PassBook
integration products to provide interoperability with Oracle's corporate
financial applications, PeopleSoft's corporate financial, payroll and human
resources applications and SPL WorldGroup's customer information applications.
COMPETITION
The enterprise management software solutions business is highly competitive,
rapidly changing and significantly affected by new product introductions and
other market activities of industry participants. Indus' primary competition
stems from companies offering enterprise software solutions, vendors offering
partial solutions and suppliers of departmental systems (primarily LAN-based).
Indus' competitors include SAP, Indus' principal competitor, and other
software vendors such as Marcam Corp., and Project Software & Development,
Inc., firms that provide software products to electric utilities, such as
Severn Trent Systems and Synercom and many other firms.
In the future, Indus may also face competition from Oracle Corp.,
PeopleSoft, Inc. and SPL WorldGroup B.V., through which it has developed or is
developing PassBook Integration products to provide interoperability with
Oracle's corporate financial applications, PeopleSoft's corporate financial,
payroll and human resources applications and SPL WorldGroup's customer
information applications. In addition, Indus faces indirect competition from
suppliers of custom-developed business applications software that have focused
largely on proprietary mainframe- and minicomputer-based systems with highly
customized software, such as the systems consulting groups of major accounting
firms and systems integrators. Indus also faces indirect competition from
systems developed by the internal MIS departments of large organizations.
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Many of Indus' competitors and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, greater name recognition, and a larger installed base of customers
than Indus. In addition, certain competitors, including SAP, have well-
established relationships with customers of Indus and with accounting and
consulting firms that may have an incentive to recommend such competitors over
Indus. Furthermore, as the enterprise management software solutions market for
process industries expands, companies with significantly greater resources
than Indus could attempt to increase their presence in this market by
acquiring or forming strategic alliances with competitors of Indus.
The principal competitive factors affecting the market for Indus' software
products are responsiveness to process industry needs, product functionality
and ease of use, speed of implementation, product architecture, quality and
reliability, vendor and product reputation, quality of customer support and
price. Based on these factors, Indus believes that it has competed effectively
to date. In order to be successful in the future, Indus must continue to
respond promptly and effectively to the challenges of technological change and
its competitors' innovations by continually enhancing its own product
offerings. There can be no assurance, however, that Indus' products will
continue to compete favorably or that Indus will be successful in the face of
increasing competition from new products and enhancements introduced by
existing competitors or new companies entering this market.
PROPRIETARY RIGHTS AND LICENSING
Indus relies on a combination of the protections provided under applicable
copyright, trademark and trade secret laws, as well as on confidentiality
procedures and licensing arrangement to establish and protect its rights in
its software. Despite Indus' efforts, it may be possible for unauthorized
third parties to copy certain portions of Indus' products or to reverse
engineer or obtain and use information that Indus regards as proprietary. In
addition, the laws of certain countries do not protect Indus' proprietary
rights to the same extent as do the laws of the United States. Furthermore,
Indus has no patents, and existing copyright laws afford only limited
protection. Accordingly, there can be no assurance that Indus will be able to
protect its proprietary software against unauthorized third party copying or
use, which could adversely affect Indus' competitive position.
Indus licenses its PassPort applications to customers under license
agreements which are generally in standard form, although each license is
individually negotiated and may contain variations. The standard form
agreement allows the customer to use Indus' products solely on the customer's
computer equipment for the customer's internal purposes, and the customer is
generally prohibited from sub-licensing or transferring the PassPort
applications. The agreements generally provide that Indus' warranty for its
products is limited to correction or replacement of the affected product, and
in most cases Indus' warranty liability may not exceed the licensing fees from
the customer. Indus' form agreement also includes a confidentiality clause
protecting proprietary information relating to the PassPort applications.
Indus' products are generally provided to customers in object code (machine-
readable) format only. From time to time, in limited circumstances, Indus has
licensed source code (human-readable form) subject to customary protections
such as use restrictions and confidentiality agreements. In addition,
customers can be beneficiaries of a master source code escrow for the PassPort
applications, pursuant to which the source code will be released to end users
upon the occurrence of certain events, such as the commencement of bankruptcy
or insolvency proceedings by or against Indus, or certain material breaches of
the agreement. Indus has the right to object to the release of the source code
in such circumstances, and to submit the matter to dispute resolution
procedures. In the event of any release of the source code from escrow, the
customer's license is limited to use of the source code to maintain, support
and configure PassPort applications.
Indus may from time to time receive notices from third parties claiming
infringement by Indus' products of proprietary rights of others. As the number
of software products in the industry increases and the functionality of these
products further overlap, Indus believes that software developers may become
increasingly subject to infringement claims. Any such claims, with or without
merit, can be time consuming and expensive to defend or could require Indus to
enter into royalty and licensing agreements. Such agreements, if required, may
not be available on terms acceptable to Indus, or at all.
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EMPLOYEES
As of March 31, 1997, Indus employed 483 people, of which 117 were primarily
engaged in research and development activities, 262 in post-sale support and
customer project operations, 38 in sales and marketing, 15 in management and
51 in administration and finance. None of Indus' employees is represented by a
labor union. Indus has experienced no work stoppages and believes that its
relationship with its employees is excellent.
PROPERTIES
Indus currently maintains offices comprising 115,000 square feet of which
its headquarters facility in San Francisco, California occupies 67,000 square
feet, under a lease which expires in May 2001. Indus conducts its product
development, customer project operations, customer training and all financial
services at its corporate headquarters location. Customer project operations
and training are also conducted at regional facilities located in Pittsburgh,
Philadelphia, Portland, Dallas and London. Management believes that its
facilities are adequate to meet the needs through 1997 and that if required,
suitable additional space will be available to accommodate expansion of Indus'
operations on commercially reasonable terms. Indus owns substantially all
equipment used in its facilities.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Indus is a party or
of which any of its property is subject.
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BUSINESS OF TSW
TSW develops, markets and supports advanced Asset Care application software
and provider related services that enable organizations to plan, execute,
monitor and improve asset maintenance processes. With TSW's products,
customers are better able to increase equipment and production capacity,
reduce operating costs and safeguard the workforce and the environment. TSW's
sales and professional services functions are organized into vertical industry
sectors to best match TSW's solution to its customers' business requirements.
Typical licensees of TSW'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 software package
in 1980. As of March 31, 1997, TSW's products were licensed for use by 321
customers at 941 sites in 48 countries.
TSW offers 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. TSW'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. TSW's
products are designed to reflect Asset Care best practices, including
Reliability Centered Maintenance ("RCM"), Total Productive Maintenance ("TPM")
and Web-based procurement, to allow customers to apply TSW'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.
TSW'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 TSW's employees. TSW's professional services and
sales organizations are established along vertical lines to apply TSW's
software technology to its customers' industry-specific requirements. In
addition, TSW offers a global customer support organization with 7 x 24 multi-
lingual support. TSW 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.
PRODUCTS
TSW'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. TSW'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 TSW'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 TSW's primary source of license fee revenue,
accounting for approximately 94% of TSW'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 TSW'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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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,
such as manufacturing, financials and project management systems. Transaction
engine modules include: Asset and Work, Component Tracking, Project Tracking,
Capacity Tracking, Warranty Tracking, Stores and Procurement, Invoice
Matching, Advanced Security and Integration Toolkit.
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 documentation and control
requirements. The workflow engine modules include: Engineering Drawing
Management ("EDM") Imaging, EDM-Workflow, Advanced Search, and Electronic
Mail.
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 real-time engine modules include: Process Control, Condition
Monitoring, and Asset Optimization.
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 content engine modules support
Electronic Commerce and provide Performance Indicators.
EMPAC Product Architecture and Development Strategy
Commercial Off-the-shelf Technology. TSW utilizes industry-standard tools
and technologies to develop its products, allowing TSW'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
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EMPAC minimizes TSW's dependence on third-party vendors and efficiently
utilizes desktop computers, "thin clients," servers and networks. TSW 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 TSW's solution by providing
customers with an enterprise-wide, integrated business information system. TSW
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 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.
TSW'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 lines,
which parallel its sales force's vertical organization, to enhance the
delivery of its subject matter expertise to its customers. TSW 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.
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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
TSW offers a variety of standard and customized training and education
services, both at customers' sites and in TSW'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. TSW 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
TSW's products. TSW 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.
WORLDWIDE CUSTOMER SUPPORT
TSW'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 TSW 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. TSW
offers a global support organization with 7 x 24 multi-lingual support. TSW'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, TSW supports a number of heritage products. MPAC-UX,
TSW'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, TSW 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, TSW 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
TSW'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 TSW's software. TSW follows a structured
development methodology to ensure the timely and cost-effective production of
high-quality software. TSW 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 TSW 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. TSW believes this direct participation by
industry leaders helps it deliver a solution which is focused on its
customers' most important business needs.
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As of March 31, 1997, TSW's product development staff consisted of 85
employees. From time to time, TSW has also engaged outside consultants in its
product development efforts. TSW's total expenses for product development in
fiscal 1995, 1996 and 1997 were $11.9 million, $9.8 million and $8.6 million,
respectively. TSW did not capitalize any software development costs in fiscal
1995, 1996 or 1997. TSW anticipates that it will continue to commit
substantial resources to product development in the future. See "TSW
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
SALES AND MARKETING
TSW currently markets its products and services to customers in the
following business segments:
Consumer Sector Includes food and beverage manufacturers,
pharmaceutical companies, consumer packaged goods
companies and retailers.
Discrete Comprised of any manufacture or assembly business such
Manufacturing as automotive, electronics, turbines and other
industrial and commercial machinery.
Forest Products Focuses on pulp and paper production and associated
related businesses such as paperboard and packaging
facilities.
Mining/Metals Includes extraction, processing, refining and
production of metals such as copper, aluminum, zinc,
coal and steel.
Petroleum and Includes upstream, transportation, and downstream oil
Petrochemical and gas operations and related chemical and rubber
producers.
Power Generation Addresses all ranges of power generation including
generation and transmission and distribution. Includes
fossil, nuclear and hydroelectric and solar power as
well as independent power producers and local
distributors.
Public Sector Addresses facility and equipment maintenance
organizations in the government, health care and
educational institutions.
Transportation Comprised of municipal bus, train and taxi authorities;
airports and aviation services companies; port
authorities and railroad/transportation service
providers.
Utilities Includes all forms of private and public non-power
utilities such as water supply and distribution, waste
water treatment, gas, cable service and
telecommunications.
TSW sells its products exclusively through direct or direct-assisted
channels, organized by industry. This structure allows TSW to exploit the
industry knowledge and Asset Care expertise of its sales and marketing
professionals to appropriately match customer requirements with TSW's
solution. TSW 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.
TSW supports its direct sales and marketing force with a group of systems
engineering professionals, many of whom also possess relevant industry and
practical Asset Care expertise. As of March 31, 1997, TSW 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 TSW'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, TSW has offices
in other cities in the United States, Europe, Australia and Asia.
TSW 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. TSW 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, TSW believes its ISI agreement with
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Oracle will allow TSW to further penetrate the consumer packaged goods
industry. TSW has also negotiated a resale relationship with Oracle which TSW
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 TSW remains accountable
for the project's success.
TSW has organized an international users' group whose Advisory Committee
plays an important role in helping TSW to develop and refine product and
services strategies. Each year, TSW arranges an international user group
conference which includes presentations by TSW and customers concerning the
features and capabilities of TSW's products. TSW also sponsors an annual
United Kingdom and Asia-Pacific user conference to promote global
participation in TSW'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 TSW's 1996 international conference held in Atlanta.
CUSTOMERS
TSW provides Asset Care software solutions to large, asset-intensive
organizations which include discrete and process manufacturers, utilities,
hospitals, mining companies, transportation authorities, educational systems,
telecommunications providers and governmental institutions. As of March 31,
1997, TSW's products were licensed for use by 321 customers at 941 sites in 48
countries worldwide.
In fiscal 1996, TSW had one customer which accounted for more than ten
percent of its total revenue. TSW had no customer which accounted for more
than ten percent of its total revenue in fiscal 1995 or 1997.
COMPETITION
The application software business is intensely competitive and characterized
by rapid changes in technology and evolving industry standards. To maintain or
enhance its position in the industry, TSW will need to continually enhance its
current product offerings, introduce new product features, and expand its
professional services capabilities. TSW 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, TSW competes on the basis of its reputation and expertise with
various industries. TSW also competes for international business on the basis
of its international distribution and services and support network. TSW
believes it competes favorably in all of these areas. TSW encounters
competition from a number of sources including: (i) software companies that
provide computerized maintenance management systems, such as Project Software
& Development, Inc.; (ii) software companies that integrate computerized
maintenance management software ("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.
PROPRIETARY RIGHTS AND LICENSES
TSW 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. TSW 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 TSW 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 TSW's products
allow customization of applications without altering source code, the source
code for TSW's products is typically neither licensed nor provided to the
customers. TSW protects the source code of its software as a trade secret and
through copyright registrations.
104
<PAGE>
TSW currently has operations in the United States, Europe, Australia and
Asia, and its products are licensed for use by customers in over 48 countries.
TSW 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. TSW 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.
TSW 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.
TSW 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 TSW 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 TSW
or its customers. In addition, TSW generally requires its consultants to enter
into an independent contractor consulting agreement which prohibits disclosure
of TSW's trade secrets and other proprietary information.
There can be no assurance that the steps taken by TSW to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or development by others of similar technology. TSW 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, TSW 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.
EMPLOYEES
As of March 31, 1997, TSW 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 TSW were based
at its locations in France, Australia and certain countries in Asia. None of
TSW's U.S.-based employees is subject to a collective bargaining agreement,
and TSW has not experienced any work stoppages. TSW believes that its employee
relations are good.
TSW'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 TSW will be successful in
attracting, retaining and motivating key personnel.
FACILITIES
TSW's principal executive offices are located at 3301 Windy Ridge Parkway,
Atlanta, Georgia, 30339. TSW 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.
LEGAL PROCEEDINGS
From time to time, TSW is involved in legal proceedings incidental to the
conduct of its business. TSW 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 TSW's results of operations or financial condition.
105
<PAGE>
MANAGEMENT OF THE COMBINED COMPANY
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to persons who are
expected to serve as executive officers or directors of the Combined Company.
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<C> <C> <S>
Robert W. Felton...................... 58 Chief Executive Officer and
Chairman of the Board of
Directors
Christopher R. Lane................... 41 President of Strategy and Product
Development and Vice Chairman of
the Board of Directors
John W. Blend, III.................... 50 President of Worldwide Sales and
Marketing and Director
President of Worldwide Operations
Edward R. Koepfler.................... 48 and Director
Richard W. MacAlmon................... 48 Senior Vice President and Director
Frank M. Siskowski.................... 49 Chief Financial Officer and
Executive Vice President of
Investor Relations
Alan G. Merten........................ 55 Director
William H. Janeway.................... 53 Director
Joseph P. Landy....................... 36 Director
</TABLE>
Mr. Felton was a founder of Indus and has been the Chairman, President and
Chief Executive Officer of Indus since its inception in 1988.
Mr. Lane has served as President of TSW since May 1994, Chief Executive
Officer of TSW since June 1994, and as a director since 1993. From June 1994
to July 1996, he served as TSW's Chairman of the Board of TSW. Prior to
joining TSW 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.
Mr. Blend has served as TSW's Executive Vice President, Worldwide
Distribution, since 1986. He also has served as a director of TSW since 1987.
Prior to joining TSW, 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, from 1980 to
1985. 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.
Mr Koepfler has served as Executive Vice President and Chief Operating
Officer of Indus since March 21, 1997. Prior to joining Indus, he served as
the President and Chief Executive Officer and was a member of the Board of
Directors of Interleaf, Inc., a document software and services company, from
1994 to 1996. From 1985 to 1994, he held various marketing and operating
positions at Systems Software Associates, Inc. ("SSA"), a provider of resource
planning software, in North America. Mr. Koepfler helped to establish
distribution channels overseas and eventually played an important role in
running SSA's operations in the United States.
Mr. MacAlmon was a founder of Indus and has been the Vice President of
Marketing and a director of Indus since January 1990 and a Senior Vice
President of Indus since June 1995. From January 1988 to December 1989, Mr.
MacAlmon served as a Product Developer for Indus.
106
<PAGE>
Mr. Siskowski has served as Senior Vice President and Chief Financial
Officer of Indus since September 1996. From July 1991 to September 1996, Mr.
Siskowski served as Senior Vice President and Controller of VISA
International. From January 1983 to July 1991, he served as Vice President and
Controller of MCI Telecommunications and Chief Financial and Administrative
Officer of the Pacific Division of MCI Communications Corporation.
Mr. Merten has served as a director of Indus since December 1995. Mr. Merten
is currently President of George Mason University, a position he has held
since July, 1996. From August 1989 to April 1996, Mr. Merten was Dean and
Professor of Information Systems at the S.C. Johnson Graduate School of
Management at Cornell University. Mr. Merten is also a director of Comshare,
Inc., Tompkins County Trust Company, American Capital Bond Fund, American
Capital Convertible Securities, American Capital Investment Trust, and Common
Sense Trust.
Mr. Janeway has served as a director of TSW 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, Vanstar, Veritas Software, a Unix system software
company, and Zilog, Inc., a manufacturer of microcontroller-based integrated
circuits, and several privately-held companies.
Mr. Landy has served as a director of TSW 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Combined Company will have the following
committees:
Audit Committee. The Audit Committee will review with the Combined Company's
independent public accountants and with the Combined Company's internal
accounting staff the scope and results of the independent accountants' audit
work, the Combined Company's annual financial statements, and the Combined
Company's internal accounting and control systems. The Audit Committee will
also recommend to the Combined Company's Board the firm of independent public
accountants to be selected to audit the Combined Company's accounts and make
further inquiries as it deems necessary or desirable to inform itself as to
the conduct of the Combined Company's affairs.
Compensation Committee. The Compensation Committee will review and make
recommendations to the Combined Company's Board regarding the compensation for
officers and compensation guidelines for employees of the Combined Company.
107
<PAGE>
STOCK PLANS
Indus International, Inc. 1997 Stock Plan
The Indus International, Inc. 1997 Stock Plan (the "Newco Plan") was
approved by the Newco Board and by Indus as Newco's sole stockholder in July
1997. The Newco Plan provides for the grant of incentive stock options to
employees (including officers and employee directors) and for the grant of
nonstatutory stock options and stock purchase rights ("SPRs") to employees,
directors and consultants. A total of 5,000,000 shares of Newco Common Stock
are currently reserved for issuance pursuant to the Newco Plan. Unless
terminated sooner, the Newco Plan will terminate automatically in July 2007.
The Newco Plan may be administered by the Newco Board or a committee of the
Newco Board (as applicable, the "Administrator"). The Administrator has the
power to determine the terms of the options or SPRs granted, including the
exercise price of the option or SPR, the number of shares subject to each
option or SPR, the exercisability thereof, and the form of consideration
payable upon such exercise. In addition, the Administrator has the authority
to amend, suspend or terminate the Newco Plan, provided that no such action
may affect any share of Newco Common Stock previously issued and sold or any
option previously granted under the Newco Plan.
Options and SPRs granted under the Newco Plan are not generally transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the Newco Plan must
generally be exercised within ninety days after the end of optionee's status
as an employee, director or consultant of Newco, or within twelve months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option's ten year term. In the case of SPRs, unless the
Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant Newco a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with Newco for any
reason (including death or disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to Newco. The repurchase option shall lapse at a
rate determined by the Administrator. The exercise price of all incentive
stock options granted under the Newco Plan must be at least equal to the fair
market value of the Newco Common Stock on the date of grant. The exercise
price of nonstatutory stock options and SPRs granted under the Newco Plan is
determined by the Administrator, but with respect to nonstatutory stock
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended,
the exercise price must at least be equal to the fair market value of the
Newco Common Stock on the date of grant. With respect to any participant who
owns stock possessing more than 10% of the voting power of all classes of
Newco's outstanding capital stock, the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the grant
date and the term of such incentive stock option must not exceed five years.
The term of all other options granted under the Newco Plan may not exceed ten
years.
The Newco Plan provides that in the event of a merger of Newco with or into
another corporation, or a sale of substantially all of Newco's assets, each
option shall be assumed or an equivalent option substituted for by the
successor corporation. If the outstanding options are not assumed or
substituted for by the successor corporation, the Administrator shall provide
for the optionee to have the right to exercise the option or SPR as to all of
the optioned stock, including shares as to which it would not otherwise be
exercisable. If the Administrator makes an option or SPR exercisable in full
in the event of a merger or sale of assets, the Administrator shall notify the
optionee that the option or SPR shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the option or SPR will
terminate upon the expiration of such period.
Indus International, Inc. 1997 Employee Stock Purchase Plan
The Indus International, Inc. 1997 Employee Stock Purchase Plan (the "Newco
ESPP") was adopted by the Newco Board and by Indus as Newco's sole stockholder
in July 1997. A total of 1,000,000 shares of Newco Common Stock has been
reserved for issuance under the Newco ESPP.
108
<PAGE>
The Newco ESPP, which is intended to qualify under Section 423 of the Code
contains six month offering periods. The offering periods generally start on
the first trading day on or after May 1 and November 1 of each year, except
for the first such offering period which commences on the first trading day on
or after the Effective Time and ends on the last trading day on or before
April 30, 1998.
Employees are eligible to participate if they are customarily employed by
Newco or any participating subsidiary for at least 20 hours per week and more
than five months in any calendar year. However, any employee who (i)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of the capital stock of Newco, or (ii)
whose rights to purchase stock under all employee stock purchase plans of
Newco accrues at a rate which exceeds $25,000 worth of stock for each calendar
year may be not granted an option to purchase stock under the Newco ESPP. The
Newco ESPP permits participants to purchase Newco Common Stock through payroll
deductions of up to 10% of the participant's "compensation." Compensation is
defined as the participant's base straight time gross earnings and commissions
but excludes payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses and other compensation. The maximum number of
shares a participant may purchase during a single offering period is 2,000
shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the Newco ESPP is 85% of the lower of the fair market value of
the Newco Common Stock at the beginning or end of the offering period.
Participants may end their participation at any time during an offering
period, and they will be paid their deductions to date. Participation ends
automatically upon termination of employment with Newco.
Rights granted under the Newco ESPP are not transferable by a participant
other than by will, the laws of descent and distribution, or as otherwise
provided under the Newco ESPP. The Newco ESPP provides that, in the event of a
merger of Newco with or into another corporation or a sale of substantially
all of Newco's assets, each outstanding option may be assumed or substituted
for by the successor corporation. If the successor corporation refuses to
assume or substitute for the outstanding options, the offering period then in
progress will be shortened and a new exercise date will be set. The Newco ESPP
will terminate in July 2007. The Newco Board has the authority to amend or
terminate the Newco ESPP, except that no such action may adversely affect any
outstanding rights to purchase stock under the Newco ESPP.
Indus International, Inc. 1997 Director Option Plan
The Indus International, Inc. Director Option Plan (the "Director Plan") was
adopted by the Board of Directors and the stockholders of Newco in July 1997.
The Director Plan provides for the grant of nonstatutory stock options to non-
employee directors. The Director Plan has a term of ten years, unless
terminated sooner by the Board. A total of 200,000 shares of Common Stock have
been reserved for issuance under the Director Plan.
The Director Plan provides that each non-employee director shall
automatically be granted an option to purchase 10,000 shares of Common Stock
(the "First Option") on the date which such person first becomes a non-
employee director, unless immediately prior to becoming a non-employee
director, such person was an employee director of the Company. In addition to
the First Option, each non-employee director shall automatically be granted an
option to purchase 5,000 shares ( a "Subsequent Option") on the date of the
annual meeting of stockholders upon such person's reelection to the Board of
Directors, provided that, on such date, such person shall have served on the
Board for at least six months. Each First option and each Subsequent Option
shall have a term of 10 years. The shares subject to the First Option and to
the Subsequent Option shall vest as to 25% of the optioned stock on each
anniversary of the date of grant, provided the non-employee director continues
to serve as a director on such dates. The exercise price of each First Option
and each Subsequent Option shall be 100% of the fair market value per share of
the Common Stock, generally determined with reference to the closing price of
the Common Stock as reported on the Nasdaq National Market on the last trading
day prior to the date of grant.
109
<PAGE>
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option may be assumed or an equivalent option
substituted for by the successor corporation. If an option is assumed or
substituted for by the successor corporation, it shall continue to vest as
provided in the Director Plan. However, if a non-employee director's status as
a director of the Company or the successor corporation, as applicable, is
terminated other than upon a voluntary resignation by the non-employee
director, each option granted to such non-employee director shall become fully
vested and exercisable. If the successor corporation does not agree to assume
or substitute of the option, each option shall become fully vested and
exercisable for a period of fifteen (15) days from the date the Board notifies
the optionee of the option's full exercisability, after which period the
option shall terminate. Options granted under the Director Plan must be
exercised within three months of the end of the optionee's tenure as a
director of the Company, or within twelve months after such director's
termination by death or disability, but in no event later than the expiration
of the option's ten year term. No option granted under the Director plan is
transferable by the optionee other than by will or the laws of descent and
distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee.
110
<PAGE>
SELECTED INFORMATION WITH RESPECT TO INDUS
COMPENSATION OF DIRECTORS
Cash Compensation
Directors of Indus currently receive no cash fees for services provided in
that capacity but are reimbursed for out-of-pocket expenses they incur in
connection with their attendance at meetings of the Indus Board of Directors.
1995 Director Option Plan
The Indus 1995 Director Option Plan was adopted by the Board of Directors
and approved by the Indus shareholders in December 1995. The Plan became
effective upon the close of Indus' initial public offering. Under the Director
Plan, Indus reserved 100,000 shares of Common Stock for issuance to the
directors of Indus pursuant to nonstatutory stock options. As of December 31,
1996, (i) options to purchase an aggregate of 20,000 shares were outstanding
under the Director Plan at a weighted average exercise price of $15.00 per
share, of which options to purchase 3,750 shares are fully vested and
immediately exercisable; (ii) no options had been exercised pursuant to the
Plan; and (iii) 80,000 shares were available for future grant.
Each director who is not an employee of Indus automatically receives a
nonstatutory option to purchase 10,000 shares of Common Stock of Indus (the
"First Option") on the date such person becomes a director or, if later, on
the effective date of the Director Plan. Thereafter, each such person receives
an option to acquire 2,500 shares of Indus' Common Stock (the "Second Option")
upon such outside director's reelection at each Annual Meeting of
Shareholders, provided that on such date such director shall have served on
the Board of Directors for at least six months. Each option granted under the
Director Plan shall be exercisable at 100% of the fair market value of Indus'
Common Stock on the date such option was granted. Six and one quarter percent
of the First Option and each Second Option shall vest three months after their
dates of grant, with an additional six and one quarter percent vesting at the
end of each subsequent three month period. The Director Plan shall be in
effect for a term of ten years unless sooner terminated.
Directors Holland and Merten were each granted an option to purchase 10,000
shares of Indus Common Stock under the Director Plan upon the closing of
Indus' initial public offering of Indus Common Stock in March 1996 at an
exercise price of $15.00 per share and Mr. Merten and Mr. Robertson were
granted options to purchase 2,500 shares of Indus Common Stock on the date of
the Indus 1997 Annual Meeting of Shareholders.
Pursuant to the terms of the Reorganization Agreement, the Director Plan
will be terminated in connection with the Closing of the Merger.
111
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid by Indus to its Chief
Executive Officer and the four other most highly compensated executive
officers (the "Indus Named Executive Officers") during the fiscal years ended
December 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------
OTHER ANNUAL
COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) (1)
- --------------------------- ---- ---------- ------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Robert W. Felton........ 1996 $195,000 $ 7,334 -- $ 4,435
Chairman, Chief
Executive Officer 1995 180,000 12,055 -- 3,919
and President 1994 166,183 3,647 -- 7,611
Richard W. MacAlmon..... 1996 185,000 7,334 -- 2,789
Senior Vice President,
Vice President 1995 180,000 12,055 -- 4,720
of Marketing and
Director 1994 166,183 89,236 -- 2,611
Michael E. Percy........ 1996 157,287 5,806 -- 2,778
Senior Vice President,
Vice President of 1995 165,000 11,092 -- 3,201
Education and
Methodologies and
Director 1994 152,175 18,187 -- 2,422
Douglas R. Piper........ 1996 148,750 5,102 -- 2,789
Senior Vice President
and Vice President 1995 145,000 8,845 -- 2,812
of Information
Technologies 1994 124,013 24,612 -- 2,043
Charles J. Rosselle..... 1996 119,626 4,348 -- 31,269
Former Senior Vice
President, Vice
President 1995 165,000 70,673 $125,346(2) 158
of Operations 1994 136,352 0 -- 526
</TABLE>
- --------
(1) In 1996, represents payments to profit sharing plans of $2,519 for Messrs.
Felton, MacAlmon, Percy and Piper, and payments of life insurance premiums
of $1,916 for Mr. Felton, $270 for Messrs. MacAlmon and Piper and $259 for
Mr. Percy and $169 for Mr. Rosselle and $31,100 for loan forgiveness for
Mr. Rosselle. In 1995, represents payments to profit sharing plans of
$3,033 for Mr. Felton, $4,562 for Mr. MacAlmon, $3,043 for Mr. Percy and
$2,654 for Mr. Piper, and payments of life insurance premiums of $158 for
Messrs. MacAlmon, Percy, Piper and Rosselle, and $886 for Mr. Felton. In
1994, represents payments to profit sharing plans of $2,085 for Mr.
Felton, $2,085 for Mr. MacAlmon, $1,896 for Mr. Percy and $1,517 for Mr.
Piper, and payments of life insurance premiums of $526 for Messrs. Felton,
MacAlmon, Percy, Piper and Rosselle.
(2) Reflects the sale by Indus to Mr. Roselle of 42,500 shares of Indus Common
Stock at a price below the fair market value.
112
<PAGE>
The following table sets forth certain information with respect to the value
of stock options held by each Indus Named Executive Officers during the fiscal
year ended December 31, 1996.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES PRICE PER OPTION TERM(4)
OPTIONS IN FISCAL SHARE EXPIRATION -----------------------
NAME GRANTED YEAR (1) (2) DATE(3) 5% 10%
---- ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Felton........ 70,000 8.7% $18.15 9/16/2001 $ 1,547,810 $ 2,046,153
Richard W. MacAlmon..... 10,000 1.2 16.50 9/16/2006 282,206 470,764
Michael E. Percy........ 10,000 1.2 16.50 9/16/2006 282,206 470,764
Douglas R. Piper........ 10,000 1.2 16.50 9/16/2006 282,206 470,764
Charles J. Rosselle..... -- -- -- -- -- --
</TABLE>
- --------
(1) Options were granted at an exercise price equal to the fair market value
of Indus' Common Stock, as determined by the Board of Directors on the
date of grant.
(2) Exercise price may be paid in cash, check, promissory note, by delivery of
already-owned shares of Indus' Common Stock subject to certain conditions,
or any combination of the foregoing methods of payment or such other
consideration or method of payment to the extent permitted under
applicable law.
(3) Options become exercisable as to 25% of the option shares on each
anniversary of the vesting commencement date, with full vesting occurring
on the fourth anniversary of the vesting commencement date.
(4) Potential realizable value is based on the assumption that the Indus
Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the option term.
Mr. Felton's options have a 5-year term, and options of Messrs. MacAlmon,
Percy and Piper have 10-year terms. These potential realizable value
numbers are calculated based on Commission requirements and do not reflect
Indus' estimate of future stock price growth.
The following table sets forth information concerning the shares acquired
and the value realized upon the exercise of stock options during 1996, the
number of shares of Indus Common Stock underlying exercisable and
unexercisable options held by each of the Indus Named Executive Officers at
December 31, 1996 and the values of unexercised "in-the-money" options as of
that date.
AGGREGATE OPTION EXERCISES IN 1996 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-
OPTIONS AT MONEY OPTIONS AT FISCAL
SHARES DECEMBER 31, 1996(#) YEAR-END(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Felton........ 51,000 $ 828,968 -- 70,000 -- $532,000
Richard W. MacAlmon..... 51,000 907,718 -- 10,000 -- 92,500
Michael E. Percy........ 35,000 649,675 16,000 10,000 $406,480 92,500
Douglas R. Piper........ 51,000 1,008,780 -- 10,000 -- 92,500
Charles J. Rosselle..... -- -- -- -- -- --
</TABLE>
- --------
(1) Represents the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of Indus Common Stock
as of December 31, 1996 ($25.75 per share), as reported by the Nasdaq
Stock Market at the close of business.
113
<PAGE>
CERTAIN TRANSACTIONS
During 1996, Indus retained Frank, Rimerman & Co. to provide tax and
consulting services. Donald F. Robertson, a director of Indus and formerly the
Treasurer and a Senior Vice President of Indus is a partner of Frank, Rimerman
& Co. Indus paid Frank, Rimerman & Co. approximately $300,000 during 1996.
During 1996, Indus recognized approximately $9.2 million in revenue from the
sale of products and services to PECO Energy Company and its subsidiaries.
Katherine C. Holland, a former director of Indus, is an executive officer of
PECO Energy Company.
On March 21, 1997, Edward R. Koepfler joined Indus as Senior Vice President
and Chief Operating Officer. On April 8, 1997, the Board of Directors of Indus
granted Mr. Koepfler options to purchase an aggregate of 300,000 shares of
Common Stock.
In March 1997, Indus acquired a 10% interest in TenFold Corporation, a
private software company for approximately $8 million in cash. Indus will
receive a perpetual, unlimited license for future applications and tools
developed with TenFold's technology. Subsequent to March 31, 1997, Indus
acquired Prism Consulting, a private management consulting firm, for $4.75
million in Indus Common Stock at the current market value and $250,000 in
cash. Indus has not and does not anticipate any material consequences on its
results of operations for the calendar year 1997 as a result of these
acquisitions.
On April 1, 1997, Indus entered into an Agreement and Plan of Reorganization
in connection with the acquisition by Indus of Prism Consulting, Inc., a
California corporation, pursuant to which Indus issued 339,285 shares of Indus
Common Stock in exchange for all of the issued and outstanding shares of Prism
Capital Stock. Pursuant to the terms of that certain Shareholders Agreement
dated as of April 1, 1997 (the "Prism Shareholders Agreement") entered into
among Indus and all of the former shareholders of Prism (the "Prism
Shareholders"), Indus granted certain registration rights to the Prism
Shareholders in respect of 339,285 shares of Indus Common Stock issued to the
Prism Shareholders in connection with the Prism Merger (the "Prism Registrable
Securities").
In connection with the Prism Merger and pursuant to the terms of that
certain Employment Agreement with Terry Maxey dated April 1, 1997, Indus has
agreed to reimburse Terry Maxey for certain relocation expenses incurred in
connection with his relocation to the San Francisco Bay Area.
114
<PAGE>
SELECTED INFORMATION WITH RESPECT TO TSW
COMPENSATION OF DIRECTORS
As compensation for serving on the TSW Board of Directors, directors who are
not employees of TSW receive an annual fee of $10,000 and $750 for each
meeting of the TSW Board or any committee thereof in which they participate.
In addition, TSW has adopted the Outside Directors Plan, which grants stock
options to directors who are not employees of TSW or any of its affiliates.
In lieu of the payment of annual director's fees to Mr. Oltman and in lieu
of Mr. Oltman's participation in the Outside Directors Plan, TSW 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
10,800 and 54,200 of TSW Common Stock, respectively. Each JRO Option has an
exercise price of $9.23 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 TSW in
the capacity of Chairman of the Board of Directors to TSW 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 Merger
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 TSW that
occur prior to the earlier of (i) December 31, 1997 and (ii) an initial public
offering of TSW 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 TSW Common Stock.
1995 Stock Option Plan for Outside Directors
The Outside Directors Plan of TSW, which provides for grants of options to
directors who are not employees of TSW 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. 100,000 of Common Stock have been reserved for issuance
under the Outside Directors Plan. As of March 31, 1997, options to purchase
11,500 shares of Common Stock were outstanding under the Outside Directors
Plan at a weighted average exercise price of $6.15 per share.
The Outside Directors Plan is administered by the Chief Financial Officer of
TSW. On the date the TSW Board approved the Outside Directors Plan, each non-
employee director was automatically granted options to purchase 7,500 shares
of TSW Common Stock vesting in equal amounts over four years. However, Messrs.
Oltman, Janeway and Landy have elected not to receive options under the
Outside Directors Plan. Upon the occurrence of an event constituting a "change
of control" as described in the Outside Directors Plan, TSW will afford each
participant in the Outside 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 TSW or acquiring its business by reason
of such change of control event. In addition, on the date of each TSW Annual
Shareholders Meeting, each non-employee director is automatically granted an
option to purchase 2,000 shares of TSW Common Stock vesting in equal
increments over a four-year period.
Pursuant to the terms of the Reorganization Agreement, the Outside Directors
Plan will be terminated in connection with the Closing of the Merger.
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<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following summary compensation table sets forth compensation paid by TSW
to its Chief Executive Officer and the three other executive officers of TSW
whose salary and bonus for fiscal 1997 exceeded $100,000 (collectively, the
"TSW Named Executive Officers") during the fiscal year ended March 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND ------------------- OTHER ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION SALARY($) COMPENSATION($) SARS(#) COMPENSATION($)(1)
------------------ ------------------- --------------- ------------ ------------------
<S> <C> <C> <C> <C>
Christopher R. Lane.... $250,000 $91,997(2) 158,509 $ 662
President and Chief
Executive Officer
John F. Bartels........ 220,000 -- 170,000 1,613
Senior Vice President,
Chief Financial
Officer, Secretary and
Treasurer
John W. Blend, III..... 200,000 -- 40,000 16,407
Executive Vice
President, Worldwide
Distribution
Kenneth C. Colby,
Jr. .................. 150,000 -- 10,500 346
Senior Vice President
of Professional
Services
</TABLE>
- --------
(1) Represents Company contribution 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.
The following table sets forth certain information with respect to grants of
stock options to each of the TSW Named Executive Officers during the fiscal
year ended March 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO STOCK OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR PER SHARE(1) DATE 5% 10%
---- ---------- ------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Christopher R. Lane..... 60,634 6.4% $9.23 08/08/06 $ 351,962 $ 891,941
21,875 2.3 9.23 11/04/06 126,978 321,787
76,000 8.0 9.23 12/11/06 441,157 1,117,978
John F. Bartels......... 130,766 13.7 9.23 08/08/06 759,057 1,923,600
10,834 1.1 9.23 08/08/06 62,888 159,371
15,400 1.6 9.23 11/04/06 89,392 226,538
13,000 1.4 10.75 02/21/07 87,888 222,726
John W. Blend, III...... 14,000 1.5 9.23 11/04/06 81,266 205,943
26,000 2.7 10.75 02/21/07 175,776 445,451
Kenneth C. Colby, Jr. .. 10,500 1.1 9.23 11/04/06 60,949 154,458
</TABLE>
- --------
(1) Prior to the Merger, there has been no public trading market for the TSW
Common Stock and, therefore, the exercise price of the options was based
upon the estimated fair market value, excluding goodwill, of TSW Common
Stock as determined by the TSW Board 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 TSW Common Stock.
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<PAGE>
The following table sets forth information regarding stock options held by
the TSW Named Executive Officers at March 31, 1997.
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE- MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END(#) YEAR-END(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Christopher R. Lane........ 188,359 140,450 $1,615,627 $955,596
John F. Bartels............ 39,734 130,266 206,607 686,356
John W. Blend, III......... 238,585 31,333 2,764,541 141,912
Kenneth C. Colby, Jr. ..... 40,000 20,500 404,000 157,385
</TABLE>
- --------
(1) There was no public trading market for the TSW Common Stock as of March
31, 1997. Accordingly, these values are based on the fair market value of
the TSW Common Stock as of March 31, 1997 of $14.60 per share, as
determined by the TSW Board of Directors.
EMPLOYMENT CONTRACTS
TSW has entered into employment agreements with Mr. Lane and Mr. 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 TSW during his employment.
The terms of Mr. Lane's employment with TSW as President and Chief Executive
Officer are detailed in his employment agreement with TSW 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 TSW or (ii)
by TSW 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 TSW Board in
its sole discretion, as well as to participate in TSW's bonus and benefit
plans. Mr. Lane is also entitled to certain other benefits 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 170,300 shares
of TSW's Common Stock at an exercise price of $4.50 per share. The Lane
Employment Agreement also contains provisions that restrict Mr. Lane's rights
to solicit TSW's customers or recruit its employees and obligate him to
protect the confidentiality of certain TSW 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 TSW. The Lane Severance Agreement details TSW'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 TSW 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 TSW.
TSW is party to a Stockholders' Agreement with John Blend dated
September 16, 1992 (the "Stockholders' Agreement") which contains the terms of
Mr. Blend's employment with TSW as an executive vice president (the "Blend
Employment Provisions"). The Stockholders' Agreement terminates automatically
when Mr. Blend ceases to own stock in TSW, and Mr. Blend's employment may be
earlier terminated by majority vote of the
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<PAGE>
TSW Board (i) upon Mr. Blend's death or incapacity, (ii) for "cause" (as
defined in the Stockholders' 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 TSW Board. Mr. Blend is entitled to receive a
salary at the rate set by the TSW Compensation Committee, currently $200,000
per year, as well as to participate in TSW'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 TSW.
If Mr. Blend is terminated by reason of his death or by TSW 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 Stockholders' Agreement expires, TSW would be obligated to
purchase from Mr. Blend's estate, and Mr. Blend's estate would become
obligated to sell to TSW, a portion of Mr. Blend's holdings of TSW Common
Stock in accordance with the Stockholders' Agreement. The Blend Employment
Provisions also restrict Mr. Blend from disclosing confidential information,
competing with or interfering with TSW.
CERTAIN TRANSACTIONS
On June 20, 1994, TSW entered into a Securities Purchase Agreement (the
"Agreement") with its principal shareholder, Warburg. In accordance with the
Agreement, TSW 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 Agreement (representing all of the other capital stock then
outstanding) were reclassified to newly authorized shares of TSW 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 Agreement, TSW 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. TSW 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 785,000 shares of TSW Common Stock held by David P.
Welden, then TSW'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 TSW Preferred Stock will be converted into shares of
Newco Common Stock simultaneously with the consummation of the Merger.
The shares of the TSW Preferred Stock issued to Warburg (the "Preferred
Shares") are convertible into an aggregate of 2,943,218 shares of TSW Common
Stock and are entitled to vote with TSW Common Stock on all matters submitted
to the shareholders of TSW. The holders of the Preferred Shares are entitled
to that number of votes which is equal to the number of shares of TSW Common
Stock into which the Preferred Shares are convertible, subject to certain
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. One-third of the Preferred Shares are
redeemable on the first day of January of each of the years 2000 through 2002
at a redemption price which is equal to the liquidation price of such
Preferred Shares, plus an amount equal to any dividends declared but unpaid on
the Series A and Series B Preferred Stock and any accumulated and unpaid
dividends on the Series C Cumulative and Series D Cumulative Preferred Stock.
The Series A Preferred Stock has a liquidation price of $1.90 per share and is
entitled to receive noncumulative dividends of $0.315 per share per annum as
and when declared by the TSW Board. The Series B Preferred Stock has a
liquidation price of $7.615 per share and is entitled to receive noncumulative
dividends of $0.533 per share per annum as and when declared by the TSW Board.
The Series C Cumulative Preferred Stock has a liquidation price of $11.48 per
share
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<PAGE>
and is entitled to receive cumulative dividends of $1.03 per share per annum
as and when declared by the TSW Board. The Series D Cumulative Preferred Stock
has a liquidation price of $9.23 per share and is entitled to receive
cumulative dividends of $0.83 per share per annum as and when declared by the
TSW Board.
Since June 20, 1994, TSW has issued to Warburg the following subordinated
notes payable and warrants to purchase TSW 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.............. $ 4,000,000 111,356 $ 7.615
Subordinated note dated November
10, 1994, with principal and in-
terest due on November 10, 1999... 2,500,000 302,595 7.93
Subordinated note dated January 4,
1995, with principal and interest
due on January 4, 2000............ 3,500,000 423,633 7.93
Subordinated note dated February
14, 1995, with principal and in-
terest due on February 14, 2000... 1,100,000 133,142 7.93
Subordinated note dated May 5,
1995, with principal and interest
due on May 5, 2000................ 1,500,000 130,662 11.48
Subordinated note dated June 27,
1995, with principal and interest
due on June 27, 2000.............. 400,000 34,843 11.48
Subordinated note dated October 13,
1995, with principal and interest
due on October 13, 2000........... 2,500,000 217,770 11.48
----------- ---------
Total.............................. $15,500,000 1,354,001
=========== =========
</TABLE>
Such notes are mandatorily due upon an initial public offering of TSW Common
Stock (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, TSW issued to Warburg warrants to purchase
shares of Common Stock which are fully exercisable and expire five years from
their respective dates of issuance.
During fiscal 1995 and 1996, TSW 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, TSW loaned $230,000 to Mr. Blend, an officer, director
and shareholder of TSW. The loan is due on or before December 31, 1998 and
bears interest at a rate of 5.98% per annum, of which $51,216 is accrued and
unpaid as of March 31, 1997. The loan is collateralized by 33,333 shares of
TSW's Common Stock and by restrictive provisions related to NQSOs to purchase
112,430 shares of Common Stock at $2.7211 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 TSW. Accrued
interest aggregating approximately $8,000 was forgiven in fiscal 1995. As of
June 30, 1997, TSW forgave the loan (and all accrued interest thereon).
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 TSW, that set 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 had in the Collateral (as defined in the Intercreditor Agreement)
to the security interests TSW had in the Collateral. In addition, the
Intercreditor Agreement provided that (i) Warburg would remit to TSW any
payments it received with respect to the Collateral, which Collateral was
subject to TSW's prior security interest and (ii) TSW would remit to Warburg
any payments it received with respect to any of the Collateral which were in
excess of Mr. Blend's indebtedness to TSW and which Collateral was also
subject to Warburg's second priority security interest and deliver to Warburg
any Collateral
119
<PAGE>
then in TSW's possession upon the satisfaction of all indebtedness to TSW
pursuant to its loan to Mr. Blend (provided that at such time there existed
any outstanding debt to Warburg). As of June 30, 1997, all outstanding
indebtedness to TSW pursuant to its loan to Mr. Blend was forgiven.
In December 1996, TSW loaned (Pounds)100,000 ($166,000 as of March 31, 1997)
to Mr. Lane, President and Chief Executive Officer of TSW. 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
97,875 shares of TSW's Common Stock at $9.23 per share and options to purchase
170,300 shares of TSW's Common Stock at $4.50 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 TSW. As of June 30, 1997, TSW forgave
the loan (and all accrued interest thereon).
Mr. Busbee, a director of TSW, is of counsel to King & Spalding, a law firm
based in Atlanta, Georgia, which provided certain legal services to TSW in
fiscal 1997 and is presently being retained to provide certain services to
TSW.
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<PAGE>
SECURITY OWNERSHIP OF THE COMBINED COMPANY
The following table sets forth certain information with respect to the
beneficial ownership of Newco Common Stock after giving effect to the Merger,
as to each Indus shareholder and each TSW shareholder expected to be the
beneficial owner of more than five percent (5%) of the Newco Common Stock, and
as to each person expected to be (i) a director of the Combined Company; (ii)
the Chief Executive Officer of the Combined Company, (iii) the Indus Named
Executive Officers and the TSW Named Executive Officers other than the Chief
Executive Officer of the Combined Company, and (iv) all persons expected to be
directors and executive officers of the Combined Company, as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1)(2) CLASS
------------------------ ---------------- ----------
<S> <C> <C>
Robert W. Felton.............................. 9,497,561 32.5%
Warburg, Pincus Investors, L.P.(3)............ 12,883,858 39.2
William H. Janeway(3)......................... 12,883,858 39.2
Joseph P. Landy(3)............................ 12,883,858 39.2
Richard W. MacAlmon........................... 1,402,500 4.8
John W. Blend, III(4)......................... 818,882 2.7
Christopher R. Lane(5)........................ 630,449 2.1
Alan G. Merten................................ 3,875 *
Edward R. Koepfler............................ -- *
Frank M. Siskowski............................ -- *
Douglas R. Piper.............................. 374,000 1.3
Michael E. Percy(6)........................... 297,432 1.0
John F. Bartels(5)............................ 398,399 1.3
Kenneth C. Colby, Jr.(5)...................... 109,200 *
All proposed executive officers and directors
as a group
(9 persons)(7)............................... 25,237,125 75.2
</TABLE>
- --------
* Represents less than 1% of the shares of Newco Common Stock expected to be
outstanding after consummation of the Merger.
(1) Reflects beneficial ownership as of July 25, 1997 and assumes an exchange
ratio of one share of Newco Common Stock for each outstanding share of
Indus Common Stock and the TSW Applicable Ratio, as of July 25, 1997, of
approximately 2.73 shares of Newco Common Stock for each outstanding share
of TSW Common Stock and Preferred Stock, resulting in an aggregate of
approximately 29,198,874 shares of Newco Common Stock.
(2) Based upon information supplied by Indus and TSW officers, directors and
principal shareholders. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission that deem shares
to be beneficially owned by any person who has or shares voting power or
investment power with respect to such shares. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. Shares of Newco
Common Stock that will be issuable to the identified person or entity
pursuant to assumed stock options that are either immediately exercisable
or exercisable within sixty days of July 25, 1997 are deemed to be
outstanding and to be beneficially owned by the person holding such
options for the purpose of computing the percentage ownership of such
person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
(3) Represents shares held by Warburg. Warburg, Pincus & Co. is the sole
General Partner of Warburg and has a 20% interest in the profits of
Warburg. E.M. Warburg, Pincus & Co. LLC manages Warburg. Lionel I. Pincus
is the managing partner of Warburg, Pincus & Co. and the managing member
of E.M. Warburg, Pincus & Co., LLC and may be deemed to control both such
entities. The members of E.M. Warburg,
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<PAGE>
Pincus & Co., LLC are substantially the same as the partners of Warburg,
Pincus & Co. Messrs. Janeway and Landy, who will be directors of the
Combined Company, are Managing Directors and members of E.M. Warburg,
Pincus & Co., LLC, and general partners of Warburg, Pincus & Co. Messrs.
Landy and Janeway may be deemed to have an indirect pecuniary interest
(within the meaning of Rule 16a-1 under the Exchange Act) in an
indeterminate portion of the shares beneficially owned by Warburg. Messrs.
Janeway and Landy each disclaim beneficial ownership, for purposes of
Section 16 of the Exchange Act or otherwise, of such shares. The address of
Warburg is 466 Lexington Avenue, New York, New York 10017. Includes
3,696,422 shares of Newco common stock issuable upon the exercise of
currently exercisable warrants held by Warburg.
(4) Includes 651,337 shares of Newco Common Stock issuable upon exercise of
stock options.
(5) Represents shares issuable upon exercise of stock options.
(6) Includes 16,000 shares of Newco Common Stock issuable upon exercise of
stock options.
(7) Includes approximately 4,347,759 shares subject to options to be assumed
by the Combined Company that are either immediately exercisable or
exercisable within sixty days of July 25, 1997.
122
<PAGE>
SECURITY OWNERSHIP OF INDUS
The following table sets forth certain information, as of July 25, 1997,
with respect to the beneficial ownership of Indus' Common Stock by (i) each
Indus shareholder known by Indus to be the beneficial owner of more than five
percent (5%) of the outstanding shares of Indus Common Stock, (ii) each Indus
director, (iii) each of the four most highly compensated officers of Indus for
the 1996 fiscal year, and (iv) all current executive officers and directors of
Indus as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OWNED(1)
------------------------ ----------------- ----------------
<S> <C> <C>
Robert W. Felton........................... 9,497,561 51.0%
Richard W. MacAlmon........................ 1,402,500 7.5
Douglas R. Piper........................... 374,000 2.0
Michael E. Percy(2)........................ 297,432 1.6
Edward P. Koepfler......................... -- *
Frank M. Siskowski......................... -- *
Alan G. Merten(2).......................... 3,875 *
Donald F. Robertson........................ -- *
All current directors and executive offi-
cers as a group (8 persons)............... 11,575,368 63.0%
</TABLE>
- --------
* Less than 1%.
(1) Based upon information supplied by Indus officers, directors and principal
shareholders. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission that deem shares to be
beneficially owned by any person who has or shares voting power or
investment power with respect to such shares. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. Shares of Indus
Common Stock issuable to the identified person or entity pursuant to stock
options that are either immediately exercisable or exercisable within
sixty days of June 1, 1997 are deemed to be outstanding and to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Amounts shown include the following number of shares, option for which are
exercisable within 60 days of July 25, 1997: Percy, 16,000; and Merten,
1,875.
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SECURITY OWNERSHIP OF TSW
The following table sets forth certain information, as of July 25, 1997,
with respect to the beneficial ownership of TSW's Common Stock, by (i) each
TSW stockholder that is the beneficial owner of more than five percent (5%) of
the outstanding shares of TSW Capital Stock, (ii) each TSW director, (iii)
each of the four most highly compensated officers of TSW for the 1997 fiscal
year, and (iv) all current executive officers and directors of TSW as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
------------------------ ------------- ----------
<S> <C> <C>
Warburg, Pincus Investors, L.P.(2)(3)........... 4,297,219 93.3%
William H. Janeway(2)(3)(4)..................... 4,297,219 93.3
Joseph P. Landy(2)(3)(4)........................ 4,297,219 93.3
Christopher R. Lane(5).......................... 230,934 4.8
John F. Bartels(6).............................. 145,934 3.1
John W. Blend, III(7)........................... 299,957 6.2
Kenneth C. Colby, Jr.(6)........................ 40,000 *
John R. Oltman(8)............................... 186,010 4.0
George D. Busbee(6)............................. 13,500 *
All executive officers and directors as a group
(8 persons)(9)................................. 5,092,544 95.4%
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of TSW Common Stock and
TSW Preferred Stock.
(1) Based upon information supplied by TSW directors, officers and principal
shareholders. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission that deem shares to be
beneficially owned by any person who has or shares voting power or
investment power with respect to such shares. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and
investment power with respect to all shares of TSW Capital Stock
beneficially owned, subject to community property laws where applicable.
Shares of TSW Common Stock issuable to the identified person or entity
pursuant to stock options that are currently exercisable or which may be
exercised within sixty days of July 25, 1997 are deemed to be outstanding
and to be beneficially owned by the person holding such options for the
purpose of computing the percentage of shares of ownership of such person
but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Includes shares of TSW Common Stock issuable upon conversion of TSW
Preferred Stock held by Warburg. Also includes 1,354,001 shares of TSW
Common Stock issuable upon the exercise of currently exercisable warrants
held by Warburg. The address of Warburg and Messrs. Janeway and Landy is
466 Lexington Avenue, New York, New York 10017.
(3) The sole general partner of Warburg is Warburg, Pincus & Co., a New York
general partnership ("WP"). E.M. Warburg, Pincus & Co., LLC ("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 has a 20% interest in the
profits of Warburg as the general partner. Messrs. Janeway and Landy,
directors of TSW, 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 Exchange Act) in an indeterminate portion of the shares
beneficially owned by Warburg and WP.
(4) 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 Exchange Act.
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(5) Represents shares issuable upon exercise of stock options. Mr. Lane's
address is c/o TSW International, Inc., 3301 Windy Ridge Parkway, Atlanta,
Georgia 30339.
(6) Represents shares issuable upon exercise of stock options.
(7) Includes 238,585 shares of TSW Common Stock 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 65,000 shares of TSW Common Stock issuable upon exercise of
stock options granted by TSW and 121,010 shares of TSW Common Stock
obtainable upon exercise of stock options granted by Warburg.
(9) Includes 682,628 shares of TSW Common Stock issuable upon exercise of
stock options, an aggregate of 2,943,218 shares of TSW Common Stock
issuable upon conversion of all of the outstanding TSW Preferred Stock and
1,354,001 shares of TSW Common Stock issuable upon exercise of currently
exercisable warrants to purchase shares of TSW Common Stock.
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<PAGE>
PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION
MARKET PRICE AND DIVIDEND DATA
Indus' Common Stock has been traded on the Nasdaq National Market under the
symbol "IGRP". The tables set forth the range of high and low closing prices
for Indus Common Stock as reported on Nasdaq for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1996
First Quarter............................................. $22 3/4 $18
Second Quarter............................................ 21 1/2 17
Third Quarter............................................. 21 1/4 15 3/4
Fourth Quarter............................................ 25 3/4 18 7/8
Fiscal 1997
First Quarter............................................. 25 3/4 14
Second Quarter ........................................... 20 1/4 13 1/2
Third Quarter (through August 5, 1997) ................... 19 3/4 15 1/2
</TABLE>
The following table sets forth the closing prices per share of Indus Common
Stock on Nasdaq on June 4, 1997, the last trading day before announcement of
the proposed Merger, and on August 5, 1997, the last practical trading day
before the printing of this Joint Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
INDUS
COMMON STOCK
------------
<S> <C>
June 4, 1997.................................................. $ 15 3/4
August 5, 1997................................................ $ 17 1/4
</TABLE>
As of the Indus Record Date, there were approximately 226 shareholders of
record who held shares of Indus Common Stock.
Prior to its initial public offering in February 1996, Indus was an S
Corporation and from time to time made substantial cash distributions to its
shareholders. Indus has not declared or paid any cash dividends on its Common
Stock since the termination of its S Corporation status. TSW has not paid any
cash dividends on its stock. Both Indus and TSW anticipate that for the
foreseeable future they will each continue to retain any earnings for use in
the operation of their respective business. Newco anticipates that for the
foreseeable future it will retain any earnings for use in the operations of
its business and does not intend to pay dividends.
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<PAGE>
DESCRIPTION OF NEWCO CAPITAL STOCK
The authorized capital stock of Newco consists of 100,000,000 shares of
Common Stock, par value $0.001 per share and 10,000,000 shares of Preferred
Stock, par value $0.001 per share. Assuming a TSW Applicable Ratio of
approximately 2.73 (the TSW Applicable Ratio as of July 25, 1997), immediately
following the consummation of the Merger, there will be outstanding
approximately 29,198,874 shares of Newco Common Stock and options and warrants
to purchase approximately 9,838,887 shares of Newco Common Stock and no shares
of Newco Preferred Stock.
COMMON STOCK
Subject to preferences that may apply to any Preferred Stock outstanding at
the time, the holders of outstanding shares of Newco Common Stock are entitled
to receive dividends out of assets legally available therefor at such times
and in such amounts as the Board of Directors may from time to time determine.
Each stockholder is entitled to one vote for each share of Newco Common Stock
held on all matters submitted to a vote of stockholders. Cumulative voting for
the election of directors is not provided for in the Newco Certificate of
Incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The Newco Common
Stock is not entitled to preemptive rights and is not subject to conversion or
redemption. Upon liquidation, dissolution or winding up of Newco, the assets
legally available for distribution to stockholders are distributable ratably
among the holders of the Newco Common Stock and any participating Newco
Preferred Stock outstanding at that time after payment of liquidation
preferences, if any, on any outstanding Newco Preferred Stock and payment of
other claims of creditors. Each share of Common Stock to be issued in the
Merger will be fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by Delaware law, to provide for the issuance of additional shares of Newco
Preferred Stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix the powers,
preferences and rights of the shares of each wholly unissued series and any
qualifications, limitations or restrictions thereon, and to increase or
decrease the number of shares of any such series (but not below the number of
shares of such series then outstanding), without any further vote or action by
the stockholders. The Board of Directors may authorize the issuance of Newco
Preferred Stock with voting or conversion rights that could adversely affect
the voting power of other rights of the holders of Newco Common Stock. Thus,
the issuance of Newco Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of Newco. Newco has no current
plan to issue any shares of Newco Preferred Stock.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Newco is subject to the provisions of the Anti-Takeover Law which regulates
corporate takeovers. The Anti-Takeover Law prevents certain Delaware
corporations, including those whose securities are listed on Nasdaq, from
engaging, under certain circumstances, in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with
any "interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date
that such stockholder became an "interested stockholder." A Delaware
corporation may "opt out" of the Anti-Takeover Law with an express provision
in its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
Newco has not "opted out" of the provisions of the Anti-Takeover Law.
Newco's Certificate of Incorporation (the "Newco Certificate") provides that
any action required or permitted to be taken by the stockholders of Newco at
an annual meeting or special meeting of stockholders may only be taken if it
is properly brought before such meeting and may not be taken by written action
in lieu of a meeting. Newco's Bylaws further provide that special meetings of
the stockholders may only be called by the
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<PAGE>
Chairman of the Board of Directors, the Chief Executive Officer, the President
of the Company or any two members of the Board of Directors. Under the Bylaws,
in order for any matter to be considered "properly brought" before a meeting,
a stockholder must comply with certain requirements regarding advance notice
to Newco. The foregoing provisions could have the effect of delaying until the
next stockholders meeting stockholder actions which are favored by the holders
of a majority of the outstanding voting securities of Newco. These provisions
may also discourage another person or entity from making a tender offer for
Newco's Common Stock, because such person or entity, even if it acquired a
majority of the outstanding voting securities of Newco, would be able to take
action as a stockholder (such as electing new directors or approving a merger)
only at a duly called stockholders meeting, and not by written consent.
REGISTRATION RIGHTS
In addition, Newco, Robert W. Felton, Richard W. MacAlmon, John W. Blend,
III, John R. Oltman and Warburg will enter into the Registration Rights
Agreement with respect to the shares of Newco Common Stock to be received by
such persons in the Merger. See "CERTAIN RELATED AGREEMENTS--Registration
Rights Agreement."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Newco Common Stock is ChaseMellon
Shareholder Services LLC.
LISTING
The Newco Common Stock will be quoted on Nasdaq under the trading symbol
"IINT."
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<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF INDUS COMMON STOCK,
TSW COMMON STOCK AND NEWCO COMMON STOCK
Upon consummation of the Merger, the shareholders of Indus, which is a
California corporation, will become stockholders of Newco, which is a Delaware
corporation, and upon consummation of the TSW Merger, the shareholders of TSW,
which is a Georgia corporation, will become stockholders of Newco. The rights
of Newco stockholders will be governed by the Certificate and Bylaws of Newco,
which differ in certain material respects from the Articles and Bylaws of
Indus and the Articles and Bylaws of TSW. In addition, the rights of the
former Indus shareholders will no longer be governed by California law and the
rights of the former TSW shareholders will no longer be governed by Georgia
law, but will be governed by Delaware law.
The following discussion summarizes certain material differences between the
Certificate and Bylaws of Newco, on the one hand, and the Articles and Bylaws
of Indus or the Articles and Bylaws of TSW, on the other, as well as material
differences between California, Georgia and Delaware law that may affect the
interests of Indus or TSW shareholders. The discussion is only a summary and
does not purport to be a complete description of such differences, and is
qualified in its entirety by reference to the DGCL, the GBCC, the CGCL, the
common law thereunder and the full text of the Articles of Incorporation and
Bylaws of TSW, the Certificate of Incorporation and Bylaws of Newco and the
Articles of Incorporation and Bylaws of Indus.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF INDUS AND STOCKHOLDERS OF NEWCO
Limitation of Director Liability. California and Delaware law each permit a
corporation to adopt a provision in its articles or certificate of
incorporation eliminating the liability of directors to the corporation or its
shareholders or stockholders for monetary damages for breach of a director's
fiduciary duty, subject to certain limitations. The Certificate and Articles
each contain a provision eliminating director liability to the maximum extent
permitted by law, with Delaware law permitting somewhat broader elimination of
liability.
California law does not permit the elimination of monetary liability of a
director where such liability is based on: (i) intentional misconduct or a
knowing and culpable violation of law; (ii) acts or omissions that a director
believes to be contrary to the best interests of the corporation or its
shareholders or that involve the absence of good faith on the part of the
director; (iii) receipt of an improper personal benefit by the director;
(iv) acts or omissions that show reckless disregard for the director's duty to
the corporation or its shareholders in circumstances in which the director was
aware, or should have been aware in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders; (v) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders; (vi) interested transactions between the
corporation and a director in which a director has a material financial
interest; or (vii) liability for improper distributions, loans or guarantees.
Delaware law does not permit the elimination of monetary liability of a
director where such liability is based on: (i) breaches of a director's duty
of loyalty to the corporation or its stockholders; (ii) acts or omissions not
in good faith or involving intentional misconduct or knowing violations of
law; (iii) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (iv) transactions in which the director received an improper
personal benefit.
Indemnification. The Bylaws of Newco and Indus require those companies to
indemnify all directors, officers and employees to the maximum extent
permitted by law.
California law permits indemnification of expenses, judgments, fines and
settlements in connection with third-party actions, and indemnification of
expenses (and possibly settlements) in derivative actions, except that, with
respect to derivative actions (i.e., actions brought on behalf of a
corporation by a shareholder of such corporation): (i) no indemnification may
be made when a person is adjudged liable to the corporation in the performance
of that person's duty to the corporation and its shareholders unless a court
determines such person is entitled to indemnity for expenses, and then such
indemnification may be made only to the extent that the
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<PAGE>
court so determines; and (ii) no indemnification may be made in respect of
amounts paid or expenses incurred in settling or otherwise disposing of a
pending action or amounts incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
The foregoing indemnification is permitted only for acts taken in good faith
and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of
the directors, independent legal counsel (if a quorum of independent directors
is not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party) or the court handling the action.
California law requires indemnification when the individual has successfully
defended an action on the merits. California law also permits a corporation to
advance expenses to a person to defend a proceeding and to provide
indemnification broader than that expressly allowed by statute, subject to
certain limitations.
Delaware law relating to indemnification is similar to California law except
that: (i) it appears less likely that a corporation could provide
indemnification of amounts paid in settling a derivative suit; (ii) the
standard of conduct as to when indemnification is permitted includes actions
made in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the corporation, not just those believed to be in the
best interests of the corporation; and (iv) indemnification of expenses
incurred in defense of an action is required whenever an individual has
successfully defended an action, regardless of whether or not a judgment was
rendered on the merits of the action.
Restrictions on Certain Business Combinations. Pursuant to the Anti-Takeover
Law, certain "business combinations" with "interested stockholders" of
Delaware corporations are subject to a three-year moratorium unless specified
conditions are met. For a description of the Anti-Takeover Law, see
"DESCRIPTION OF NEWCO CAPITAL STOCK--Delaware's Anti-Takeover Law."
Although California law does not have a provision comparable to the Anti-
Takeover Law, it does require that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with a
holder of more than 50% but less than 90% of such common stock or such
holder's affiliate, unless all of the holders of such class or series consent
to the transaction. This provision of California law may have the effect of
making a "cash-out" merger by a majority shareholder more difficult to
accomplish.
California law also provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is
made by an interested party (generally a controlling or managing party of the
target corporation), an affirmative opinion in writing as to the fairness of
the consideration to be paid to the shareholders must be delivered to
shareholders. Furthermore, if a tender of shares or vote is sought pursuant to
an interested party's proposal, and a later proposal is made by another party
at least ten days prior to the date for acceptance of the interested party
proposal, then the shareholders must be informed of the later offer and be
afforded a reasonable opportunity to withdraw any vote, consent or proxy, or
to withdraw any tendered shares.
Classification of Board of Directors. California law provides that
corporations that are listed on the New York or American Stock Exchange or on
Nasdaq if the corporation has at least 800 shareholders may, with the approval
of its Board of Directors and shareholders, divide the Board of Directors into
two or three classes to serve for terms of two or three years, respectively,
or to eliminate cumulative voting or both. A corporation must have at least
six directors to divide its Board into two classes, and must have at least
nine directors to classify its Board into three classes.
Delaware law permits any corporation to classify its Board of Directors and
does not have a minimum Board size that is required to classify the Board.
The Certificate and Bylaws of Newco presently do not provide for a
classified Board, although a classified Board could be established following
the Merger with the approval of the Newco stockholders.
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<PAGE>
Size of Board of Directors. Under California law, the number of directors of
a corporation may be fixed in the articles of incorporation or bylaws of a
corporation, or a limited range may be established for the number of
directors, with the Board of Directors given authority to fix the exact number
of directors within such range. The Bylaws of Indus establish the number of
directors of Indus to be between five and nine, currently set at six. The
provision setting forth the number of directors in the Bylaws may not be
amended to reduce the minimum number of directors below five if the votes cast
against the adoption of such amendment are equal to more than 16 2/3% of the
outstanding shares entitled to vote.
Under Delaware law, the number of directors of a corporation may be fixed or
changed by the Board of Directors acting alone, by amendment to the
corporation's bylaws, unless the directors are not authorized to amend the
bylaws or the number of directors is fixed in the certificate of
incorporation, in which cases stockholder approval is required. The Bylaws of
Newco establish the initial authorized number of directors of Newco at one.
Robert W. Felton currently is the sole director of Newco. Immediately prior to
the Closing and after the Meetings, the Bylaws of Newco will be amended to
establish the number of directors to be eight, and certain current directors
and officers of Indus and of TSW and each of Messrs. Landy and Janeway will be
appointed as directors of Newco. However, the Certificate and Bylaws of Newco
authorize the Newco Board to amend Bylaws, and accordingly a majority of
Newco' Board of Directors will have the ability to change the authorized
number of directors and appoint additional directors without having such
additional directors first elected by stockholders. This ability could have
the effect of delaying or preventing a change in control of Newco.
Cumulative Voting for Directors. Under California law, shareholders of a
California corporation may, unless such corporation's articles of
incorporation or bylaws expressly eliminate cumulative voting, cumulate their
votes in the election of directors so long as at least one shareholder has
given notice, prior to the voting, of such shareholder's intent to cumulate
his or her votes at the meeting. The Articles and Bylaws of Indus do not
contain any provision eliminating cumulative voting.
Stockholders of Newco will not be entitled to cumulate their votes in the
election of directors.
Removal of Directors. Under California law, a director or the entire Board
of Directors may be removed, with or without cause, by the affirmative vote of
the holders of a majority of the securities entitled to vote, provided that no
director of a corporation whose Board of Directors is unclassified (such as
Indus) may be removed (unless the entire Board of Directors is removed) if the
votes cast against such removal would be sufficient to elect the director in
an election involving cumulative voting. A director of a corporation whose
Board of Directors is classified may not be removed if the votes cast against
removal of the director would be sufficient to elect the director if voted
cumulatively (without regard to whether shares may otherwise be voted
cumulatively) at an election at which the same total number of votes were cast
and either the number of directors elected at the most recent annual meeting
of shareholders, or if greater, the number of directors for whom removal is
being sought, were then being elected. In addition, under California law, a
director may be removed for cause for certain specified reasons by the
Superior Court in a suit by shareholders holding at least 10% of the
outstanding shares of any class.
Under Delaware law, any director of a corporation without cumulative voting
and without a classified Board of Directors may be removed with or without
cause by holders of a majority of the shares then entitled to vote at an
election of directors. In addition, a Delaware corporation that adopts a
classified Board has the option of allowing directors to be removed only for
cause.
Board of Directors Vacancies. The Bylaws of both Newco and Indus provide
that vacancies on the Board of Directors, including newly created
directorships, may be filled by the vote of a majority of directors then in
office. However, California law prohibits directors from filling a vacancy on
the Board created by the removal of a director unless such power is expressly
granted to the Board in a corporation's charter documents. The charter
documents of Indus do not authorize the Board to fill a vacancy by removal of
a director.
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Notice of Special Meetings of the Board of Directors. Under California law,
notice of a special meeting of the Board of Directors must be given four days
prior to such a meeting, if the notice is delivered by mail, or 48 hours prior
to such a meeting, if the notice is delivered personally or by telephone or
telegraph. Delaware law does not specify requirements with respect to the
notice period prior to a special meeting of the Board of Directors. The Bylaws
of Newco require seven days' notice by mail or 48 hours' notice delivered
personally or by telephone or telegraph prior to such a special meeting.
Special Shareholders or Stockholders Meetings; Shareholder or Stockholder
Action by Written Consent. Under California law, special meetings of
shareholders may be called by the Board of Directors, the Chairman of the
Board of Directors, the President, the holders of shares representing 10% or
more of the outstanding voting power and such other persons as may be
designated in the articles of incorporation or bylaws. The Bylaws of Indus
authorize the President, the Chairman of the Board, the Board, one or more
shareholders entitled to cast not less than 10% of the votes at the meeting to
call a special meeting. Any action required or able to be taken at any meeting
of Indus shareholders may be taken without a meeting, without prior notice and
without a vote if a written consent is signed by the holders of outstanding
Indus Common Stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, provided that, except to fill
a vacancy caused by removal, directors may not be elected except by unanimous
written consent of shares entitled to vote. Unless the consents of all
shareholders entitled to vote have been solicited in writing, prompt notice of
the taking of any corporate action which is approved by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders entitled to vote who have not consented in writing.
Delaware law, on the other hand, provides that special meetings of
stockholders may be called by a majority of the Board of Directors or by such
persons as may be designated in the certificate of incorporation or bylaws,
and does not expressly provide stockholders the right to call special
meetings. The Bylaws of Newco currently provide that special meetings of
stockholders may be called only by any two Directors, the Chairman of the
Board, the Chief Executive Officer or the President. The Bylaws of Newco also
provide that stockholders may not act by written consent.
Amendment of Certificate or Articles of Incorporation. Under both Delaware
and California law, a company's certificate or articles of incorporation may
be amended only if such amendment is approved by the Board and by a majority
of the shareholders or stockholders. In addition, under both Delaware and
California law, if a corporation has more than one class or series of stock
outstanding, certain amendments that would affect the rights of such class or
series require the vote of a majority of the shares of such class or series.
"Supermajority" requirements (i.e., requirements of a vote of more than a
majority of the shares) are permitted under both California and Delaware law.
Nevertheless, California law provides that, for a corporation with outstanding
shares held of record by 100 or more persons, such provision: (i) cannot
require a vote higher than 66 2/3%; (ii) must be approved by at least as large
a proportion of the outstanding shares as the supermajority provision
requires; and (iii) automatically expires after two years unless renewed
pursuant to a shareholder vote. Delaware law contains no similar provision.
Amendment of Bylaws. Under California law, bylaws may be amended by
shareholders holding a majority of the outstanding shares or by the Board of
Directors, except that if the number or a range of directors are specified in
the bylaws, this provision can be changed only with the approval of the
shareholders. Shareholders can adopt or amend bylaw provisions to limit the
ability of the Board of Directors to amend the bylaws. Under Delaware law, the
bylaws may be amended only by the stockholders, unless the corporation's
certificate of incorporation also confers the power to amend the bylaws on the
directors. The Certificate authorizes Newco directors to amend the Bylaws of
Newco.
Shareholder Vote for Mergers and Other Corporate Reorganizations. Generally,
California law requires a shareholder vote in more situations involving
corporate mergers and other reorganizations than does Delaware law. Both
California and Delaware law generally provide for shareholder or stockholder
votes of both the acquiring and acquired corporation to approve mergers and of
the selling corporation in a sale of all or
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substantially all of its assets. In addition to the foregoing, California law
also requires the affirmative vote of a majority of the outstanding shares of
(i) an acquiring corporation in share-for-share reorganizations, (ii) the
acquiring and acquired corporations in sale-of-assets reorganizations and
(iii) a parent corporation whose equity securities are being issued or
transferred in connection with certain corporate reorganizations (such as
triangular mergers), all subject to certain exceptions, whereas Delaware law
does not. California law generally requires a vote of all outstanding shares
voting in the aggregate and by class when a vote is required in connection
with these transactions, whereas Delaware law generally does not require class
voting in connection with these transactions.
Delaware law does not require a stockholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if: (i) the merger agreement does not amend the
existing certificate of incorporation; (ii) each share of the surviving
corporation outstanding before the merger is an identical outstanding or
treasury share after the merger; and (iii) the number of shares to be issued
by the surviving corporation in the merger does not exceed 20% of the shares
outstanding immediately prior to the merger. California law contains a similar
exception to its voting requirements for mergers and other reorganizations
where a corporation or its shareholders immediately prior to the
reorganization own immediately after the reorganization more than 5/6ths of
the voting power of the surviving or acquiring corporation, or its parent.
Dissenters' Rights in Mergers and Reorganizations. Under both California and
Delaware law, a dissenting shareholder of a corporation engaging in certain
major corporate transactions may, under varying circumstances, be entitled to
appraisal rights. Appraisal rights permit a shareholder to receive cash equal
to the fair market value of such shareholder's shares, in lieu of the
consideration such shareholder would otherwise receive in any such
transaction.
Delaware law provides for dissenters' rights in certain mergers and
consolidations. However, such rights are not available with respect to: (i) a
merger or consolidation by a corporation, with respect to any class or series
of shares that are either listed on a national securities exchange or held by
more than 2,000 stockholders, if such stockholders receive shares of the
surviving corporation or of such a listed or widely-held corporation; or (ii)
stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the merger.
In general, California law does not afford dissenters' rights in share-for-
share reorganizations (except for those that do not result in the acquiror
gaining control of the other corporation) and sale-of-assets reorganizations,
and affords only limited dissenters' rights for mergers where a shareholder
vote is required if the shares are publicly traded. See "THE MERGER--Appraisal
and Dissenters' Rights."
Loans to Directors, Officers and Employees. Under Delaware law, a
corporation may make loans to, guarantee the obligations of or otherwise
assist its officers or other employees (including those who are directors),
and those of its subsidiaries, when such action, in the judgment of the
directors, may reasonably be expected to benefit the corporation. Under
California law, a corporation with 100 or more shareholders may make a loan
to, or guarantee the obligations of, directors or officers only if a majority
of the disinterested directors determines that such loan or guarantee may
reasonably be expected to benefit the corporation (provided the bylaws
authorize the board alone to approve such loan).
Inspection of Shareholder or Stockholder Lists. Delaware law allows any
shareholder and California law allows any shareholder with a voting trust
certificate to inspect a corporation's shareholder list for a purpose
reasonably related to such person's interest as a shareholder. In addition,
California law provides that a shareholder or shareholders holding 5% or more
of a corporation's shares, or who hold 1% or more of a corporation's shares
after it is a public company and has filed a Schedule 14A with the Commission
relating to the election of directors, have an absolute right to inspect and
copy the corporation's shareholder list. Delaware law permits a stockholder to
inspect the stockholder list during the ten days preceding a stockholders'
meeting for any purpose germane to the meeting.
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Payment of Dividends. California law does not use the concepts of par value
of shares (except for tax purposes), capital or surplus. The concepts of par
value, capital and surplus are retained under Delaware law.
Under California law, any distribution of corporate assets to shareholders
(including dividends and repurchases of shares) are limited either to: (i)
retained earnings; or (ii) an amount that would leave the corporation with
assets (exclusive of goodwill, capitalized research and development expenses
and deferred charges) equal to at least 1 1/4 times its liabilities (not
including deferred taxes, deferred income and other deferred credits) and with
current assets, as defined, at least equal to its current liabilities (or 1
1/4 times its current liabilities if the average pretax and pre-interest
earnings for the preceding two fiscal years were less than the average
interest expense for such years). There are exceptions to the foregoing rules
for repurchases pursuant to employee stock plans. Additionally, a corporation
cannot make a distribution if, as a result of such distribution, the
corporation would likely be unable to meet its liabilities as they come due or
if such distribution would impair certain preference rights of the holders of
preferred stock.
Delaware law permits the payment of dividends out of surplus (generally
defined as net assets of the corporation less capital) or, if there is no
surplus, out of net profits for the current fiscal year and/or the preceding
fiscal year. Delaware law generally provides that a corporation may redeem or
repurchase its shares only if such redemption or repurchase would not impair
the capital of the corporation.
Interested Director Transactions. Under both California and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest,
provided certain conditions are met. With certain exceptions, the conditions
are similar under California and Delaware law. Under California and Delaware
law: (i) either the shareholders (or stockholders) or the Board of Directors
must approve any such contract or transaction after full disclosure of the
material facts, and, in the case of Board approval, the contract or
transaction must also be "just and reasonable" (in California) or "fair" (in
Delaware) to the corporation; or (ii) the contract or transaction must have
been just and reasonable or fair, as applicable, to the corporation at the
time it was approved. In the latter case, California law explicitly places the
burden of proof on the interested director. Under California law, if
shareholder approval is sought, the interested director is not entitled to
vote his shares at a shareholder meeting or by written consent with respect to
any action regarding such contract or transaction. Also under California law,
if Board approval is sought, the contract or transaction must be approved by a
majority vote of a quorum of the directors, without counting the vote of any
interested directors (except that interested directors may be counted for
purposes of establishing a quorum). Under Delaware law, if Board approval is
sought, the contract or transaction must be approved by a majority of the
disinterested directors (even though less than a quorum).
Notice of Board Nominations and Other Shareholder or Stockholder Business--
Annual Meetings. The Bylaws of Newco require that nominations of persons for
election to the Board and the proposal of business to be considered at an
annual meeting of stockholders must be made: (i) pursuant to notice by Newco
notice of such meeting; (ii) by the Board; or (iii) if by a stockholder, by
advance written notice given to Newco between 60 to 90 days prior to the first
anniversary of the preceding year's annual meeting of stockholders. However,
if the date of the annual meeting at which such nomination or business is
proposed by a stockholder is more than 30 days before or more than 60 days
after such anniversary, then such notice may be given by the stockholder no
earlier than the 90th day prior to such meeting and not later than the later
of 60 days prior to such meeting or the 10th day following the first public
announcement of such meeting. The above notice provisions are subject to
certain exceptions with respect to electing directors to fill Board seats
resulting from increases in the size of the Board not publicly announced at
least 70 days prior to the annual meeting. In addition, certain other
information regarding a Board nominee or the business proposed for discussion
must be included in the stockholder's notice to Newco.
Notice of Board Nominations and Other Shareholder or Stockholder Business--
Special Meetings. Newco' Bylaws also provide that, at special meetings of
stockholders, the only business that can be conducted will be the items of
business set forth in the notice of such special meeting. The Bylaws also
provide that nominations of persons for election to the Board at a special
meeting at which directors are to be elected pursuant to the
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notice of the meeting shall be made: (i) by the Board; or (ii) if the Board
has determined that directors will be elected at the meeting, by a stockholder
of record meeting certain qualifications who gives Newco advance written
notice of such nominations no earlier than 90 days prior to such special
meeting and no later than the later of 60 days before such special meeting, or
the 10th day after the first public announcement of such meeting and of the
nominees proposed by the Board to be elected at such meeting.
Derivative Suits. California law provides that a shareholder bringing a
derivative action on behalf of a corporation need not have been a shareholder
at the time of the transaction in question, provided that certain tests are
met. Under Delaware law, a stockholder may only bring a derivative action on
behalf of the corporation if the stockholder was a stockholder of the
corporation at the time of the transaction in question or his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to
furnish a security bond. Delaware does not have a similar bonding requirement.
Dissolution. Under California law, shareholders holding 50% or more of the
total voting power may authorize a corporation's dissolution, with or without
the approval of the corporation's Board of Directors, and this right may not
be modified by the articles of incorporation. Under Delaware law, unless the
Board of Directors approves the proposal to dissolve, the dissolution must be
unanimously approved by all stockholders entitled to vote. A dissolution
initiated by the Board of Directors only requires the approval of a majority
of the corporation's stockholders. In the event of such a Board-initiated
dissolution, Delaware law allows a Delaware corporation to include in its
certificate of incorporation a supermajority voting requirement in connection
with dissolutions. The Certificate does not contain such a requirement.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF TSW AND STOCKHOLDERS OF NEWCO
Limitation of Director Liability. Both the GBCC and the DGCL allow a
corporation to limit the personal liability of directors with certain similar
exceptions. The TSW Articles limit the personal liability of a director,
except for liability for (a) any appropriation, in violation of the director's
duties, of any business opportunity of the corporation, (b) acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) unlawful distributions or (d) any transaction from which
the director derived an improper personal benefit.
The Newco Certificate provides that the liability of its directors for
monetary damages shall be eliminated to the fullest extent permissible under
Delaware law. The DGCL allows a corporation to limit in this manner the
personal liability of a director, except for liability for (a) any breach of
the director's duty of loyalty to the corporation or its stockholders, (b)
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) an unlawful payment of a dividend or an
unlawful stock purchase or redemption or (d) any transaction from which the
director derived an improper personal benefit.
Indemnification. The TSW Bylaws and the Newco Bylaws both require TSW or
Newco, as the case may be, to indemnify directors, officers and employees to
the maximum extent permitted by law.
Under the GBCC, a corporation may indemnify an individual for reasonable
expenses incurred in connection with a proceeding to which the individual is a
party by reason of the fact he is or was a director or officer of the
corporation; provided, that he acted in good faith and in a manner in or not
opposed to the best interests of the corporation and, in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The GBCC provides that a corporation may not indemnify a director
(a) in connection with a proceeding by or in the right of the corporation if
the director has not met the relevant standard of conduct or (b) in connection
with any other proceeding if the director is adjudged liable on the basis that
personal benefit was improperly received by the director. A corporation may
also indemnify officers, employees and agents who are not directors,
consistent with public policy. The TSW Bylaws provide for indemnification of
directors, officers, and individuals serving at the request of TSW as
directors or officers of another enterprise to the maximum extent permitted by
Georgia law. A corporation may also advance funds to pay for or reimburse
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reasonable expenses incurred by a director or officer if he furnishes a
written affirmation of his good faith belief that he met the relevant standard
of conduct and a written undertaking to repay the advance if it is ultimately
determined that he is not entitled to indemnification. The TSW Bylaws require
that such advances be made if such written affirmation and undertaking is
provided. Unless a corporation's articles of incorporation provide otherwise,
Georgia law also allows directors and officers to apply to a court of
competent jurisdiction for indemnification or advances. The GBCC also permits
a corporation to purchase and maintain liability insurance for its directors
and officers.
The DGCL allows a corporation to indemnify its officers, director, employees
and agents for expenses, judgments or settlements actually and reasonably
incurred by them in connection with suits and other legal proceedings if they
acted in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe their conduct was
unlawful. If the action is brought by or in the right of the corporation, the
DGCL limits indemnification to the expenses (including attorney's fees)
reasonably incurred and provides that no such indemnification can be made when
the individual is adjudged liable to the corporation, unless and only to the
extent the Delaware Court of Chancery deems such indemnification fair and
reasonable under the circumstances. The DGCL also provides that a corporation
may advance expenses of defense upon receipt of a written undertaking to
reimburse the corporation if indemnification is not appropriate. The Newco
Bylaws include a provision making such advances mandatory. A corporation may
also purchase and maintain liability insurance for its directors, officers,
employees and agents. The Newco Bylaws provide that Newco shall indemnify, in
accordance with Delaware law, any director, officer, employee or agent for any
liability or expense reasonably incurred in connection with any proceeding
arising by reason of the fact that such person is or was an agent of the
corporation. The Newco Bylaws also provide for the purchase and maintenance of
liability insurance.
Restrictions on Certain Business Combinations. The GBCC contains certain
provisions that restrict certain business combinations with interested
shareholders (the "Georgia Business Combination Statute") and require that
certain fair price criteria be satisfied with respect to certain business
combinations with interested shareholders (the "Georgia Fair Price Statute").
The Georgia Business Combination Statute and the Georgia Fair Price Statute
apply only to corporations which have elected to be covered by such statutes.
TSW has not elected to be covered by such statutes, but it could do so at any
time by amending the TSW Bylaws.
The Georgia Business Combination Statute prohibits any person who is (a) the
beneficial owner of 10% or more of the voting power of a Georgia corporation's
outstanding voting stock or (b) is an affiliate of the corporation and, at any
time within the two-year period immediately prior to the date in question, was
the beneficial owner of 10% or more of the voting power of the corporation's
then outstanding voting stock (an "interested shareholder") from engaging in
certain business combinations with that corporation for a period of five years
following the time such person became an interested shareholder. The
prohibitions do not apply if (i) prior to the time such person became an
interested shareholder, the Board of Directors approved either the business
combination or the transaction which resulted in such person becoming an
interested shareholder, (ii) in the transaction which resulted in such person
becoming an interested shareholder, the person became the beneficial owner of
at least 90% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned by (x) directors or officers of the
corporation or their affiliates or associates, (y) subsidiaries of the
corporation and (z) any employee stock plan of the corporation under which
participants do not have the right (as determined exclusively by reference to
the terms of such plan and any trust which is part of such plan) to determine
confidentially the extent to which shares held under such plan will be
tendered in a tender or exchange offer (any such holder described in clause
(ii)(x), (y) or (z) being referred to herein as an "Excluded Holder") or (iii)
subsequent to becoming an interested shareholder (x) such person acquired
additional shares resulting in such person being the beneficial owner of at
least 90% of the outstanding voting stock of the corporation, excluding any
shares owned by the Excluded Holders and the business combination was approved
by the interested shareholder or by holders of a majority of the voting stock
entitled to vote thereon (excluding voting stock beneficially owned by the
interested shareholder or by the Excluded Holders). The restrictions in the
Georgia
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Business Combination Statute do not apply if a person (i) becomes an
interested shareholder inadvertently, (ii) as soon as practicable divests
sufficient shares so that such person ceases to be an interested shareholder
and (iii) would not, at any time within the five-year period immediately prior
to a business combination between the corporation and such person, have been
an interested shareholder but for the inadvertent acquisitions. This broad
statute is designed to inhibit unfriendly acquisitions.
The Georgia Fair Price Statute also places strict requirements on business
combinations between a Georgia corporation and an interested shareholder. It
requires that (i) the business combination is unanimously approved by the
"continuing directors" of the corporation (generally, directors who served
prior to the time the person became an interested shareholder and who are
unaffiliated with the interested shareholder), (ii) 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
(iii) certain fair price criteria and dividend requirements are met, and the
interested shareholder has neither increased the percentage of his ownership
by more than 1% in any 12-month period nor received certain benefits from the
corporation. The statute is designed to inhibit unfriendly acquisitions that
do not satisfy the specified "fair price" requirements.
Although there is no provision corresponding to the Georgia Fair Price
Statute in the DGCL, Section 203 of the DGCL is similar to the Georgia
Business Combination Statute, though generally less restrictive. For a
description of Section 203 of the DGCL, see "Description of Newco Capital
Stock--Delaware's Anti-Takeover Law." A Delaware corporation will be subject
to the provisions of Section 203 unless it specifically elects to opt out of
the statute. Newco has not opted out of Section 203.
Size of Board of Directors. Under the GBCC, a Board of Directors must
consist of one or more individuals with the number specified in or fixed in
accordance with the articles of incorporation or bylaws. The TSW Bylaws
provide that unless Georgia law permits a lesser number, the number of
directors of the corporation shall be not less than three nor more than 20
directors, with the precise number to be fixed by resolution of the TSW Board
from time to time.
Under Delaware law, the number of directors of a corporation may be fixed or
changed by the Board of Directors acting alone, by amendment to the
corporation's bylaws, unless the directors are not authorized to amend the
bylaws or the number of directors is fixed in the certificate of
incorporation, in which cases stockholder approval is required. The Bylaws of
Newco establish the initial authorized number of directors of Newco at one.
Robert W. Felton is currently the sole director of Newco. Immediately prior to
Closing and after the Meetings, the Bylaws of Newco will be amended to set the
number of directors at eight, and certain current directors and officers of
Indus and of TSW will be appointed as directors of Newco. However, the Newco
Certificate and Bylaws authorize the Newco Board to amend the Bylaws, and
accordingly a majority of Newco's Board of Directors will have the ability to
change the authorized number of directors and appoint additional directors
without having such additional directors first elected by stockholders. This
ability could have the effect of delaying or preventing a change in control of
Newco.
Removal of Directors. The TSW Bylaws allow for the removal of directors 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 TSW 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.
The Newco Bylaws allow a majority of the voting power of the then
outstanding shares of the capital stock entitled to vote at an election of
directors to remove a director at any time, subject to Delaware law. Under
Delaware law, any director of a corporation without cumulative voting and
without a classified Board of Directors may be removed with or without cause
by holders of a majority of the shares then entitled to vote at an election of
directors. In addition, a Delaware corporation that adopts a classified Board
has the option of allowing directors to be removed only for cause.
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Special Shareholders or Stockholders Meetings. Under the GBCC and the DGCL,
a special meeting of shareholders may be called by the Board of Directors or
by such other persons as are authorized by the bylaws or articles or
certificate of incorporation, as the case may be. The TSW Bylaws provide that
a special meeting of the shareholders may be called by the Board of Directors,
the chairman of the Board of Directors, the president, the secretary at the
written request of two or more directors or shareholders owning at least
twenty-five percent (25%) of the issued and outstanding capital stock of TSW
entitled to vote thereat. The Newco Bylaws provide that a special meeting of
the stockholders may be called only by the chairman of the Board of Directors,
the president, the chief executive officer or any two directors. Under the
Newco Bylaws, stockholders may not call special meetings.
Shareholder or Stockholder Action by Written Consent. The GBCC permits
shareholders of a Georgia corporation to act without a meeting only by
unanimous written consent of all shareholders entitled to vote on the action,
unless otherwise provided by the articles of incorporation. The TSW Bylaws
provide for shareholder action to be taken by unanimous written consent. The
DGCL provides that, unless otherwise provided in the certificate of
incorporation, stockholders of a Delaware corporation may take any action
without a meeting by written consent signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Under the Newco Certificate, no action
may be taken by the stockholders by written consent.
Amendment of Certificate or Articles of Incorporation and Bylaws. Both the
GBCC and the DGCL generally require that amendments to the articles or
certificate of incorporation be approved by the Board of Directors and by a
majority vote of the outstanding shares of each voting group or class of
shares entitled to vote thereon. Under the TSW Articles, however, no amendment
may be made to the TSW Articles without the affirmative vote or written
consent of the holders of a majority of the outstanding shares of each series
of TSW Preferred Stock.
Under Georgia law, shareholder action is generally not required to amend the
bylaws, unless the articles provide otherwise. The shareholders do, however,
have the right to amend, repeal or adopt bylaws. Furthermore, the shareholders
of a Georgia corporation may restrict the right of the Board of Directors to
amend, alter or repeal a particular bylaw. The TSW Articles require the
affirmative vote or consent of at least a majority of the outstanding shares
of each series of TSW Preferred Stock in order to amend the TSW Bylaws. Under
Delaware law, the bylaws may be amended only by the stockholders, unless the
corporation's certificate of incorporation also confers the power to amend the
bylaws on the directors. Under the Newco Certificate, the Newco directors are
authorized to amend the Newco Bylaws.
Shareholder Vote for Mergers and Other Corporate Reorganizations. Both the
GBCC and the DGCL require a majority of the outstanding shares entitled to
vote thereon to approve certain business reorganizations, including mergers
and sales of all or substantially all of a corporation's assets. The TSW
Articles further provide that no such actions may be taken by TSW without the
affirmative vote or consent of a majority of the outstanding shares of each
series of TSW Preferred Stock. In addition, the GBCC generally requires the
affirmative vote of a majority of the outstanding shares of both the acquiring
and acquired corporations in share exchanges. Under both the GBCC and the
DGCL, a Board of Directors need not submit a plan of merger to the
shareholders of the surviving corporation if: (i) the merger does not amend
the articles of incorporation of the surviving corporation; (ii) each
shareholder whose shares of the surviving corporation were outstanding
immediately prior to the effectiveness of the merger retains the same number
of shares with identical designations, preferences, limitations and relative
rights after the merger; and (iii) the number and kind of shares outstanding
after the merger will not exceed the total number and kind of shares of the
surviving corporation authorized before the merger. The GBCC also exempts
share exchanges meeting these criteria from the shareholder approval
requirement.
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With respect to transactions described in clause (iii) above, the DGCL is
less strict than the GBCC. Under the DGCL, such merger also need not be
approved by such stockholders where any such shares to be issued in the merger
plus the shares initially issuable upon conversion of any such convertible
securities issued in the merger will not exceed 20% of the number of shares
outstanding immediately prior to the merger. The DGCL further provides that no
stockholder approval is required in a merger of a corporation with or into a
single direct or indirect wholly-owned subsidiary of such corporation for the
purpose of effecting a holding company reorganization, if certain conditions
are met.
Dissenters' Rights in Mergers and Reorganizations. Under the GBCC,
shareholders who comply with certain procedural requirements of the GBCC are
entitled to assert dissenters' rights with respect to such shareholders'
shares upon the merger of a corporation, the consummation of a plan of share
exchange to which the corporation is the acquired party, the sale or other
disposition of all or substantially all of the corporation's assets, an
amendment of the articles of the corporation that materially and adversely
affects rights in respect of such shareholders' shares in ways specified in
the GBCC or any corporate action taken pursuant to a shareholder vote to the
extent that the articles, bylaws or resolution of the Board of Directors
provides that shareholders are entitled to rights of appraisal. Unless the
articles or a resolution of the board provide otherwise, however, holders of
any class of shares which are listed on a "national securities exchange" or
are held of record by more than 2,000 shareholders are not entitled to assert
dissenters' rights under Georgia law if the shareholder receives shares of the
surviving corporation or another corporation whose shares are listed on a
national securities exchange or are held of record by at least 2,000
shareholders.
Similarly, the DGCL provides stockholders of a Delaware corporation with
appraisal rights in connection with mergers and consolidations generally, but
does not provide appraisal rights for holders of any class or series of stock
which, at the record date fixed to determine stockholders entitled to receive
notice of and to vote at the meeting to act upon agreement of merger or
consolidation, were either (a) listed on a national securities exchange or
designated as a national market security on an inter-dealer quotation system
by the National Association of Securities Dealers, Inc., or (b) held of record
by more than 2,000 stockholders, so long as, in either case, such stockholders
are not required by the terms of the agreement of merger or consolidation to
receive as consideration in such merger or consolidation anything other than
shares of stock of the surviving corporation or another corporation whose
shares are so listed or designated or held of record by more than 2,000
stockholders. In addition, the DGCL does not provide appraisal rights for
stockholders of the surviving corporation or for stockholders of the subject
corporation, as applicable, for mergers for which the DGCL does not require
stockholder approval described under "--Shareholder Vote for Mergers and Other
Corporate Reorganizations" above.
Inspection of Shareholder or Stockholder Lists. The GBCC provides that a
shareholder, after giving advance notice, is entitled to inspect and copy,
among other things, the corporation's articles of incorporation, by-laws,
certain Board of Directors' and shareholders' resolutions, and minutes of
shareholders' meetings by right, and, among other things, the corporation's
minutes of Board of Directors' meetings and accounting records only if (a) its
demand is made in good faith and for a proper purpose that is reasonably
relevant to its legitimate interest as a shareholder, (b) it describes with
reasonable particularity its purpose and the records it desires to inspect,
(c) the records are directly connected with its purpose and (d) the records
are to be used only for the stated purpose; provided, however, that the right
to inspect the latter set of records may be limited by a corporation's
articles of incorporation or by-laws for shareholders owning two percent or
less of the corporation's outstanding shares. The TSW Bylaws authorize the
Board of Directors to determine which records shall be given to shareholders
in accordance with Georgia law.
Similarly, under the DGCL and the Newco Bylaws, upon written demand under
oath, any stockholder of record may inspect the stock ledger, a list of the
stockholders and the other books and records of a corporation so long as such
inspection is for a purpose reasonably related to such person's interest as a
stockholder.
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Payment of Dividends. The ability of TSW and Newco to pay dividends is
governed by different standards. Under the GBCC, TSW is permitted to pay
dividends or make other distributions with respect to its stock unless, after
giving effect to the dividend or other distribution, either TSW would not be
able to pay its debts as they become due in the usual course of business, or
TSW's total assets would be less than the sum of its total liabilities plus
the amount that would be needed, if TSW were to be dissolved at the time of
the dividend or other distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the dividend or other distribution.
A Delaware corporation, unless otherwise restricted by its certificate of
incorporation, may pay dividends out of surplus or, if no surplus exists, out
of net profits for the fiscal year in which the dividend is declared and/or
for the preceding fiscal year (but the directors may not declare and pay
dividends out of such net profits if the capital of the corporation shall have
diminished to an amount less than the aggregate amount of capital represented
by the issued and outstanding stock of all classes having preference upon the
distribution of assets). The Newco Certificate imposes no additional
restrictions.
Notice of Board Nominations and Other Shareholder or Stockholder Business--
Annual Meetings. Both the TSW and the Newco Bylaws require that nominations of
persons for election to the Board and the proposal of business to be
considered at an annual meeting of shareholders or stockholders must be made:
(i) in the notice of meeting (or any supplement thereto) given by the
corporation; (ii) by the Board; or (iii) if by a shareholder or stockholder,
by advance written notice given to the corporation between 60 to 90 days prior
to the anniversary of the preceding annual meeting. However, under the Newco
Bylaws, if the date of the annual meeting at which such nomination or business
is proposed by a stockholder is more than 30 days before or more than 60 days
after such anniversary, then such notice may be given by the stockholder no
earlier than the 90th day prior to such meeting and not later than the later
of 60 days prior to such meeting or the 10th day following the first public
announcement of such meeting. The above notice provisions are subject to
certain exceptions with respect to electing directors to fill Board seats
resulting from increases in the size of the Board not publicly announced at
least 70 days prior to the annual meeting. In addition, certain other
information regarding a Board nominee or the business proposed for discussion
must be included in the stockholder's notice to Newco.
Notice of Board Nominations and Other Shareholder or Stockholder Business--
Special Meetings. Both the TSW and Newco Bylaws also provide that, at special
meetings of stockholders, the only business that can be conducted will be the
items of business set forth in the notice of such special meeting. The Newco
Bylaws also provide that nominations of persons for election to the Board at a
special meeting at which directors are to be elected pursuant to the notice of
the meeting shall be made: (i) by the Board; or (ii) if the Board has
determined that directors will be elected at the meeting, by a stockholder of
record meeting certain qualifications who gives Newco advance written notice
of such nominations no earlier than 90 days prior to such special meeting and
no later than the later of 60 days before such special meeting, or the 10th
day after the first public announcement of such meeting and of the nominees
proposed by the Board to be elected at such meeting.
Dissolution. Under the DGCL, shareholders may authorize the dissolution of
the corporation by unanimous consent. Alternately, the Board of Directors may
initiate a dissolution with the approval of a majority or, if so set forth in
the certificate of incorporation, supermajority of the corporation's
stockholders. The Newco Certificate does not contain a supermajority
requirement. Under the GBCC, the Board of Directors must initiate the
dissolution process and a majority or, if so set forth in the articles of
incorporation, supermajority of the corporation's shareholders must approve
the dissolution. Shareholders may not independently dissolve the corporation
by unanimous consent. The TSW Articles further require that a majority of each
class of stock must approve dissolution.
Limitation on Voting of Shares. The TSW Articles provide that if any person
owns, in the aggregate, directly and indirectly, beneficially and of record, a
number of shares of all classes of stock in TSW that would otherwise entitle
such person to cast a number of votes in excess of the number of votes
represented by all outstanding shares of TSW capital stock which are not owned
by such person (the "Maximum Number of Votes"), then all shares held by such
person which represent a number of votes in excess of the Maximum Number of
Votes shall be deemed to be nonvoting shares. Such a provision is not included
in the Newco Certificate.
140
<PAGE>
SHAREHOLDER PROPOSALS
If the Merger is consummated, any Newco stockholder who intends to present a
proposal at the 1998 Newco Annual Meeting and wishes to have such proposal
considered for inclusion in the proxy materials for such meeting, such holder
must submit the proposal to Newco by December 31, 1997. In the event the
Merger is not consummated, the only shareholder proposals eligible to be
considered for inclusion in the proxy materials for the 1998 Annual Meeting of
Indus will be those which have been duly submitted to the Secretary of Indus
by November 21, 1997.
EXPERTS
The consolidated financial statements of The Indus Group, Inc. at December
31, 1995 and 1996, and for each of the three years in the period ended
December 31, 1996, appearing in this Joint Proxy Statement/Prospectus, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements 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 Joint Proxy Statement/Prospectus, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the shares of Newco Common Stock to be issued in connection
with the Merger will be passed upon by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. The United States federal
income tax consequences of the Merger will be passed upon for Indus by Wilson
Sonsini Goodrich & Rosati and for TSW by Wachtell, Lipton, Rosen & Katz, New
York, New York. As of the date of this Joint Proxy Statement/Prospectus, a
member of Wilson Sonsini Goodrich & Rosati was the beneficial owner of 4,000
shares of Indus Common Stock.
141
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE INDUS GROUP, INC.
Report of Independent Auditors.......................................... F-2
Audited Financial Statements
Combined Balance Sheet as of December 31, 1995 and Consolidated Balance
Sheet as of December 31, 1996.......................................... F-3
Combined Statements of Operations for the years ended December 31, 1994
and 1995 and Consolidated Statement of Operations for the year ended
December 31, 1996...................................................... F-4
Combined and Consolidated Statement of Shareholders' Equity for the
three-year period ended December 31, 1996.............................. F-5
Combined and Consolidated Statements of Cash Flows for the fiscal years
ended December 31, 1994, 1995 and 1996................................. F-6
Notes to Financial Statements........................................... F-7
Unaudited Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1996 (derived
from audited consolidated balance sheet) and March 31, 1997............ F-17
Condensed Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1997.......................................... F-18
Condensed Consolidated Statement of Shareholders' Equity for the year
ended December 31, 1996 and three months ended March 31, 1997.......... F-19
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1997.......................................... F-20
Notes to Condensed Consolidated Financial Statements.................... F-21
TSW INTERNATIONAL, INC.
Report of Independent Auditors.......................................... F-23
Audited Financial Statements
Consolidated Balance Sheets as of March 31, 1996 and 1997............... F-24
Consolidated Statements of Operations for the years ended March 31,
1995, 1996 and 1997.................................................... F-25
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended March 31, 1995, 1996 and 1997.................................... F-26
Consolidated Statements of Cash Flows for the years ended March 31,
1995, 1996 and 1997.................................................... F-27
Notes to Consolidated Financial Statements.............................. F-28
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Boards of Directors and Shareholders
The Indus Group, Inc.
We have audited the accompanying consolidated balance sheet of The Indus
Group, Inc. as of December 31, 1996, and the related consolidated statements
of operations, shareholders' equity, and cash flows for the year then ended,
and the accompanying combined balance sheet of The Indus Group, Inc. and Indus
International, Inc. (a related entity acquired by The Indus Group, Inc. in
1996) as of December 31, 1995, and the related combined statements of
operations, shareholders' equity, and cash flows for each of the two years in
the period ended December 31, 1995. 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 The Indus
Group, Inc. at December 31, 1996, and the consolidated results of its
operations and its cash flows for the year then ended and the combined
financial position of The Indus Group, Inc. and Indus International, Inc. at
December 31, 1995, and the combined results of their operations and its cash
flows for the two years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
January 24, 1997
F-2
<PAGE>
THE INDUS GROUP, INC.
COMBINED (1995); CONSOLIDATED (1996) BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
ASSETS 1995 1996
------ ------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 45 $13,266
Marketable securities................................... -- 26,524
Billed accounts receivable, less allowance for doubtful
accounts of $652 and $449 at December 31, 1995 and
1996, respectively..................................... 17,661 16,889
Unbilled accounts receivable............................ 9,053 5,633
Other current assets.................................... 1,108 4,523
------- -------
Total current assets.................................. 27,867 66,835
Marketable securities--maturing beyond one year........... -- 2,129
Property and equipment, net............................... 3,128 6,337
Employee notes receivable ................................ 80 140
Other assets.............................................. -- 73
------- -------
$31,075 $75,514
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Borrowings under line of credit......................... $ 8,900 $ --
Accounts payable........................................ 1,331 2,165
Accrued compensation.................................... 1,841 3,030
Income taxes payable.................................... 218 --
Deferred income taxes................................... 326 3,837
Other accrued liabilities............................... 186 511
Deferred revenue........................................ 7,425 10,599
------- -------
Total current liabilities............................. 20,227 20,142
Commitments............................................... -- --
Shareholders' equity:
Preferred Stock......................................... -- --
Common Stock............................................ 609 19
Additional capital...................................... 18,900 (1) 46,425
Other................................................... (438) (300)
Retained earnings (deficit)............................. (8,223) 9,228
------- -------
Total shareholders' equity............................ 10,848 55,372
------- -------
$31,075 $75,514
======= =======
</TABLE>
- --------
(1) Value of unexercised stock options of The Indus Group, Inc. upon
elimination of contingency feature, which had precluded exercise of these
options. This amount was charged to operations in September 1995 and
reduced retained earnings at December 31, 1995.
See accompanying notes.
F-3
<PAGE>
THE INDUS GROUP, INC.
COMBINED (1994 AND 1995); CONSOLIDATED (1996) STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Revenues:
Software licensing fees........................... $ 7,547 $10,676 $16,208
Services and maintenance.......................... 23,044 43,115 59,731
------- ------- -------
Total revenues.................................. 30,591 53,791 75,939
Cost of revenues(1)................................. 12,798 22,578 31,790
------- ------- -------
Gross margin........................................ 17,793 31,213 44,149
Operating expenses:
Research and development.......................... 7,120 8,306 12,493
Sales and marketing............................... 4,144 5,680 9,306
General and administrative........................ 4,654 4,918 7,819
Compensation charge--stock options(2)............. -- 18,900 --
------- ------- -------
Total operating expenses........................ 15,918 37,804 29,618
------- ------- -------
Income (loss) from operations....................... 1,875 (6,591) 14,531
Interest and other income, net...................... 7 167 1,356
Interest expense.................................... (108) (71) (105)
------- ------- -------
Income (loss) before income taxes................... 1,774 (6,495) 15,782
Provision for income taxes (state and foreign only
in 1994 and 1995).................................. 69 325 6,554
Cumulative effect of deferred income taxes provided
upon January 1, 1996 conversion to C-Corporation
(3) status......................................... -- -- 6,700
Net income (loss)................................... $ 1,705 $(6,820) $ 2,528
======= ======= =======
Pro forma statement of operations:
Income (loss) before income taxes, as above....... $(6,495) $15,782
Add back portion of compensation charge--stock
options(4)....................................... 17,900 --
------- -------
Income before income taxes, as adjusted........... 11,405 15,782
Provision for income taxes (federal, state and
foreign)......................................... 5,083 6,554
------- -------
Pro forma net income.............................. $ 6,322 $ 9,228
======= =======
Pro forma net income per share...................... $ 0.36 $ 0.49
======= =======
Shares used in computing pro forma net income per
share.............................................. 17,490 18,924
======= =======
</TABLE>
- --------
(1) Includes royalties due to the Chief Executive Officer and principal
shareholder of $924,956 in 1994. No royalties were due after 1994.
(2) Value of unexercised stock options of The Indus Group, Inc. upon
elimination of contingency feature, which had precluded exercise of these
options.
(3) Deferred income taxes related to differences in cash basis accounting for
income tax purposes and accrual basis accounting for financial statement
purposes through December 31, 1995.
(4) To reduce compensation expense to amount related to options granted in
1995 only.
See accompanying notes.
F-4
<PAGE>
THE INDUS GROUP, INC.
COMBINED (1994 AND 1995), CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
COMMON ADDITIONAL (ACCUMULATED SHAREHOLDERS'
STOCK CAPITAL OTHER DEFICIT) EQUITY
------ ---------- ----- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993...................... 131 $ -- $ (9) $ 8,001 $ 8,123
Repurchase of common
stock(1)................ (2) -- -- (47) (49)
Cash distributions to
shareholders............ -- -- -- (1,546) (1,546)
Translation adjustment... -- -- 9 -- 9
Net income............... -- -- -- 1,705 1,705
---- ------- ----- ------- -------
Balance at December 31,
1994...................... 129 -- -- 8,113 8,242
Issuance of common stock
as deferred
compensation............ 480 -- (480) -- --
Cash distributions to
shareholders(2)......... -- -- -- (9,516) (9,516)
Translation adjustment... -- -- (6) -- (6)
Stock options(3)......... -- 18,900 -- -- 18,900
Amortization of deferred
compensation............ -- -- 48 -- 48
Net loss................. -- -- -- (6,820) (6,820)
---- ------- ----- ------- -------
Balance at December 31,
1995...................... 609 18,900 (438) (8,223) 10,848
Conversion to C
Corporation on January
1, 1996................. -- (8,223) -- 8,223 --
Reincorporation and
adoption of $.001 par
value................... (494) 494 -- -- --
Issuance of common
stock(4)................ 4 35,288 -- -- 35,292
Tax benefit from employee
stock transactions...... -- 6,669 -- -- 6,669
Purchase of Indus
International, Inc. net
assets(1)............... (100) (3) -- -- (103)
Unrealized loss on
marketable securities... -- -- (42) -- (42)
Translation adjustment... -- -- 84 -- 84
Amortization of deferred
compensation............ -- -- 96 -- 96
Net income............... -- (6,700) -- 9,228 2,528
---- ------- ----- ------- -------
Balance at December 31,
1996...................... 19 $46,425 $(300) $ 9,228 $55,372
==== ======= ===== ======= =======
</TABLE>
- --------
(1) Except for the initial capitalization of Indus International, Inc., all
transactions in common stock relate to The Indus Group, Inc.
(2) Cash distributions to shareholders have been made by The Indus Group, Inc.
only. Indus International, Inc. did not make any cash distributions prior
to its acquisition by The Indus Group, Inc..
(3) Value of unexercised stock options of The Indus Group, Inc. upon
elimination of contingency feature.
(4) Consists of $33,864 received from February 29, 1996 initial public
offering (2,500,000 common shares offered at $15 per share less
underwriting commission and expenses), $1,052 received from issuance of
71,309 common shares under the Employee Stock Purchase Plan and $376
received from the issuance of 916,845 common shares upon exercise of
options.
See accompanying notes.
F-5
<PAGE>
THE INDUS GROUP, INC.
COMBINED (1994 AND 1995); CONSOLIDATED (1996) STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................. $ 1,705 $(6,820) $ 2,528
Adjustments to reconcile net income to net cash
provided by operating activities:
Compensation charge--stock options............... -- 18,900 --
Depreciation and amortization.................... 1,105 901 1,360
Provision for doubtful accounts.................. 436 325 (203)
Amortization of deferred compensation............ -- 48 96
Cumulative effect of deferred income taxes
provided on conversion to C-corporation status.. -- -- 6,700
Changes in operating assets and liabilities:
Billed accounts receivable..................... (4,782) (8,910) 975
Unbilled accounts receivable................... (984) (4,502) 3,420
Receivable from shareholder.................... 306 -- --
Other current assets........................... (387) (316) (3,415)
Employee notes receivable...................... 157 13 (61)
Accounts payable............................... 191 223 834
Accrued payroll and related expense............ 348 824 1189
Income taxes payable........................... 7 (75) 6,451
Deferred income taxes.......................... 14 384 (3,189)
Other accrued liabilities...................... 299 (387) 106
Deferred revenue............................... 3,780 2,596 3,174
Other.......................................... 62 (59) 231
------- ------- --------
Net cash provided by operating activities.......... 2,257 3,145 20,196
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities.................. -- -- (39,010)
Sales and maturities of marketable securities...... -- -- 10,314
Acquisition of property and equipment.............. (861) (577) (4,568)
------- ------- --------
Net cash used in investing activities.............. (861) (577) (33,264)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (repayment) of line of credit......... 172 6,895 (8,900)
Net proceeds from issuance of common stock......... -- -- 35,292
Repurchase of common stock......................... (49) -- --
Distributions to shareholders...................... (1,546) (9,517) --
Purchase of Indus International, Inc. net assets... -- -- (103)
------- ------- --------
Net cash provided by (used in) financing
activities........................................ (1,423) (2,622) 26,289
------- ------- --------
Net increase (decrease) in cash and cash
equivalents....................................... (27) (54) 13,221
Cash and cash equivalents at beginning of period... 126 99 45
------- ------- --------
Cash and cash equivalents at end of period......... $ 99 $ 45 $ 13,266
======= ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid...................................... $ 108 $ 72 $ 105
======= ======= ========
Income taxes paid.................................. $ -- $ 236 $ 5,417
======= ======= ========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES
Issuance of common stock in exchange for notes
receivable........................................ $ -- $ 480 $ --
======= ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
THE INDUS GROUP, INC.
NOTES TO COMBINED (1994 AND 1995); CONSOLIDATED (1996) FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
The Indus Group, Inc. was incorporated under the laws of the state of
California in 1990. On March 1, 1996, pursuant to an Asset Purchase Agreement,
The Indus Group, Inc. purchased all of the assets and assumed all of the
liabilities of Indus International, Inc., an entity which was incorporated in
1993 to operate in the United Kingdom and which was related to The Indus
Group, Inc. through control by common shareholders. The purchase price of the
net assets, which equaled the net book value, was $103,252. Concurrent with
this purchase, The Indus Group, Inc. established a new wholly-owned subsidiary
also named Indus International, Inc. to which the net assets were transferred.
On January 1, 1996, The Indus Group, Inc. established a foreign sales
corporation, Indus Foreign Sales Corporation. Collectively, the entities are
referred to as the Company.
The Company develops, markets, implements and supports client/server
enterprise management software solutions. The Company focuses primarily on
process industry companies, including electric utility, nuclear, oil and gas,
chemical refining, steel and forest products companies.
BASIS OF PRESENTATION
The Company's combined financial statements for 1994 and 1995 include the
accounts of The Indus Group, Inc. and Indus International, Inc. The Company's
consolidated financial statements for 1996 include the accounts of The Indus
Group, Inc., Indus International, Inc. and Indus Foreign Sales Corporation.
All significant intercompany accounts and transactions have been eliminated.
SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company provides its software to customers under contracts which provide
for both software license fees and system implementation services. Revenues
from system implementation services, which generally are time- and material-
based, are recognized as direct contract costs are incurred. Revenues from
application software licenses are recognized as earned revenue over the
estimated time period to complete implementation of the software, which period
generally is twelve to fourteen months. Revenues from client workstation
software are recognized as billed.
A portion of license fees is deferred initially and subsequently recognized
over the one-year period during which continuing maintenance and support
services are provided to customers under the contracts. After that initial
contract period, additional maintenance and support services are subject to
separate contracts for which revenue is recognized ratably over the contract
period.
Unbilled accounts receivable represent amounts related to revenue which has
been recorded either as deferred revenue or earned revenue but which has not
been billed. Generally, unbilled amounts are billed within 90 days.
Deferred revenue represents primarily unearned license fees and unearned
maintenance and support fees.
Concentration of Credit Risk
The Company's customers are generally large companies in the electrical
utility, nuclear, oil and gas, chemical refining, steel and forest products
industries. The Company performs ongoing credit evaluations of its customers
and does not require collateral. The Company maintains allowances for
potential credit losses and such
F-7
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
losses have been within management's expectations. Two customers accounted for
12% and 11% of revenues in 1995 and 11% and 10% of revenues in 1996. No
individual customer represented greater than 10% of sales in 1994.
Cash Equivalents and Marketable Securities
The Company considers all highly liquid, low risk debt instruments with a
maturity of three months or less from the date of purchase to be cash
equivalents. The Company generally invests its cash and cash equivalents in
money market accounts.
The Company presently classifies all marketable securities as available-for-
sale investments and carries them at fair market value. Marketable securities
represent U.S. government obligations and indirect investments in municipal
obligations. Marketable securities classified as long-term mature no later
than July 1998. Unrealized holding gains and losses, net of taxes, are carried
as a separate component of shareholders' equity.
Depreciation and Amortization
Depreciation on office and computer equipment and furniture is computed
using the straight-line method over estimated useful lives of five to seven
years. Leasehold improvements are amortized using the straight-line method
over the shorter of the related lease term or their estimated useful lives.
The Company's policy is to capitalize software development costs after
technological feasibility has been established. To date, software development
costs incurred subsequent to the establishment of technological feasibility
have not been material and have not been capitalized.
Income Taxes
Effective January 1, 1996, the Company elected C Corporation status for
income tax purposes. Prior to 1996, the Company was an S Corporation and, as a
result, income determined on the cash basis for income tax purposes was
taxable to the shareholders, and not the Company, for federal and certain
state income tax purposes. In connection with the termination of S Corporation
status on January 1, 1996, a $6.7 million cumulative effect charge was
recorded. The majority of the cumulative effect charge is due to changing from
the cash basis of accounting as an S Corporation to the accrual basis of
accounting as a C Corporation. The related deferred tax liability is payable
over four years.
The provision for income taxes included in the accompanying financial
statements represents federal, state and foreign income taxes in 1996 and
state income taxes in certain states for the Company and foreign income taxes
relating to Indus International, Inc. in 1995 and 1994.
Pro Forma Data
For purposes of presenting comparative earnings and calculating earnings per
share data, pro forma net income for 1996 reflects the elimination of the $6.7
million cumulative deferred income tax charge.
Pro forma net income in 1995 reflects provisions for taxes assuming the
Company was taxed as a C Corporation. Furthermore, pro forma net income data
in 1995 includes a $1 million nonrecurring compensation charge representing
the fair value of the options granted in 1995 and excludes a $18.9 million
nonrecurring compensation charge representing the value of unexercised non-
qualified stock options upon elimination of athe contingency feature. The
contingency feature was intended to preserve the Company's S Corporation
qualification by limiting the number of shareholders. If the Company had not
been an S Corporation, no liquidity event contingency feature would have been
necessary and the value of all stock options would have been measured at their
grant dates.
F-8
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Per Share Data
Pro forma net income per share is computed using pro forma net income and
the weighted average number of common and dilutive common equivalent shares
outstanding during each period. Dilutive common equivalent shares consist of
incremental common shares issuable upon the assumed exercise of stock options
(using the treasury stock method). Pursuant to the Securities and Exchange
Commission Staff Accounting Bulletins and Staff policy, the number of shares
in 1995 also includes: (i) all common shares issued (and shares subject to
stock options granted) within 12 months of the initial public offering date,
as if they were outstanding for all periods presented; and (ii) 634,444
additional shares (equivalent to dividends paid in 1995 divided by the
expected offering price per share).
Foreign Currency Translation
Gains and losses from the translation of Indus International, Inc.'s
financial statements are included in shareholders' equity. Net gains and
losses resulting from foreign exchange transactions were immaterial in all
periods presented.
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.
2. MARKETABLE SECURITES
The Company held no marketable securities prior to the initial public
offering of common stock in February 1996. The following is a summary of
marketable securities, all of which are available for sale at December 31,
1996 (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
agencies........................ $16,067 $ 0 $(65) $16,002
Municipal obligations............ 13,628 23 0 13,651
------- --- ---- -------
$29,695 $23 $(65) $29,653
======= === ==== =======
Included in:
Cash and cash equivalents........ $ 1,000 $ 0 $ 0 $ 1,000
Short term investments........... 26,579 10 (65) 26,524
Long term investments............ 2,116 13 0 2,129
------- --- ---- -------
$29,695 $23 $(65) $29,653
======= === ==== =======
</TABLE>
There were no realized gains or losses on sales of marketable securities.
The net adjustment to unrealized holding losses on marketable securities
included as a component of shareholder's equity totaled $41,986 in 1996.
F-9
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Office and computer equipment............................... $4,233 $6,886
Furniture................................................... 2,153 2,973
Leasehold improvements...................................... 434 1,337
Purchased software.......................................... 272 465
------ ------
7,092 11,661
Less accumulated depreciation and amortization.............. 3,964 5,324
------ ------
$3,128 $6,337
====== ======
</TABLE>
4. LINE OF CREDIT
The Company has an unsecured revolving bank line of credit agreement,
renewable annually in May, which permits borrowings, including stand-by
letters of credit, of up to $15 million. No direct borrowings were outstanding
under this agreement at December 31, 1996. Interest would have been payable at
the bank's prime rate of 8.25% at December 31, 1996. Borrowings outstanding
under this agreement at December 31, 1995 were $8.9 million, with interest at
the bank's prime rate of 8.50%. Stand-by letters of credit outstanding were
$232,641 and $602,641 at December 31, 1995 and 1996, respectively. The credit
agreement contains certain affirmative and negative covenants. The Company was
in compliance with these covenants at December 31, 1996.
5. RELATED PARTY TRANSACTIONS
The Company had a software license and royalty agreement with its Chief
Executive Officer and principal shareholder through 1995. In 1995, accrual and
payment under this agreement was waived. The related royalty expense, which
was included in the cost of revenues, was $924,956 for 1994 (none in 1995).
There were no royalties payable at December 31, 1996.
The Company held employee notes receivable totaling $79,827 and $140,763 at
December 31, 1995 and 1996, respectively, from officers and employees of the
Company.
6. COMMITMENTS
The Company leases its office facilities under various operating lease
agreements. The leases require monthly rental payments in varying amounts
through 2001. These leases also require the Company to pay all property taxes,
normal maintenance, and insurance on the leased facilities.
Total rental expense under these leases was approximately $1,450,000,
$2,378,000 and $3,888,000 for 1994, 1995 and 1996, respectively. Future
minimum lease payments under all non-cancelable operating leases are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
1997.......................................................... $ 3,529
1998.......................................................... 3,019
1999.......................................................... 2,717
2000.......................................................... 2,313
2001.......................................................... 589
-------
$12,167
=======
</TABLE>
F-10
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A stand-by letter of credit ($202.674 at December 31, 1996), which is
required in the lease for the Company's office, has been issued under The
Indus Group, Inc.'s bank line of credit. This letter of credit requirement
will terminate in May 1997.
In 1995, the bank issued four irrevocable stand-by letters of credit
totaling $29,967. In 1996, the bank issued two additional irrevocable stand-by
letters of credit totaling $370,000. These letters are a requirement of two of
the Company's licensing agreements. These letter of credit requirement will
terminate in 1998.
7. SHAREHOLDERS' EQUITY
On December 27, 1995, the articles of incorporation of The Indus Group, Inc.
were amended to: (i) increase the authorized number of common shares to
50,000,000, all of which are voting shares; (ii) effect a 17-for-one split of
the outstanding common shares (and shares under option), and (iii) authorize
5,000,000 shares of preferred stock, issuable in series, with the rights and
preferences to be established for each series. All share and per share data in
the accompanying financial statements have been adjusted retroactively to give
effect to the stock split. No series of preferred stock has been designated.
Common Stock
The following is a summary of the authorized and issued common stock of The
Indus Group, Inc. and in 1995 only for Indus International, Inc.:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
----------- -----------
<S> <C> <C>
The Indus Group, Inc.:
Authorized shares, no par value in 1995, $.001
par value in 1996............................. $50,000,000 $50,000,000
Issued and outstanding......................... 15,102,222 18,590,376
Amount......................................... $ 509,061 $ 18,590
Indus International, Inc.:
Authorized shares, no par value................ 200,000 (not
Amount......................................... $ 100,000 applicable)
Total Amount for The Company..................... $ 609,061 $ 18,590
</TABLE>
Preferred and Common Stock
On February 29, 1996, the Company completed an initial public offering in
which it sold 2,500,000 shares of common stock at $15.00 per share. The
offering raised net proceeds of $33,863,764 after underwriting discount and
$1,011,236 in related expenses.
8. INCENTIVE COMMON STOCK PLANS ISSUED AS DEFERRED COMPENSATION
Common Stock
In June 1995, the Company issued 162,622 shares of common stock to several
employees in exchange for notes aggregating $109,626. The notes will be
forgiven over a five-year period provided the note holders continue their
employment with the Company. Additional deferred compensation of $370,000 has
been recorded for the difference between the notes and the deemed fair value
of the shares at the date of issuance. The $479,626 total deferred
compensation is being amortized over the five-year period.
F-11
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1992 Stock Option Plan
In 1992, the Company adopted a stock option plan under which options for a
total of 1,805,400 shares of common stock may be granted to employees. The
exercise price of each common share under option was the book value per share
on the grant date. No further options will be granted under the 1992 Stock
Option Plan.
Under the plan, options granted would not be exercisable until a "liquidity
event" had occurred. A liquidity event was defined as the sale of more than
20% of the voting stock interest to an independent party or parties or an
acquisition of the Company which would result in termination of the plan.
Options granted would expire on the earlier of termination of employment or
ten years. Upon expiration of an option, the Company was obligated to pay the
optionee the increase in book value over the term of the option ("the book
value appreciation feature"). If any options were exercised, the Company would
retain the right to repurchase the issued shares at their then book value upon
termination of employment.
As of September 29, 1995, the board of directors eliminated the liquidity
event contingency, thereby causing the options then outstanding as to
1,791,970 common shares to be exercisable in their entirety. As a result,
these options were valued as of September 30, 1995 for financial statement
purposes and a one-time charge of $18,900,000 was recorded in the combined
statement of operations. The book value appreciation feature, in the event of
expiration of an option, also was eliminated at that time.
A summary of activity under the option plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ----------------------
AVAILABLE NUMBER OF PRICE PER
FOR GRANT SHARES SHARE
--------- --------- -----------
<S> <C> <C> <C>
Balances at December 31, 1993............. 99,790 1,705,610 $0.28-$0.35
Options canceled........................ 298,860 (298,860) $0.28-$0.35
-------- ---------
Balances at December 31, 1994............. 398,650 1,406,750 $0.28-$0.35
Options granted......................... (438,260) 438,260 $ 0.69
Options canceled........................ 56,440 (56,440) $ 0.28
-------- ---------
Balances at December 31, 1995............. 16,830 1,788,570 $0.28-$0.69
Options exercised....................... -- (916,845) $0.28-$0.69
Options canceled........................ 1,700 (1,700) $ 0.28
-------- ---------
Balances at December 31, 1996............. 18,500 870,025 $0.28-$0.69
======== =========
</TABLE>
1995 Stock Plan
The 1995 Stock Plan provides for the grant of incentive stock options to
employees of the Company and nonstatutory stock options to employees,
directors and consultants of the Company. A total of 1,500,000 shares of
common stock have been reserved for issuance under the plan. The incentive
stock options will be granted at not less than the fair market value of the
stock on the date of grant; nonqualified stock options will be granted at not
less than 85% of the fair market value of the stock on the date of grant. The
options will generally vest over a one to four year period and have a maximum
term of ten years.
F-12
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A summary of activity under the option plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------
SHARES NUMBER
AVAILABLE OF PRICE
FOR GRANT SHARES PER SHARE
--------- ------- -------------
<S> <C> <C> <C>
Balances at December 31, 1995............. 1,500,000 --
Options granted......................... (807,350) 807,350 $16.50-$22.75
Options canceled........................ 2,250 (2,250) $ 16.50
--------- -------
Balances at December 31, 1996............. 694,900 805,100 $16.50-$22.75
========= =======
</TABLE>
1995 Director Option Plan
The 1995 Director Option Plan provides for the issuance of nonstatutory
stock options to nonemployee directors of the Company. A total of 100,000
shares of common stock have been reserved for issuance. Under the plan,
nonemployee directors were each granted an option to purchase 10,000 shares of
common stock upon the completion of the initial public offering in February
1996. The options were granted at an exercise price of $15.00 per share and
vest quarterly over a four year period. On each date of the Company's Annual
Meeting of Shareholders, each nonemployee director will be granted an option
to purchase an additional 2,500 shares, provided the director has served on
the board for at least six months. Future options will be granted at the fair
market value of the stock on the date of grant and will vest quarterly over a
four year period.
1995 Employee Stock Purchase Plan
The Company has an employee stock purchase plan under which 500,000 shares
of common stock have been reserved for issuance. The plan allows for eligible
employees to purchase stock at 85% of the lower of the fair market value of
the Company's common stock as of the first day of each six-month offering
period or the fair market value of the stock at the end of the offering
period. The offering period will commence on January 1 and July 1 of each
year, with the first offering period beginning on such date following the
closing of the initial public offering in February 1996. Purchases will be
limited to 10% of each employee's compensation. The Company issued 71,309
shares under the plan in 1996 at prices ranging from $12.75 to $17.21 per
share.
9. ALTERNATIVE METHOD OF VALUING STOCK OPTIONS
The Company has elected to follow Accounting Principal Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under
Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-
Based Compensation," (Statement 123) requires use of option valuation models
that were not developed for use in valuing employee stock options. Under APB
25, because the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized in the Company's financial statements.
The Company's 1995 Stock Option Plan has authorized the grant of options to
employees for up to 1,500,000 shares of the Company's common stock. All
options granted typically have 10 year terms and vest and become fully
exercisable at the end of 4 years of continued employment.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to December 31, 1994 under fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using the minimum value method for 1995 and the Black-Scholes
F-13
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
option pricing model for 1996 with the following weighted-average assumptions
for 1995 and 1996, respectively: risk-free interest rates of 6.0% and 5.75%;
dividend yields of 0%; volatility factors of the expected market price of the
Company's common stock of 0.75 and 0.0; and a weighted-average expected life
of the option of 1 and 4 years.
The option valuation models were developed for use in estimating the fair
value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
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 net income including compensation expense, net
of tax of $1,074,000 and $878,000 for the year ended December 31, 1995 and
1996, respectively, is as follows ( in thousands except for earnings per share
information):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Pro forma net income........................................ $5,248 $8,350
Pro forma earnings per share:............................... $ 0.29 $ 0.44
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
1997. A summary of the Company's stock option activity, and related
information for the years ended December 31, follows:
<TABLE>
<CAPTION>
1995 1996
------------------------ ------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE
(IN THOUSANDS) PRICE (IN THOUSANDS) PRICE
-------------- --------- -------------- ---------
<S> <C> <C> <C> <C>
Outstanding-beginning of
year.................... 1,407 $0.32 1,789 $ 0.41
Granted.................. 438 0.69 827 16.50
Exercised................ -- -- (917) 0.41
Forfeited................ (56) 0.28 (4) 5.25
----- ----- ------ ------
Outstanding-end of year.. 1,789 $0.41 1,695 $ 8.38
===== ======
Exercisable at end of
year.................... 1,789 $0.41 874 $ 8.38
Weighted-average fair
value of options granted
during the year......... $5.16 $16.71
</TABLE>
The following table summarizes information about fixed stock options
outstanding as of December 31, 1996.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ---------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AS OF CONTRACTUAL EXERCISE AS OF EXERCISE
EXERCISE PRICES 12/31/96 LIFE PRICE 12/31/96 PRICE
--------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.28-$0.69......... 870,025 6.53 $ 0.41 870,025 $ 0.41
$15.00-$22.75....... 825,100 9.28 $16.79 3,750 $15.00
--------- ---- ------ ------- ------
Total............. 1,695,125 7.87 $ 8.38 873,775 $ 0.47
========= ==== ====== ======= ======
</TABLE>
F-14
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
10. EMPLOYEE BENEFIT AND PROFIT-SHARING PLANS
The Company has a defined contribution 401(K) plan. All employees over the
age of 21 who have completed at least one-half year of service are eligible to
participate. Each participant may elect to have amounts deducted from his or
her compensation and contributed to the plan up to 15% of his or her base
salary. All contributions are fully vested at the time the employee becomes an
active participant.
The Company also has a profit sharing plan. All employees over the age of 21
who have completed at least one-half year of service are eligible to
participate. Contributions to the plan are at the discretion of the board of
directors and are made to eligible employees' individual accounts in
proportion to their base salary. Contribution expense related to the profit
sharing plan for 1994, 1995 and 1996 was approximately $100,000, $238,000 and
$250,000, respectively.
11. EXPORT SALES
Export sales were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Europe.............................................. $1,457 $2,017 $ 7,337
Pacific............................................. 2,237 1,766 2,326
Other............................................... 753 2,118 3,005
------ ------ -------
$4,447 $5,901 $12,668
====== ====== =======
</TABLE>
12. INCOME TAXES
The provision for income taxes (state and foreign only in 1994 and 1995)
consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- -------
<S> <C> <C> <C>
Current:
Federal.............................................. $-- $-- $ 7,639
State and foreign.................................... 55 95 2,202
---- ---- -------
Deferred:.............................................. 55 95 9,841
Federal.............................................. -- -- (2,522)
State and foreign.................................... 14 230 (765)
---- ---- -------
14 230 (3,287)
---- ---- -------
$ 69 $325 $ 6,554
==== ==== =======
</TABLE>
The provision for income taxes reconciles to the amount computed by applying
the federal statutory rate to income before provision for income taxes as
follows (in thousands):
<TABLE>
<CAPTION>
1996
---------------
AMOUNT PERCENT
------ -------
<S> <C> <C>
Federal statutory rate.................................... $5,524 35.0 %
State taxes, net of federal benefit ...................... 934 5.9
FSC benefit............................................... (294) (1.8)
Other..................................................... 390 2.4
------ ----
$6,554 41.5 %
====== ====
</TABLE>
F-15
<PAGE>
THE INDUS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
No state income tax benefit has been recorded in connection with the $18.9
million compensation charge recorded in 1995. The 1996 current federal and
state tax provisions do not reflect the tax savings of $6,669,000 resulting
from deductions associated with the exercise of stock options by employees in
1996. This tax benefit has been included in additional capital in 1996.
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the net deferred tax liability are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996
---- -------
<S> <C> <C>
Accounts receivable allowances................................ $-- $ (197)
Tax over book depreciation and amortization................... -- 363
Nondeductible accruals........................................ -- (782)
Deferred licensing fees....................................... -- (3,820)
State income taxes............................................ -- (339)
Conversion from cash to accrual basis of accounting........... -- 8,612
Cash basis of accounting for income taxes..................... 312 --
Other, net.................................................... 14 --
---- -------
Net deferred tax liability.................................... $326 $ 3,837
==== =======
</TABLE>
The additional taxable income resulting from the change from the cash to
accrual basis of accounting for income taxes in 1996 will be reportable in
taxable income over the year 1996 through 1999.
13. SUBSEQUENT EVENTS
The Company entered into an agreement to acquire a 10% interest in TenFold
Corporation, a private software company, for $8 million in cash. The Company
will receive a perpetual, unlimited license for future applications and tools
developed with TenFold's technology.
The Company entered into an agreement to acquire Prism Consulting, a private
management consulting firm, for $4.75 million in the Company's stock at the
current market value and $250,000 in cash. The principals of Prism Consulting
will become employees of the Company and be subject to non-compete agreements.
F-16
<PAGE>
THE INDUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1997 1996(1)
------ --------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 5,666 $13,266
Marketable securities................................. 27,422 26,524
Billed accounts receivable, less allowance for
doubtful accounts of $549 at March 31, 1997 and $449
at December 31, 1996................................. 16,065 16,889
Unbilled accounts receivable.......................... 6,292 5,633
Other current assets.................................. 3,766 4,523
------- -------
Total current assets................................ 59,211 66,835
Marketable securities--noncurrent....................... 2,111 2,129
Property and equipment, net............................. 7,174 6,337
Investment.............................................. 7,997 --
Employee notes receivable............................... 210 213
------- -------
$76,703 $75,514
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable...................................... $ 2,823 2,165
Deferred income taxes................................. 4,233 3,837
Other accrued liabilities............................. 3,495 3,541
Deferred revenue...................................... 8,056 10,599
------- -------
Total current liabilities........................... 18,607 20,142
Shareholders' equity:
Preferred Stock, $.001 par value at March 31, 1997 and
December 31, 1996:
Authorized shares--5,000,000
Issued and outstanding shares--none................. -- --
Common Stock, $.001 par value at March 31, 1997 and
December 31, 1996:
Authorized shares--50,000,000
Issued and outstanding shares--18,639,011
(18,590,376 at December 31, 1996).................. 19 19
Additional capital.................................... 46,448 46,425
Other................................................. (412) (300)
Retained earnings..................................... 12,041 9,228
------- -------
Total shareholders' equity.......................... 58,096 55,372
------- -------
$76,703 $75,514
======= =======
</TABLE>
- --------
(1) Derived from audited financial statements.
See accompanying notes.
F-17
<PAGE>
THE INDUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31,
--------------
1997 1996
------ -------
<S> <C> <C>
Revenues:
Software licensing fees..................................... $3,722 $ 3,958
Services and maintenance.................................... 18,700 12,901
------ -------
Total revenues............................................ 22,422 16,859
Cost of revenues.............................................. 9,518 6,649
------ -------
Gross margin.................................................. 12,904 10,210
Operating expenses:
Research and development.................................... 2,931 3,415
Sales and marketing......................................... 3,238 1,936
General and administrative.................................. 2,296 1,843
------ -------
Total operating expenses.................................. 8,465 7,194
------ -------
Income from operations........................................ 4,439 3,016
Other income, net............................................. 411 47
------ -------
Income before income taxes.................................... 4,850 3,063
Provision for income taxes.................................... 2,037 1,260
Cumulative effect of deferred income taxes provided upon
January 1, 1996 conversion to C-Corporation status........... -- 6,700
Net income (loss)............................................. $2,813 $(4,897)
====== =======
PRO FORMA STATEMENT OF OPERATIONS:
Income before income taxes, as above........................ $4,850 $ 3,063
Provision for income taxes (federal, state and foreign)..... 2,037 1,260
------ -------
Pro forma net income........................................ $2,813 $ 1,803
====== =======
Pro forma net income per share................................ $ 0.14 $ 0.10
====== =======
Shares used in computing pro forma net income per share....... 19,609 17,686
====== =======
</TABLE>
See accompanying notes.
F-18
<PAGE>
THE INDUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
COMMON ADDITIONAL (ACCUMULATED SHAREHOLDERS'
STOCK CAPITAL OTHER DEFICIT) EQUITY
------ ---------- ----- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994...................... $129 $ -- $ -- 8,113 8,242
Issuance of common stock
as deferred
compensation............ 480 -- (480) -- --
Cash distributions to
shareholders............ -- -- -- (9,516) (9,516)
Translation adjustment... -- -- (6) -- (6)
Stock options(2)......... -- 18,900 -- -- 18,900
Amortization of deferred
compensation............ -- -- 48 -- 48
Net loss................. -- -- -- (6,820) (6,820)
---- ------- ----- ------- -------
Balance at December 31,
1995...................... 609 18,900 (438) (8,223) 10,848
Conversion to C
Corporation on January
1, 1996................. -- (8,223) -- 8,223 --
Reincorporation and
adoption of $.001 par
value................... (494) 494 -- -- --
Issuance of common
stock(1)................ 4 35,288 -- -- 35,292
Tax benefit from exercise
of stock options........ -- 6,669 -- -- 6,669
Purchase of Indus
International, Inc. net
assets.................. (100) (3) -- -- (103)
Unrealized loss on
marketable securities... -- -- (42) -- (42)
Translation adjustment... -- -- 84 -- 84
Amortization of deferred
compensation............ -- -- 96 -- 96
Net loss................. -- (6,700) 9,228 2,528
---- ------- ----- ------- -------
Balance at December 31,
1996...................... 19 46,425 (300) $ 9,228 $55,372
==== ======= ===== ======= =======
Tax benefit from exercise
of stock options.......... -- 23 -- -- 23
Translation adjustment... -- -- (44) -- (44)
Unrealized loss on
marketable securities... -- -- (86) -- (86)
Amortization of deferred
compensation............ -- -- 18 -- 18
Net income............... -- -- -- 2,813 2,813
---- ------- ----- ------- -------
Balance at March 31, 1997.. $ 19 $46,448 $(412) $12,041 $58,096
==== ======= ===== ======= =======
</TABLE>
- --------
(1) Consists of $33,864 received from February 29, 1996 initial public
offering (2,500,000 common shares offered at $15 per share less
underwriting commission and expenses), $500 received from June 30, 1996
issuance of 39,189 common shares under the Employee Stock Purchase Plan
and $230 received from the issuance of 545,595 common shares upon exercise
of options.
(2) Value of unexercised stock options of The Indus Group, Inc. upon
elimination of contingency feature.
See accompanying notes.
F-19
<PAGE>
THE INDUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31,
-----------------
1997 1996
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).......................................... $ 2,813 $ (4,897)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................ 496 288
Provision for doubtful accounts.......................... 100 --
Amortization of deferred compensation.................... 19 48
Loss (gain) on sale of fixed assets...................... 300 --
Deferred income taxes.................................... 395 (860)
Cumulative effect of deferred income taxes provided
January 1, 1996......................................... -- 6,700
Tax benefit from exercise of stock options............... -- 801
Changes in operating assets and liabilities:
Billed accounts receivable............................. 724 4,048
Unbilled accounts receivable........................... (659) 1,276
Other current assets................................... 757 (200)
Employee notes receivable.............................. (69) (10)
Accounts payable....................................... 307 69
Accrued payroll and related expense.................... 216 --
Income taxes payable................................... -- 1,274
Other accrued liabilities.............................. 90 582
Deferred revenue....................................... (2,543) 1,069
Other.................................................. (61) 4
------- --------
Net cash provided by operating activities.................. 2,885 10,192
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities.......................... (893) (31,914)
Investment................................................. (7,997) --
Acquisition of property and equipment...................... (1,617) (521)
------- --------
Net cash used in investing activities...................... (10,507) (32,435)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayment of credit.................................... -- (8,900)
Net proceeds from issuance of common stock................. 22 33,927
Purchase of Indus International, Inc. net assets........... -- (103)
------- --------
Net cash provided by financing activities.................. 22 24,924
------- --------
Net increase in cash and cash equivalents.................. (7,600) 2,681
Cash and cash equivalents at beginning of period........... 13,266 45
------- --------
Cash and cash equivalents at end of period................. $ 5,666 $ 2,726
======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid.............................................. $ -- $ 76
======= ========
Income taxes paid.......................................... $ 80 $ 6
======= ========
</TABLE>
See accompanying notes.
F-20
<PAGE>
THE INDUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. For further
information, refer to the audited financial statements and footnotes thereto
for the fiscal year ended December 31, 1996 included in the Company's Annual
Report on Form 10-K filed March 26, 1997.
Cash Equivalents and Marketable Securities
The Company considers all highly liquid, low risk debt instruments with a
maturity of three months or less from the date of purchase to be cash
equivalents. The Company generally invests its cash and cash equivalents in
money market fund accounts.
The Company presently classifies all marketable securities as available-for-
sale investments and carries them at fair market value. Marketable securities
represent U.S. government obligations and indirect investments in municipal
obligations. Marketable securities classified as long-term mature no later
than July 1998. Unrealized holding gains and losses, net of taxes, are carried
as a separate component of shareholders' equity.
2. BASIS OF PRESENTATION
On March 1, 1996, pursuant to an Asset Purchase Agreement, the Company
purchased all of the assets and assumed all of the liabilities of Indus
International, Inc., an entity which was related to The Indus Group, Inc.
through common shareholders. The purchase price of the net assets, which
equaled the net book value, was $103,252. Concurrent with this purchase, the
Company established a new wholly-owned subsidiary to which the net assets were
transferred. The financial statements include the accounts of the Company and
Indus International, Inc., which was included on a combined basis prior to
March 1, 1996. All significant intercompany accounts and transactions have
been eliminated.
3. ISSUANCE OF COMMON STOCK
Initial Public Offering
On February 29, 1996, the Company completed an initial public offering (the
"Offering") in which it sold 2,500,000 shares of Common Stock at $15.00 per
share. The Offering raised net proceeds of $33,863,764 (exclusive of
underwriting discount and $1,011,236 in related expenses).
Exercise of Stock Options
During the three months ended March 31, 1997, the Company received $22,026
from the issuance of 52,660 shares of common stock upon exercise of options.
Subsequent Event
The Company entered into an agreement after March 31, 1997 to acquire Prism
Consulting, a private management consulting firm, for $4.75 million in the
Company's stock at the current market value and $250,000 in cash.
F-21
<PAGE>
THE INDUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
4. INVESTMENT
The Company acquired a 10% interest in TenFold Corporation, a private
software company, for approximately $8 million in cash. The Company will
receive a perpetual, unlimited license for future applications and tools
developed with TenFold's technology.
5. PRO FORMA DATA
The pro forma data reflects adjustments which would have been applicable had
the Company been a C Corporation in all periods.
Statements of Operations
Effective upon its incorporation in 1990, the Company elected to have its
United States income taxed under Subchapter S of the Code. Income tax
provisions through December 31, 1995 have been principally attributable to
state taxes and taxes imposed by foreign governments on the Company's foreign
operations. The Company's S Corporation status terminated effective January 1,
1996, and the Company will be subject to federal income taxation at the
corporate level thereafter. In connection with the termination of S
Corporation status on January 1, 1996, a one-time charge representing a
cumulative net federal and state deferred income tax liability of $6.7 million
was recorded.
For purposes of presenting comparative earnings and calculating earnings per
share data, pro forma net income for the first quarter of 1996 reflects the
elimination of the $6.7 million cumulative deferred income tax charge upon
converting from an S Corporation to a C Corporation.
Per Share Data
Pro forma net income per share is computed using pro forma net income and
the weighted average number of common and dilutive common equivalent shares
outstanding during each period. Dilutive common equivalent shares consist of
incremental common shares issuable upon the assumed exercise of stock options
(using the treasury stock method). Fully diluted per share amounts are not
presented, as the effect is not material. The computation of the weighted
average number of shares outstanding for the three month periods ended March
31, 1997 and March 31, 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
--------- ---------
<S> <C> <C>
Weighted average outstanding............................ 18,629 15,984
Equivalent shares assumed to be outstanding had options
granted prior to 1995 been exercised and used to
repurchase shares at their then fair value............. 980 1,702
--------- ---------
19,609 17,686
========= =========
</TABLE>
6. EARNING PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earning per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary earnings per share for the first quarter
ended March 31, 1997 and March 31, 1996 of $.01 per share. The impact of
Statement 128 on the calculation of fully diluted earnings per share for these
quarters is not expected to be material.
F-22
<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.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
April 18, 1997
F-23
<PAGE>
TSW INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
ASSETS 1996 1997
------ ------- -------
(IN THOUSANDS,
EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
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
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<S> <C> <C> <C>
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............................ 13,100 18,100
SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock, $.01 par value; 6,000,000 shares
authorized; 264,795 and 296,282, shares issued and
outstanding at March 31, 1996 and 1997................. 3 3
Additional paid-in capital.............................. 2,113 2,220
Accumulated deficit..................................... (33,227) (36,630)
Equity adjustment from foreign currency translation..... (210) (299)
------- -------
Total shareholders' equity (deficit).................. (31,321) (34,706)
------- -------
$26,659 $42,341
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<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)....... $ (1.09)
==========
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING
(NOTE 1)..................................... 3,133,107
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE>
TSW INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
ADJUSTMENTS
COMMON STOCK ADDITIONAL FROM FOREIGN TOTAL
---------------- PAID-IN ACCUMULATED CURRENCY SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION EQUITY (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-26
<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-27
<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, unless there
is a significant change in ownership.
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 majority 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.
NET LOSS PER SHARE
Pro forma net loss per share has been computed using the weighted average
number of common shares outstanding during each year assuming conversion of
preferred stock had occurred as of the date of issuance. Historical 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. 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
$565,000 in fiscal 1996 and fiscal 1997, respectively.
F-28
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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........................... $ (48.40) $ (54.45) $ (14.29)
======== ======== ========
Weighted average common and common equivalent
shares outstanding during the period........ 275,857 216,444 277,792
======== ======== ========
</TABLE>
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.
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 of the acquired
F-29
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
businesses. If there are indicated impairments, a write-down is recorded to
the extent the carrying amount exceeds fair value. Fair value is based on
estimated future cash flows of the respective business unit, discounted at a
market rate of interest. 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.
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
F-30
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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.
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
F-31
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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-32
<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-33
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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-34
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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-35
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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.
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.
F-36
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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,
---------------------
1996 1997
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Pro forma net loss.................................... $ 11,872 $ 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-37
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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 $ 6.83
Granted................. 393,695 $4.58 471,534 $11.48 953,170 $ 9.32
Exercised............... (65,839) $2.64 (85,609) $ 3.12 (31,961) $ 3.52
Forfeited............... (76,594) $3.61 (174,133) $ 5.96 (497,092) $10.77
------- --------- ----------
Outstanding end of
year................... 803,256 $3.75 1,015,048 $ 6.83 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-38
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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-39
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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.
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 which allows the Company to purchase an
additional 19% of Socotec's outstanding shares for approximately $280,000 or
for Socotec Industrie SA to require the Company to purchase an additional 19%
of Socotec's outstanding shares for approximately $190,000 for a period up to
five years from the acquisition date.
F-40
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1997
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.
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
STATES EUROPE ASIA/PACIFIC TOTAL
------- ------ ------------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
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.
F-41
<PAGE>
TSW INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
MARCH 31, 1997
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.
18. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS' REPORT
Under an Agreement and Plan of Merger and Reorganization dated June 5, 1997,
TSW International, Inc. and The Indus Group, Inc. will be merged into wholly
owned subsidiaries of Newco, subject to the approval of the shareholders of
both companies. Upon consummation of the Merger, TSW International, Inc.
shareholders, with each share of preferred stock being treated as having
converted into one share of common stock, will receive 2.7444 shares, subject
to certain adjustments, of common stock of Newco. The Company expects to
account for the merger as a pooling of interests.
F-42
<PAGE>
APPENDIX A-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BETWEEN
THE INDUS GROUP, INC.,
a California corporation,
NEWCO GROUP, INC.
a Delaware corporation
and
TSW INTERNATIONAL, INC.,
a Georgia corporation
JUNE 5, 1997
AS AMENDED
JULY 21, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. PLAN OF MERGER AND REORGANIZATION...................................... 1
1.1 The Organization of Newco, INDUS Sub and TSW Sub.................. 1
1.2 The INDUS Merger.................................................. 1
1.3 The TSW Merger.................................................... 2
1.4 Conversion of Capital Stock in the INDUS Merger................... 2
1.5 Conversion of Capital Stock in the TSW Merger..................... 2
1.6 Adjustments for Capital Changes................................... 4
1.7 Dissenting Shares................................................. 4
1.8 Fractional Shares................................................. 4
1.9 INDUS Options and Warrants........................................ 5
1.10 TSW Options and Warrants.......................................... 6
1.11 INDUS and TSW Plans............................................... 6
1.12 Registration...................................................... 6
1.13 Effective Time; Effects of the Mergers............................ 6
1.14 Registration on Form S-4.......................................... 7
1.15 Tax Free Reorganization........................................... 7
1.16 Pooling of Interests.............................................. 8
1.17 Hart-Scott-Rodino Filings......................................... 8
1.18 Board of Directors and Officers of Newco.......................... 8
2. REPRESENTATIONS AND WARRANTIES OF TSW.................................. 8
2.1 Organization; Good Standing; Qualification and Power.............. 8
2.2 Capital Structure................................................. 9
2.3 Authority......................................................... 10
2.4 SEC Documents..................................................... 11
2.5 Information Supplied.............................................. 11
2.6 Compliance with Applicable Laws................................... 12
2.7 Litigation........................................................ 12
2.8 ERISA and Other Compliance........................................ 12
2.9 Absence of Undisclosed Liabilities................................ 14
2.10 Absence of Certain Changes or Events.............................. 15
2.11 Agreements........................................................ 16
2.12 No Defaults....................................................... 17
2.13 Certain Agreements................................................ 17
2.14 Taxes............................................................. 17
2.15 Intellectual Property............................................. 18
2.16 Fees and Expenses................................................. 20
2.17 Insurance......................................................... 20
2.18 Ownership of Property............................................. 20
2.19 Environmental Matters............................................. 20
2.20 Interested Party Transactions..................................... 21
2.21 Board Approval.................................................... 21
2.22 Vote Required..................................................... 21
2.23 Applicability of State Takeover Laws.............................. 22
2.24 Disclosure........................................................ 22
2.25 Fairness Opinion.................................................. 22
3. REPRESENTATIONS AND WARRANTIES OF INDUS AND NEWCO...................... 22
3.1 Organization; Good Standing; Qualification and Power.............. 22
3.2 Capital Structure................................................. 23
3.3 Authority......................................................... 24
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3.4 SEC Documents..................................................... 25
3.5 Information Supplied.............................................. 25
3.6 Compliance with Applicable Laws................................... 25
3.7 Litigation........................................................ 26
3.8 ERISA and Other Compliance........................................ 26
3.9 Absence of Undisclosed Liabilities................................ 28
3.10 Absence of Certain Changes or Events.............................. 28
3.11 Agreements........................................................ 30
3.12 No Defaults....................................................... 31
3.13 Certain Agreements................................................ 31
3.14 Taxes............................................................. 31
3.15 Intellectual Property............................................. 32
3.16 Fees and Expenses................................................. 33
3.17 Insurance......................................................... 33
3.18 Ownership of Property............................................. 33
3.19 Environmental Matters............................................. 34
3.20 Interested Party Transactions..................................... 34
3.21 Board Approval.................................................... 34
3.22 Vote Required..................................................... 34
3.23 Applicability of State Takeover Laws.............................. 35
3.24 Interim Operations of Newco and Newco Subsidiaries................ 35
3.25 Disclosure........................................................ 35
3.26 Fairness Opinion.................................................. 35
4. TSW COVENANTS.......................................................... 35
4.1 Advice of Changes................................................. 35
4.2 Maintenance of Business........................................... 35
4.3 Conduct of Business............................................... 35
4.4 Shareholder Approval.............................................. 37
4.5 TSW Affiliate Agreements.......................................... 37
4.6 Letters of TSW's Accountants...................................... 38
4.7 Prospectus/Proxy Statement........................................ 38
4.8 Regulatory Approvals.............................................. 38
4.9 Necessary Consents................................................ 38
4.10 Access to Information............................................. 39
4.11 Satisfaction of Conditions Precedent.............................. 39
4.12 No Other Negotiations............................................. 39
5. INDUS AND NEWCO COVENANTS ............................................ 39
5.1 Advice of Changes................................................. 39
5.2 Maintenance of Business........................................... 39
5.3 Conduct of Business............................................... 39
5.4 Shareholder Approval.............................................. 41
5.5 INDUS Affiliate Agreements........................................ 41
5.6 Letter of INDUS's Accountants..................................... 42
5.7 Prospectus/Proxy Statement........................................ 42
5.8 State Securities Law Compliance................................... 43
5.9 Regulatory Approvals.............................................. 43
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5.10 Necessary Consents.............................................. 43
5.11 Access to Information........................................... 43
5.12 Satisfaction of Condition Precedent............................. 44
5.13 No Other Negotiations........................................... 44
5.14 Newco Employee Plans and Benefit Arrangements; Severance........ 44
5.15 Indemnification and Insurance................................... 44
5.16 Registration Rights Agreement................................... 47
5.17 Employee Matters................................................ 47
5.18 Board Representation............................................ 47
6. CLOSING MATTERS........................................................ 48
6.1 The Closing..................................................... 48
6.2 Exchange of Certificates........................................ 48
6.3 Assumption of Options........................................... 50
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TSW............................. 50
7.1 Accuracy of Representations and Warranties...................... 50
7.2 Covenants....................................................... 51
7.3 Compliance with Law............................................. 51
7.4 Consents........................................................ 51
7.5 Form S-4........................................................ 51
7.6 Opinion of INDUS's and Newco's Counsel.......................... 51
7.7 TSW Shareholder Approval........................................ 51
7.8 INDUS Shareholder Approvals..................................... 51
7.9 No Legal Action................................................. 51
7.10 Tax Opinion..................................................... 51
7.11 Pooling Opinion................................................. 51
7.12 Nasdaq Listing.................................................. 51
7.13 Incorporation of New Companies.................................. 51
7.14 Absence of Substantial Material Adverse Change.................. 52
7.15 HSR Act Compliance.............................................. 52
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF INDUS AND NEWCO................. 52
8.1 Accuracy of Representations and Warranties...................... 52
8.2 Covenants....................................................... 52
8.3 Compliance with Law............................................. 52
8.4 Consents........................................................ 52
8.5 Form S-4........................................................ 53
8.6 Opinion of TSW's Counsel........................................ 53
8.7 INDUS Shareholder Approvals..................................... 53
8.8 TSW Shareholder Approval........................................ 53
8.9 No Legal Action................................................. 53
8.10 Tax Opinion..................................................... 53
8.11 Pooling Opinion................................................. 53
8.12 Absence of Substantial Material Adverse Change.................. 53
8.13 HSR Act Compliance.............................................. 53
9. TERMINATION OF AGREEMENT............................................... 54
9.1 Termination..................................................... 54
9.2 Notice of Termination........................................... 55
9.3 No Liability.................................................... 55
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10. SURVIVAL OF REPRESENTATIONS........................................... 55
10.1 No Survival of Representations................................. 55
11. MISCELLANEOUS......................................................... 55
11.1 Governing Law.................................................. 55
11.2 Assignment; Binding Upon Successors and Assigns................ 55
11.3 Severability................................................... 55
11.4 Counterparts................................................... 55
11.5 Other Remedies................................................. 55
11.6 Amendment and Waivers.......................................... 56
11.7 Expenses....................................................... 56
11.8 Attorneys' Fees................................................ 56
11.9 Notices........................................................ 56
11.10 Construction of Agreement...................................... 57
11.11 No Joint Venture............................................... 57
11.12 Further Assurances............................................. 57
11.13 Absence of Third Party Beneficiary Rights...................... 57
11.14 Public Announcement............................................ 57
11.15 Entire Agreement............................................... 58
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Exhibit A......................... INDUS Agreement of Merger
Exhibit B......................... TSW Agreement of Merger
Exhibit C......................... Form of Certificate of Incorporation of Newco
Exhibit D......................... Form of Bylaws of Newco
Exhibit 4.5(a)(i)................. List of TSW Affiliates
Exhibit 4.5(a)(ii)................ TSW Affiliate Agreement
Exhibit 4.5(b).................... TSW Voting Agreement
Exhibit 4.5(c).................... Warburg Affiliate Agreement
Exhibit 5.5(a)(i)................. List of INDUS Affiliates
Exhibit 5.5(a)(ii)................ INDUS Affiliate Agreement
Exhibit 5.5(b).................... INDUS Voting Agreement
Exhibit 5.5(c).................... Felton Affiliate Agreement
Exhibit 5.16...................... Registration Rights Agreement
Exhibit 5.18...................... Nomination Agreement
Exhibit 7.4....................... Permits and Consents to be obtained by INDUS
Exhibit 7.6....................... Opinion of Counsel to INDUS and Newco
Exhibit 8.4....................... Permits and Consents to be obtained by TSW
Exhibit 8.6....................... Opinion of Counsel to TSW
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement") is
entered into as of June 5, 1997, by and among THE INDUS GROUP, INC., a
California corporation ("INDUS"), NEWCO GROUP, INC., a Delaware corporation
("Newco"), and TSW International, Inc., a Georgia corporation ("TSW").
RECITALS
A. The parties intend that, subject to the terms and conditions of this
Agreement, INDUS and TSW will each become a subsidiary of a new Delaware
corporation named Newco which has been formed by INDUS solely for the purpose
of the transactions contemplated hereunder. To effect such transactions, (i)
Newco will form two new corporations, INDUS Sub, a California corporation, and
TSW Sub, a Georgia corporation, respectively as wholly-owned subsidiaries of
Newco, (ii) INDUS Sub will merge with and into INDUS, with INDUS to be the
surviving corporation of such merger (the "INDUS Merger"), and (iii) TSW Sub
will merge with and into TSW, with TSW to be the surviving corporation of such
merger (the "TSW Merger," and together with the INDUS Merger, the "Mergers"),
all pursuant to the terms and conditions of this Agreement, the agreements of
merger substantially in the forms of Exhibit A and Exhibit B hereto (the
"Agreements of Merger") and the applicable provisions of the California
General Corporation Law (the "CGCL") and the Georgia Business Corporation Code
(the "GBCC"). Upon the effectiveness of the Mergers, all of the outstanding
capital stock of INDUS and all of the outstanding capital stock of TSW will be
converted into common stock, par value $.001 per share, of Newco (the "Newco
Common Stock"). Newco will assume all outstanding options, warrants and rights
to purchase shares of common stock of each of INDUS and TSW, as provided in
this Agreement and the Agreements of Merger. The Newco common stock issued in
the Mergers will be registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Newco registration statement.
B. The Mergers are each intended to be treated as (i) a tax-free
reorganization pursuant to the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) a "pooling of
interests" for accounting purposes.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. PLAN OF MERGER AND REORGANIZATION
1.1 THE ORGANIZATION OF NEWCO, INDUS SUB AND TSW SUB. INDUS has
formed Newco under the laws of the State of Delaware for the purposes
of the transactions contemplated by the Mergers. INDUS currently owns,
and will own immediately prior to the Effective Time (as defined
below), all of the outstanding shares of capital stock of Newco,
consisting of 10 shares of common stock, par value $.001 per share, of
Newco ("Newco Common Stock"). Other than the shares of Newco Common
Stock owned by INDUS, Newco currently has no outstanding securities and
will not issue any securities prior to the Effective Time, will conduct
no business or operations, will have no assets and will enter into no
agreements or obligations except as required or contemplated by this
Agreement or necessary to perform its obligations hereunder. As soon as
practicable after the date of this Agreement, Newco shall form a
wholly-owned subsidiary named INDUS Sub, Inc. ("INDUS Sub"), under the
laws of California, and a wholly-owned subsidiary named TSW Sub, Inc.
("TSW Sub") under the laws of Georgia. The form of the Certificate of
Incorporation and By-laws of Newco as will be in effect at the
Effective Time are attached hereto as Exhibit C and Exhibit D,
respectively.
1.2 THE INDUS MERGER. Subject to the terms and conditions of this
Agreement, Newco will cause INDUS Sub to execute and deliver an
Agreement of Merger in the form to be agreed upon by the parties to
this Agreement and to be subsequently attached hereto as Exhibit A (the
"INDUS Agreement of Merger") pursuant to which, in accordance with the
applicable provisions of the CGCL,
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at the Effective Time, INDUS Sub shall be merged with and into INDUS
(the "INDUS Merger"), with INDUS continuing as the surviving
corporation (in such capacity, the "INDUS Surviving Corporation").
1.3 THE TSW MERGER. Subject to the terms and conditions of this
Agreement, and simultaneously with the execution of the INDUS Agreement
of Merger, Newco will cause TSW Sub to execute and deliver an Agreement
of Merger in the form to be agreed upon by the parties to this
Agreement and to be subsequently attached hereto as Exhibit B (the "TSW
Agreement of Merger") pursuant to which, and in accordance with the
GBCC, at the Effective Time, TSW Sub shall be merged with TSW (the "TSW
Merger"), with TSW continuing as the surviving corporation (in such
capacity, the "TSW Surviving Corporation").
1.4 CONVERSION OF CAPITAL STOCK IN THE INDUS MERGER.
(a) Except as provided in paragraph (b), each share of the common
stock, par value $.001 per share, of INDUS ("INDUS Common Stock"),
that is issued and outstanding immediately prior to the Effective
Time will by virtue of the INDUS Merger and at the Effective Time,
and without any further action on the part of INDUS, Newco or any
holder of INDUS Common Stock, be converted into the right to receive
one share (the "INDUS Applicable Ratio") of validly issued, fully
paid and nonassessable Newco Common Stock.
(b) Each share of INDUS Common Stock held in the treasury of INDUS
or any of which are owned by Newco, INDUS, TSW or any direct or
indirect wholly-owned subsidiary of Newco, INDUS or TSW immediately
prior to the Effective Time will by virtue of the INDUS Merger and
at the Effective Time be canceled and extinguished without any
conversion thereof.
(c) Each issued and outstanding share of capital stock of INDUS
Sub will by virtue of the INDUS Merger and at the Effective Time be
converted into one fully paid and nonassessable share of common
stock, $.001 par value, of the INDUS Surviving Corporation.
1.5 CONVERSION OF CAPITAL STOCK IN THE TSW MERGER.
(a) Number of Shares to be Issued. The total number of shares of
Newco Common Stock to be issued to former shareholders and
noteholders of TSW in the Mergers (including the New Warburg Shares)
and to become issuable to former TSW optionholders and
warrantholders after the Effective Time shall be the number of
shares of Newco Common Stock to be issued or to become issuable to
former INDUS shareholders and optionholders pursuant to Sections 1.4
and 1.9 multiplied by .86047 (the "TSW Number").
(b) Common Stock. Except as provided in paragraph (f) and except
for Dissenting Shares (as defined below), each share of common
stock, par value $.01 per share, of TSW ("TSW Common Stock"), that
is issued and outstanding immediately prior to the Effective Time
will by virtue of the TSW Merger and at the Effective Time, and
without any further action on the part of TSW, Newco or any holder
of TSW Common Stock, be converted into the right to receive a number
of shares of validly issued, fully paid and nonassessable Newco
Common Stock equal to the TSW Applicable Ratio (as defined below).
(c) Preferred Stock.
(i) Except as provided in paragraph (f), each share of Series
A Preferred Stock, par value $.01 per share, Series B Preferred
Stock, par value $.01 per share, Series C Cumulative Preferred
Stock, par value $.01 per share, and Series D Preferred Stock,
par value $.01 per share, of TSW (collectively, the "TSW
Preferred Stock") that is issued and outstanding immediately
prior to the Effective Time will by virtue of the TSW Merger and
at the Effective Time, and without any further action on the
part of TSW, Newco or any holder of TSW Preferred Stock, will be
converted into the right to receive the number of shares of
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Newco Common Stock the holder thereof would have become entitled
to receive by virtue of Section 1.5(b) of this Agreement had
such share of TSW Preferred Stock been converted immediately
prior to the Effective Time into shares of TSW Common Stock
pursuant to the terms of the applicable series of TSW Preferred
Stock.
(d) Certain Indebtedness and Unpaid Dividends of TSW.
(i) Each subordinated floating rate note of TSW set forth in
Section 1.5(d) of the TSW Disclosure Letter (as defined below)
(each, a "TSW Subordinated Note") will by virtue of the TSW
Merger and at the Effective Time, and without any further action
on the part of TSW, Newco or any holder of an TSW Subordinated
Note, be exchanged for the right to receive a number of shares
of validly issued, fully paid and nonassessable Newco Common
Stock equal to the product of (x) a fraction, the numerator of
which shall be the aggregate principal balance of such TSW
Subordinated Note at the Effective Time plus all accrued and
unpaid interest thereon to the Effective Time and the
denominator of which shall be the INDUS Common Stock Market
Price (as defined below) and (y) the INDUS Applicable Ratio. As
a result of the conversion provided for in this paragraph, each
TSW Subordinated Note shall be deemed to have been satisfied in
full and the principal balance and accrued interest thereof
reduced to zero and thereafter each such TSW Subordinated Note
shall be canceled and shall be of no further force or effect.
TSW hereby represents and warrants that the holder of each TSW
Subordinated Note (i) has consented and agreed to the provisions
of this paragraph and (ii) has an adjusted tax basis in each TSW
Subordinated Note equal to the face amount of such note. "INDUS
Common Stock Market Price" means the average of the high and low
sales prices of INDUS Common Stock, as quoted on the Nasdaq
Stock Market and reported in the Wall Street Journal, on each of
the ten consecutive trading days prior to the Closing Date (as
defined below).
(ii) The amount of any TSW Unpaid Dividends (as defined below)
will not be paid to the holders thereof and in lieu thereof each
holder of TSW Preferred Stock will be entitled to receive by
virtue of the TSW Merger and at the Effective Time, and without
any further action on the part of TSW, Newco or any holder of
TSW Preferred Stock, a number of shares of validly issued, fully
paid and nonassessable Newco Common Stock equal to the product
of (x) a fraction, the numerator of which shall be the aggregate
TSW Unpaid Dividends at the Effective Time with respect to all
shares of TSW Preferred Stock held by such holder immediately
prior to the Effective Time and the denominator of which shall
be the INDUS Common Stock Market Price and (y) the INDUS
Applicable Ratio. As a result of the conversion provided for in
this paragraph, all TSW Unpaid Dividends shall thereafter be
deemed to have been paid in full. TSW hereby represents and
warrants that the holder of each share of TSW Preferred Stock
has consented and agreed to the provisions of this paragraph.
The number of shares of Newco Common Stock to be issued pursuant
to paragraph (d)(i) and this paragraph (d)(ii) of this Section
1.5 are referred to as the "New Warburg Shares." "TSW Unpaid
Dividends" means the amount of any unpaid dividends on each
series of TSW Preferred Stock, including any proportionate
amounts unpaid with respect to any uncompleted dividend periods,
set forth with respect to each such series of TSW Preferred
Stock in Section 1.5(d)(ii) of the TSW Disclosure letter.
(e) The "TSW Applicable Ratio" shall be a fraction, the numerator
of which shall be the TSW Number minus the number of New Warburg
Shares and the denominator of which shall be the total number of
shares of TSW Common Stock outstanding immediately prior to the
Effective Time, assuming that each share of TSW Preferred Stock is
converted immediately prior thereto into TSW Common Stock pursuant
to the terms of the applicable series of TSW Preferred Stock, plus
the total number of shares of TSW Common Stock issuable upon
exercise of the TSW Options (as defined below) and the TSW Warrants
(as defined below).
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(f) Each share of TSW Common Stock or TSW Preferred Stock held in
the treasury of TSW or any of such shares which are owned by Newco,
INDUS, TSW or any direct or indirect wholly-owned subsidiary of
Newco, INDUS or TSW immediately prior to the Effective Time will by
virtue of the INDUS Merger and at the Effective Time be canceled and
extinguished without any conversion thereof.
(g) Each issued and outstanding share of capital stock of TSW Sub
will by virtue of the TSW Merger and at the Effective Time be
converted into one fully paid and nonassessable share of common
stock, $.01 par value, of the TSW Surviving Corporation.
1.6 ADJUSTMENTS FOR CAPITAL CHANGES. If, prior to the Effective Time,
either INDUS or TSW recapitalizes through a subdivision of its
outstanding shares into a greater number of shares, or a combination of
its outstanding shares into a lesser number of shares, or reorganizes,
reclassifies or otherwise changes its outstanding shares into the same
or a different number of shares of other classes, or declares a
dividend on its outstanding shares payable in shares of its capital
stock or securities convertible into shares of its capital stock, then
the INDUS Applicable Ratio and/or TSW Applicable Ratio will be adjusted
appropriately so as to maintain the relative proportionate interests of
the holders of INDUS Common Stock and the holders of the TSW Common
Stock in Newco securities.
1.7 DISSENTING SHARES.
(a) The INDUS Merger.
(i) Holders of shares of INDUS Common Stock who dissent from
the INDUS Merger are not entitled to dissenters' rights under
Chapter 13 of the CGCL provided, however, that if demands for
payment under Chapter 13 of the CGCL are filed with respect to
5% or more of the outstanding shares of INDUS Common Stock by
the holders of shares which voted against the INDUS Merger, then
(i) such holders of INDUS Common Stock shall be entitled to
exercise dissenters' rights to the extent available under
Chapter 13 of the CGCL with respect to the shares for which such
demand has been filed in accordance with Chapter 13 of the CGCL;
and (ii) any shares of INDUS Common Stock whose transfer is
restricted by law or regulation or by INDUS and that are voted
against the INDUS Merger shall be entitled to exercise
dissenters' rights to the extent available under Chapter 13 of
the CGCL. Such shares ("INDUS Dissenting Shares") for which the
holder's thereof are entitled to exercise dissenters' rights
shall not be exchanged for Newco Common Stock as provided in
Section 1.5, but the holders of INDUS Dissenting Shares shall be
entitled to payment of the fair market value of such INDUS
Dissenting Shares in accordance with Chapter 13 of the CGCL;
provided, however, that if any such holder shall fail to perfect
or shall otherwise waive the right to demand payment under
Chapter 13 of CGCL or a court of competent jurisdiction shall
determine that such holder is not entitled to the relief
provided by such Chapter 13, then the right of such holder of
INDUS Dissenting Shares to be paid the fair value of such
holder's INDUS Dissenting Shares shall cease and such INDUS
Dissenting Shares shall be treated as if they had been converted
as of the Effective Time into the right to receive the shares of
Newco Common Stock as provided in Section 1.5 and any cash in
lieu of fractional shares as provided in Section 1.8, without
any interest thereon.
(ii) TSW shall give Newco (A) prompt notice of any notices or
other instruments received by TSW pursuant to Article 13 of the
GBCC and (B) the opportunity to participate in all negotiations
and proceedings with respect to demands for payment for TSW
Dissenting Shares. TSW shall not, except with the prior written
consent of Newco, voluntarily offer to make or make any payment
with respect to any demands for payment for TSW Dissenting
Shares or offer to settle or settle any such demands.
1.8 FRACTIONAL SHARES. No fractional shares of Newco Common Stock
will be issued in connection with the Mergers, but in lieu thereof each
holder of INDUS Common Stock, TSW Common
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Stock, TSW Preferred Stock, TSW Subordinated Notes and TSW Unpaid
Dividends who would otherwise be entitled to receive a fraction of a
share of Newco Common Stock as a result of the Mergers will receive
from the Exchange Agent (as hereinafter defined), at such time as such
holder shall receive a certificate representing shares of Newco Common
Stock as contemplated by Section 6.2, an amount of cash (rounded up to
the nearest whole cent) equal to such holder's proportionate interest
in the net proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such holders, of the aggregate
fractional Newco Common Stock issued pursuant to Sections 1.4 and 1.5.
As soon as practicable following the Effective Time, the Exchange Agent
shall determine the excess of (i) the number of full shares of Newco
Common Stock delivered to the Exchange Agent by Newco over (ii) the
aggregate number of full shares of Newco Common Stock to be distributed
to holders of INDUS Common Stock, TSW Common Stock, TSW Preferred
Stock, TSW Subordinated Notes and TSW Unpaid Dividends (such excess
being herein called the "Excess Shares"), and the Exchange Agent, as
agent for the former the former holders of INDUS and TSW capital stock,
shall sell the Excess Shares at the prevailing prices on The Nasdaq
Stock Market, Inc.'s National Market (the "Nasdaq Stock Market"). Newco
shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Shares.
Until the net proceeds of such sale have been distributed to the former
holders of INDUS and TSW securities, the Exchange Agent will hold such
proceeds in trust for such former security holders (the "Fractional
Securities Fund").
1.9 INDUS OPTIONS AND WARRANTS.
(a) Conversion. At the Effective Time, each of the then
outstanding options to purchase shares of INDUS Common Stock
(collectively, the "INDUS Options") (consisting of all
outstanding options granted under INDUS's 1992 Stock Option
Plan, 1995 Stock Plan and 1995 Director Option Plan
(collectively, and with the INDUS Stock Purchase Plan referred
to in Section 1.9(b) below, the "INDUS Plans")) will by virtue
of the INDUS Merger, and without any further action on the part
of any holder thereof, be assumed by Newco and converted into an
option (a "Newco Option") to purchase that number of shares of
Newco Common Stock determined by multiplying the number of
shares of INDUS Common Stock subject to such INDUS Option at the
Effective Time by the INDUS Applicable Ratio, at an exercise
price per share of Newco Common Stock equal to the exercise
price per share of such INDUS Option immediately prior to the
Effective Time divided by the INDUS Applicable Ratio rounded up
to the nearest cent. If the foregoing calculation results in an
assumed INDUS Option being exercisable for a fraction of a share
of Newco Common Stock, then the number of shares of Newco Common
Stock subject to such option will be rounded down to the nearest
whole number of shares, with no cash being payable for such
fractional share. The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the
Code, if applicable, and all other terms and conditions of each
Newco Option will otherwise remain as set forth in the INDUS
Option assumed by such Newco Option. Continuous service as an
employee or consultant with INDUS or any of the INDUS
Subsidiaries (as hereinafter defined) will be credited to an
optionee of INDUS for purposes of determining the number of
shares of Newco Common Stock subject to exercise under a Newco
Option after the Effective Time.
(b) INDUS Stock Purchase Plan. At the Effective Time, each of
the then outstanding options (the "INDUS Stock Purchase Plan
Options") granted under the INDUS Stock Purchase Plan (the
"INDUS ESPP") will, by virtue of the INDUS Merger and without
any further action on the part of any holder thereof, be assumed
by Newco and converted into an option (a "Newco Stock Purchase
Plan Option") to purchase, on the same terms and as were
applicable under INDUS ESPP immediately prior to the Effective
Time, a number of shares of Newco Common Stock determined by
multiplying the number of shares of INDUS Common Stock subject
to such INDUS Stock Purchase Plan Option at the Effective Time as
provided in the INDUS ESPP by the INDUS Applicable Ratio, at a
purchase price per share
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of Newco Common Stock equal to the lower of (i) the quotient
determined by dividing eight-five percent (85%) of the fair
market value of the INDUS Common Stock on the offering date of
each assumed offering by the INDUS Applicable Ratio or (ii)
eighty-five percent (85%) of the fair market value of the Newco
Common Stock on each exercise date of the assumed offering
occurring after the Effective Time.
1.10 TSW OPTIONS AND WARRANTS. At the Effective Time, each of the
then outstanding options to purchase TSW Common Stock (collectively,
the "TSW Options") (consisting of all outstanding options granted under
TSW's 1984 Stock Option Plan, 1994 Stock Option Plan, 1995 Stock Option
Plan for Outside Directors and 1995 Consultants Stock Option Plan
(collectively, the "TSW Plans"), and any individual non-Plan options
set forth in Section 1.10 of the TSW Disclosure Letter (as hereinafter
defined) issued by TSW pursuant to an option agreement or otherwise)
and each of the then outstanding warrants to purchase TSW Common Stock
set forth in Section 1.10 of the TSW Disclosure Letter issued by TSW
(the "TSW Warrants") will by virtue of the TSW Merger, and without any
further action on the part of any holder thereof, be assumed by Newco
and converted into a Newco Option or warrant (a "Newco Warrant"), as
the case may be, to purchase that number of shares of Newco Common
Stock determined by multiplying the number of shares of TSW Common
Stock subject to such TSW Option or TSW Warrant at the Effective Time
by the TSW Applicable Ratio, at an exercise price per share of Newco
Common Stock equal to the exercise price per share of such TSW Option
or TSW Warrant immediately prior to the Effective Time divided by the
TSW Applicable Ratio rounded up to the nearest cent. If the foregoing
calculation results in an assumed TSW Option or TSW Warrant being
exercisable for a fraction of a share of Newco Common Stock, then the
number of shares of Newco Common Stock subject to such option or
warrant, as the case may be, will be rounded down to the nearest whole
number of shares, with no cash being payable for such fractional share.
The term, exercisability, vesting schedule, status as an "incentive
stock option" under Section 422 of the Code, if applicable, and all
other terms and conditions of each Newco Option and each Newco Warrant
will otherwise remain as set forth in the TSW Option or TSW Warrant
assumed by such Newco Option Newco Warrant. Continuous service as an
employee or consultant with TSW or any of the TSW Subsidiaries (as
hereinafter defined) will be credited to an optionee of TSW for
purposes of determining the number of shares of Newco Common Stock
subject to exercise under a Newco Option after the Effective Time.
1.11 INDUS AND TSW PLANS. Upon the Effective Time, and subject to
assumption of the Stock Rights (as defined below), the INDUS Plans, the
INDUS Stock Purchase Plan and the TSW Plans shall be terminated in
accordance with their respective terms.
1.12 REGISTRATION. INDUS will cause Newco to cause the Newco Common
Stock issuable upon exercise of Newco Options, and Newco Stock Purchase
Plan Options, (collectively, the "Stock Rights") and the shares
reserved for issuance pursuant to future awards under the Newco Plans
to be registered on Form S-8 (the "Form S-8") promulgated by the
Securities and Exchange Commission ("SEC") within 5 days after the
Effective Time and will use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements
for so long as any such assumed Stock Rights shall remain outstanding.
With respect to those individuals who subsequent to the Mergers will be
subject to the reporting requirements under Section 16(a) of the
Exchange Act (as hereinafter defined), Newco shall administer the Stock
Rights assumed pursuant to Sections 1.9 and 1.10 (including the
provisions of the INDUS Plans, the INDUS ESPP and the TSW Plans
incorporated in the Stock Rights) in a manner that complies with Rule
16b-3 promulgated by the SEC under the Exchange Act.
1.13 EFFECTIVE TIME; EFFECTS OF THE MERGERS.
(a) The INDUS Merger shall be effective when the INDUS Agreement
of Merger has been filed with the Secretary of State of the State of
California in accordance with the relevant provisions of the CGCL
(the "INDUS Effective Time"). The TSW Merger shall be effective when
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a properly executed Certificate of Merger (the "TSW Certificate of
Merger") is filed with the Secretary of State of the State of
Georgia in accordance with the relevant provisions of the GBCC (the
"TSW Effective Time"). The parties shall cause the INDUS Effective
Time and the TSW Effective Time to occur substantially
simultaneously on the Closing Date. The "Effective Time" shall mean
the time and date of the INDUS Effective Time or the TSW Effective
Time, whichever is later.
(b) At the Effective Time: (i) pursuant to the terms of this
Agreement and the INDUS Agreement of Merger, INDUS Sub will be
merged with and into INDUS, the separate corporate existence of
INDUS Sub will cease, and INDUS will continue as the INDUS Surviving
Corporation; (ii) pursuant to the terms of this Agreement and the
TSW Agreement of Merger, TSW Sub will be merged with and into TSW,
the separate corporate existence of TSW Sub will cease, and TSW will
continue as the TSW Surviving Corporation; (iii) the Articles of
Incorporation of INDUS in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the INDUS Surviving
Corporation; (iv) the Articles of Incorporation of TSW in effect
immediately prior to the Effective Time shall be the Articles of
Incorporation of the TSW Surviving Corporation; (v) the Bylaws of
INDUS Sub in effect immediately prior to the Effective Time shall be
the Bylaws of the INDUS Surviving Corporation; (vi) the Bylaws of
TSW Sub in effect immediately prior to the Effective Time will be
the Bylaws of the TSW Surviving Corporation; (vii) the directors and
officers to be determined by the parties to this Agreement will be
the directors and officers of the INDUS Surviving Corporation;
(viii) the directors and officers to be determined by the parties to
this Agreement will be the directors and officers of the TSW
Surviving Corporation; (ix) the INDUS Merger will, from and after
the Effective Time, have all of the effects provided by applicable
law, including, without limitation, the CGCL; and (x) the TSW Merger
shall have the effects set forth in Section 14-2-1106 of the GBCC.
1.14 REGISTRATION ON FORM S-4. The Newco Common Stock to be issued in
the mergers shall be registered under the Securities Act on the Form S-
4 (as hereinafter defined). As promptly as practicable after the date
of this Agreement, INDUS, Newco and TSW shall prepare and file with the
SEC a registration statement on Form S-4 (the "Form S-4"), together
with the prospectus/joint proxy statement to be included therein (the
"Prospectus/Proxy Statement") and any other documents required by the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in connection with the Mergers. Each of INDUS, Newco
and TSW shall use its reasonable best efforts to respond promptly to
any comments of the SEC and to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing.
INDUS and Newco shall also take any action required to be taken under
any applicable state securities or "blue sky" laws and regulations of
the Nasdaq Stock Market in connection with the issuance of the Newco
Common Stock pursuant to the Mergers. Each party hereto shall promptly
furnish to any other party hereto all information concerning such party
and its shareholders as may be reasonably required in connection with
any action contemplated by this Section 1.14. Each of INDUS, Newco and
TSW will notify the other promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Form S-4 or the Prospectus/Proxy
Statement or for additional information and will supply the other with
copies of all correspondence with the SEC or its staff with respect to
the Form S-4 or the Prospectus/Proxy Statement. Whenever any event
occurs which should be set forth in an amendment or supplement to the
Form S-4 or the Prospectus/Proxy Statement, INDUS and Newco or TSW, as
the case may be, shall promptly inform the other of such occurrence and
cooperate in filing with the SEC or its staff, and/or mailing to
shareholders of INDUS and TSW, such amendment or supplement.
1.15 TAX FREE REORGANIZATION. The parties intend to adopt this
Agreement and the Mergers as a plan of reorganization under Section
368(a)(1)(A) of the Code by virtue of the provisions of Section
368(a)(2)(E) of the Code. The Newco Common Stock issued in the INDUS
Merger will be
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issued solely in exchange for the INDUS Common Stock and the Newco
Common Stock issued in the TSW Merger will be issued solely in exchange
for the TSW Common Stock, the TSW Preferred Stock, the TSW Subordinated
Notes and the TSW Unpaid Dividends. Cash paid in lieu of fractional
shares of any INDUS Common Stock, TSW Common Stock, TSW Preferred
Stock, TSW Subordinated Notes and the TSW Unpaid Dividends is being
paid for the convenience of the parties and is not separately bargained
for consideration. The parties shall not take a position on any tax
return inconsistent with this Section 1.15. In addition, Newco hereby
represents, and will represent as of the Closing Date, that it intends
to cause each of INDUS and TSW to continue at least one significant
historic business or continue to use a significant portion of its
business assets in a trade or business, in each case within the meaning
of Treasury Regulation 1.368-1(d).
1.16 POOLING OF INTERESTS. The parties intend that the Mergers be
treated as a "pooling of interests" for accounting purposes. The
parties shall use their reasonable best efforts to cause their
respective affiliates to execute and deliver Affiliates Agreements, as
contemplated by Sections 4.5 and 5.5 below, to ensure compliance by
such affiliates with the restrictions required to allow such accounting
treatment to be utilized. In addition, Newco hereby represents and
warrants that it shall not after the Closing Date take any action that
will cause the Mergers not to qualify as a "pooling of interests" for
accounting purposes.
1.17 HART-SCOTT-RODINO FILINGS. INDUS and Newco will, and TSW shall
use its reasonable best efforts to cause Warburg, Pincus Investors,
L.P. ("Warburg") to, promptly prepare and file the applicable notices
(if any) required to be filed by them under the Hart-Scott-Rodino
Antitrust Improvements Act (the "HSR Act"), and comply promptly with
any requests to any of them from the Federal Trade Commission or United
States Department of Justice for additional information.
1.18 BOARD OF DIRECTORS AND OFFICERS OF NEWCO. At the Effective Time,
the directors of Newco shall be Robert W. Felton, Richard W. MacAlmon,
Edward R. Koepfler, Alan G. Merten, Christopher R. Lane, John W. Blend,
III, William H. Janeway and Joseph P. Landy. At the Effective Time, the
following individuals shall be elected to the following offices of
Newco:
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
Robert W. Felton..... Chairman and Chief Executive Officer
Vice Chairman and President of Strategy and
Christopher R. Lane.. Product Development
Edward R. Koepfler... President of Worldwide Operations
John W. Blend, III... President of Worldwide Sales and Marketing
Chief Financial Officer and Executive VicePresident
Frank M. Siskowski... of Investor Relations
</TABLE>
2. REPRESENTATIONS AND WARRANTIES OF TSW
Except as. set forth in a letter dated the date of this Agreement, delivered
by TSW to INDUS concurrently herewith, and certified by an officer of TSW, on
behalf of TSW, to be true, accurate and complete to the best of his knowledge
(the "TSW Disclosure Letter"), TSW hereby represents and warrants to INDUS and
Newco that:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. TSW, and
each of its subsidiaries set forth in Section 2.1 of the TSW Disclosure
Letter (the "TSW Subsidiaries") (the TSW Subsidiaries being the only
subsidiaries of TSW), is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now
being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to
qualify would not have a Material Adverse Effect on TSW (as defined
below). Section 2.1 of the TSW Disclosure Letter sets forth
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a correct and complete list of the TSW Subsidiaries, the holders of
record of each TSW Subsidiary's outstanding equity, and a correct and
complete list of each jurisdiction in which each of TSW and the TSW
Subsidiaries is duly qualified and in good standing to do business. TSW
has delivered to INDUS or its counsel complete and correct copies of
the Articles of Incorporation and Bylaws of TSW and will deliver upon
request to INDUS or its counsel prior to the Closing Date the
equivalent charter documents for each of the TSW Subsidiaries, in each
case as amended to the date of this Agreement. Other than the TSW
Subsidiaries, TSW does not own, directly or indirectly, any capital
stock or other equity interest of any corporation or have any direct or
indirect equity or ownership interest in or control over any other
business, whether organized as a corporation, partnership, joint
venture or otherwise. The TSW SEC Document (defined below) sets forth a
complete and accurate list of the directors and officers of TSW. The
operations now being conducted by TSW have not been conducted under any
other name.
In this Agreement, any reference to the term "Material Adverse Effect
on TSW" means any event, change or effect which, individually or
together with any other events, changes or effects, is materially
adverse to the business, assets (including intangible assets),
financial condition, results of operations, or prospects of TSW and the
TSW Subsidiaries, taken as a whole. In addition, any reference to the
terms "to TSW's knowledge" or "known to TSW" refers to the current
actual knowledge of any of the officers of TSW listed in Section 2.1 of
the TSW Disclosure Letter.
2.2 CAPITAL STRUCTURE.
(a) Stock and Options. The authorized capital stock of TSW
consists of 50,000,000 shares of $.01 par value per share TSW Common
Stock and 22,390,993 shares of $.01 par value per share TSW
Preferred Stock, of which 1,897,028 shares are denominated Series A
Preferred Stock, 393,965 shares are denominated Series B Preferred
Stock, 500,000 shares are denominated Series C Cumulative Preferred
Stock, 600,000 shares are denominated Series D Cumulative Preferred
Stock and 20,000,000 shares may be issued from time to time in one
or more series. At the close of business on June 5, 1997, (i)
302,850 shares of TSW Common Stock were issued and outstanding, no
shares of TSW Common Stock were held by TSW in its treasury,
1,575,597 shares of TSW Common Stock were reserved for issuance upon
the exercise of outstanding TSW Options, 1,081,292 shares of TSW
Common Stock were available for the grant of additional awards under
the TSW Plans, 1,354,001 shares of TSW Common Stock were reserved
for issuance upon exercise of outstanding TSW Warrants, and
2,943,218 shares of TSW Common Stock were reserved for issuance upon
conversion of TSW Preferred Stock, and (ii) 2,943,218 shares of TSW
Preferred Stock were issued and outstanding, consisting of 1,897,028
shares of Series A Preferred Stock, 393,965 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.
Section 2.2 of the TSW Disclosure Letter sets forth a correct and
complete list of the holders of record of TSW's outstanding capital
stock, including their addresses as set forth on the stock transfer
books of TSW and the number of shares held by each holder. All
outstanding shares of TSW Common Stock and TSW Preferred Stock are
validly issued, fully paid and non-assessable and not subject to
preemptive rights by statute, the Articles of Incorporation or
Bylaws of TSW, or any agreement or document to which TSW is a party
or by which it is bound. All outstanding shares of the capital stock
of each of the TSW Subsidiaries are validly issued, fully paid and
non-assessable and are owned by TSW or one of the TSW Subsidiaries
free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances. All issued and
outstanding shares of TSW and the TSW Subsidiaries were issued in
compliance with registration and qualification requirements of all
applicable federal and state securities laws. TSW has delivered to
INDUS a correct and complete list of each TSW Option and TSW Warrant
outstanding as of the date hereof, including the name of the holder
of such TSW Option or TSW Warrant, the TSW Plan, if any, pursuant to
which such TSW Option was issued, the number of shares covered by
such TSW Option or TSW Warrant, the per share exercise price of such
TSW Option or TSW Warrant and
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the vesting commencement date and vesting schedule applicable to
each such TSW Option, including the number of shares vested as of
the date of this Agreement.
(b) No Other Commitments. Except for the TSW Options, the TSW
Warrants and the TSW Subordinated Notes disclosed in Section 2.2(a)
above, a list of which has been provided to INDUS, and as disclosed
in Section 2.2 of the TSW Disclosure Letter, there are no options,
warrants, calls, rights, commitments, conversion rights or
agreements of any character to which TSW or any of the TSW
Subsidiaries is a party or by which TSW or any of the TSW
Subsidiaries is bound obligating TSW or any of the TSW Subsidiaries
to issue, deliver, sell, redeem or repurchase or cause to be issued,
delivered, sold, redeemed or repurchased any shares of capital stock
of TSW or any of the TSW Subsidiaries or securities convertible into
or exchangeable for shares of capital stock of TSW or any of the TSW
Subsidiaries, or obligating TSW or any of the TSW Subsidiaries to
grant, extend, amend or enter into any such option, warrant, call,
right, commitment, conversion right or agreement. There are no
voting trusts, proxies or other agreements or understandings to
which TSW is a party with respect to the voting of the capital stock
of TSW or any of the TSW Subsidiaries, other than the TSW Voting
Agreement.
(c) Registration Rights. Except as disclosed in Section 2.2 of the
TSW Disclosure Letter, TSW is not under any obligation to register
under the Securities Act any of its presently outstanding securities
or any securities that may be subsequently issued.
2.3 AUTHORITY.
(a) Corporate Action. Subject to receipt of the TSW Shareholder
Approval (as defined below), TSW has all requisite corporate power
and authority to enter into this Agreement and the TSW Agreement of
Merger, to perform its obligations hereunder and thereunder and to
consummate the TSW Merger and the other transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
TSW Agreement of Merger by TSW and, subject to receipt of the TSW
Shareholder Approval, the filing of the TSW Certificate of Merger
pursuant to the GBCC and the consummation by TSW of the TSW Merger
and the other transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of
TSW. This Agreement has been, and upon the Closing Date the TSW
Agreement of Merger will have been, duly executed and delivered by
TSW and this Agreement is, and the TSW Agreement of Merger as of the
Effective Time will be, valid and binding obligations of TSW,
enforceable in accordance with their terms, except as enforceability
may be limited by bankruptcy and other similar laws and general
principles of equity.
(b) No Conflict. Neither the execution, delivery and performance
of this Agreement or the TSW Agreement of Merger, nor the
consummation of the transactions contemplated hereby or thereby
applicable to TSW nor compliance with the provisions hereof or
thereof will: (i) conflict with, or result in any violations of, or
cause a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in, or the
loss of any material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the
material properties or assets of TSW or any of the TSW Subsidiaries
under, any term, condition or provision of (x) the Articles of
Incorporation or Bylaws of TSW or the equivalent organizational
documents of any of the TSW Subsidiaries or (y) except as disclosed
in Section 2.3 of the TSW Disclosure Letter any loan or credit
agreement, note, bond, mortgage, indenture, lease or other material
agreement, instrument, permit, license judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to TSW or any
of the TSW Subsidiaries or their respective properties or assets,
other than any such conflicts, violations, defaults, rights, losses,
liens, security interests, charges or encumbrances which,
individually or in the aggregate, would not have a Material Adverse
Effect on TSW; or (ii) require the affirmative vote of the holders
of greater than (A) a majority of the issued and outstanding shares
of TSW Common Stock and TSW Preferred Stock, voting together as a
single
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class and (B) a majority of the outstanding shares of each series of
TSW Preferred Stock, each series voting separately as a class.
(c) Governmental Consents. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (each a
"Governmental Entity"), is required to be obtained by TSW or any of
the TSW Subsidiaries in connection with the execution and delivery
of this Agreement or the TSW Agreement of Merger, or the
consummation of the transactions contemplated hereby or thereby
applicable to TSW or any TSW Subsidiary, except for: (i) the filing
with the SEC, and the effectiveness, of the Form S-4, and the filing
of the Prospectus/ Proxy Statement relating to the meeting of the
shareholders of TSW (the "TSW Shareholders Meeting") to be held with
respect to the approval by TSW's shareholders of this Agreement, the
TSW Agreement of Merger, and the Mergers, and the filing of such
reports and information under the Exchange Act, and the rules and
regulations promulgated by the SEC thereunder, as may be required in
connection with this Agreement and the transactions contemplated
hereby; (ii) the filing of the TSW Agreement of Merger with the
Secretary of State of the State of Georgia and appropriate documents
with the relevant authorities of other states in which TSW is
qualified to do business; (iii) such filings, authorizations, orders
and approvals as may be required under state "control share
acquisition," "anti-takeover," "blue sky" or other similar statutes
and regulations (collectively, "State Takeover Laws"); (iv) such
filings and notifications as may be necessary under the HSR Act; and
(v) such other filings, authorizations, orders and approvals which,
if not obtained or made, would not have a Material Adverse Effect on
TSW or INDUS or have a material adverse effect on the ability of the
parties to consummate the Mergers promptly.
2.4 SEC DOCUMENTS.
(a) SEC Reports. TSW has delivered to INDUS or its counsel correct
and complete copy of its Registration Statement on Form S-1 filed
with the SEC on May 5, 1997 (the "TSW SEC Document"), which is the
only document that TSW has ever filed with the SEC. Except as
disclosed in Section 2.4 of the TSW Disclosure Letter, as of the
date hereof, the TSW SEC Document (including all exhibits and
schedules thereto and documents incorporated by reference therein)
does not contain any untrue statement of a material fact and does
not omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. TSW has filed all documents and
agreements which TSW reasonably believed were required to be filed
as exhibits to the TSW SEC Document other than exhibits indicated in
the TSW SEC Document as "to be filed by amendment."
(b) Financial Statements. The financial statements of TSW included
in the TSW SEC Document complied as to form in all material respects
with the then applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as
may have been indicated in the notes thereto) and fairly present
(subject, in the case of the unaudited statements, to normal year-
end audit adjustments) the consolidated financial position of TSW
and its consolidated TSW Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and cash
flows for the respective periods then ended.
2.5 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by TSW for inclusion or incorporation by reference in
the Form S-4 and Prospectus/Proxy Statement will, at the time the
Form S-4 is declared effective, at the date the Prospectus/Proxy
Statement is mailed to the shareholders of TSW and at the time of
the TSW Shareholders Meeting, contain, after giving effect to any
supplement or amendment thereto, any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements
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therein, in light of the circumstances under which they are made,
not misleading. The Prospectus/Proxy Statement will comply as to
form in all material respects with the provisions of the Exchange
Act and the rules and regulations promulgated by the SEC thereunder.
Notwithstanding the foregoing, TSW makes no representation or
warranty with respect to any information supplied by INDUS or Newco
which is or will be contained in any of the foregoing documents.
2.6 COMPLIANCE WITH APPLICABLE LAWS. The businesses of TSW and the
TSW Subsidiaries are not being conducted in violation of any law,
ordinance, regulation, rule or order of any Governmental Entity,
except where such violation would not have a Material Adverse Effect
on TSW. Except as disclosed in Section 2.6 of the TSW Disclosure
Letter, TSW has not been notified in writing by any Governmental
Entity that any investigation or review with respect to TSW, its
officers or directors or any of the TSW Subsidiaries is pending or
threatened, nor has any Governmental Entity notified TSW in writing
of its intention to conduct the same, which investigation or review
would have a Material Adverse Effect on TSW. Except as disclosed in
Section 2.6 of the TSW Disclosure Letter, TSW and the TSW
Subsidiaries have all permits, licenses and franchises from
Governmental Entities required to conduct their businesses as now
being conducted, except for those whose absence would not have a
Material Adverse Effect on TSW.
2.7 LITIGATION. Except as disclosed in Section 2.7 of the TSW
Disclosure Letter, or as would not have a Material Adverse Effect on
TSW, there is no suit, action, arbitration, demand, claim or
proceeding pending or, to the knowledge of TSW, threatened against
TSW, any of its officers or directors or any of the TSW
Subsidiaries; nor is there any judgment, decree, injunction, ruling
or order of any Governmental Entity or arbitrator or settlement
agreement outstanding against TSW, any of its officers or directors
or any of the TSW Subsidiaries. TSW has delivered or made available
to INDUS or its counsel correct and complete copies of all
correspondence prepared by its counsel for TSW's auditors in
connection with the last two completed audits of TSW's financial
statements and any such correspondence since the date of the last
such audit. Neither TSW nor any of the TSW Subsidiaries is a party
to any decree, order or arbitration award (or agreement entered into
in any administrative, judicial or arbitration proceeding with any
governmental authority) with respect to its properties, assets,
personnel or business activities which would have a Material Adverse
Effect on TSW. TSW is not in violation of, or delinquent, in respect
of, any decree, order or arbitration award naming TSW or a TSW
Subsidiary as a party or otherwise known to it, or law, ordinance,
statute, or governmental authority to which its properties, assets,
personnel or business activities are subject or to which TSW or a
TSW Subsidiary is subject, including, without limitation, laws,
rules and regulations relating to occupational health and safety,
equal employment opportunities, fair employment practices, and sex,
race, religious and age discrimination, except for such violations
as would not have a Material Adverse Effect on TSW.
2.8 ERISA AND OTHER COMPLIANCE.
(a) Section 2.8 of the TSW Disclosure Letter identifies each
"employee benefit plan," as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
currently or previously maintained, contributed to or entered into
by TSW or any of the TSW Subsidiaries under which TSW or any of the
TSW Subsidiaries or any ERISA Affiliate (as defined below) thereof
has any present or future obligation or liability (collectively, the
"TSW Employee Plans"). For purposes of this Section 2.8, "ERISA
Affiliate" shall mean any entity which is a member of (A) a
"controlled group of corporations," as defined in Section 414(b) of
the Code, (B) a group of entities under "common control," as defined
in Section 414(c) of the Code, or (C) an "affiliated service group,"
as defined in Section 414 (m) of the Code, or treasury regulations
promulgated under Section 414(o) of the Code, any of which includes
TSW or any of the TSW Subsidiaries. Copies of all TSW Employee Plans
(and, if applicable, related trust
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agreements) and all amendments thereto and written interpretations
thereof (including summary plan descriptions) have been delivered to
INDUS or its counsel, together with the three most recent annual
reports (Form 5500, including, if applicable, the auditor's reports
and any Schedule B thereto) prepared in connection with any such TSW
Employee Plan. All TSW Employee Plans which individually or
collectively would constitute an "employee pension benefit plan," as
defined in Section 3 (2) of ERISA (collectively, the "TSW Pension
Plans") are identified as such in the TSW Disclosure Letter. All TSW
Employee Plans which individually or collectively would constitute
an "employee welfare benefit plan," as defined in Section 3(l) of
ERISA are identified as such in the TSW Disclosure Letter. All
contributions or premiums due from TSW or any of the TSW
Subsidiaries with respect to any of the TSW Employee Plans have been
made as required under ERISA or have been accrued on TSW's or any
such TSW Subsidiary's financial statements as of March 31, 1997, or
will be made prior to the Closing. Each TSW Employee Plan has been
established and maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations, including, without limitation, ERISA and the Code,
which are applicable to such TSW Employee Plans, except as would not
have a Material Adverse Effect on TSW.
(b) No TSW Pension Plan constitutes, or has since the enactment of
ERISA constituted, a "multiemployer plan," as defined in Section
3(37) of ERISA. No TSW Pension Plans are subject to Title IV of
ERISA. No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any
TSW Employee Plan which is covered by Title I of ERISA which would
result in a material liability to TSW or any of the TSW Subsidiaries
taken individually, excluding transactions effected pursuant to a
statutory or administrative exemption. Nothing done or omitted to be
done and no transaction or holding of any asset under or in
connection with any TSW Employee Plan has or will make TSW or any
employee, officer or director of TSW subject to any material
liability under Title I of ERISA or liable for any material Tax (as
defined below) or penalty pursuant to any of Sections 4972, 4975,
4976, 4977 or 4979 of the Code or Section 502 of ERISA.
(c) With respect to each TSW Pension Plan that is intended to be
qualified under Section 401(a) of the Code (a "TSW 401(a) Plan"),
either (i) a favorable determination letter has been received from
the Internal Revenue Service ("IRS") as to the qualification of the
TSW 401(a) Plan under the Code as in effect immediately after the
Tax Reform Act of 1986, or (ii) the TSW 401(a) Plan has been
established under a standardized prototype plan for which an
Internal Revenue Service opinion letter has been obtained and upon
which the TSW 401(a) Plan may rely. TSW has delivered to INDUS or
its counsel a complete and correct copy of the most recent Internal
Revenue Service determination letter with respect to each TSW 401(a)
Plan.
(d) No TSW Employee Plan or TSW Arrangement (as defined below)
provides or ever has provided death, medical or health benefits
(whether or not insured) with respect to current or former employees
after any such employee's retirement or other termination of service
(other than benefit coverage mandated by applicable law, including,
without limitation, coverage provided pursuant to Section 4980B of
the Code).
(e) The TSW Disclosure Letter lists each employment, severance,
compensation or other similar contract, arrangement or policy and
each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers'
benefits, vacation benefits, severance benefits, disability
benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other
forms of incentive compensation or post-retirement insurance,
compensation or benefits for employees, consultants or directors
(other than workers compensation, unemployment compensation and
other government mandated programs) which (A) is entered into,
maintained or contributed to, as the case may be, by TSW or any of
the TSW Subsidiaries, and (B) covers any current or former employee,
consultant or director of TSW or
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any of the TSW Subsidiaries. Such contracts, plans and arrangements
as are described in this Section 2.8(e) are herein referred to
collectively as the "TSW Benefit Arrangements." Each TSW Benefit
Arrangement has been established and maintained in substantial
compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations which are
applicable to such TSW Benefit Arrangement. TSW has delivered to
INDUS or its counsel a complete and correct copy of each TSW Benefit
Arrangement document or, if such TSW Benefit Arrangement is
unwritten, a description thereof.
(f) TSW does not have any plan or commitment to establish any new
TSW Employee Plans or TSW Arrangements and there has been no
amendment to, written interpretation or announcement (whether or not
written) by TSW or any of the TSW Subsidiaries relating to any TSW
Employee Plan or TSW Benefit Arrangement that would increase
materially the expense of maintaining such TSW Employee Plan or TSW
Benefit Arrangement above the level of the expense incurred in
respect thereof for the year ended March 31, 1997.
(g) TSW has timely provided, or will have provided prior to the
Closing (as defined below), to individuals entitled thereto all
required notices and coverage pursuant to Section 4980B of the Code
and the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), with respect to any "qualifying event" (as
defined in Section 4980B(f)(3) of the Code). TSW will timely provide
to individuals entitled thereto all required notices and coverage
pursuant to Code Section 4980B and COBRA with respect to any
"qualifying event" (as defined in Section 4980B(f)(3) of the Code)
occurring prior to and including the Closing Date. No material Tax
payable on account of Section 4980B of the Code has been incurred
with respect to any current or former employees (or their
beneficiaries) of TSW or any of the TSW Subsidiaries.
(h) No benefit payable or which may become payable by TSW or any
of the TSW Subsidiaries pursuant to any TSW Employee Plan or any TSW
Benefit Arrangement or as a result of or arising under this
Agreement shall constitute an "excess parachute payment" (as defined
in Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise Tax under Section 4999 of the Code or which
would not be deductible by reason of Section 280G of the Code.
(i) TSW and each TSW Subsidiary are in compliance in all material
respects with all applicable laws, agreements and contracts relating
to employment, employment practices, wages, hours, and terms and
conditions of employment, including, but not limited to, employee
compensation matters, but not including ERISA.
(j) TSW and each TSW Subsidiary have good labor relations and have
no knowledge of any facts indicating that the consummation of the
transactions contemplated hereby will have a material adverse effect
on labor relations, and have no knowledge that any of their key
employees intends to leave its or their employ.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES. Neither TSW nor any of the
TSW Subsidiaries has any liabilities or obligations of any nature
(matured or unmatured, fixed or contingent) which are, individually or
in the aggregate, of a nature required to be disclosed on the face of
the balance sheet prepared in accordance with GAAP and are material to
the business of TSW and the TSW Subsidiaries, taken as a whole, except
for such liabilities or obligations as (i) were accrued or fully
reserved against in the consolidated balance sheet of TSW at March 31,
1997 included in the TSW SEC Document (the "TSW Balance Sheet") or (ii)
are of a normally recurring nature and were incurred after March 31,
1997 (the "TSW Balance Sheet Date") in the ordinary course of business
consistent with past practice. As of the TSW Balance Sheet Date, there
were no material loss contingencies (as such term is used in Statement
of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975) which are not adequately
provided for in the TSW Balance Sheet as required by said Statement No.
5.
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2.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Section 2.10 of the TSW Disclosure Letter, since the TSW Balance Sheet
Date there has not occurred:
(a) any change, event or effect not identified below that would
have a Material Adverse Effect on TSW;
(b) any amendments or changes in the Articles of Incorporation or
Bylaws of TSW;
(c) any damage, destruction or loss, whether covered by insurance
or not, having a Material Adverse Effect on TSW;
(d) any redemption, repurchase or other acquisition of shares of
TSW Common Stock or TSW Preferred Stock by TSW (other than pursuant
to arrangements with terminated employees or consultants), or any
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to
TSW Common Stock or TSW Preferred Stock;
(e) any increase in or modification of the compensation or
benefits payable or to become payable by TSW to any of its
directors, employees or consultants, except in the ordinary course
of business, consistent with past practice;
(f) other than as required by applicable statute or regulation,
any increase in or modification of any bonus, pension, insurance or
TSW Employee Plan or TSW Benefit Arrangement (including, but not
limited to, the granting of stock options, restricted stock awards
or stock appreciation rights) made to, for or with any of its
employees, other than (a) in the ordinary course of business,
consistent with past practice, and (b) after the date of this
Agreement, which is authorized, if required, pursuant to Section 4.3
below;
(g) any acquisition or sale of a material amount of property or
assets of TSW, other than in the ordinary course of business,
consistent with past practice;
(h) any alteration in any term of any outstanding security of TSW
including, but not limited to, acceleration of the vesting or any
change in the terms of any outstanding stock options;
(i) other than in the ordinary course of business, consistent with
past practice, the total amount of which is not material, any (A)
incurrence, assumption or guarantee by TSW of any debt for borrowed
money; (B) issuance or sale of any securities convertible into or
exchangeable for debt securities of TSW; or (C) issuance or sale of
options or other rights to acquire from TSW, directly or indirectly,
debt securities of TSW or any securities convertible into or
exchangeable for any such debt securities;
(j) any creation or assumption by TSW of any mortgage, pledge,
security interest or lien or other encumbrance on any asset, other
than in the ordinary course of business, consistent with past
practice, not in excess of $100,000 in the aggregate;
(k) any making of any loan, advance or capital contribution to or
investment in any person other than (i) loans, advances or capital
contributions made in the ordinary course of business of TSW, and
(ii) other loans and advances, where the aggregate amount of all
such items outstanding at any time does not exceed $50,000;
(l) any entering into, amendment of, relinquishment, termination
or non-renewal by TSW of any material contract, lease transaction,
commitment or other right or obligation other than in the ordinary
course of business;
(m) except as disclosed in Section 2.11(j) of the TSW Disclosure
Letter, any transfer or grant of a right under the TSW IP Rights (as
defined below), other than those transferred or granted in the
ordinary course of business, consistent with past practices, except
for any grant of a right to TSW source code or grant of any
exclusive rights to any TSW IP Rights;
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<PAGE>
(n) any labor dispute, claim of wrongful discharge or charge of
unfair labor practice (other than routine individual grievances),
any activity or proceeding by a labor union or representative
thereof to organize any employees of TSW or, to TSW's knowledge, any
campaign being conducted to solicit authorization from employees to
be represented by such labor union; or
(o) other than in the ordinary course of business, consistent with
past practice, any capital expenditure or commitment by TSW, either
individually or in the aggregate, exceeding $50,000;
(p) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates by TSW;
(q) any revaluation by TSW of any of its assets other than normal
periodic accounting valuations consistent with past practice;
(r) material change in pricing or royalties set or charged by TSW
to its customers or licensees or in pricing or royalties set or
charged by persons who have licensed Intellectual Property (as
defined in Section 2.15 below) to TSW;
(s) any agreement by TSW or, to TSW's knowledge, any officer or
employee thereof, to take any of the actions described in the
preceding clauses (a) through (r) (other than negotiations with
INDUS and its representatives regarding the transactions
contemplated by this Agreement).
2.11 AGREEMENTS. The TSW Disclosure Letter sets forth a list of any
of the following currently effective contracts, agreements and other
instruments to which TSW or any TSW Subsidiary is a party, copies of
each of which have been delivered to INDUS or its counsel:
(a) contract with or commitment to any labor union;
(b) continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services
requiring payment to or from TSW or any TSW Subsidiary of an amount
in excess of $100,000 per annum which is not terminable on 120 days'
or less notice without cost or other liability at, or at any time
after, the Effective Time or in which TSW or such TSW Subsidiary has
granted or received manufacturing rights, most favored nations
pricing provisions or exclusive marketing rights relating to any
product, group of products or territory, provided, however, that
only contracts for the top 10 customers of TSW (as measured by
fiscal year 1997 TSW customer purchases) are listed in the TSW
Disclosure Letter;
(c) contract providing for the development of technology for TSW
which technology is used or incorporated in any products currently
distributed by TSW or is anticipated to be used or incorporated in
any planned products of TSW or which requires TSW to perform
specified development work for a third party;
(d) joint venture contract or agreement or other agreement which
has involved, or is reasonably expected to involve, a sharing of
profits or losses in excess of $25,000 per annum with any other
party;
(e) contract or commitment for the employment of any officer,
employee or consultant, or any other type of contract or
understanding with any officer, employee or consultant, which is not
immediately terminable without cost, notice or other liability
(except for normal severance benefits available to employees
generally as set forth in any TSW Benefit Arrangement and except to
the extent general principles of wrongful termination law may limit
TSW's or any TSW Subsidiary's ability to terminate employees at
will);
(f) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of
money, for a line of credit or for a leasing transaction of a type
required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards
Board (other than equipment leases entered into in the
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<PAGE>
ordinary course of business pursuant to which payments by TSW do not
exceed $100,000 in the aggregate);
(g) lease or other agreement under which TSW or any TSW Subsidiary
is lessee of or holds or operates any items of tangible personal
property or real property owned by any third party and under which
payments to such third party exceed $60,000 per annum;
(h) agreement or arrangement for the sale or acquisition of any
assets, properties or rights having a value in excess of $25,000,
other than in the ordinary course of business consistent with past
practice;
(i) agreement which restricts TSW or any TSW Subsidiary from
engaging in any aspect of its business or competing in any line of
business in any geographic area (including any such agreement
pursuant to which TSW has granted exclusive rights to a third
party);
(j) TSW IP Rights Agreements, other than ordinary course license
agreements with and users (of which representative copies of current
agreements have been delivered to INDUS or its counsel), and, in any
event, any agreement that grants rights or access to any source code
included in the TSW IP Rights;
(k) any material contract, license or agreement between TSW and
any third party (excluding customers other than the customers
described in Section 2.11(b) above) wherein or whereby TSW has
agreed to, or assumed, any obligation or duty to warrant, indemnify,
hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement or misappropriation by
TSW or such third party of the Intellectual Property of any third
party;
(l) any agreement, contract or commitment relating to capital
expenditures and involving future payments after the date hereof in
excess of $100,000;
(m) agreement between or among TSW or any TSW Subsidiary regarding
intercompany loans, revenue or cost sharing, ownership or license of
TSW IP Rights, intercompany royalties or dividends or similar
matters.
2.12 NO DEFAULTS. To TSW's knowledge, neither it nor any of the TSW
Subsidiaries is in breach, violation or default under, and there exists
no event, condition or occurrence which, after notice or lapse of time,
or both, would constitute such a breach, violation or default by TSW or
any of the TSW Subsidiaries under, any contract or agreement to which
TSW or any of the TSW Subsidiaries is a party or by which it is bound
and which would, if terminated or modified, have a Material Adverse
Effect on TSW. Each such agreement and contract is in full force and
effect, and to the knowledge of TSW, all other parties to each such
agreement or contract are in compliance with, and have not breached,
violated or defaulted under any term of such agreement or contract.
2.13 CERTAIN AGREEMENTS. Except as disclosed in Section 2.13 of the
TSW Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director, employee or consultant of TSW
or any of the TSW Subsidiaries from TSW or any of the TSW Subsidiaries,
under any TSW Employee Plan, TSW Benefit Arrangement or otherwise, (ii)
materially increase any benefits otherwise payable under any TSW
Employee Plan or TSW Benefit Arrangement or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.14 TAXES. TSW and each of the TSW Subsidiaries have filed, or
caused to be filed, all Tax (as defined below) returns required to be
filed by them (all of which returns were true, correct and complete in
all material respects and were completed in accordance with applicable
law) and have paid or withheld and paid, or caused to be paid or
withheld and paid, all Taxes that are shown on such Tax returns as due
and payable, other than such Taxes as are being contested in good faith
and for which
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<PAGE>
adequate reserves have been established in accordance with GAAP on the
TSW Balance Sheet and other than where the failure to so file, pay or
withhold would not have a Material Adverse Effect on TSW. All Taxes
required to have been paid or accrued by TSW and the TSW Subsidiaries
for all periods prior to the TSW Balance Sheet Date have been fully
paid or are adequately provided for or reflected in the TSW Balance
Sheet in accordance with GAAP. As of the Closing, TSW and each of the
TSW Subsidiaries will have withheld and timely remitted with respect to
its employees all income taxes and other Taxes required to be withheld
and remitted. Since the TSW Balance Sheet Date, no material Tax
liability has been assessed, proposed to be assessed, incurred or
accrued other than in the ordinary course of business. Except as
disclosed in Section 2.14 of the TSW Disclosure Letter, neither TSW nor
any TSW Subsidiary has received any notification that any material
issues have been raised (and are currently pending) by the Internal
Revenue Service or any other taxing authority, including, without
limitation, any sales tax authority, in connection with any of the Tax
returns referred to in the first sentence of this Section 2.14, and no
waivers of statutes of limitations have been given or requested with
respect to TSW or any of the TSW Subsidiaries. No taxing authority is
currently conducting an audit of any Tax returns of TSW or any of the
TSW Subsidiaries or, to TSW's knowledge, about to conduct such an
audit. Any deficiencies asserted or assessments (including interest and
penalties) made as a result of any examination by the Internal Revenue
Service or by appropriate national, state or departmental authorities
of the Tax returns of or with respect to TSW or any of the TSW
Subsidiaries have been fully paid or are adequately provided for in the
TSW Balance Sheet in accordance with GAAP and no material proposed (but
unassessed) additional Taxes have been asserted and no Tax liens have
been filed other than for Taxes not yet due and payable. None of TSW or
any of the TSW Subsidiaries (i) has made an election to be treated as a
"consenting corporation" under Section 341(f) of the Code or (ii) is a
"personal holding company" within the meaning of Section 542 of the
Code. TSW operates at least one historic business line, or owns at
least a significant portion of its historic business assets, in each
case within the meaning of Treasury Regulation 1.368-1(d).
As used in this Agreement, "Tax" means any of the Taxes and "Taxes"
means, with respect to any entity, (A) all income taxes (including any
tax on or based upon net income, gross income, income as specially
defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties or other
taxes, fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties or additional amounts imposed by
any taxing authority (domestic or foreign) on such entity, and (B) any
liability for the payment of any amount of the type described in the
immediately preceding clause (A) as a result of being a "transferee"
(within the meaning of Section 6901 of the Code of any other applicable
law) of another entity or a member of an affiliated or combined group.
2.15 INTELLECTUAL PROPERTY.
(a) Section 2.15 of the TSW Disclosure Letter contains a complete
and accurate list of all United States and foreign: (i) patents;
(ii) copyright registrations and mask work registrations; (iii)
trademarks registrations and trademark intent-to-use registrations;
(iv) registered user licenses; (v) all applications, provisional
applications or other filings for or to obtain any of the foregoing;
and (vi) any other similar registrations or applications for
Intellectual Property Rights (as defined below).owned by, or filed
by, or on behalf of, TSW or any of the TSW Subsidiaries anywhere in
the world (all of the foregoing, "TSW Registered Intellectual
Property").
(b) Section 2.15 of the TSW Disclosure Letter contains a complete
and accurate list of all material software programs and other
products sold or licensed by TSW or any of the TSW Subsidiaries.
(c) All TSW Intellectual Property Rights are owned free and clear
of any liens, encumbrances or security interests.
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<PAGE>
(d) TSW and the TSW Subsidiaries own, or have the right to use,
sell or license such Intellectual Property Rights (as defined below)
as are necessary or required for the conduct of their respective
businesses as presently conducted (such Intellectual Property Rights
being hereinafter collectively referred to as the "TSW IP Rights")
and such ownership or rights to use, sell or license are reasonably
sufficient for such conduct of their respective businesses, except
for any failure to own or have the right to use, sell or license
that would not have a Material Adverse Effect on TSW.
(e) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not
constitute a breach of any material instrument or material agreement
in respect of any Intellectual Property Rights licensed by or to TSW
or the TSW Subsidiaries (the "TSW IP Rights Agreements"), will not
cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any TSW IP Right or materially impair
the right of TSW and the TSW Subsidiaries or the TSW Surviving
Corporation to use, sell or license any TSW IP Right or portion
thereof (except where such breach, forfeiture, termination or
impairment would not have a Material Adverse Effect on TSW).
(f) There are no royalties, honoraria, fees or other payments
payable by TSW to any person by reason of the ownership, use,
license, purchase, sale, disposition or acquisition of the TSW IP
Rights (other than as set forth in the TSW IP Rights Agreements
listed in the TSW Disclosure Letter).
(g) To TSW's knowledge, no third party is infringing or
misappropriating any Intellectual Property Rights, including TSW
Registered Intellectual Property, owned by TSW or any of the TSW
Subsidiaries.
(h) Neither the manufacture, marketing, license, sale nor the
intended use of any product currently licensed or sold by TSW or any
of the TSW Subsidiaries or currently under development by TSW or any
of the TSW Subsidiaries violates any license or agreement between
TSW or any of the TSW Subsidiaries and any third party or infringes
any Intellectual Property Right of any other party; and there is no
pending or, to TSW's knowledge, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or
dispose of any TSW IP Right, nor has TSW or any of the TSW
Subsidiaries received any notice asserting that any TSW IP Right or
the proposed use, sale, license-or disposition thereof conflicts or
will conflict with the rights of any other party, except for any
violations, infringements, claims or litigation that would not have
a Material Adverse Effect on TSW, nor, to TSW's knowledge, is there
any basis for any such assertion.
(i) TSW has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all material trade secrets or other
confidential information constituting TSW IP Rights. 'To TSW's
knowledge, no current or prior officers, employees or consultants of
TSW or of any of the TSW Subsidiaries claim an ownership interest in
any TSW IP Rights as a result of having been involved in the
development of such property while employed by or consulting to TSW
or of any of the TSW Subsidiaries, or otherwise. Except as disclosed
in Section 2.15 of the TSW Disclosure Letter, all current officers
and development employees and, to TSW's knowledge, all other current
employees and consultants of TSW or any of the TSW Subsidiaries have
executed and delivered to TSW or the TSW Subsidiary an agreement
substantially in the form provided to INDUS or its counsel regarding
the protection of proprietary information and the assignment to TSW
or the TSW Subsidiary of all Intellectual Property Rights arising
from the services performed for TSW or the TSW Subsidiary by such
persons.
As used herein, the term "Intellectual Property Rights" shall mean
all industrial, intellectual property or other rights of a person
in, to, or arising out of: (i) any United States or foreign patent
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or any application therefor and any and all reissues, divisions,
continuations, renewals, extensions and continuations-in-part
thereof; (ii) inventions (whether patentable or not in any country),
invention disclosures, industrial designs, improvements, trade
secrets, proprietary information, know-how, technology and technical
data; (iii) copyrights, mask works, copyright registrations, mask
work registrations, and applications therefor in the United States
or any foreign country, and all other rights corresponding thereto
throughout the world; (iv) United States or foreign registered or
common law trademarks, service marks, trade dress, trade names,
logos, intent-to-use registrations or notices, and applications to
register or use any of the foregoing anywhere in the world; and (v)
any other proprietary rights in technology, including software, all
source and object code, algorithms, architecture, structure, display
screens, layouts, inventions, development tools and all
documentation and media constituting, describing or relating to the
above, including, without limitation, manuals, memoranda, records,
business information, or trade marks, trade dress or names, anywhere
in the world.
2.16 FEES AND EXPENSES. Except for the fees and expenses set forth in
TSW's engagement letter with Alex. Brown & Sons Incorporated, a copy of
which has been provided to INDUS, neither TSW nor any of the TSW
Subsidiaries has paid or become obligated to pay any fee or commission
to any broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.
2.17 INSURANCE. TSW and the TSW Subsidiaries maintain fire and
casualty, general liability, business interruption, directors and
officers, product liability and sprinkler and water damage insurance
that TSW believes to be reasonably prudent for its business. Correct
and complete copies of all such insurance policies presently in effect
have been provided to INDUS or its counsel. There is no claim by TSW
pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies.
TSW has no knowledge of any threatened termination of, or premium
increase, with respect to any such policies.
2.18 OWNERSHIP OF PROPERTY. Except (a) as disclosed in Section 2.18
of the TSW Disclosure Letter, (b) for liens for current Taxes not yet
delinquent or (c) for liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to carriers,
warehousemen, laborers, material men and the like, TSW and each of the
TSW Subsidiaries own their real and personal property free and clear of
all security interests, mortgages, liens, charges, claims, options and
encumbrances. All real and personal property of TSW and each of the TSW
Subsidiaries necessary for the operation of the business of TSW and
each TSW subsidiary, as applicable, is in generally good repair and is
operational and usable in the operations of TSW, subject to ordinary
wear and tear. Neither TSW nor any TSW Subsidiary is in violation of
any zoning, building or safety ordinance, regulation or requirement or
other law or regulation applicable to the operation of owned or leased
properties (the violation of which would have a Material Adverse Effect
on TSW), or has received any notice of violation with which it has not
complied, except where such violation would not have a Material Adverse
Effect on TSW.
2.19 ENVIRONMENTAL MATTERS.
(a) During the period that TSW and the TSW Subsidiaries have
operated, occupied, leased or owned their respective properties or
operated, occupied, leased or owned any facilities, there have been,
to TSW's knowledge, no disposals, releases or threatened releases of
Hazardous Materials (as defined below) on, from or under such
properties or facilities. TSW has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials
on, from, under or about any of such properties or facilities, which
may have occurred prior to TSW or any of the TSW Subsidiaries having
taken possession of any of such properties or facilities. No
Hazardous Materials are present as a result of the deliberate
actions of TSW or, to TSW's knowledge, as a result of any actions of
any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface
water thereof, that TSW has at any time owned, operated, occupied or
leased. For the purposes of this Agreement, the terms
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"disposal," "release," and "threatened release" shall have the
definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. 9601 et
seq., as amended ("CERCLA"). For the purposes of this Agreement
"Hazardous Materials" shall mean any hazardous or toxic substance,
material or waste which is or becomes prior to the Closing regulated
under, or defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous materials," "toxic
substance" or "hazardous chemical" under, (1) CERCLA; (2) any
similar international, federal, state or local law; or (3)
regulations promulgated under any of the above laws or statutes.
(b) To TSW's knowledge, none of the properties or facilities of
TSW or the TSW Subsidiaries is in violation of any federal, state or
local law, ordinance, regulation or order relating to industrial
hygiene or to the environmental conditions on, above, under or about
such properties or facilities, including, but not limited to, air,
soil, ground water or surface water condition ("Environmental
Violation"), except for such violations as would not have a Material
Adverse Effect on TSW. During the time that TSW or the TSW
Subsidiaries have operated, occupied, leased or owned their
respective properties and facilities, neither TSW, nor any of the
TSW Subsidiaries, nor, to TSW's knowledge, any third party, has
used, generated, manufactured or stored on, under or about such
properties or facilities or transported to or from such properties
or facilities any Hazardous Materials (except those Hazardous
Materials associated with general office use or janitorial
supplies).
(c) During the time that TSW or the TSW Subsidiaries have
operated, occupied, leased or owned their respective properties and
facilities, there has been no litigation brought or, to TSW'S
knowledge, threatened against TSW or any of the TSW Subsidiaries by,
or any settlement reached by TSW or any of the TSW Subsidiaries
with, any party or parties alleging the presence, disposal, release
or threatened release of any Hazardous Materials on, from or under
any of such properties or facilities or relating to any alleged
Environmental Violation.
2.20 INTERESTED PARTY TRANSACTIONS. Except as disclosed in Section
2.20 of the TSW Disclosure Letter, no officer or director of TSW or any
"affiliate" or "associate" (as those terms are defined in Rule 405
promulgated under the Securities Act) of any such person has had,
either directly or indirectly, a material interest in: (i) any person
or entity which purchases from or sells, licenses or furnishes to TSW
or any of the TSW Subsidiaries any goods, property, technology or
intellectual or other property rights or services; or (ii) any contract
or agreement to which TSW or any of the TSW Subsidiaries is a party or
by which it may be bound or affected.
2.21 BOARD APPROVAL. The Board of Directors of TSW has unanimously
(i) adopted this Agreement and the TSW Agreement of Merger, (ii)
determined that the Mergers are in the best interests of the
shareholders of TSW and upon terms that are fair to such shareholders,
and (iii) recommended that shareholders of TSW vote to approve this
Agreement and the TSW Agreement of Merger at the TSW Shareholders
Meeting.
2.22 VOTE REQUIRED.
(a) The affirmative vote of (i) a majority of all the votes
entitled to be cast by holders of the outstanding shares of TSW
Common Stock and TSW Preferred Stock, voting together as a single
class, and (ii) a majority of all of the votes entitled to be cast
by holders of the outstanding shares of each series of TSW Preferred
Stock, each series voting separately as a separate class, are the
only votes (collectively, the "TSW Shareholder Approval") of the
holders of any class or series of TSW's capital stock necessary to
approve this Agreement, the TSW Agreement of Merger, and the
transactions contemplated thereby, including the TSW Merger.
(b) The affirmative vote of the shareholders of TSW who are party
to the TSW Voting Agreement (as defined below) will be sufficient to
cause the TSW Shareholder Approval to be granted without the vote of
any other shareholder of TSW.
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2.23 APPLICABILITY OF STATE TAKEOVER LAWS. TSW has taken all such
action as may be necessary to ensure that any otherwise applicable
provisions of Section 14-2-1132 of the GBCC or of any other section of
the GBCC that would have the effect of prohibiting or preventing either
of the Mergers or any of the transactions contemplated by this
Agreement or the Agreements of Merger shall be inapplicable to the
Mergers, this Agreement, the Agreements of Merger, or any of the
transactions contemplated thereby.
2.24 DISCLOSURE. No representation or warranty made by TSW in this
Agreement, nor any document, written information, statement, financial
statement, certificate or exhibit prepared and furnished or to be
prepared and furnished by TSW or its representatives pursuant hereto or
in connection with the transactions contemplated hereby, when taken
together, contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the
circumstances under which they were furnished.
2.25 FAIRNESS OPINION. TSW's Board of Directors has received an
opinion as of the date hereof from Alex. Brown & Sons Incorporated to
the effect that, as of the date hereof, the TSW Number is fair, from a
financial point of view, to the holders of the TSW Common Stock, TSW
Preferred Stock, TSW Subordinated Notes, TSW Options and TSW Warrants,
taken as a whole.
3. REPRESENTATIONS AND WARRANTIES OF INDUS AND NEWCO
Except as set forth in a letter dated the date of this Agreement, delivered
by INDUS and Newco to TSW concurrently herewith, and certified by an officer
of INDUS and Newco, on behalf of INDUS and Newco, to be true, accurate and
complete to the best of his knowledge (the "INDUS Disclosure Letter"), INDUS
and Newco hereby represent and warrant to TSW that:
3.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. INDUS,
Newco and each of INDUS's subsidiaries set forth in Section 3.1 of the
INDUS Disclosure Letter (the "INDUS Subsidiaries") (the INDUS
Subsidiaries being the only subsidiaries of INDUS), are corporations
duly organized, validly existing and in good standing under the laws of
the jurisdiction of their incorporation, have all requisite corporate
power and authority to own, lease and operate their properties and to
carry on their business as now being conducted, and are duly qualified
and in good standing to do business in each jurisdiction in which the
nature of their business or the ownership or leasing of its properties
makes such qualification necessary, other than in such jurisdictions
where the failure so to qualify would not have a Material Adverse
Effect on INDUS (as defined below). Section 3.1 of the INDUS Disclosure
Letter sets forth a correct and complete list of the INDUS's
Subsidiaries, the holders of record of each INDUS Subsidiary's
outstanding equity, and a correct and complete list of each
jurisdiction in which each of INDUS, Newco and the INDUS Subsidiaries
is duly qualified and in good standing to do business. INDUS has
delivered to TSW or its counsel complete and correct copies of the
Articles of Incorporation and Bylaws of INDUS, the Articles of
Incorporation and Bylaws of Newco and will deliver upon request to TSW
or its counsel prior to the Closing Date the equivalent charter
documents of each of the INDUS Subsidiaries, in each case as amended to
the date of this Agreement. Newco does not own and, except for the
INDUS Subsidiaries, INDUS does not own, directly or indirectly, any
capital stock or other equity interest of any corporation or have any
direct or indirect equity or ownership interest in or control over any
other business, whether organized as a corporation, partnership, joint
venture or otherwise. The INDUS SEC Documents (defined below) set forth
a complete and accurate list of the directors and officers of INDUS.
The operations now being conducted by INDUS have not been conducted by
any other name.
In this Agreement, any reference to the term "Material Adverse Effect
on INDUS" means any event, change or effect which, individually or
together with any other events, changes or effects, is materially
adverse to the business, assets (including intangible assets),
financial condition, results of operations or prospects of INDUS, Newco
and the INDUS Subsidiaries, taken as a whole. In addition,
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any reference to the terms "to INDUS's knowledge" or "known to INDUS"
refers to the current actual knowledge of any of the officers of INDUS
listed in Section 2.1 of the INDUS Disclosure Letter.
3.2 CAPITAL STRUCTURE.
(a) Stock and Options. The authorized capital stock of INDUS
consists of 50,000,000 shares of $.001 par value per share INDUS
Common Stock and 5,000,000 shares of preferred stock, par value
$.001 per share (the "INDUS Preferred Stock") At the close of
business on June 5, 1997, 19,060,841 shares of INDUS Common Stock
were issued and outstanding, no shares of INDUS Common Stock were
held by INDUS in its treasury, 1,907,565 shares of INDUS Common
Stock were reserved for issuance upon the exercise of outstanding
INDUS Options, 2,951,730 shares of INDUS Common Stock were available
for the grant of additional awards under the INDUS Plans, and
428,691 shares of INDUS Common Stock were reserved for issuance upon
the exercise of INDUS Stock Purchase Plan Options. No shares of
INDUS Preferred Stock are issued or outstanding. All outstanding
shares of INDUS Common Stock are validly issued, fully paid and
nonassessable and not subject to preemptive rights by statute, the
Articles of Incorporation or Bylaws of INDUS, or any agreement or
document to which INDUS is a party or by which it is bound. All
outstanding shares of the capital stock of each of the INDUS
Subsidiaries are validly issued, fully paid and nonassessable and
are owned by INDUS or one of the INDUS Subsidiaries free and clear
of any liens, security interests, pledges, agreements, claims,
charges or encumbrances. INDUS has delivered to TSW a correct and
complete list of each INDUS Option outstanding as of the date
hereof, including the name of the holder of such INDUS Option, the
INDUS Plan pursuant to which such INDUS Option was issued (if
applicable), the number of shares covered by such INDUS Option, the
per share exercise price of such INDUS Option, and the vesting
schedule applicable to each such INDUS Option, including the number
of shares vested as of the date of this Agreement.
(b) Newco capital. The authorized capital stock of Newco will
consist of 100,000,000 shares of $.001 par value per share Newco
Common Stock and 10,000,000 shares of $.001 par value per share
Newco Preferred Stock 10 of which shall be outstanding immediately
prior to the Effective Time. Immediately prior to the Effective
Time, Newco shall have reserved a sufficient number of shares of
Newco Common Stock for issuance pursuant to the Newco Plans.
(c) No Other Commitments. Except for the INDUS Options and INDUS
Stock Purchase Plan Options and as disclosed in Section 3.2(c) of
the INDUS Disclosure Letter, a list of which has been provided to
TSW, and except as provided in this Agreement, there are no options,
warrants, calls, rights, commitments, conversion rights or
agreements of any character to which INDUS, Newco or any of the
INDUS Subsidiaries is a party or by which INDUS, Newco or any of the
INDUS Subsidiaries is bound obligating INDUS, Newco or any of the
INDUS Subsidiaries to issue, deliver or sell, redeem or repurchase
or cause to be issued, delivered, sold, redeemed or repurchased any
shares of capital stock of INDUS, Newco or any of the INDUS
Subsidiaries or securities convertible into or exchangeable for
shares of capital stock of INDUS, Newco or any of the INDUS
Subsidiaries, or obligating INDUS, Newco or any of the INDUS
Subsidiaries to grant, extend, amend or enter into any such option,
warrant, call, right, commitment, conversion right or agreement.
There are no voting trusts or other agreements or understandings to
which INDUS or Newco is a party with respect to the voting of the
capital stock of INDUS or Newco or any of the INDUS Subsidiaries,
other than the INDUS Voting Agreement.
(d) Registration Rights. Except as provided in Section 5.16 of
this Agreement and as disclosed in Section 3.2(d) of the INDUS
Disclosure Letter, neither INDUS nor Newco is under any obligation
to register under the Securities Act any of its presently
outstanding securities or any securities that may be subsequently
issued.
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3.3 AUTHORITY.
(a) Corporate Action. Subject to receipt of the INDUS Shareholder
Approval (as defined below), INDUS has all requisite corporate power
and authority to enter into this Agreement and the INDUS Agreement
of Merger, and Newco has, or will have, all requisite corporate
power and authority to enter into this Agreement, to perform their
respective obligations hereunder and thereunder and to consummate
the Mergers and the other transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the
INDUS Agreement of Merger by INDUS, and the execution and delivery
of this Agreement and the Agreements of Merger by Newco, and,
subject to approval of this Agreement and the INDUS Merger by the
shareholders of INDUS, the filing and recordation of the INDUS
Agreement of Merger pursuant to CGCL and the filing of the TSW
Certificate of Merger pursuant to the GBCC and the consummation by
INDUS and Newco of the Mergers and the other transactions
contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of INDUS and Newco,
respectively. This Agreement has been, and upon the Closing the
INDUS Agreement of Merger will have been, duly executed and
delivered by INDUS and this Agreement is, and the INDUS Agreement of
Merger as of the Effective Time will be, the valid and binding
obligations of INDUS, enforceable in accordance with their terms,
except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity. This Agreement has
been, and upon the Closing the Agreements of Merger will have been,
duly executed and delivered by Newco, and this Agreement is, and as
of the Effective Time will be, the valid and binding obligation of
Newco, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws
and general principles of equity.
(b) No Conflict. Neither the execution, delivery and performance
of this Agreement, the INDUS Agreement of Merger in the case of
INDUS, or the Agreements of Merger in the case of Newco, nor the
consummation of the transactions contemplated hereby or thereby
applicable to INDUS and Newco, as the case may be, nor compliance
with the provisions hereof or thereof will: (i) conflict with, or
result in any violations of, or cause a default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any
obligation contained in, or the loss of any material benefit under,
or result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties or assets of INDUS,
Newco or any of the INDUS Subsidiaries under, any term, condition or
provision of (x) the Articles of Incorporation or Bylaws of INDUS,
the Articles of Incorporation or Bylaws of Newco, or the equivalent
organizational documents of any of the INDUS Subsidiaries or (y) any
loan or credit agreement, note, bond, mortgage, indenture, lease or
other material agreement, instrument, permit, license judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to INDUS, Newco or any of the INDUS Subsidiaries or their
respective properties or assets, other than any such conflicts,
violations, defaults, rights, losses, liens, security interests,
charges or encumbrances which, individually or in the aggregate,
would not have a Material Adverse Effect on INDUS; or (ii) require
the affirmative vote of the holders of greater than a majority of
the issued and outstanding shares of INDUS Common Stock.
(c) Governmental Consents. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be obtained by INDUS, Newco or
any of the INDUS Subsidiaries in connection with the execution and
delivery of this Agreement or the Agreements of Merger, or the
consummation of the transactions contemplated hereby or thereby,
applicable to INDUS, Newco or any of the INDUS Subsidiaries except
for: (i) the filing with the SEC, and the effectiveness, of the Form
S-4, the filing of the Prospectus/Proxy Statement relating to the
meeting of the shareholders of INDUS (the "INDUS Shareholders
Meeting") to be held with respect to the approval by INDUS's
shareholders of this Agreement and the Mergers, and the filing of
the Form S-8, and such reports and information under the Exchange
Act and the rules and regulations promulgated by the SEC thereunder,
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including, but not limited to, the filing of a Form 8-A by Newco
with the SEC, as may be required in connection with this Agreement
and the transactions contemplated hereby; (ii) the filing of the
Agreements of Merger with the Secretary of State of the State of
California and appropriate documents with the relevant authorities
of other states in which INDUS or Newco is qualified to do business;
(iii) such filings, authorizations, orders and approvals as may be
required under State Takeover Laws; (iv) such filings and
notifications as may be necessary under the HSR Act; (v) such
filings as may be required by the Nasdaq Stock Market with respect
to the Newco Common Stock to be issued in connection with the
Mergers and the Stock Rights to be assumed by Newco in the Mergers;
and (vi) such other filings, authorizations, orders and approvals
which if not obtained or made, would not have a Material Adverse
Effect on INDUS or TSW or have a material adverse effect on the
ability of the parties to consummate the Mergers promptly.
3.4 SEC DOCUMENTS.
(a) SEC Reports. INDUS has delivered to TSW or its counsel correct
and complete copies of each report, schedule, registration statement
and definitive proxy statement filed by INDUS with the SEC on or
after January 1, 1996 (the "INDUS SEC Documents"), which are all the
documents (other than preliminary material) that INDUS was required
to file with the SEC on or after January 1, 1996. As of their
respective dates or, in the case of registration statements, their
effective dates, none of the INDUS SEC Documents (including all
exhibits and schedules thereto and documents incorporated by
reference therein) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and there
is no requirement under the Securities Act or the Exchange Act, as
the case may be, to have amended any such filing. The INDUS SEC
Documents complied, when filed, in all material respects with the
then applicable requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations promulgated
by the SEC thereunder. INDUS has filed all documents and agreements
which INDUS reasonably believed were required to be filed as
exhibits to the INDUS SEC Documents.
(b) Financial Statements. The financial statements of INDUS
included in the INDUS SEC Documents complied as to form in all
material respects with the then applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may have
been indicated in the notes thereto) and fairly present (subject, in
the case of the unaudited statements, to normal year-end audit
adjustments) the consolidated financial position of INDUS and its
consolidated INDUS Subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for
the respective periods then ended.
3.5 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by INDUS or Newco for inclusion or incorporation by reference
in the Form S-4 and Prospectus/Proxy Statement will, at the time the
Form S-4 is declared effective, at the date the Prospectus/Proxy
Statement is mailed to the shareholders of INDUS and at the time of the
INDUS Shareholders Meeting, contain, after giving effect to any
supplement or amendment thereto, any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, The
Prospectus/Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, INDUS and Newco make no representation or warranty with
respect to any information supplied by TSW which is or will be
contained in any of the foregoing documents.
3.6 COMPLIANCE WITH APPLICABLE LAWS. The businesses of INDUS and the
INDUS Subsidiaries are not being conducted in violation of any law,
ordinance, regulation, rule or order of
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any Governmental Entity, except where such violation would not have a
Material Adverse Effect on INDUS. Except as disclosed in Section 3.6 of
the INDUS Disclosure Letter, INDUS has not been notified in writing by
any Governmental Entity that any investigation or review with respect
to INDUS, its officers or directors or any of the INDUS Subsidiaries is
pending or threatened, nor has any Governmental Entity notified INDUS
in writing of its intention to conduct the same, which investigation or
review would have a Material Adverse Effect on INDUS. INDUS, Newco and
the INDUS Subsidiaries have all permits, licenses and franchises from
Governmental Entities required to conduct their businesses as now being
conducted, except for those whose absence would not have a Material
Adverse Effect on INDUS.
3.7 LITIGATION. Except as would not have a Material Adverse Effect on
INDUS, there is no suit, action, arbitration, demand, claim or
proceeding pending or, to INDUS's knowledge, threatened against INDUS,
Newco, its officers or directors or any of the INDUS Subsidiaries; nor
is there any judgment, decree, injunction, ruling or order of any
Governmental Entity or arbitrator or settlement agreement outstanding
against INDUS, Newco, its officers or directors or any of the INDUS
Subsidiaries. INDUS has delivered or made available to TSW or its
counsel correct and complete copies of all correspondence prepared by
its counsel for INDUS auditors in connection with the last two
completed audits of INDUS's financial statements and any such
correspondence since the date of the last such audit. Neither INDUS,
Newco nor any of the INDUS Subsidiaries is a party to any decree, order
or arbitration award (or agreement entered into in any administrative,
judicial or arbitration proceeding with any governmental authority)
with respect to its properties, assets, personnel or business
activities which would have a Material Adverse Effect on INDUS. Neither
INDUS nor Newco is in violation of, or delinquent in respect of, any
decree, order or arbitration award naming INDUS, Newco or a INDUS
Subsidiary as a party or otherwise known to them, or law, ordinance,
statute, or governmental authority to which their properties, assets,
personnel or business activities are subject or to which INDUS, Newco
or an INDUS Subsidiary is subject, including, without limitation, laws,
rules and regulations relating to occupational health and safety, equal
employment opportunities, fair employment practices, and sex, race,
religious and age discrimination, except for such violations as would
not have a Material Adverse Effect on INDUS.
3.8 ERISA AND OTHER COMPLIANCE.
(a) Section 3.8 of the INDUS Disclosure Letter identifies each
"employee benefit plan," as defined in Section 3(3) of ERISA,
currently or previously maintained, contributed to or entered into
by INDUS or any of the INDUS Subsidiaries under which INDUS or any
of the INDUS Subsidiaries or any ERISA Affiliate (as defined below)
thereof has any present or future obligation or liability
(collectively, the "INDUS Employee Plans"). For purposes of this
Section 3.8, "ERISA Affiliate" shall mean any entity which is a
member of (A) a "controlled group of corporations," as defined in
Section 414(b) of the Code, (B) a group of entities under "common
control," as defined in Section 414 (c) of the Code, or (C) an
"affiliated service group," as defined in Section 414(m) of the
Code, or treasury regulations promulgated under Section 414(o) of
the Code, any of which includes INDUS or any of the INDUS
Subsidiaries. Copies of all INDUS Employee Plans (and, if
applicable, related trust agreements) and all amendments thereto and
written interpretations thereof (including summary plan
descriptions) have been delivered to TSW or its counsel, together
with the three most recent annual reports (Form 5500, including, if
applicable, the auditor's reports and any Schedule B thereto)
prepared in connection with any such INDUS Employee Plan. All INDUS
Employee Plans which individually or collectively would constitute
an "employee pension benefit plan," as defined in Section 3(2) of
ERISA (collectively, the "INDUS Pension Plans"), are identified as
such in the INDUS Disclosure Letter. All INDUS Employee Plans which
individually or collectively would constitute an "employee welfare
benefit plan," as defined in Section 3(l) of ERISA are identified as
such in the INDUS Disclosure Letter. All contributions or premiums
due from INDUS or any of the INDUS Subsidiaries with respect to any
of the INDUS Employee Plans have been made as required under ERISA
or have been
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accrued on INDUS or any such INDUS Subsidiary's financial statements
as of March 31, 1997, or will be made prior to the Closing. Each
INDUS Employee Plan has been established and maintained in
compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including,
without limitation, ERISA and the Code, which are applicable to such
INDUS Employee Plans, except as would not have a Material Adverse
Effect on INDUS.
(b) No INDUS Pension Plan constitutes, or has since the enactment
of ERISA constituted, a "multiemployer plan," as defined in Section
3(37) of ERISA. No INDUS Pension Plans are subject to Title IV of
ERISA. No "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any
INDUS Employee Plan which is covered by Title I of ERISA which would
result in a material liability to INDUS or any of the INDUS
Subsidiaries taken individually, excluding transactions effected
pursuant to a statutory or administrative exemption. Nothing done or
omitted to be done and no transaction or holding of any asset under
or in connection with any INDUS Employee Plan has or will make INDUS
or any employee, officer or director of INDUS subject to any
material liability under Title I of ERISA or liable for any material
Tax or, penalty pursuant to any of Sections 4972, 4975, 4976, 4977
or 4979 of the Code or Section 502 of ERISA.
(c) With respect to each INDUS Pension Plan that is intended to be
qualified under Section 401 (a) of the Code (an "INDUS 401(a)
Plan"), either (i) a favorable determination letter has been
received from the IRS as to the qualification of the INDUS 401(a)
Plan under the Code as in effect immediately after the Tax Reform
Act of 1986, or (ii) the INDUS 401(a) Plan has been established
under a standardized prototype plan for which an Internal Revenue
Service opinion letter has been obtained and upon which the INDUS
401(a) Plan may rely. INDUS has delivered to TSW or its counsel a
complete and correct copy of the most recent Internal Revenue
Service determination letter with respect to each INDUS 401(a) Plan.
(d) No INDUS Employee Plan or INDUS Arrangement (as defined below)
provides or ever has provided death, medical or health benefits
(whether or not insured) with respect to current or former employees
after any such employee's retirement or other termination of service
(other than benefit coverage mandated by applicable law, including,
without limitation, coverage provided pursuant to Section 4980B of
the Code).
(e) The INDUS Disclosure Letter lists each employment, severance,
compensation or other similar contract, arrangement or policy and
each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers'
benefits, vacation benefits, severance benefits, disability
benefits, death benefits, hospitalization benefits, retirement
benefits, deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other
forms of incentive compensation or post-retirement insurance,
compensation or benefits for employees, consultants or directors
(other than workers' compensation, unemployment compensation and
other government mandated programs) which (A) is entered into,
maintained or contributed to, as the case may be, by INDUS or any of
the INDUS Subsidiaries, and (B) covers any current or former
employee, consultant or director of INDUS or any of the INDUS
Subsidiaries. Such contracts, plans and arrangements as are
described in this Section 3.8(e) are herein referred to collectively
as the "INDUS Benefit Arrangements." Each INDUS Benefit Arrangement
has been established and maintained in substantial compliance with
its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such
INDUS Benefit Arrangement. INDUS has delivered to TSW or its counsel
a complete and correct copy of each INDUS Benefit Arrangement
document or, if such INDUS Benefit Arrangement is unwritten, a
description thereof.
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(f) INDUS does not have any plan or commitment to establish any
new INDUS Employee Plans or INDUS Arrangements and there has been no
amendment to, written interpretation or announcement (whether or
not-written) by INDUS or any of the INDUS Subsidiaries relating to
any INDUS Employee Plan or INDUS Benefit Arrangement that would
increase materially the expense of maintaining such INDUS Employee
Plan or INDUS Benefit Arrangement above the level of the expense
incurred in respect thereof for the year ended December 31, 1996.
(g) INDUS has timely provided, or will have provided prior to the
Closing, to individuals entitled thereto all required notices and
coverage pursuant to Section 4980B of COBRA with respect to any
"qualifying event" (as defined in Section 4980B (f) (3) of the
Code). INDUS will timely provide to individuals entitled thereto all
required notices and coverage pursuant to Code Section 4980B and
COBRA with respect to any "qualifying event" (as defined in Section
4980B(f) (3) of the Code) occurring prior to and including the
Closing Date. No material Tax payable on account of Section 4980B of
the Code has been incurred with respect to any current or former
employees (or their beneficiaries) of INDUS or any of the INDUS
Subsidiaries.
(h) No benefit payable or which may become payable by INDUS or any
of the INDUS Subsidiaries pursuant to any INDUS Employee Plan or any
INDUS Benefit Arrangement or as a result of or arising under this
Agreement shall constitute an "excess parachute payment" (as defined
in Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise Tax under Section 4999 of the Code or which
would not be deductible by reason of Section 280G of the Code.
(i) INDUS and each INDUS Subsidiary is in compliance in all
material respects with all applicable laws, agreements and contracts
relating to employment, employment practices, wages, hours and terms
and conditions of employment, including, but not limited to,
employee compensation matters, but not including ERISA.
(j) INDUS and each INDUS Subsidiary has good labor relations and
has no knowledge of any facts indicating that the consummation of
the transactions contemplated hereby will have a material adverse
effect on labor relations, and has no knowledge that any of its key
employees intends to leave its or their employ.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Neither INDUS, Newco nor any
of the INDUS Subsidiaries has any liabilities or obligations of any
nature (matured or unmatured, fixed or contingent) which are,
individually or in the aggregate, of a nature required to be disclosed
on the face of a balance sheet prepared in accordance with GAAP and are
material to the business of INDUS and the INDUS Subsidiaries, taken as
a whole, except for such liabilities or obligations as (i) were accrued
or fully reserved against in the consolidated balance sheet of INDUS at
March 31, 1997 (the "INDUS Balance Sheet") or (ii) are of a normally
recurring nature and were incurred after March 31, 1997 (the "INDUS
Balance Sheet Date") in the ordinary course of business consistent with
past practice. As of the INDUS Balance Sheet Date, there were no
material loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) which are not adequately provided for in
the INDUS Balance Sheet as required by said Statement No. 5.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Section 3.10 of the INDUS Disclosure Letter filed prior to the date of
this Agreement, since the INDUS Balance Sheet Date there has not
occurred:
(a) any change, event or effect not identified below that would
have a Material Adverse Effect on INDUS;
(b) any amendments or changes in the Articles of Incorporation or
Bylaws of INDUS;
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(c) any damage, destruction or loss, whether covered by insurance
or not, having a Material Adverse Effect on INDUS;
(d) any redemption, repurchase or other acquisition of shares of
INDUS Common Stock by INDUS (other than pursuant to arrangements
with terminated employees or consultants), or any declaration,
setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to INDUS Common
Stock;
(e) any increase in or modification of the compensation or
benefits payable or to become payable by INDUS to any of its
directors, employees or consultants, except in the ordinary course
of business, consistent with past practice;
(f) other than as required by applicable statute or regulation,
any increase in or modification of any bonus, pension, insurance or
INDUS Employee Plan or INDUS Benefit Arrangement (including, but not
limited to, the granting of stock options, restricted stock awards
or stock appreciation rights) made to, for or with any of its
employees, other than (a) in the ordinary course of business,
consistent with past practice, and (b) after the date of this
Agreement, which is authorized, if required, pursuant to Section
5.3;
(g) any acquisition or sale of a material amount of property or
assets of INDUS, other than in the ordinary course of business,
consistent with past practice;
(h) any alteration in any term of any outstanding security of
INDUS, including, but not limited to, acceleration of the vesting or
any change in the terms of any outstanding stock options;
(i) other than in the ordinary course of business, consistent with
past practice, the total amount of which is not material, any (A)
incurrence, assumption or guarantee by INDUS of any debt for
borrowed money; (B) issuance or sale of any securities convertible
into or exchangeable for debt securities of INDUS; or (C) issuance
or sale of options or other rights to acquire from INDUS, directly
or indirectly, debt securities of INDUS or any securities
convertible into or exchangeable for any such debt securities;
(j) any creation or assumption by INDUS of any mortgage, pledge
security interest or lien or other encumbrance on any asset, other
than in the ordinary course of business, consistent with past
practice, not in excess of $100,000 in the aggregate;
(k) any making of any loan, advance or capital contribution to or
investment in any person other than (i) loans, advances or capital
contributions made in the ordinary course of business of INDUS, and
(ii) other loans and advances, where the aggregate amount of all
such items outstanding at any time does not exceed $50,000;
(l) any entering into, amendment of, relinquishment, termination
or non-renewal by INDUS of any material contract, lease transaction,
commitment or other right or obligation other than in the ordinary
course of business;
(m) except as disclosed in Section 3.11(j) of the INDUS Disclosure
Letter, any transfer or grant of a right under the INDUS IP Rights
(as defined below), other than those transferred or granted in the
ordinary course of business, consistent with past practices, except
for any grant of a right to INDUS source code or grant of any
exclusive rights to any INDUS IP Rights;
(n) any labor dispute, claim of wrongful discharge or charge of
unfair labor practice (other than routine individual grievances),
any activity or proceeding by a labor union or representative
thereof to organize any employees of INDUS or, to INDUS's knowledge,
any campaign being conducted to solicit authorization from employees
to be represented by such labor union; or
(o) other than in the ordinary course of business, consistent with
past practice, any capital expenditure or commitment by INDUS,
either individually or in the aggregate, exceeding $50,000;
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(p) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates by INDUS;
(q) revaluation by INDUS of any of its assets other than normal
periodic accounting valuations consistent with past practice.
(r) material change in pricing or royalties set or charged by
INDUS to its customers or licensees or in pricing or royalties set
or charged by persons who have licensed Intellectual Property (as
defined in Section 3.15 below) to INDUS;
(s) any agreement by INDUS or, to INDUS's knowledge, any officer
or employee thereof, to take any of the actions described in the
preceding clauses (a) through (r) (other than negotiations with TSW
and its representatives regarding the transactions contemplated by
this Agreement).
3.11 AGREEMENTS. The INDUS Disclosure Letter sets forth a list of any
of the following currently effective contracts, agreements and other
instruments to which INDUS, Newco or any INDUS Subsidiary is a party,
copies of each of which have been delivered to TSW or its counsel:
(a) contract with or commitment to any labor union;
(b) continuing contract for the future purchase, sale or
manufacture of products, material, supplies, equipment or services
requiring payment to or from INDUS, Newco or any INDUS Subsidiary in
an amount in excess of $100,000 per annum which is not terminable on
120 days' or less notice without cost or other liability at, or at
any time after, the Effective Time or in which INDUS, Newco or such
INDUS Subsidiary has granted or received manufacturing rights, most
favored nations pricing provisions or exclusive marketing rights
relating to any product, group of products or territory, provided,
however, that only contracts for the top 10 customers of INDUS (as
measured by calendar year 1996 INDUS customers purchases) are listed
in the INDUS Disclosure Letter;
(c) contract providing for the development of technology for INDUS
which technology is used or incorporated in any products currently
distributed by INDUS or is anticipated to be used or incorporated in
any planned products of INDUS or which requires INDUS to perform
specified development work for a third party;
(d) joint venture contract or agreement or other agreement which
has involved or is reasonably expected to involve, a sharing of
profits or losses in excess of $25,000 per annum with any other
party;
(e) contract or commitment for the employment of any officer,
employee or consultant or any other type of contract or
understanding with any officer, employee or consultant which is not
immediately terminable without cost, notice or other liability
(except for normal severance benefits available to employees
generally as set forth in any INDUS Benefit Arrangement and except
to the extent general principles of wrongful termination laws may
limit INDUS's or any INDUS Subsidiaries' ability to terminate
employees at will);
(f) indenture, mortgage, promissory note, loan agreement,
guarantee or other agreement or commitment for the borrowing of
money, for a line of credit or for a leasing transaction of a type
required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards
Board (other than equipment leases entered into in the ordinary
course of business pursuant to which payments by INDUS or Newco do
not exceed $100,000 in the aggregate);
(g) lease or other agreement under which INDUS, Newco or any INDUS
Subsidiary is lessee of or holds or operates any items of tangible
personal property or real property owned by any third party and
under which payments to such third party exceed $60,000 per annum;
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(h) agreement or arrangement for the sale or acquisition of any
assets, properties or rights having a value in excess of $25,000,
other than in the ordinary course of business consistent with past
practice;
(i) agreement which restricts INDUS, Newco or any INDUS Subsidiary
from engaging in any aspect of its business or competing in any line
of business in any geographic area, (including any such agreement
pursuant to which INDUS has granted exclusive rights to a third
party);
(j) INDUS IP Rights Agreement (as defined below), other than
ordinary course license agreements with end users (of which
representative copies of current agreements have been delivered to
TSW or its counsel) and, in any event, any agreement that grants
rights or access to any source code included in the INDUS IP Rights;
(k) any material contract, license or agreement between INDUS and
any third party (excluding customers other than the customers
described in Section 3.11(b) above) wherein or whereby INDUS has
agreed to, or assumed, any obligation or duty to warrant, indemnify,
hold harmless or otherwise assume or incur any obligation or
liability with respect to the infringement or misappropriation by
INDUS or such third party of the Intellectual Property of any third
party;
(l) any agreement, contract or commitment relating to capital
expenditures and involving future payments after the date hereof in
excess of $100,000; or
(m) agreement between or among INDUS or any INDUS Subsidiary
regarding intercompany loans, revenue or cost sharing, ownership or
license of INDUS IP Rights, intercompany royalties or dividends or
similar matters.
3.12 NO DEFAULTS. To INDUS's knowledge, neither it, Newco nor any of
the INDUS Subsidiaries is in breach, violation or default under, and
there exists no event, condition or occurrence which, after notice or
lapse of time, or both, would constitute such a breach, violation or
default by INDUS, Newco or any of the INDUS Subsidiaries under, any
contract or agreement to which INDUS, Newco or any of the INDUS
Subsidiaries is a party or by which it is bound, and which would, if
terminated or modified, have a Material Adverse Effect on INDUS. Each
such agreement and contract is in full force and effect, and to the
knowledge of INDUS, except as disclosed in Section 3.12 of the INDUS
Disclosure Letter, all other parties to each such agreement or contract
are in compliance with, and have not breached, violated or defaulted
under any term of such agreement or contract.
3.13 CERTAIN AGREEMENTS. Except as disclosed in Section 3.13 of the
INDUS Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director, employee or consultant of
INDUS or any of the INDUS Subsidiaries from INDUS or any of the INDUS
Subsidiaries, under any INDUS Employee Plan, INDUS Benefit Arrangement
or otherwise, (ii) materially increase any benefits otherwise payable
under any INDUS Employee Plan or INDUS Benefit Arrangement or (iii)
result in the acceleration of the time of payment or vesting of any
such benefits.
3.14 TAXES. INDUS and each of the INDUS Subsidiaries have filed, or
caused to be filed, all Tax returns required to be filed by them (all
of which returns were true, correct and complete in all material
respects and were completed in accordance with applicable law) and have
paid or withheld and paid , or caused to be paid or withheld and paid,
all Taxes that are shown on such Tax returns as due and payable, other
than such Taxes as are being contested in good faith and for which
adequate reserves have been established in accordance with GAAP on the
INDUS Balance Sheet and other than where the failure to so file, pay or
withhold would not have a Material Adverse Effect on INDUS. All Taxes
required to have been paid or accrued by INDUS and the INDUS
Subsidiaries for all periods prior to the INDUS Balance Sheet Date have
been fully paid or are adequately provided for or reflected
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in the INDUS Balance Sheet in accordance with GAAP. As of the Closing,
INDUS and each of the INDUS Subsidiaries will have withheld and timely
remitted with respect to its employees all income taxes and other Taxes
required to be withheld and remitted. Since the INDUS Balance Sheet
Date, no material Tax liability has been assessed, proposed to be
assessed, incurred or accrued other than in the ordinary course of
business. Neither INDUS nor any INDUS Subsidiary has received any
notification that any material issues have been raised (and are
currently pending) by the Internal Revenue Service or any other taxing
authority, including, without limitation, any sales tax authority, in
connection with any of the Tax returns referred to in the first
sentence of Section 3.14, and no waivers of statutes of limitations
have been given or requested with respect to INDUS or any of the INDUS
Subsidiaries. No taxing authority is currently conducting an audit of
any Tax returns of INDUS or any of the INDUS Subsidiaries or, to
INDUS's knowledge, about to conduct such an audit. Any deficiencies
asserted or assessments (including interest and penalties) made as a
result of any examination by the Internal Revenue Service or by
appropriate national, state or departmental authorities of the Tax
returns of or with respect to INDUS or any of the INDUS Subsidiaries
have been fully paid or are adequately provided for in the INDUS
Balance Sheet in accordance with GAAP and no material proposed (but
unassessed) additional Taxes have been asserted and no Tax liens have
been filed other than for Taxes not yet due and payable. None of INDUS
or any of the INDUS Subsidiaries (i) has made an election to be treated
as a "consenting corporation" under Section 341(f) of the Code or (ii)
is a "personal holding company" within the meaning of Section 542 of
the Code. INDUS operates at least one historic business line, or owns
at least a significant portion of its historic business assets, in each
case within the meaning of Treasury Regulation 1.368-1(d).
3.15 INTELLECTUAL PROPERTY.
(a) Section 3.15 of the INDUS Disclosure Letter contains a
complete and accurate list of all United States and foreign: (i)
patents; (ii) copyright registrations and mask work registrations;
(iii) trademarks registrations and trademark intent-to-use
registrations; (iv) registered user licenses; (v) all applications,
provisional applications or other filings for or to obtain any of
the foregoing; and (vi) any other similar registrations or
applications for Intellectual Property Rights (as defined below)
owned by, or filed by, or on behalf of, INDUS or any of the INDUS
Subsidiaries anywhere in the world (all of the foregoing, "INDUS
Registered Intellectual Property");
(b) Section 3.15 of the INDUS Disclosure Letter contains a
complete and accurate list of all material software programs and
other products sold or licensed by INDUS or any of the INDUS
Subsidiaries;
(c) All INDUS Intellectual Property Rights are owned free and
clear of any liens, encumbrances or security interests;
(d) INDUS and the INDUS Subsidiaries own, or have the right to
use, sell or license such Intellectual Property Rights (as defined
below) as are necessary or required for the conduct of their
respective businesses as presently conducted (such Intellectual
Property Rights being hereinafter collectively referred to as the
"INDUS IP Rights") and such ownership or rights to use, sell or
license are reasonably sufficient for such conduct of their
respective businesses, except for any failure to own or have the
right to use, sell or license that would not have a Material Adverse
Effect on INDUS;
(e) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not
constitute a breach of any material instrument or material agreement
in respect of any Intellectual Property Rights licensed by or to
INDUS or the INDUS Subsidiaries (the "INDUS IP Rights Agreements"),
will not cause the forfeiture or termination or give rise to a right
of forfeiture or termination of any INDUS IP Right or materially
impair the right of INDUS and the INDUS Subsidiaries or the INDUS
Surviving Corporation to use, sell or license any INDUS IP Right or
portion thereof (except where such breach, forfeiture, termination
or impairment would not have a Material Adverse Effect on INDUS);
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(f) There are no royalties, honoraria, fees or other payments
payable by INDUS to any person by reason of the ownership, use,
license, purchase, sale or disposition or acquisition of the INDUS
IP Rights (other than as set forth in the INDUS IP Rights Agreements
listed in the INDUS Disclosure Letter);
(g) To INDUS's knowledge, no third party is infringing or
misappropriating any Intellectual Property Rights, including INDUS
Registered Intellectual Property, owned by INDUS or any of the INDUS
Subsidiaries;
(h) Neither the manufacture, marketing, license, sale nor the
intended use of any product currently licensed or sold by INDUS or
any of the INDUS Subsidiaries or currently under development by
INDUS or any of the INDUS Subsidiaries violates any license or
agreement between INDUS or any of the INDUS Subsidiaries and any
third party or infringes any Intellectual Property Right of any
other party; and there is no pending or, to INDUS's knowledge,
threatened claim or litigation contesting the validity, ownership or
right to use, sell, license or dispose of any INDUS IP Right, nor
has INDUS or any of the INDUS Subsidiaries received any notice
asserting that any INDUS IP Right, or the proposed use, sale,
license or disposition thereof, conflicts or will conflict with the
rights of any other party, except for any violations, infringements,
claims or litigation that would not have a Material Adverse Effect
on INDUS, nor, to INDUS's knowledge, is there any basis for any such
assertion; and
(i) INDUS has taken reasonable and practicable steps designed to
safeguard and maintain the secrecy and confidentiality of, and its
proprietary rights in, all material trade secrets or other
confidential information constituting INDUS IP Rights. To INDUS's
knowledge, no current or prior officers, employees or consultants of
INDUS or of any of the INDUS Subsidiaries claim an ownership
interest in any INDUS IP Rights as a result of having been involved
in the development of such property while employed by or consulting
with INDUS or any of the INDUS Subsidiaries, or otherwise. All
current officers and development employees and, to INDUS's
knowledge, all other current employees and consultants of INDUS or
any of the INDUS Subsidiaries have executed and delivered to INDUS
or the INDUS Subsidiary an agreement substantially in the form
provided to TSW or its counsel regarding the protection of
proprietary information and the Aassignment to INDUS or the INDUS
Subsidiary of all Intellectual Property Rights arising from the
services performed for INDUS or the INDUS Subsidiary by such
persons.
3.16 FEES AND EXPENSES. Except for the fees and expenses set forth in
INDUS's engagement letter with Cowen & Company, a copy of which has
been provided to TSW, neither INDUS, Newco nor any of the INDUS
Subsidiaries has paid or become obligated to pay any fee or commission
to any broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.
3.17 INSURANCE. INDUS and the INDUS Subsidiaries maintain fire and
casualty, general liability, business interruption, directors and
officers, product liability and sprinkler and water damage insurance
that INDUS believes to be reasonably prudent for its business. Correct
and complete copies of all such insurance policies presently in effect
have been provided to TSW and its counsel. There is no claim by INDUS
pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies.
INDUS has no knowledge of any threatened termination of, or premium
increase, with respect to any such policies.
3.18 OWNERSHIP OF PROPERTY. Except (a) as disclosed in Section 3.18
of the INDUS Disclosure Letter, (b) for liens for current Taxes not yet
delinquent or (c) for liens imposed by law and incurred in the ordinary
course of business for obligations not yet due to carriers,
warehousemen, laborers, material men and the like, INDUS and each of
the INDUS Subsidiaries owns its real and personal property free and
clear of all security interests, mortgages, liens, charges, claims,
options and encumbrances. All real and personal property of INDUS and
each of the INDUS Subsidiaries is in generally good repair and is
operational and usable in the operations of INDUS, subject to ordinary
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wear and tear. Neither INDUS nor any INDUS Subsidiary is in violation
of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of owned or
leased properties (the violation of which would have a Material Adverse
Effect on INDUS), or has received any notice of violation with which it
has not complied, except where such violation would not have a Material
Adverse Effect on INDUS.
3.19 ENVIRONMENTAL MATTERS.
(a) During the period that INDUS and the INDUS Subsidiaries have
operated, occupied, leased or owned their respective properties or
operated, occupied, leased or owned any facilities, there have been,
to INDUS's knowledge, no disposals, releases or threatened releases
of Hazardous Materials on, from, under or about such properties or
facilities. INDUS has no knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on, from,
under or about any of such properties or facilities, which may have
occurred prior to INDUS or any of the INDUS Subsidiaries having
taken possession of any of such properties or facilities. No
Hazardous Materials are present as a result of the deliberate
actions of INDUS or, to INDUS's knowledge, as a result of any
actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and
surface water thereof, that INDUS has at any time owned, operated,
occupied or leased.
(b) To INDUS's knowledge, none of the properties or facilities of
INDUS or the INDUS Subsidiaries is the subject of an Environmental
Violation, except for such violations as would not have a Material
Adverse Effect on INDUS. During the time that INDUS or the INDUS
Subsidiaries have operated, occupied, leased or owned their
respective properties and facilities, neither INDUS nor any of the
INDUS Subsidiaries nor, to INDUS's knowledge, any third party, has
used, generated, manufactured or stored on, under or about such
properties or facilities or transported to or from such properties
or facilities any Hazardous Materials (except those Hazardous
Materials associated with general office use or janitorial
supplies).
(c) During the time that INDUS or the INDUS Subsidiaries have
operated, occupied, leased or owned their respective properties and
facilities, there has been no litigation brought or, to INDUS's
knowledge, threatened against INDUS or any of the INDUS Subsidiaries
by, or any settlement reached by INDUS or any of the INDUS
Subsidiaries with, any party or parties alleging the presence,
disposal, release or threatened release of any Hazardous Materials
on, from or under any of such properties or facilities or relating
to any alleged Environmental Violation.
3.20 INTERESTED PARTY TRANSACTIONS. Except as disclosed in Section
3.20 of the INDUS Disclosure Letter, no officer or director of INDUS or
any "affiliate" or "associate" (as those terms are defined in Rule 405
promulgated under the Securities Act) of any such person has had,
either directly or indirectly, a material interest in: (i) any person
or entity which purchases from or sells, licenses or furnishes to INDUS
or any of the INDUS Subsidiaries any goods, property, technology or
intellectual or other property rights or services; or (ii) any contract
or agreement to which INDUS or any of the INDUS Subsidiaries is a party
or by which it may be bound or affected.
3.21 BOARD APPROVAL. The Board of Directors of INDUS and Newco have
each unanimously approved this Agreement and the Mergers, the Board of
Directors of INDUS has determined that the Mergers are in the best
interests of the shareholders of INDUS and upon terms that are fair to
such shareholders, and the Board of Directors of INDUS has recommended
that shareholders of INDUS vote to approve this Agreement and the
Mergers at the INDUS Shareholders Meeting.
3.22 VOTE REQUIRED.
(a) The affirmative vote approving the principal terms of this
Agreement of at least a majority of the votes that holders of the
outstanding shares of INDUS Common Stock are entitled to cast is the
only vote (the "INDUS Shareholder Approval") of the holders of any
class or series
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of INDUS capital stock necessary to approve the principal terms of
this Agreement and the Mergers.
(b) The affirmative vote of the shareholders of INDUS who are
party to the INDUS Voting Agreement (as defined below) will be
sufficient to cause the INDUS Shareholder Approval to be granted
without the vote of any other shareholder of INDUS.
3.23 APPLICABILITY OF STATE TAKEOVER LAWS. INDUS has taken all such
action as may be necessary to ensure that any otherwise applicable
provisions of Chapters 11 and 12 of the CGCL that would have the effect
of prohibiting or preventing either of the Mergers or any of the
transactions contemplated by this Agreement or the Agreements of Merger
shall be inapplicable to the Mergers, this Agreement, the Agreements of
Merger, or any of the transactions contemplated thereby.
3.24 INTERIM OPERATIONS OF NEWCO AND NEWCO SUBSIDIARIES. Newco, INDUS
Sub and TSW Sub will be formed for the purpose of engaging in the
transactions contemplated hereby, will engage in no other business
activities and will conduct their operations only as contemplated
hereby.
3.25 DISCLOSURE. No representation or warranty made by INDUS or Newco
in this Agreement, nor any document, written information, statement,
financial statement, certificate or exhibit prepared and furnished or
to be prepared and furnished by INDUS, Newco or their respective
representatives pursuant hereto or in connection with the transactions
contemplated hereby, when taken together, contains any untrue statement
of a material fact, or omits to state a material fact necessary to make
the statements or facts contained herein or therein not misleading in
light of the circumstances under which they were furnished.
3.26 FAIRNESS OPINION. INDUS's Board of Directors has received an
opinion as of the date hereof from Cowen & Company to the effect that,
as of the date hereof, the financial terms of the Mergers, taken as a
whole, are fair to INDUS from a financial point of view.
4. TSW COVENANTS
4.1 ADVICE OF CHANGES. During the period from the date of this
Agreement until the earlier of the effective Time or the termination of
this Agreement in accordance with its terms, TSW will promptly advise
INDUS in writing, (a) of any event occurring subsequent to the date of
this Agreement that could reasonably be expected to render any
representation or warranty of TSW or INDUS contained in this Agreement,
if made on or as of the date of such event or the Closing Date, untrue
or inaccurate in any material respect, (b) of any event that would have
a Material Adverse Effect on TSW, and (c) of any material breach by TSW
of any covenant or agreement contained in this Agreement.
4.2 MAINTENANCE OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, TSW will use its best
efforts (i) to carry on and preserve its business and its relationships
with customers, suppliers, employees and others in substantially the
same manner as it has prior to the date hereof and, (ii) to execute on
its existing operating plan through to the date of the Closing. If TSW
becomes aware of any material deterioration in the relationship with
any customer, supplier or key employee, it will promptly bring such
information to the attention of INDUS in writing and, if requested by
INDUS, will exert its reasonable best efforts to restore the
relationship.
4.3 CONDUCT OF BUSINESS. Except as disclosed in Section 4.3 of the
TSW Disclosure Schedule, during the period from the date of this
Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, TSW will continue to
conduct its business and maintain its business relationships in the
ordinary and usual course and will not, without the prior written
consent of INDUS, which consent shall not be unreasonably withheld:
(a) borrow any money except for borrowings under TSW's loan and
security agreement with Greyrock Business Credit for amounts not
exceeding $3,000,000 and except for borrowings from Warburg;
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(b) enter into any material transaction not in the ordinary course
of its business;
(c) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business consistent with past practice
and to an extent which is not material;
(d) dispose of any of its assets except in the ordinary course of
business, consistent with past practice;
(e) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the
ordinary course of business, consistent with past practice;
(f) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has
maintained to the date of this Agreement, subject only to ordinary
wear and tear;
(g) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for
bonuses in amounts consistent with past practices and normal salary
increases consistent with past practices) or enter into or vary the
terms of any employment, consulting or severance agreement with any
such person, pay any severance or termination pay (other than
payments in amounts consistent with past practice or made in
accordance with plans or agreements existing on the date hereof),
grant any stock option (except for normal grants to employees
consistent with past practices) or issue any restricted stock, or
enter into or modify any agreement or plan or increase benefits of
the type described in Section 2.8;
(h) except as required by GAAP, change accounting methods;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock (other than pursuant to
arrangements with terminated employees or consultants in the
ordinary course of business, consistent with past practice);
(j) amend or terminate any contract, agreement or license to which
it is a party except those amended or terminated in the ordinary
course of its business, consistent with past practice, and that are
not material to the financial condition of TSW and the TSW
Subsidiaries, taken as a whole;
(k) lend any amount to any person or entity, other than (i)
advances for travel and expenses which are incurred in the ordinary
course of business, consistent with past practice, not material in
amount, or (ii) any loans pursuant to any TSW Section 401(a) Plan;
(l) guarantee or act as a surety for any obligation except for
obligations of TSW Subsidiaries in amounts that are not material to
the financial condition of TSW and the TSW Subsidiaries, taken as a
whole;
(m) waive or release any right or claim except for the waiver or
release of non-material claims in the ordinary course of business,
consistent with past practice, or the waiver or release of rights or
claims described in the TSW Disclosure Letter;
(n) issue or sell any shares of its capital stock of any class
(except upon the exercise of an option, stock purchase right or
warrant currently outstanding or permitted to be granted under
Section 4. 3 (g)), or any other of its securities, or issue or
create any warrants, obligations, subscriptions, options (except as
expressly permitted under Section 4.3(g)), convertible securities or
other commitments to issue shares of capital stock, or accelerate
the vesting or change any other term of any outstanding option or
other security;
(o) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement
affecting the number or rights of outstanding shares of its capital
stock of any class or affecting any other of its securities;
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<PAGE>
(p) merge, consolidate or reorganize with, or acquire any entity;
(q) amend its Articles of Incorporation or Bylaws;
(r) license any TSW IP Rights except in the ordinary course of
business, consistent with past practice, or grant any exclusive
rights or agree to do any development projects with respect to the
TSW IP Rights;
(s) agree to any audit assessment by any Tax authority, except
amounts not exceeding $300,000 with prior written notice to Indus;
(t) change any insurance coverage or issue any certificates of
insurance except in the ordinary course of business consistent with
past practice;
(u) take any action, or permit any action within TSW's control,
which would (i) prevent the Mergers from qualifying as a tax-free
reorganization under Section 368(a) (1) (A) of the Code, or (ii)
prevent the Mergers from qualifying for accounting as a pooling of
interests, or fail to use its reasonable best efforts to prevent any
of its officers or directors from taking or permitting any such
action;
(v) provide or publish to its shareholders any material which
might constitute an unauthorized "prospectus" within the meaning of
the Securities Act; or
(w) agree to take, or permit any TSW Subsidiary to take or agree
to take, or enter into negotiations with respect to, any of the
actions described in the preceding clauses in this Section 4.3.
4.4 SHAREHOLDER APPROVAL. TSW will call the TSW Shareholders meeting,
to be held within 45 days after the Form S-4 shall have been declared
effective by the SEC, to obtain the TSW Shareholder Approval. Subject
to the fiduciary obligations of TSW's directors and officers and to
TSW's legal disclosure obligations, the Prospectus/Proxy Statement will
include a statement to the effect that TSW's Board of Directors has
recommended that TSW shareholders vote to grant the TSW Shareholder
Approval. Such meeting will be called, held and conducted, and any
proxies will be solicited, in compliance with applicable law.
4.5 TSW AFFILIATE AGREEMENTS.
(a) Affiliate Agreement. Concurrently with the execution of this
Agreement, TSW shall cause each of those persons who may be deemed
to be, in TSW's reasonable judgment, an "affiliate" (within the
meaning of Rule 145 of the rules and regulations promulgated by the
SEC under the Securities Act ("Rule 145")) of TSW, which persons are
all listed on Exhibit 4.5(a)(i) hereto, to sign and deliver to INDUS
and Newco an Affiliate Agreement in the form of Exhibit 4.5(a)(ii)
hereto (the "TSW Affiliate Agreements") agreeing that such persons
(a) will have no present intent to dispose of more than fifty
percent (50%) of the Newco Common Stock received in the TSW Merger;
and (b) will make no disposition of TSW Common Stock, or the Newco
Common Stock received in exchange therefor: (i) in the 30 day period
prior to the Closing Date; (ii) after the Closing Date until Newco
shall have published combined financial results of Newco, TSW and
INDUS for a period of at least 30 days of combined operations; or
(iii) except in compliance with SEC Rule 145(d), pursuant to another
available exemption from the registration requirements under the
Securities Act or in a registered offering. Newco shall be entitled
to place legends on the certificates evidencing any Newco Common
Stock to be received by such TSW affiliates pursuant to the terms of
this Agreement and the TSW Agreement of Merger, and to issue
appropriate stop transfer instructions to the transfer agent for
Newco Common Stock, consistent with the terms of such TSW Affiliate
Agreements, whether or not such TSW Affiliate Agreements are
actually delivered to INDUS.
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(b) Voting Agreement. Concurrently with the execution of this
Agreement, Warburg, John W. Blend, III and John R. Oltman shall sign
and deliver to INDUS and Newco a Voting Agreement in the form of
Exhibit 4.5(b) hereto (the "TSW Voting Agreement") agreeing that
such persons will vote in favor of the Mergers at the TSW
Shareholders Meeting.
4.6 LETTERS OF TSW'S ACCOUNTANTS.
(a) TSW shall use its reasonable best efforts to cause to be
delivered a letter of Ernst & Young LLP, TSW's independent auditors,
dated a date within five business days following the date of this
Agreement, stating that firm's written concurrence with the INDUS
management's and the TSW management's conclusions, respectively, as
to the appropriateness of pooling of interests accounting for the
Mergers under Accounting Principles Board Opinion No. 16, if closed
and consummated in accordance with this Agreement.
(b) TSW shall use its reasonable best efforts to cause to be
delivered to INDUS a letter of Ernst & Young LLP dated a date within
two business days before the date on which the Form S-4 shall become
effective and addressed to INDUS, in form and substance reasonably
satisfactory to INDUS and customary in scope and substance for
letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
4.7 PROSPECTUS/PROXY STATEMENT. TSW will mail to its shareholders in
a timely manner, for the purpose of considering and voting upon the
Mergers at the TSW Shareholders Meeting, the Prospectus/Proxy Statement
in the Form S-4. TSW will promptly provide to INDUS all information
relating to its business or operations necessary for inclusion in the
Prospectus/ Proxy Statement to satisfy all requirements of applicable
state and federal securities laws. None of the information relating to
TSW (or, to TSW's knowledge, any other person, contained in any
document, certificate or other writing furnished or to be furnished by
TSW) provided to INDUS pursuant to the previous sentence and included
in (i) the Prospectus/Proxy Statement at the time the Proxy Statement
is mailed or at the time of the meeting of TSW's shareholders to obtain
the TSW Shareholder Approval, or (ii) the Form S-4 at the time the Form
S-4 becomes effective, will contain any untrue statement of a material
fact or will omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading or necessary to
correct any statement which has become false or misleading in any
earlier communication with respect to the solicitation of proxies for
the INDUS and TSW shareholder meetings. The Prospectus/Proxy Statement,
as it relates to TSW, will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder in effect at the time the Prospectus/Proxy Statement is
mailed.
4.8 REGULATORY APPROVALS. TSW will promptly execute and file, or join
in the execution and filing, of any application or other document that
may be necessary in order to obtain the authorization, approval or
consent of any governmental body, federal, state, local or foreign,
which may be reasonably required, or which INDUS or Newco may
reasonably request, in connection with the consummation of the
transactions contemplated by this Agreement. TSW will use its
reasonable best efforts to promptly obtain all such authorizations,
approvals and consents. In addition, TSW shall use its reasonable best
efforts to cause Warburg, as promptly as practicable after the
execution of this Agreement, to file with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice
(the "DOJ"), a pre-merger notification report under the HSR Act.
4.9 NECESSARY CONSENTS. TSW will use its reasonable best efforts to
obtain such permits, governmental consents, approval and
authorizations, written consents, assignments, waivers, authorizations
and other certificates and to take such other actions as may be
necessary or appropriate in addition to those set forth in Section 4.8
to allow the consummation of the transactions contemplated hereby and
to allow the TSW Surviving Corporation to carry on TSW's business after
the Effective Time.
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<PAGE>
4.10 ACCESS TO INFORMATION. TSW will allow INDUS and its agents
reasonable access to the files, books, records, technology and offices
of TSW and each TSW Subsidiary, including, without limitation, any and
all information relating to TSW's Taxes, commitments, contracts,
leases, licenses and real, personal, intellectual and intangible
property and financial condition. TSW will use its reasonable best
efforts to cause its accountants to cooperate with INDUS and its agents
in making available to INDUS all financial information reasonably
requested, including, without limitation, the right to examine all
working papers pertaining to all Tax returns and financial statements
prepared or audited by such accountants.
4.11 SATISFACTION OF CONDITIONS PRECEDENT. TSW will use its
reasonable best efforts to satisfy or cause to be satisfied all the
conditions precedent that are set forth in Section 8 and to cause the
mergers and the other transactions contemplated by this Agreement to be
consummated.
4.12 NO OTHER NEGOTIATIONS. From and after the date of this Agreement
until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, TSW shall not, directly or
indirectly, (a) solicit or initiate discussions,.or engage in
negotiations with any person or take any other action intended,
designed or reasonably likely to facilitate the efforts of any person,
other than INDUS and Newco, relating to the possible acquisition of TSW
or any of the TSW Subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion
of its or their capital stock or assets, (b) provide non-public
information with respect to TSW or any of the TSW Subsidiaries to any
person, other than INDUS and Newco, relating to the possible
acquisition of TSW or any of the TSW Subsidiaries (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or
any material portion of its or their capital stock or assets, (c) enter
into an agreement with any person, other than INDUS and Newco,
providing for the possible acquisition of TSW or any of the TSW
Subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its or
their capital stock or assets.
5. INDUS AND NEWCO COVENANTS
5.1 ADVICE OF CHANGES. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, INDUS will promptly advise
TSW in writing (a) of any event occurring subsequent to the date of
this Agreement that could reasonably be expected to render any
representation or warranty of INDUS, Newco or TSW contained in this
Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect, (b) of any event
that would have a Material Adverse Effect on INDUS, and (c) of any
material breach by INDUS or Newco of any covenant or agreement
contained in this Agreement.
5.2 MAINTENANCE OF BUSINESS. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, INDUS will use its best
efforts (i) to carry on and preserve its business and its relationships
with customers, suppliers, employees and others in substantially the
same manner as it has prior to the date hereof, and (ii) to execute on
its existing operating plan through the date of Closing. If INDUS
becomes aware of any material deterioration in the relationship with
any customer, supplier or key employee, it will promptly bring such
information to the attention of TSW in writing and, if requested by
TSW, will exert its reasonable best efforts to restore the
relationship.
5.3 CONDUCT OF BUSINESS. Except as disclosed in Section 5.3 of the
INDUS Disclosure Letter, during the period from the date of this
Agreement until the earlier of the Effective Time or the termination of
this Agreement in accordance with its terms, INDUS will continue to
conduct its business and maintain its business relationships in the
ordinary and usual course and will not, without the prior written
consent of TSW, which consent shall not be unreasonably withheld:
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<PAGE>
(a) borrow any money except for amounts not exceeding $3,000,000
in the aggregate;
(b) enter into any transaction not in the ordinary course of its
business, except for those transactions described in the INDUS
Disclosure Letter;
(c) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business, consistent with past
practice, and to an extent which is not material;
(d) dispose of any of its assets, except in the ordinary course of
business, consistent with past practice (which shall include renewal
of agreements relating to INDUS's principal offices);
(e) enter into any material lease or contract for the purchase or
sale or license of any property, real or personal, except in the
ordinary course of business, consistent with past practice;
(f) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has
maintained to the date of this Agreement, subject only to ordinary
wear and tear;
(g) pay (or make any oral or written commitments or
representations to pay) any bonus, increased salary or special
remuneration to any officer, employee or consultant (except for
bonuses in amounts consistent with past practices, and normal salary
increases consistent with past practices) or enter into or vary the
terms of any employment, consulting or severance agreement with any
such person, pay any severance or termination pay (other than
payments in amounts consistent with past practices or made in
accordance with plans or agreements existing on the date hereof),
grant any stock option (except for normal grants to employees
consistent with past practices) or issue any restricted stock, or
enter into or modify any agreement or plan of the type described in
Section 3.8 (except for amendments to the INDUS Plans to increase
the number of shares reserved thereunder to the number set forth in
Section 3.2(b) hereof and to accommodate the assumption of such
Plans by Newco in the Mergers);
(h) except as required by GAAP, change accounting methods;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of capital stock, or redeem or otherwise
acquire any of its capital stock (other than pursuant to
arrangements with terminated employees or consultants in the
ordinary course of business, consistent with past practice);
(j) amend or terminate any contract, agreement or license to which
it is a party except those amended or terminated in the ordinary
course of its business, consistent with past practice, and that are
not material to the financial condition of INDUS, Newco and the
INDUS Subsidiaries, taken as a whole;
(k) lend any amount to any person or entity, other than (i)
advances for travel and expenses which are incurred in the ordinary
course of business, consistent with past practice, not material in
amount, or (ii) any loans pursuant to any INDUS Section 401(a) Plan;
(l) guarantee or act as a surety for any obligation except for
obligations of Newco or any of the INDUS Subsidiaries in amounts
that are not material to the financial condition of INDUS, Newco and
the INDUS Subsidiaries, taken as a whole;
(m) waive or release any right or claim except for the waiver or
release of non-material claims in the ordinary course of business,
consistent with past practice, or the waiver or release of rights or
claims described in the INDUS Disclosure Letter;
(n) except in connection with any transaction described in the
INDUS Disclosure Letter, issue or sell any shares of its capital
stock of any class (except upon the exercise of an option or warrant
currently outstanding or permitted to be granted by Section 5.3(g)),
or any other of its securities, or issue or create any warrants,
obligations, subscriptions, options (except as expressly
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<PAGE>
permitted by Section 5.3(g)), convertible securities or other
commitments to issue shares of capital stock, or accelerate the
vesting or change any other term of any outstanding option or other
security;
(o) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization or agreement
affecting the number or rights of outstanding shares of its capital
stock of any class or affecting any other of its securities;
(p) merge, consolidate or reorganize with, or acquire any entity;
(q) amend its Articles of Incorporation or Bylaws, or amend the
Certificate of Incorporation or Bylaws of Newco, except in
connection with any transaction described in the INDUS Disclosure
Letter;
(r) license any INDUS IP Rights except in the ordinary course of
business, consistent with past practice, or grant any exclusive
rights or agree to do any development projects with respect to the
INDUS IP Rights;
(s) agree to any audit assessment by any Tax authority, except
amounts not exceeding $300,000 with prior written notice to TSW;
(t) change any insurance coverage or issue any certificates of
insurance, other than in the ordinary course of business consistent
with past practice;
(u) take any action, or permit any action within INDUS's control,
which would (i) prevent the Mergers from qualifying as a tax-free
reorganization under Section 368(a)(1)(A) of the Code, (ii) prevent
the Mergers from qualifying for accounting as a pooling of
interests, or fail to use its reasonable best efforts to prevent any
of its officers or directors from taking or permitting any such
action or (iii) result in a failure to maintain the trading of INDUS
Common Stock on the Nasdaq Stock Market without causing such stock
to be listed on the New York Stock Exchange or the American Stock
Exchange at or prior to the termination of its trading on the Nasdaq
Stock Market, or fail to use its reasonable best efforts to prevent
its officers or directors from taking or permitting such action;
(v) provide or publish to its shareholders any material which
might constitute an unauthorized "prospectus" within the meaning of
the Securities Act; or
(w) agree to take, or permit any INDUS Subsidiary to take or agree
to take, or enter into negotiations with respect to, any of the
actions described in the preceding clauses in this Section 5.3.
5.4 SHAREHOLDER APPROVAL. INDUS will call the INDUS Shareholders
Meeting, to be held within 45 days after the Form S-4 shall have been
declared effective by the SEC, to obtain the INDUS Shareholder
Approval. Subject to the fiduciary obligations of INDUS's directors and
officers and to INDUS's legal disclosure obligations, the
Prospectus/Proxy Statement will include a statement to the effect that
INDUS's Board of Directors has recommended that INDUS shareholders vote
to grant the INDUS Shareholder Approval. Such meeting will be called,
held and conducted, and any proxies will be solicited, in compliance
with applicable law.
5.5 INDUS AFFILIATE AGREEMENTS.
(a) Affiliate Agreement. Concurrently with the execution of this
Agreement, INDUS shall cause each of those persons who may be deemed
to be, in INDUS's reasonable judgment, an "affiliate" (within the
meaning of Rule 145 of the rules and regulations promulgated by the
SEC under the Securities Act ("Rule 145")) of INDUS, which persons
are all listed on Exhibit 5.5(a)(i) hereto, to sign and deliver to
TSW an Affiliate Agreement in the form of Exhibit 5.5(a)(ii) hereto
(the "INDUS Affiliate Agreements") agreeing that such persons (a)
will have no present intent to
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<PAGE>
dispose of more than fifty percent (50%) of the Newco Common Stock
received in the INDUS Merger; and (b) will make no disposition of
INDUS Common Stock, or the Newco-Common Stock received in exchange
therefor: (i) in the 30 day period prior to the Closing Date; (ii)
after the Closing Date until Newco shall have published combined
financial results of Newco, TSW and INDUS for a period of at least
30 days of combined operations; or (iii) except in compliance with
SEC Rule 145(d), pursuant to another available exemption from the
registration requirements under the Securities Act or in a
registered offering. Newco shall be entitled to place legends on the
certificates evidencing any Newco Common Stock to be received by
such INDUS affiliates pursuant to the terms of this Agreement and
the INDUS Agreement of Merger, and to issue appropriate stop
transfer instructions to the transfer agent for Newco Common Stock,
consistent with the terms of such INDUS Affiliate Agreements,
whether or not such INDUS Affiliate Agreements are actually
delivered to TSW.
(b) Voting Agreement. Concurrently with the execution of this
Agreement, Robert W. Felton ("Felton"), Richard W. MacAlmon
("MacAlmon"), Michael E. Percy and Douglas R. Piper will sign and
deliver to TSW a Voting Agreement in the form of Exhibit 5.5(b)
hereto (the "INDUS Voting Agreement") agreeing that such persons
will vote in favor of the Mergers at the INDUS Shareholder Meeting.
5.6 LETTER OF INDUS'S ACCOUNTANTS.
(a) INDUS shall use its reasonable best efforts to cause to be
delivered a letter of Ernst & Young LLP INDUS's independent
auditors, dated a date within five business days following the date
of this Agreement, stating that firm's written concurrence with
INDUS management's and the TSW management's conclusions,
respectively, as to the appropriateness of pooling of interests
accounting for the Mergers under Accounting Principles Board Opinion
No. 16, if closed and consummated in accordance with this Agreement.
(b) INDUS shall use its reasonable best efforts to cause to be
delivered to TSW a letter of Ernst & Young LLP, dated a date within
two business days before the date on which the Form S-4 shall become
effective and addressed to TSW, in form and substance reasonably
satisfactory to TSW and customary in scope and substance for letters
delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
5.7 PROSPECTUS/PROXY STATEMENT. INDUS will mail to its shareholders
in a timely manner, for the purpose of considering and voting upon the
Mergers at the INDUS shareholders Meeting, the Prospectus/Proxy
Statement in the Form S-4. INDUS and Newco will prepare and file the
Proxy Statement/Prospectus with the SEC as promptly as practicable, and
each will use its respective best reasonable efforts to cause the Form
S-4 to become effective as soon after such filing as practicable. In
this regard, INDUS and Newco will advise TSW promptly as to the time at
which the Form S-4 becomes effective and of the issuance by the SEC of
any stop order suspending the effectiveness of the Form S-4 or the
institution of any proceedings for such purpose and each will use its
respective reasonable best efforts to prevent the issuance of any stop
order and to obtain as soon as possible the lifting thereof, if issued.
Until the Effective Time, INDUS and Newco will advise TSW promptly of
any requirement of the SEC for any amendment or supplement of the Form
S-4 or for additional information, and will not at any time file any
amendment of or supplement to the prospectus contained therein (or to
the prospectus filled pursuant to Rule 424(b) of the SEC) (the
"Prospectus") which shall not have been previously submitted to TSW in
reasonable time prior to the proposed filing thereof or to which TSW
shall reasonably object or which is not in compliance in all material
respects with the Securities Act and the rules and regulations issued
by the SEC thereunder. None of the information relating to INDUS or
Newco (or, to INDUS's or Newco's knowledge, any other person, contained
in any document, certificate or other writing furnished or to be
furnished by INDUS) included in (i) the Prospectus/ Proxy Statement at
the time the Prospectus/Proxy Statement is mailed or at the time of the
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<PAGE>
meeting of INDUS shareholders to obtain the INDUS Shareholder Approval
or at the time of the meeting of the shareholders of TSW to vote on the
Mergers, or (ii) the Form S-4 at the time the Form S-4 becomes
effective, will contain any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading or necessary to correct any
statement which has become false or misleading in any earlier
communication with respect to the solicitation of proxies for the TSW
and INDUS shareholder meetings. From and after the date the Form S-4
becomes effective and until the Effective Time, if any event known to
INDUS or Newco occurs as a result of which the Prospectus would include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or if it is necessary at any time to amend the
Form S-4 or the Prospectus to comply with the Securities Act, INDUS and
Newco will promptly notify TSW and will prepare an-amended or
supplemented Form S-4 or Prospectus which will correct such statement
or omission and will use its reasonable best efforts to cause any such
amendment to become effective as promptly as possible. The
Prospectus/Proxy Statement, as it relates to INDUS and Newco, will
comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder in effect at the
time the Prospectus/Proxy Statement is mailed.
5.8 STATE SECURITIES LAW COMPLIANCE. INDUS and Newco shall use their
respective reasonable best efforts to (i) qualify the Newco Common
Stock to be issued pursuant to the Mergers under the state securities
or "blue sky" laws of every jurisdiction of the United States in which
(a) any registered shareholder of TSW has an address on the records of
TSW's transfer agent on the record date for determining the TSW
shareholders entitled to notice of and to vote on the Mergers, (b) any
registered shareholder of INDUS has an address on the records of
INDUS's transfer agent on the record date for determining the INDUS
shareholders entitled to notice of and to vote on the Mergers, and (c)
a Nasdaq Stock Market or other exemption from the qualification
requirements under such laws is unavailable, and (ii) qualify the Stock
Rights to be assumed by INDUS pursuant to Sections 1.9 and 1.10 hereof
under the state securities or "blue sky" laws of every jurisdiction of
the United States in which (a) the records of INDUS or TSW, as of the
Closing Date, indicate that a holder of such Stock Rights resides and
(b) a Nasdaq Stock Market or other exemption from the qualification
requirements under such laws is unavailable.
5.9 REGULATORY APPROVALS. INDUS and Newco will promptly execute and
file, or join in the execution and filing, of any application or other
document that may be necessary in order to obtain the authorization,
approval or consent of any governmental body, federal, state, local or
foreign which may be reasonably required, or which TSW may reasonably
request, in connection with the consummation of the transactions
contemplated by this Agreement. INDUS and Newco will each use its
respective reasonable best efforts to promptly obtain all such
authorizations, approvals and consents. Without-limiting the generality
of the foregoing, as promptly as practicable after the execution of
this Agreement, INDUS and Newco shall file with the FTC and the DOJ a
pre-merger notification report under the HSR Act.
5.10 NECESSARY CONSENTS. INDUS and Newco will each use its respective
reasonable best efforts to obtain such permits, governmental consents,
approval and authorizations, written consents, assignments, waivers,
authorizations and other certificates and to take such other actions as
may be necessary or appropriate in addition to those set forth in
Section 5.9 to allow the consummation of the transactions contemplated
hereby and to allow the INDUS Surviving Corporation to carry on INDUS's
business after the Effective Time.
5.11 ACCESS TO INFORMATION. INDUS will allow TSW and its agents
reasonable access to the files, books, technology, records and offices
of INDUS, Newco and each INDUS Subsidiary, including, without
limitation, any and all information relating to INDUS Taxes,
commitments, contracts, leases, licenses and real, personal,
intellectual and intangible property and financial condition. INDUS
will
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<PAGE>
use its reasonable best efforts to cause its accountants to cooperate
with TSW and its agents in making available to TSW all financial
information reasonably requested, including, without limitation, the
right to examine all working papers pertaining to all Tax returns and
financial statements prepared or audited by such accountants.
5.12 SATISFACTION OF CONDITIONS PRECEDENT. INDUS and Newco will each
use its respective reasonable best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Section 7
and to cause the Mergers and the other transactions contemplated by
this Agreement to be consummated.
5.13 NO OTHER NEGOTIATIONS. From and after the date of this Agreement
until the earlier of the Effective Time or the termination of this
Agreement in accordance with its terms, INDUS shall not, directly or
indirectly, (a) solicit or initiate discussions, or engage in
negotiations with any person or take any other action intended,
designed or reasonably likely to facilitate the efforts of any person,
other than TSW and Newco, relating to the possible acquisition of INDUS
or any of the INDUS Subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion
of its or their capital stock or assets, (b) provide non-public
information with respect to INDUS or any of the INDUS Subsidiaries to
any person, other than TSW and Newco, relating to the possible
acquisition of INDUS or any of the INDUS Subsidiaries (whether by way
of merger, purchase of capital stock, purchase of assets or otherwise)
or any material portion of its or their capital stock or assets, ( c)
enter into an agreement with any person, other than TSW and Newco,
providing for the possible acquisition of INDUS or any of the INDUS
Subsidiaries (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its or
their capital stock or assets.
5.14 NEWCO EMPLOYEE PLANS AND BENEFIT ARRANGEMENTS; SEVERANCE. The
TSW Employee Plans and TSW Benefit Arrangements listed in the TSW
Disclosure Letter, and the INDUS Employee Plans and INDUS Benefit
Arrangements listed in the INDUS Disclosure Letter, in each case that
are in effect at the date of this Agreement shall, to the extent
practicable, remain in effect until employees of TSW and INDUS are
allowed to participate in comparable employee plans ("Newco Employee
Plans") and benefit arrangements ("Newco Benefit Arrangements") of
Newco. Newco will use reasonable efforts to arrange that, as soon as
practicable after the Effective Time, the Newco Benefit Arrangements
and Newco Employee Plans provide the same or a comparable benefit or
plan to each employee of INDUS or TSW, as the case may be, as is
currently provided to such employee by INDUS or TSW, as the case may
be; provided that all similarly situated employees of Newco, INDUS and
TSW shall enjoy substantially similar benefits regardless of whether
such employees are employees of Newco, INDUS or TSW. The Newco Benefit
Arrangements and Newco Employee Plans shall give full credit for each
participant's period of service with INDUS or TSW, as the case may be,
and each ERISA Affiliate prior to the Effective Time for all purposes
for which such service was recognized under INDUS Benefit Arrangement
or INDUS Employee Plans, or TSW Benefit Arrangements or TSW Employee
Plans, as the case may be, prior to the Effective Time. From and after
the Effective Time, Newco shall provide all employees of TSW and its
ERISA Affiliates with the opportunity to participate in any employee
stock option or other incentive compensation plan of Newco and its
ERISA Affiliates on substantially the same terms and subject to
substantially the same conditions as are available to similarly
situated employees of INDUS, and vice versa.
5.15 INDEMNIFICATION AND INSURANCE.
(a) TSW Rights.
(i) The Articles of Incorporation and Bylaws of the TSW
Surviving Corporation shall contain the provisions with respect
to indemnification and limitation of liability for monetary
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damages set forth in the Articles of Incorporation and Bylaws of
TSW on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of ten
years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the Effective
Time were directors, officers, employees or agents of TSW,
unless such modification is required by law.
(ii) From and after the Effective Time, Newco and the TSW
Surviving Corporation shall honor, in all respects, all of the
indemnity agreements entered into prior to the date hereof by
TSW with its respective officers and directors, whether or not
such persons continue in their positions with Newco or the TSW
Surviving Corporation following the Effective Time.
(iii) After the Effective Time, Newco and the TSW Surviving
Corporation will, jointly and severally, to the fullest extent
permitted under applicable law, indemnify and hold harmless,
each present and former director or officer of TSW or any TSW
subsidiary (collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys, fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal
administrative or investigative, to the extent arising out of or
pertaining to any action or omission in his or her capacity as a
director or officer of TSW arising out of or pertaining to the
transactions contemplated by this Agreement for a period of six
years after the date hereof. In the event of any such claim,
action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (a) any counsel retained
for the defense of the Indemnified Parties for any period after
the Effective Time will be reasonably satisfactory to the
Indemnified Parties, (b) after the Effective Time, the TSW
Surviving Corporation will pay the reasonable fees and expenses
of such counsel promptly after statements therefor are received,
and (c) the TSW Surviving Corporation will cooperate in the
defense of any such matter; provided, however, that the TSW
Surviving Corporation will not be liable for any settlement
effected without its written consent (which consent will not be
unreasonably withheld); and provided, further, that, in the
event that any claim or claims for indemnification are asserted
or made within such six-year period, all rights to
indemnification in respect of any such claim or claims will
continue until the disposition of any and all such claims. The
Indemnified Parties as a group may be defended by only one law
firm (in addition to local counsel) with respect to any single
action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties.
(iv) For the entire period from and after the Effective Time
until at least six years after the Effective Time, Newco will
cause the TSW Surviving Corporation to use its commercially
reasonable efforts to maintain in effect directors' and
officers' liability insurance covering those persons who are
currently covered by TSW's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered
to INDUS) of at least the same coverage and amounts, containing
terms that are no less advantageous with respect to claims
arising at or before the Effective time than TSW's policies in
effect immediately prior to the Effective Time to those
applicable to the then current directors and officers of Newco
and the INDUS Surviving Corporation; provided, however, that in
no event shall Newco or the TSW Surviving Corporation be
required to expend in excess of 150% of the annual premium
currently paid by TSW for such coverage in which event Newco
shall purchase such coverage as is available for such 150% of
such annual premium.
(v) Newco and the TSW Surviving Corporation shall pay all
expenses, including attorneys' fees, that may be incurred by any
Indemnified Parties in enforcing the Indemnity and other
obligations provided for in this Section 5.15(a).
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(b) INDUS Rights.
(i) The Articles of Incorporation and Bylaws of the INDUS
Surviving Corporation shall contain the provisions with respect
to indemnification and limitation of liability for monetary
damages set forth in the Articles of Incorporation and Bylaws of
INDUS on the date of this Agreement, which provisions shall not
be amended, repealed or otherwise modified for a period of ten
years from the Effective Time in any manner-that would adversely
affect the rights thereunder of individuals who at the Effective
Time were directors, officers, employees or agents of INDUS,
unless such modification is required by law.
(ii) From and after the Effective Time, Newco and the INDUS
Surviving Corporation shall honor, in all respects, all of the
indemnity agreements entered into prior to the date hereof by
INDUS with its respective officers and directors, whether or not
such persons continue in their positions with Newco or the INDUS
Surviving Corporation following the Effective Time. Following
the Effective Time, INDUS's form of indemnification agreement
shall be adopted as the form of indemnification agreement for
Newco and the INDUS Surviving Corporation and all continuing
officers and directors of Newco or the INDUS Surviving
Corporation shall be afforded the opportunity to enter into such
indemnification agreement, and shall be covered by such
directors' and officers' liability insurance policies as Newco
shall have in effect from time to time.
(iii) After the Effective Time, Newco and the INDUS Surviving
Corporation will, jointly and severally, to the fullest extent
permitted under applicable law, indemnify and hold harmless,
each present and former director or officer of INDUS or any of
its subsidiaries (collectively, the "Indemnified Parties")
against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal
administrative or investigative, to the extent arising out of or
pertaining to any action or omission in his or her capacity as a
director or officer of INDUS arising out of or pertaining to the
transactions contemplated by this Agreement for a period of six
years after the date hereof. In the event of any such claim,
action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (a) any counsel retained
for the defense of the Indemnified Parties for any period after
the Effective Time will be reasonably satisfactory to the
Indemnified Parties, (b) after the Effective Time, the INDUS
Surviving Corporation will pay the reasonable fees and expenses
of such counsel, promptly after statements therefor are
received, and (c) the INDUS Surviving Corporation will cooperate
in the defense of any such matter; provided, however, that the
INDUS Surviving Corporation will not be liable for any
settlement effected without its written consent (which consent
will not be unreasonably withheld); and provided, further, that,
in the event that any claim or claims for indemnification are
asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims will
continue until the disposition of any and all such claims. The
Indemnified Parties as a group may be defended by only one law
firm (in addition to local counsel) with respect to any single
action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties.
(iv) For the entire period from and after the Effective Time
until at least six years after the Effective Time, Newco will
cause the INDUS Surviving Corporation to use its commercially
reasonable efforts to maintain in effect directors' and
officers' liability insurance covering those persons who are
currently covered by INDUS's directors' and officers' liability
insurance policy (a copy of which has been heretofore delivered
to TSW) of at least the same coverage and amounts, containing
terms that are no less advantageous with respect to claims
arising at or before the Effective time than INDUS's policies in
effect immediately prior to the Effective Time to those
applicable to the then current directors and
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officers of Newco and the INDUS Surviving Corporation; provided,
however, that in no event shall Newco or the INDUS Surviving
Corporation be required to expend in excess of 150% of the
annual premium currently paid by INDUS for such coverage in
which event Newco shall purchase such coverage as is available
for such 150% of such annual premium.
(v) Newco and the INDUS Surviving Corporation shall pay all
expenses, including attorneys' fees, that may be incurred by any
Indemnified Parties in enforcing the Indemnity and other-
obligations provided for in this Section 5.15(b).
(c) In the event Newco, the TSW Surviving Corporation or the INDUS
Surviving Corporation or any of their respective successors or
assigns (a) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, or (b) transfers or conveys
all or a substantial portion of its properties or assets to any
person or entity, then, and in each such case, to the extent
necessary to effectuate the purposes of this Section 5.15(c), proper
provision shall be made so that the successors and the assigns of
Newco, the TSW Surviving Corporation and the INDUS Surviving
Corporation assume the obligations set forth in this Section 5.15.
(d) The provisions of this Section 5.15 shall survive the
Effective Time and are intended to be for the benefit of, and shall
be enforceable by, each officer and director of TSW or INDUS
described in Sections 5.15(a)(i) and 5.15(b)(i) and his or her heirs
and representatives.
5.16 REGISTRATION RIGHTS AGREEMENT. Prior to the Effective Time,
Newco, TSW, Felton, MacAlmon, Warburg, John W. Blend, III and John R.
Oltman shall enter into a Registration Rights Agreement in the form
attached hereto as Exhibit 5.16 (the "Registration Rights Agreement").
5.17 EMPLOYEE MATTERS. Prior to the Effective Time, INDUS, Newco and
TSW shall mutually agree upon an integration plan relating to the
Mergers which shall include, among other things, provisions relating to
compensation and other equity incentives for employees of Newco, INDUS
and TSW.
5.18 BOARD REPRESENTATION. At the Effective Time, Newco shall execute
a Nomination Agreement in the form attached hereto as Exhibit 5.18 (the
"Nomination Agreement") providing for the following rights of Warburg
and Felton. For purposes of this Section 5.18, a person shall be deemed
to own as "Common Stock of Newco on a fully diluted basis" all shares
of Common Stock of Newco subject to all warrants, options and purchase
rights owned by such person.
(a) Provided that Warburg holds a number of shares of Newco Common
Stock in excess of fifteen percent (15%) of the outstanding shares
of Common Stock of Newco on a fully diluted basis, Newco shall
nominate, in connection with each shareholder solicitation relating
to the election of directors, two candidates selected by Warburg,
consisting of one representative of Warburg.
(b) Provided that Warburg holds a number of shares of Newco Common
Stock equal to or less than fifteen percent (15%) but exceeding
seven percent (7%) of the outstanding Common Stock of Newco on a
fully diluted basis, Newco shall nominate one candidate selected by
Warburg.
(c) Provided that Felton holds a number of shares of Newco Common
Stock in excess of fifteen percent (15%) of the outstanding shares
of Common Stock of Newco on a fully diluted basis, Newco shall
nominate, in connection with each shareholder solicitation relating
to the election of directors, two candidates selected by Felton, one
of which may be Felton.
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(d) Provided that Felton holds a number of shares of Newco Common
Stock equal to or less than fifteen percent (15%) but exceeding
seven percent (7%) of the outstanding Common Stock of Newco on a
fully diluted basis, Newco shall nominate one candidate selected by
Felton, which may be Felton.
At such time as Warburg or Felton ceases to hold in excess of seven percent
(7%) of the outstanding Common Stock of Newco on a fully diluted basis, the
rights of Warburg or Felton, as the case may be, under the Nomination
Agreement will terminate and will have no further force or effect.
6. CLOSING MATTERS
6.1 THE CLOSING. Subject to the termination of this Agreement as
provided in Section 9 below, the Closing of the transactions
contemplated by this Agreement (the "Closing") will take place at the
offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo
Alto, California 94304 on a date (the "Closing Date") and at a time to
be mutually agreed upon by the parties, which date shall be as soon as
practicable after the TSW Shareholders Meeting and the INDUS
Shareholders Meeting and, in any event, no later than the third
business day after all conditions to Closing set forth herein (other
than those conditions that are intended to be satisfied at the closing)
shall have been satisfied or waived, unless another place, time and
date is mutually selected by TSW and INDUS.
6.2 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. ChaseMellon Shareholder Services LLC shall act as
exchange agent (the "Exchange Agent") in the Mergers. Promptly after
the Effective Time, Newco shall deposit with the Exchange Agent, for
the benefit of the holders of shares of INDUS Common Stock, TSW Common
Stock, TSW Preferred Stock and TSW Subordinated Notes, for exchange in
accordance with this Agreement and the Agreements of Merger,
certificates representing the shares of Newco Common Stock (such shares
of Newco Common Stock, together with any dividends or distributions
with respect thereto, being hereinafter referred to as the "Exchange
Fund") issuable pursuant to this Agreement and the Agreements of
Merger, and cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.8, in exchange for outstanding
shares of INDUS Common Stock, TSW Common Stock and TSW Preferred Stock.
(b) Exchange Procedures.
(i) As soon as practicable after the Effective Time, Newco
shall cause the Exchange Agent to mail to each holder of record
of a certificate or certificates which immediately prior to the
Effective Time represented issued and outstanding shares of
INDUS Common Stock, TSW Common Stock and TSW Preferred Stock
(collectively, the "Certificates") whose shares are converted
into the right to receive Newco Common Stock pursuant to Section
1.4 or 1.5, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and
have such other provisions as INDUS and TSW may reasonably
specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates
representing Newco Common Stock. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as may
be reasonably required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Newco
Common Stock and cash in lieu of fractional shares which such
holder has the right to receive pursuant to the provisions of
this Agreement and the Agreements of Merger, and the Certificate
so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of INDUS Common Stock, TSW
Common Stock or TSW Preferred Stock which is not registered on
the transfer records of INDUS or TSW, as applicable, a
certificate representing the proper number of
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shares of Newco Common Stock may be issued to a transferee if
the Certificate representing such INDUS Common Stock, TSW Common
Stock or TSW Preferred Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this
Section 6.2 and the Agreements of Merger, each Certificate shall
be deemed, on and after the Effective Time, to evidence the
ownership of the number of full shares of Newco Common Stock
into which such shares of INDUS Common Stock, TSW Common Stock
or TSW Preferred Stock shall have been so converted and the
right to receive an amount in lieu of any fractional shares of
Newco Common Stock as contemplated by Section 1.8, the
Agreements of Merger and the Delaware Law.
(ii) As soon as practicable after the Effective Time, Newco
shall cause the Exchange Agent to mail to each holder of an TSW
Subordinated Note (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and
title to the TSW Subordinated Notes shall pass, only upon
delivery of the TSW Subordinated Notes to the Exchange Agent and
shall be in such form and have such other provisions as INDUS
and TSW may reasonably specify) and (ii) instructions for use in
effecting the surrender of the TSW Subordinated Notes in
exchange for certificates representing Newco Common Stock. Upon
surrender of an TSW Subordinated Note for cancellation to the
Exchange Agent, together with a duly executed letter of
transmittal and such other documents as may be reasonably
required by the Exchange Agent, the holder of such TSW
Subordinated Note shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares
of Newco Common Stock and cash in lieu of fractional shares
which such holder has the right to receive pursuant to the
provisions of this Agreement and the Agreements of Merger, and
the TSW Subordinated Note so surrendered shall forthwith be
canceled. Until surrendered as contemplated by this Section 6.2
and the Agreements of Merger, each TSW Subordinated Note shall
be deemed, on and after the Effective Time, to evidence the
ownership of the number of full shares of Newco Common Stock
into which such TSW Subordinated Note shall have been so
exchanged and the right to receive an amount in lieu of any
fractional shares of Newco Common Stock as contemplated by
Section 1.8 and the Agreements of Merger.
(c) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the
Effective Time with respect to Newco Common Stock with a record date
after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Newco Common
Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 1.8 and
the Agreements of Merger, until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect
of applicable laws, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates
representing whole shares of Newco Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Newco
Common Stock to which such holder is entitled pursuant to Section
1.8 and the Agreements of Merger and the amount of dividends or
other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Newco Common
Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent
to surrender payable with respect to such whole shares of Newco
Common Stock.
(d) No Further Ownership Rights. All shares of Newco Common Stock
issued upon the surrender for exchange of shares of INDUS Common
Stock, TSW Common Stock or TSW Preferred Stock in accordance with
the terms of this Agreement and the TSW Agreements of Merger
(including any cash paid pursuant to Section 1.8 and Section 6.2(c))
shall be deemed to
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have been issued in full satisfaction of all rights pertaining to
such shares of INDUS Common Stock, TSW Common Stock or TSW Preferred
Stock. After the Effective Time there shall be no further
registration of transfers on the stock transfers books of (i) the
INDUS Surviving Corporation of the shares of INDUS Common Stock, or
(ii) the TSW Surviving Corporation of the shares of TSW Common Stock
or TSW Preferred Stock, which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are
presented to either the INDUS Surviving Corporation or the TSW
Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Section 6.2 and the Agreements of
Merger.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to shareholders six months after the
Effective Time shall be delivered to Newco, upon demand, and any
former shareholders of INDUS or TSW who have not theretofore
complied with this Section 6.2 and the Agreements of Merger shall
thereafter look only to Newco for payment of their claim for Newco
Common Stock, any cash in lieu of fractional shares of Newco Common
Stock and any dividends or distributions with respect to Newco
Common Stock.
(f) No Liability. Neither the Exchange Agent, Newco, INDUS or TSW
shall be liable to any holder of shares of TSW Common Stock or Newco
Common Stock, as the case may be, for any amount delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the
holder thereof and the posting of reasonable bond therefor, such
shares of Newco Common Stock, cash for fractional shares, if any, as
may be required pursuant to Section 1.8 and any dividends or
distributions payable pursuant to Section 6.2(c).
6.3 ASSUMPTION OF OPTIONS. Promptly after the Effective Time, Newco
shall (a) notify in writing each holder of a Stock Right of the
assumption of such Stock Right by Newco, the number of shares of Newco
Common Stock that are then subject to such Stock Right and the exercise
price or purchase price of such Stock Right, as determined pursuant to
Sections 1.9 and 1.10 hereof, and (b) file the Form S-8 to register the
Stock Rights.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF TSW
The obligations of TSW hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions
(any one or more of which may be waived by TSW, but only in a writing signed
by TSW):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of INDUS and Newco set forth in Section 3 (as qualified
by the INDUS Disclosure Letter) shall have been true and accurate in
all material respects (except for such representations and warranties
which are qualified by materiality or Material Adverse Effect, which
shall have been true and accurate in all respects) when made and shall
be true and accurate in all material respects (except for such
representations and warranties which are qualified by materiality or
Material Adverse Effect, which shall be true and accurate in all
respects) on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties that address matters only as of a particular date (which
shall remain true and accurate as of such particular date), with the
same force and effect as if they had been made at the Closing, and TSW
shall receive certificates to such effect executed by each of INDUS's
Chief Executive Officer and Newco's Chief Executive Officer.
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7.2 COVENANTS. INDUS and Newco shall have performed and complied in
all material respects with all of their respective covenants contained
in Section 5 on or before the Closing, and TSW shall receive
certificates to such effect executed by each of INDUS's Chief Executive
Officer and Newco's Chief Executive Officer.
7.3 COMPLIANCE WITH LAW. There shall be no order, decree or ruling by
any governmental agency which would prohibit or render illegal the
transactions contemplated by this Agreement.
7.4 CONSENTS. There shall have been obtained on or before the Closing
the permits, governmental consents, approvals and authorizations listed
on Exhibit 7.4 hereto, and INDUS shall have received the written
consents, assignments, waivers, authorizations and other certificates
also listed on Exhibit 7.4.
7.5 FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop-order or
proceedings seeking a stop-order and the Prospectus/Proxy Statement
shall on the Closing not be subject to any proceedings commenced or
overtly threatened by the SEC.
7.6 OPINION OF INDUS'S AND NEWCO'S COUNSEL. TSW shall have received
from counsel to INDUS and Newco, an opinion substantially in the form
to be agreed upon by the parties to this Agreement and attached hereto
as Exhibit 7.6.
7.7 TSW SHAREHOLDER APPROVAL. The TSW Shareholder Approval shall have
been granted in accordance with applicable law and TSW's Articles of
Incorporation and Bylaws. Holders of 5% or more of the outstanding
shares of TSW Common Stock and TSW Preferred Stock shall not be
eligible to exercise dissenter's rights under Articles 13 of the GBBC.
7.8 INDUS SHAREHOLDER APPROVALS. The INDUS Shareholder Approval shall
have been granted in accordance with applicable law and INDUS's
Articles of Incorporation and Bylaws. Holders of 5% or more of the
outstanding shares of INDUS Common Stock shall not be eligible to
exercise dissenter's rights under Chapter 13 of the CGCL.
7.9 NO LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of either of the Mergers shall have been issued by any
Federal or state court and remain in effect.
7.10 TAX OPINION. INDUS shall have received an opinion in form and
substance satisfactory to it from its counsel, to the effect that the
INDUS Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and
TSW shall have received an opinion in form and substance satisfactory
from its counsel, to the effect that the TSW Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. The parties shall make representations
related to the INDUS and TSW tax opinions, which representations
counsel may rely upon.
7.11 POOLING OPINION. TSW shall have received from Ernst & Young LLP
an opinion, in form and substance satisfactory to TSW, dated as of the
Closing that the Mergers together will be treated as a "pooling of
interests" in accordance with GAAP and all published rules, regulations
and policies of the SEC.
7.12 NASDAQ LISTING. The Newco Common Stock to be issued in the
Mergers shall have been approved for quotation on the Nasdaq Stock
Market, subject to notice of issuance.
7.13 INCORPORATION OF NEW COMPANIES. Newco shall have formed INDUS
Sub and TSW Sub prior to the Closing Date, which corporations shall be
duly organized, validly existing and in good
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standing under the laws of California and Georgia, respectively, and
which corporations shall have been formed solely for the purpose of the
transactions hereunder and shall not have engaged in any business
activities during the period from incorporation to the Closing Date.
TSW shall receive a certificate to such effect signed by Newco's Chief
Executive Officer.
7.14 ABSENCE OF SUBSTANTIAL MATERIAL ADVERSE CHANGE. There shall not
have been any Substantial Material Adverse Change since the date of
this Agreement. "Substantial Material Adverse Change" shall be deemed
to have occurred only in the event that, prior to the Effective Time,
there shall occur at any event or change which, individually or in the
aggregate of all such events or changes, have resulted, or reasonably
would be expected to result in, a substantial impairment to INDUS's
ability after the Closing to continue to develop, produce, sell and
distribute the products and services that are material to INDUS's
business in substantially the same manner as it has prior to the date
of this Agreement.
7.15 HSR ACT COMPLIANCE. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and any authorization, consent or approval required under
any Antitrust Law shall have been obtained or any waiting period
applicable to the review of the transactions contemplated hereby shall
have expired or been terminated.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, all other
federal, state, or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization, restraint of trade or lessening of competition
through merger or acquisition.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF INDUS AND NEWCO
The obligations of INDUS and Newco hereunder are subject to the fulfillment or
satisfaction on or before the Closing, of each of the following conditions
(any one or more of which may be waived by INDUS, but only in a writing signed
by INDUS):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of TSW set forth in Section 2 (as qualified by the TSW
Disclosure Letter) shall have been true and accurate in all material
respects (except for such representations and warranties which are
qualified by materiality or Material Adverse Effect, which shall have
been true and accurate in all respects) when made and shall be true and
accurate in all material respects (except for such representations and
warranties which are qualified by materiality or Material Adverse
Effect, which shall be true and accurate in all respects) on and as of
the Closing Date, except for changes contemplated by this Agreement and
except for those representations and warranties that address matters
only as of a particular date (which shall remain true and accurate as
of such particular date), with the same force and effect as if they had
been made at the Closing, and INDUS shall receive a certificate to such
effect executed by TSW's Chief Executive Officer and Chief Financial
Officer.
8.2 COVENANTS. TSW shall have performed and complied in all material
respects with all of its covenants contained in Section 4-on or before
the Closing, and INDUS shall receive a certificate to such effect
signed by TSW'S Chief Executive officer and Chief Financial Officer.
8.3 COMPLIANCE WITH LAW. There shall be no order, decree or ruling by
any court or governmental agency which would prohibit or render illegal
the transactions contemplated by this Agreement.
8.4 CONSENTS. There shall have been obtained on or before the Closing
the permits, governmental consents, approvals and authorizations listed
on Exhibit 8.4 hereto, and TSW shall have
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received the written consents, assignments, waivers, authorizations and
other certificates also listed on Exhibit 8.4.
8.5 FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not-be the subject of any stop-order or
proceedings seeking a stop-order and the Prospectus/Proxy Statement
shall on the Closing not be subject to any proceedings commenced or
overtly threatened by the SEC.
8.6 OPINION OF TSW'S COUNSEL. INDUS shall have received from counsel
to TSW, an opinion substantially in the form to be agreed upon by the
parties to this Agreement and attached hereto as Exhibit 8.6.
8.7 INDUS SHAREHOLDER APPROVALS. The INDUS Shareholder Approval shall
have been granted in accordance with applicable law and INDUS's
Articles of Incorporation and Bylaws. Holders of 5% or more of the
outstanding shares of INDUS Common Stock shall not be eligible to
exercise dissenter's rights under Chapter 13 of the CGCL.
8.8 TSW SHAREHOLDER APPROVAL. The TSW Shareholder Approval shall have
been granted in accordance with applicable law and TSW's Articles of
Incorporation and Bylaws. Holders of 5% or more of the outstanding
shares of TSW Common Stock and TSW Preferred Stock shall not be
eligible to exercise dissenter's rights under Article 13 of the GBBC.
8.9 NO LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of either of the Mergers shall have been issued by any
Federal or state court and remain in effect.
8.10 TAX OPINION. TSW shall have received an opinion in form and
substance satisfactory from its counsel, to the effect that the TSW
Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and
INDUS shall have received an opinion in form and substance satisfactory
to it from its counsel, to the effect that the INDUS Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. The parties shall make
representations related to the INDUS and TSW tax opinions, which
representations counsel may rely upon.
8.11 POOLING OPINION. INDUS shall have received from Ernst & Young
LLP an opinion, in form and substance satisfactory to INDUS, dated as
of the Closing that the Mergers together will be treated as a "pooling
of interests" in accordance with GAAP and all published rules,
regulations and policies of the SEC.
8.12 ABSENCE OF SUBSTANTIAL MATERIAL ADVERSE CHANGE. There shall not
have been any Substantial Material Adverse Change since the date of the
Agreement. "Substantial Material Adverse Change" shall be deemed to
have occurred only in the event that prior to the Effective Time there
shall occur any event or change which, individually or in the aggregate
of all such events or changes, have resulted, or reasonably would be
expected to result in, a substantial impairment to TSW's ability after
the Closing to continue to develop, produce, sell and distribute the
products and services that are material TSW's business in substantially
the same manner as it has prior to the date of this Agreement.
8.13 HSR ACT COMPLIANCE. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and any authorization, consent or approval required under
any Antitrust Law shall have been obtained or any waiting period
applicable to the review of the transactions contemplated hereby shall
have expired or been terminated.
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9. TERMINATION OF AGREEMENT
9.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the Mergers
by the shareholders of INDUS or TSW:
(a) by mutual agreement of TSW and INDUS;
(b) by TSW, if there has been a breach by INDUS or Newco of any
representation or warranty set forth in this Agreement on the part
of INDUS or Newco, and, as a result of such breach, the conditions
set forth in Section 7.1 would not then be satisfied, and which
INDUS or Newco fails to cure within ten (10) business days after
notice thereof from TSW (except that no cure period shall be
provided for a breach by INDUS or Newco which by its nature cannot
be cured);
(c) by TSW, if there has been a breach by INDUS or Newco of any
covenant or agreement set forth in this Agreement on the part of
INDUS or Newco and as a result of such breach, the conditions set
forth in Section 7.2 would not then be satisfied, and which INDUS or
Newco fails to cure within ten (10) business days after notice
thereof from TSW (except that no cure period shall be provided for a
breach by INDUS or Newco which by its nature cannot be cured);
(d) by INDUS, if there has been a breach by TSW of any
representation or warranty set forth in this Agreement on the part
of TSW, and as a result of such breach, the conditions set forth in
Section 8.1 would not then be satisfied, and which TSW fails to cure
within ten (10) business days after notice thereof from INDUS
(except that no cure period shall be provided for a breach by TSW
which by its nature cannot be cured);
(e) by INDUS, if there has been a breach by TSW of any covenant or
agreement set forth in this Agreement on the part of TSW, and as a
result of such breach, the conditions set forth in Section 8.2 would
not then be satisfied, and which TSW fails to cure within ten (10)
business days after notice thereof from INDUS (except that no cure
period shall be provided for a breach by TSW which by its nature
cannot be cured);
(f) by INDUS or TSW, if all the conditions for Closing the Mergers
shall not have been satisfied or waived on or before the Final Date
(as defined below) other than as a result of a breach of this
Agreement by the terminating party;
(g) by INDUS or TSW, if a permanent injunction or other order
shall have been entered by any Federal or state court which would
make illegal or otherwise restrain or prohibit the consummation of
either of the Mergers shall have been issued and shall have become
final and nonappealable;
(h) by INDUS or TSW, if the TSW Shareholder Approval is not
granted at the TSW Shareholders Meeting;
(i) by INDUS or TSW, if the INDUS Shareholder Approval is not
granted at the INDUS Shareholders meeting;
(j) by INDUS, if the condition to Closing set forth in Section
7.11 is not met for any reason related to TSW;
(k) by TSW, if the condition to Closing set forth in Section 8.11
is not met for any reason related to INDUS;
(l) by TSW, if the INDUS Common Stock Market Price is less than
$9.50 per share.
(m) by INDUS, if the INDUS Common Stock Market Price is greater
than $22.50.
As used herein, the Final Date shall be December 5, 1997, except that if the
FTC or the DOJ issues a "second request" under the HSR Act then the Final Date
shall be extended to March 5, 1998; and except that if a temporary,
preliminary or permanent injunction or other order by any Federal or state
court which would prohibit or otherwise restrain consummation of the Mergers
shall have been issued and shall remain in effect on
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December 5, 1997, and such injunction shall not have become final and
nonappealable, either party, by giving the other written notice thereof on or
prior to December 5, 1997, may extend the time for consummation of the Mergers
up to and including the earlier of the date such injunction shall become final
and non-appealable or March 5, 1998, so long as such party shall, at its own
expense, use its reasonable best efforts to have such injunction dissolved.
9.2 NOTICE OF TERMINATION. Any termination of this Agreement under
Section 9.1 above will be effective by the delivery of notice of the
terminating party to the other party hereto.
9.3 NO LIABILITY. Any termination of this Agreement in accordance
with this Section 9 will be without further obligation or liability
upon any party in favor of the other parties hereto other than the
obligations contained in the Mutual Confidential Nondisclosure
Agreement dated May 7, 1997 between TSW and INDUS (the "Nondisclosure
Agreement"), which will survive termination of this Agreement;
provided, however, that nothing herein will relieve any party from
liability for any willful breach of this Agreement.
10. SURVIVAL OF REPRESENTATIONS
10.1 NO SURVIVAL OF REPRESENTATIONS. All representations, warranties
and covenants of the parties contained in this Agreement will remain
operative and in full force and effect, regardless of any investigation
made by or on behalf of the parties to this Agreement, until the
earlier of the termination of this Agreement or the Closing Date,
whereupon such representations, warranties and covenants will expire
(except for covenants that by their terms survive for a longer period).
11. MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State
of Delaware (without giving effect to the provisions thereof relating
to conflicts of law).
11.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. None of the
parties hereto may assign any of its rights or obligations hereunder
without the prior written consent of the other parties hereto. This
Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
11.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid
or unenforceable, the remainder of this Agreement and application of
such provision to other persons or circumstances will be interpreted so
as reasonably to effect the intent of the parties hereto. The parties
further agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to
the greatest extent possible, the economic, business and other purposes
of the void or unenforceable provision.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will
constitute one and the same instrument. This Agreement will become
binding when one or more counterparts hereof, individually or taken
together, will bear the signatures of all the parties reflected hereon
as signatories.
11.5 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby
or by law on such party, and the exercise of any one remedy will not
preclude the exercise of any other.
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11.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the party
or parties to be bound thereby. The waiver by a party-of any breach
hereof or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding breach or
default. The Agreement may be amended by the parties hereto at any time
before or after approval of the TSW shareholders or the INDUS
shareholders, but, after such approval, no amendment will be made which
by applicable law requires the further approval of the TSW shareholders
or the INDUS shareholders without obtaining such further approval.
11.7 EXPENSES. In the event that the Mergers are consummated, the
expenses and fees of both parties with respect to this Agreement and
the transactions contemplated hereby will be borne by Newco. In the
event that the Mergers are not consummated, each party will bear its
respective fees and expenses incurred with respect to this Agreement
and the transactions contemplated hereby; provided, however, that TSW
and INDUS shall share equally all fees and expenses, other than
attorneys', accountants' and financial advisors' fees, incurred in
connection with the printing and filing of the Form S-4 (including
financial statements and exhibits) and any amendment or supplements
thereto.
11.8 ATTORNEYS' FEES. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages,
reasonable attorneys' fees to be fixed by the court (including, without
limitation, costs, expenses and fees on any appeal). The prevailing
party will be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.
11.9 NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained
in a written instrument and shall be deemed given if delivered
personally, telecopied, sent by nationally-recognized overnight courier
or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following address (or at such
other address for a party as shall be specified by like notice):
If to TSW to: TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
Attention: Chief Executive Officer
Telecopier: (770) 999-5461
With copies to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Telecopier: (212) 403-2000
and
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Robert W. Grout, Esq.
Telecopier (404) 885-3900
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<PAGE>
And if to INDUS or
Newco to: THE INDUS GROUP, Inc.
60 Spear Street
San Francisco, California 94105
Attention: Chief Executive officer
Telecopier: (415) 904-5050
With a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Henry P. Massey, Jr., Esq.
Telecopier: (415) 493-6811
All such notices and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery,
(b) in the case of a telecopy, when the party receiving such copy shall have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following
dispatch, and (d) in the case of mailing, on the third business day following
such mailing.
11.10 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated
by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference
to a Section or an exhibit will mean a Section in, or exhibit to, this
Agreement unless otherwise explicitly set forth. The titles and
headings herein are for reference purposes only and will not in any
manner limit the construction of this Agreement which will be
considered as a whole.
11.11 NO JOINT VENTURE. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between
any of the parties hereto. No party is by virtue of this Agreement
authorized as an agent, employee or legal representative of any other
party. No party will have the power to control the activities and
operations of any other and their status is, and at all times, will
continue to be, that of independent contractors with respect to each
other. No party will have any power or authority to bind or commit any
other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
11.12 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances as may be
reasonably requested by any other party to evidence and reflect the
transactions described herein and contemplated hereby and to carry into
effect the intents and purposes of this Agreement.
11.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. Except as otherwise
provided in Sections 5.14, 5.15 and 5.18, no provisions of this
Agreement are intended, nor will be interpreted, to provide or create
any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, partner or any party
hereto or any other person or entity unless specifically provided
otherwise herein, and, except as so provided, all provisions hereof
will be personal solely between the parties to this Agreement.
11.14 PUBLIC ANNOUNCEMENT. Upon execution of this Agreement, INDUS
and TSW promptly will issue a joint press release approved by both
parties announcing the Mergers. Thereafter, INDUS or TSW may issue such
press releases, and make such other disclosures regarding the Mergers,
as it
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determines (after consultation with legal counsel) are required under
applicable securities laws or NASD rules; provided that INDUS or TSW
shall, to the extent practicable, obtain the approval of the other
party (which approval shall not be unreasonably withheld) prior to any
such release or disclosure.
11.15 ENTIRE AGREEMENT. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements or understandings, inducements or
conditions, express or implied, written or oral, between the parties
with respect hereto other than the Nondisclosure Agreement, which shall
remain in full force and effect. The express terms hereof control and
supersede any course of performance or usage of the trade inconsistent
with any of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan
of Reorganization as of the date first above written.
THE INDUS GROUP, INC. TSW INTERNATIONAL, INC.
a California corporation a Georgia corporation
/s/ Robert W. Felton /s/ Christopher R. Lane
By: _________________________________ By: _________________________________
Name: Robert W. Felton Name: Christopher R. Lane
Title: President and CEO Title: President and CEO
INDUS/TSW, INC.
a Delaware corporation
/s/ Robert W. Felton
By: _________________________________
Name: Robert W. Felton
Title: President and CEO
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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APPENDIX A-2
FORM OF
AGREEMENT OF MERGER
OF
INDUS SUB, INC.,
INDUS INTERNATIONAL, INC.
AND
THE INDUS GROUP, INC.
This Agreement of Merger (this "Agreement") is entered into as of ,
1997 between THE INDUS GROUP, INC., a California corporation (the "INDUS" or
the "Surviving Corporation") and INDUS SUB, INC., a California corporation
("INDUS Sub"), a wholly-owned subsidiary of Indus International, Inc., a
Delaware corporation ("Newco").
RECITALS
A. INDUS, Newco and TSW International, Inc., a Georgia corporation ("TSW"),
have entered into an Agreement and Plan of Merger and Reorganization, dated as
of June 5, 1997 (the "Plan"), providing for, among other things, for the
execution and filing of this Merger Agreement and the merger of INDUS Sub, a
wholly-owned subsidiary of Newco, with and into INDUS ("INDUS Merger"), such
that INDUS will be the surviving corporation of the INDUS Merger, in
accordance with the California General Corporation Law (the "CGCL").
B. The Boards of Directors of INDUS, Newco and INDUS Sub, respectively, have
determined the INDUS Merger to be advisable and in the respective interests of
INDUS, Newco and INDUS Sub and their respective shareholders.
C. The Plan, this Agreement and the INDUS Merger have been approved by Newco
as the sole shareholder of INDUS Sub and by the shareholders of INDUS.
D. The Plan also provides for the merger (the "TSW Merger") of TSW Sub,
Inc., a Georgia corporation and a wholly-owned subsidiary of Newco ("TSW
Sub"), with and into TSW. The shareholders of TSW will exchange their TSW
securities for a certain number of shares of Common Stock of Newco pursuant to
the TSW Merger.
E. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and subject to the terms and conditions set forth herein and
in the Plan, the parties agree as follows:
1. THE CONSTITUENT CORPORATIONS
1.1 INDUS SUB.
(a) INDUS Sub was incorporated under the laws of the State of
California on , 1997.
(b) At the date hereof, INDUS Sub is authorized to issue an
aggregate of 1,000 shares of Common Stock, with a par value of
$0.001 ("INDUS Sub Common Stock").
(c) At the date hereof, an aggregate of 1,000 shares of INDUS Sub
Common Stock were issued and outstanding, all of which are owned by
INDUS.
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1.2 INDUS.
(a) INDUS was incorporated under the laws of the State of
California on January 2, 1990.
(b) INDUS is authorized to issue an aggregate of 50,000,000 shares
of Common Stock, with a par value of $0.001, and an aggregate of
5,000,000 shares of Preferred Stock, with a par value of $0.001.
(c) As of the date hereof, an aggregate of shares of Common
Stock of INDUS ("INDUS Common Stock") were issued and outstanding.
No shares of Preferred Stock were issued and outstanding.
2. THE MERGER
2.1 INDUS MERGER. INDUS Sub will be merged with and into INDUS
pursuant to the terms and conditions of this Agreement, and in
accordance with applicable provisions of the CGCL, and the separate
existence of INDUS Sub shall cease. INDUS shall be the surviving
corporation in the INDUS Merger (hereinafter sometimes referred to as
the "Surviving Corporation") and its separate corporate existence, with
all its purposes, objects, rights, privileges, powers and franchises,
shall continue unaffected and unimpaired by the INDUS Merger. The
Surviving Corporation shall succeed, without transfer, to all of the
rights, privileges, powers and franchises of INDUS Sub and all of the
debts, choses in action and other interests due or belonging to INDUS
Sub and shall be subject to, and responsible for, all of the debts,
liabilities and obligations of INDUS Sub with the effect as set forth
in the CGCL.
2.2 CONVERSION OF INDUS SUB SHARES. At the Effective Time (as defined
below), each share of INDUS Sub Common Stock issued and outstanding
immediately prior to the Effective Time will, by virtue of the INDUS
Merger, and without any further action on the part of INDUS, INDUS Sub
or any shareholder thereof, be converted into one share of validly
issued, fully paid and nonassessable Common Stock of the Surviving
Corporation ("Surviving Corporation Common Stock"). The shares of
Surviving Corporation Common Stock into which the shares of INDUS Sub
Common Stock are so converted shall be the only shares of Surviving
Corporation Common Stock that are issued and outstanding immediately
after the Effective Time. Each certificate which immediately prior to
the Effective Time represented shares of INDUS Sub Common Stock shall
be deemed for all purposes to represent the number of shares of
Surviving Corporation Common Stock into which the shares of INDUS Sub
Common Stock represented by such certificate shall have been converted
pursuant to this Section 2.2.
2.3 CONVERSION OF INDUS SHARES. At the Effective Time, each share of
INDUS Common Stock that is issued and outstanding immediately prior to
the Effective Time (other than shares, if any, held by persons
exercising dissenters' rights in accordance with Chapter 13 of the
CGCL) will, by virtue of the INDUS Merger, and without any further
action on the part of INDUS, Newco or any shareholder thereof, be
converted into the right to receive one share (the "INDUS Applicable
Ratio") of validly issued, fully paid and nonassessable Common Stock of
Newco ("Newco Common Stock"). Each share of INDUS capital stock held in
the treasury of INDUS or any of which are owned by Newco, INDUS, TSW or
any direct or indirect wholly-owned subsidiary of Newco, INDUS or TSW
immediately prior to the Effective Time, will be canceled and
extinguished and will not be converted into shares of Newco Common
Stock, cash or any other property.
2.4 EFFECTIVE TIME. The INDUS Merger shall become effective (the
"Effective Time") at the time and date that this Agreement and each of
the certificates meeting the requirements of Section 1103 of the CGCL
are filed with the Secretary of State of the State of California, in
accordance with Section 1103 of the CGCL.
2.5 FRACTIONAL SHARES. No fractional shares of Newco Common Stock
will be issued in connection with the INDUS Merger, but in lieu thereof
each holder of INDUS Common Stock who would otherwise be entitled to
receive a fraction of a share of Newco Common Stock as a result of the
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INDUS Merger will receive from the Exchange Agent (as hereinafter
defined), at such time as such holder shall receive a certificate
representing shares of Newco Common Stock as contemplated by Section
2.10, an amount of cash (rounded up to the nearest whole cent) equal to
such holder's proportionate interest in the net proceeds from the sale
or sales in the open market by the Exchange Agent, on behalf of all
such holders, of the aggregate fractional Newco Common Stock issued
pursuant to the INDUS Merger and the TSW Merger.
2.6 CONVERSION OF INDUS OPTIONS. At the Effective Time, each of the
then outstanding options to purchase INDUS Common Stock (collectively,
the "INDUS Options") will, by virtue of the INDUS Merger and without
any further action on the part of any holder thereof, be assumed by
Newco and converted into an option to purchase that number of shares of
Newco Common Stock determined by multiplying the number of shares of
INDUS Common Stock subject to such INDUS Option at the Effective Time
by the INDUS Applicable Ratio, at an exercise price per share of Newco
Common Stock equal to the exercise price per share of such INDUS Option
immediately prior to the Effective Time divided by the INDUS Applicable
Ratio rounded up to the nearest cent. If the foregoing calculation
results in an assumed INDUS Option being exercisable for a fraction of
a share of Newco Common Stock, then the number of shares of Newco
Common Stock subject to such option will be rounded down to the nearest
whole number of shares, with no cash being payable for such fractional
share.
2.7 ASSUMPTION OF INDUS STOCK PURCHASE PLAN OPTIONS. At the Effective
Time, each then outstanding option (an "INDUS Stock Purchase Plan
Option") granted under the INDUS Stock Purchase Plan (the "INDUS ESPP")
will, by virtue of the INDUS Merger and without any further action on
the part of any holder thereof, be assumed by Newco and converted into
an option (a "Newco Stock Purchase Plan Option") to purchase, on the
same terms and as were applicable under the INDUS ESPP immediately
prior to the Effective Time, a number of shares of Newco Common Stock
determined by multiplying the number of shares of INDUS Common Stock
subject to such INDUS Stock Purchase Plan Option at the Effective Time
as provided in the INDUS ESPP by the INDUS Applicable Ratio, at a
purchase price per share of Newco Common Stock equal to the lower of
(i) the quotient determined by dividing eight-five percent (85%) of the
fair market value of the INDUS Common Stock on the offering date of
each assumed offering or (ii) eighty-five percent (85%) of the fair
market value of the Newco Common Stock on each exercise date of the
assumed offering occurring after the Effective Time.
2.8 FURTHER ASSIGNMENTS. After the Effective Time, Newco and its
officers and directors may execute and deliver such deeds, assignments
and assurances and do all other things necessary or desirable to vest,
perfect or confirm title to INDUS Sub's property or rights in INDUS and
otherwise to carry out the purposes of the Plan in the name of INDUS
Sub or otherwise.
2.9 ARTICLES OF INCORPORATION OF THE SURVIVING CORPORATION. The
Articles of Incorporation of INDUS in effect immediately prior to the
Effective Time of the INDUS Merger shall be the Articles of
Incorporation of the Surviving Corporation, except that Article III of
the Articles of Incorporation shall be amended to read as follows:
"This corporation is authorized to issue only one class of shares,
and the total number of shares which this corporation is authorized
to issue is one thousand (1,000) shares."
2.10 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. ChaseMellon Shareholder Services LLC shall act
as exchange agent (the "Exchange Agent") in the INDUS Merger.
Promptly after the Effective Time, Newco shall deposit with the
Exchange Agent, for the benefit of the holders of shares of INDUS
Common Stock, for exchange in accordance with this Agreement and the
Plan, certificates representing the shares of Newco Common Stock
(such shares of Newco Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as
the "Exchange
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Fund") issuable pursuant to this Agreement and the Plan, and cash in
an amount sufficient for payment in lieu of fractional shares
pursuant to Section 2.5, in exchange for outstanding shares of INDUS
Common Stock.
(b) Exchange Procedures. As soon as practicable after the
Effective Time, Newco shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding
shares of INDUS Common Stock (the "Certificates") whose shares are
converted into the right to receive Newco Common Stock pursuant to
Section 2.3 hereof, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and shall be in such form and have such other
provisions as INDUS may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in exchange
for certificates representing Newco Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent, together with
a duly executed letter of transmittal and such other documents as
may be reasonably required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Newco Common
Stock and cash in lieu of fractional shares which such holder has
the right to receive pursuant to the provisions of this Agreement
and the Plan, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of INDUS
Common Stock which is not registered on the transfer records of
INDUS, a certificate representing the proper number of shares of
Newco Common Stock may be issued to a transferee if the Certificate
representing such INDUS Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer
taxes have been paid. Until surrendered as contemplated by this
Section 2.10 and the Plan, each Certificate shall be deemed, on and
after the Effective Time, to evidence the ownership of the number of
full shares of Newco Common Stock into which such shares of INDUS
Common Stock shall have been so converted and the right to receive
an amount of cash in lieu of any fractional shares of Newco Common
Stock as contemplated by Section 2.5, the Plan, the CGCL and
Delaware Law.
(c) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the
Effective Time with respect to Newco Common Stock with a record date
after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Newco Common
Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.5 and
the Plan until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole
shares of Newco Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Newco Common Stock to which
such holder is entitled pursuant to Section 2.5 and the Plan and the
amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such whole
shares of Newco Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record
date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole
shares of Newco Common Stock.
(d) No Further Ownership Rights. All shares of Newco Common Stock
issued upon the surrender for exchange of shares of INDUS Common
Stock in accordance with the terms of this Agreement and the Plan
(including any cash paid pursuant to Section 2.5 and Section
2.10(c)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of INDUS Common Stock. After
the Effective Time there shall be no further registration of
transfers on the stock transfers books of the Surviving Corporation
of the shares of INDUS Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective
Time,
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Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this
Section 2.10 and the Plan.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to shareholders six months after the
Effective Time shall be delivered to Newco, upon demand, and any
former shareholders of INDUS who have not theretofore complied with
this Section 2.10 and the Plan shall thereafter look only to Newco
for payment of their claim for Newco Common Stock, any cash in lieu
of fractional shares of Newco Common Stock and any dividends or
distributions with respect to Newco Common Stock.
3. MISCELLANEOUS
3.1 PLAN. The Plan and this Agreement are intended to be construed
together in order to effectuate their purposes.
3.2 TERMINATION. Notwithstanding the approval of this Agreement by
the shareholders of INDUS, INDUS Sub and Newco, this Agreement may be
terminated at any time prior to the Effective Time by the mutual
written agreement of INDUS, INDUS Sub and Newco. Notwithstanding the
approval of this Agreement by the shareholders of INDUS, INDUS Sub and
Newco, this Agreement will terminate forthwith in the event that the
Plan is terminated in accordance with its terms. In the event of the
termination of this Agreement as provided above, this Agreement will
forthwith become void and there will be no liability on the part of
either INDUS, Newco, INDUS Sub or TSW or their respective officers and
directors, except as otherwise provided in the Plan.
3.3 AMENDMENT. This Agreement may be amended by the parties hereto at
any time before or after approval by the shareholders of INDUS, INDUS
Sub or Newco, but, after such approval, no amendment will be made
which, by applicable law, requires the further approval of shareholders
without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of
the parties hereto.
3.4 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. No party may
assign any of its rights or obligations under this Agreement without
the prior written consent of the other parties hereto. This Agreement
will be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
3.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of California
(without regard to its choice of law principles).
3.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date and year first above written.
THE INDUS GROUP, INC.
By: _________________________________
ROBERT W. FELTON, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
By: _________________________________
ANNA BORDEN, SECRETARY
INDUS SUB, INC.
By: _________________________________
ROBERT W. FELTON, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
By: _________________________________
ANNA BORDEN, SECRETARY
SIGNATURE PAGE TO AGREEMENT OF MERGER
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<PAGE>
THE INDUS GROUP, INC.
(SURVIVING CORPORATION)
OFFICERS' CERTIFICATE
Robert W. Felton and Anna Borden hereby certify that:
1. They are the duly elected, acting and qualified President and Secretary
of THE INDUS GROUP, INC., a California corporation (the "Company").
2. The Company has authorized two classes of stock designated "Common Stock"
and "Preferred Stock." There are authorized 50,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock.
3. There were shares of Common Stock outstanding and entitled to vote on
the Agreement of Merger attached hereto (the "Merger Agreement"). There were
no shares of Preferred Stock outstanding and entitled to vote on the Merger
Agreement.
4. The principal terms of the Merger Agreement in the form attached hereto
were approved by the Board of Directors of the Company and by the vote of a
majority of the outstanding shares of Common Stock entitled to vote thereon.
The required vote was a majority of the outstanding shares of Common Stock of
the Company entitled to vote thereon.
5. Robert W. Felton and Anna Borden further declare under penalty of perjury
under the laws of the State of California that each has read the foregoing
certificate and knows the contents thereof and that the same is true of their
own knowledge.
Executed in San Francisco, California on , 1997.
_____________________________________
ROBERT W. FELTON, PRESIDENT
_____________________________________
ANNA BORDEN, SECRETARY
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<PAGE>
INDUS SUB, INC.
(A CALIFORNIA CORPORATION)
OFFICERS' CERTIFICATE
Robert W. Felton and Anna Borden hereby certify that:
1. They are the duly elected, acting and qualified President, Chief
Executive Officer, Chief Financial Officer and Secretary of INDUS Sub, Inc., a
California corporation (the "Company").
2. The Company has authorized one class of stock designated "Common Stock."
There are authorized 1,000 shares of Common Stock.
3. There were 1,000 shares of Common Stock outstanding and entitled to vote
on the Agreement of Merger attached hereto (the "Merger Agreement").
4. The principal terms of the Merger Agreement in the form attached hereto
were approved by the Board of Directors and by the vote of all outstanding
shares of Common Stock of the Company.
5. The principal terms of the Merger Agreement in the form attached hereto
were approved by the Board of Directors and by the vote of all outstanding
shares of Common Stock of Newco, the parent of INDUS Sub, Inc.
6. Robert W. Felton and Anna Borden further declare under penalty of perjury
under the laws of the State of California that each has read the foregoing
certificate and knows the contents thereof and that the same is true of their
own knowledge.
Executed in San Francisco, California on , 1997.
_____________________________________
ROBERT W. FELTON, PRESIDENT
_____________________________________
ANNA BORDEN, SECRETARY
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<PAGE>
APPENDIX A-3
FORM OF
AGREEMENT AND PLAN OF MERGER
OF
TSW INTERNATIONAL, INC.,
INDUS INTERNATIONAL, INC.
AND
TSW MERGER SUB, INC.
This Agreement of Merger (this "Agreement") is entered into as of ,
1997 among TSW International, Inc., a Georgia corporation ("TSW"), Indus
International, Inc., a Delaware corporation ("NEWCO"), and TSW Merger Sub,
Inc., a Georgia corporation ("TSW Sub") which is a wholly-owned subsidiary of
Newco.
RECITALS
A. NEWCO, TSW and The Indus Group, Inc., a California corporation ("INDUS")
have entered into an Agreement and Plan of Merger and Reorganization, dated as
of June 5, 1997 (as amended or supplemented, the "Plan"), providing for,
amongst other things, the merger of TSW Sub with and into TSW ("TSW Merger"),
such that TSW will be the surviving corporation of the TSW Merger, all in
accordance with the Georgia Business Corporation Code (the "GBCC").
B. The Boards of Directors of NEWCO, TSW and TSW Sub, respectively, have
determined the TSW Merger to be advisable and in the respective interests of
NEWCO, TSW and TSW Sub and their respective stockholders.
C. The Plan also provides for the merger (the "INDUS Merger") of INDUS
Merger Sub, Inc., a California corporation and a wholly owned-subsidiary of
NEWCO ("INDUS Sub"), with and into INDUS. In the INDUS Merger, the
shareholders of INDUS will exchange their INDUS common stock for a number of
shares of Newco Common Stock (as defined below) set forth in the Plan.
D. Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and subject to the terms and conditions set forth herein and
in the Plan, the parties agree as follows:
1. THE MERGER
1.1 TSW MERGER. At the TSW Effective Time (as defined below), TSW Sub
will be merged with and into TSW pursuant to the terms and conditions
of this Agreement and the Plan, and in accordance with applicable
provisions of the GBCC, and the separate existence of TSW Sub shall
cease. TSW shall be the surviving corporation in the TSW Merger
(hereinafter sometimes referred to as the "Surviving Corporation") and
its separate corporate existence, with all its purposes, objects,
rights, privileges, powers and franchises, shall continue unaffected
and unimpaired by the TSW Merger. The Surviving Corporation shall
succeed, without transfer, to all of the rights, privileges, powers and
franchises of TSW Sub, and all of the liabilities, obligations, choices
in action and other interests due or belonging to TSW Sub, pursuant to
the GBCC.
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1.2 CONVERSION OF TSW SUB SHARES. At the TSW Effective Time, each
share of common stock of TSW Sub (the "Sub Common Stock") issued and
outstanding immediately prior to the TSW Effective Time will, by virtue
of the TSW Merger, and without any further action on the part of TSW,
NEWCO or any holder thereof, be converted into and become one share of
common stock, par value $0.01 per share, of the Surviving Corporation
("Surviving Corporation Common Stock"). The shares of Surviving
Corporation Common Stock into which the shares of Sub Common Stock are
so converted shall be the only shares of Surviving Corporation Common
Stock that are issued and outstanding immediately after the TSW
Effective Time. Each certificate which, immediately prior to the TSW
Effective Time, represented shares of Sub Common Stock shall be deemed
for all purposes to represent the number of shares of Surviving
Corporation Common Stock into which the shares of Sub Common Stock
represented by such certificate shall have been converted pursuant to
this Section 1.2.
1.3 CONVERSION OF TSW SHARES.
(a) Number of Shares to be Issued. The total number of shares of
common stock, par value $.001 per share, of Newco ("Newco Common
Stock") to be issued to former shareholders and noteholders of TSW
in the Mergers (including the New Warburg Shares (as defined below))
and to become issuable to former TSW optionholders and
warrantholders after the TSW Effective Time shall be the number of
shares of Newco Common Stock to be issued or to become issuable to
former INDUS shareholders and optionholders pursuant to Sections 1.4
and 1.9 of the Plan multiplied by .86047 (the "TSW Number").
(b) Common Stock. Except as provided in paragraph (f) and except
for Dissenting Shares (as defined below), each share of common
stock, par value $.01 per share, of TSW ("TSW Common Stock"), that
is issued and outstanding immediately prior to the TSW Effective
Time will by virtue of the TSW Merger and at the TSW Effective Time,
and without any further action on the part of TSW, Newco or any
holder of TSW Common Stock, be converted into the right to receive a
number of shares of validly issued, fully paid and nonassessable
Newco Common Stock equal to the TSW Applicable Ratio (as defined
below).
(c) Preferred Stock.
(i) Except as provided in paragraph (f), each share of Series
A Preferred Stock, par value $.01 per share, Series B Preferred
Stock, par value $.01 per share, Series C Cumulative Preferred
Stock, par value $.01 per share, and Series D Preferred Stock,
par value $.01 per share, of TSW (collectively, the "TSW
Preferred Stock") that is issued and outstanding immediately
prior to the TSW Effective Time will by virtue of the TSW Merger
and at the TSW Effective Time, and without any further action on
the part of TSW, Newco or any holder of TSW Preferred Stock,
will be converted into the right to receive the number of shares
of Newco Common Stock the holder thereof would have become
entitled to receive by virtue of Section 1.3(b) of this
Agreement had such share of TSW Preferred Stock been converted
immediately prior to the TSW Effective Time into shares of TSW
Common Stock pursuant to the terms of the applicable series of
TSW Preferred Stock.
(d) Certain Indebtedness and Unpaid Dividends of TSW.
(i) Each subordinated floating rate note of TSW set forth in
Section 1.3(d) of the TSW Disclosure Letter (as defined in the
Plan) (each, a "TSW Subordinated Note") will by virtue of the
TSW Merger and at the TSW Effective Time, and without any
further action on the part of TSW, Newco or any holder of a TSW
Subordinated Note, be exchanged for the right to receive a
number of shares of validly issued, fully paid and nonassessable
Newco Common Stock equal to the product of (x) a fraction, the
numerator of which shall be the aggregate principal balance of
such TSW Subordinated Note at the TSW Effective Time plus
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<PAGE>
all accrued and unpaid interest thereon to the TSW Effective
Time and the denominator of which shall be the INDUS Common
Stock Market Price (as defined below) and (y) the INDUS
Applicable Ratio. As a result of the conversion provided for in
this paragraph, each TSW Subordinated Note shall be deemed to
have been satisfied in full and the principal balance thereof
reduced to zero and thereafter each such TSW Subordinated Note
shall be canceled and shall be of no further force and effect.
TSW hereby represents and warrants that the holder of each TSW
Subordinated Note (i) has consented and agreed to the provisions
of this paragraph and (ii) has an adjusted tax basis in each TSW
Subordinated Note equal to the face value amount of such note.
"INDUS Common Stock Market Price" means the average of the high
and low sales price of INDUS Common Stock, as quoted on the
Nasdaq Stock Market and reported in the Wall Street Journal, on
each of the ten consecutive trading days prior to the Closing
Date (as defined in the Plan).
(ii) The amount of any TSW Unpaid Dividends (as defined below)
will not be paid to the holders thereof and in lieu thereof each
holder of TSW Preferred Stock will by virtue of the TSW Merger
and at the TSW Effective Time, and without any further action on
the part of TSW, Newco or any holder of TSW Preferred Stock, be
entitled to receive a number of shares of validly issued, fully
paid and nonassessable Newco Common Stock equal to the product
of (x) a fraction, the numerator of which shall be the aggregate
TSW Unpaid Dividends at the TSW Effective Time with respect to
all shares of TSW Preferred Stock held by such holder
immediately prior to the TSW Effective Time and the denominator
of which shall be the INDUS Common Stock Market Price and (y)
the INDUS Applicable Ratio. As a result of the conversion
provided for in this paragraph, all TSW Unpaid Dividends shall
thereafter be deemed to have been paid in full. TSW hereby
represents and warrants that the holder of each share of TSW
Preferred Stock has consented and agreed to the provisions of
this paragraph. The number of shares of Newco Common Stock to be
issued pursuant to paragraph (d)(i) and this paragraph (d)(ii)
of this Section 1.3 are referred to as the "New Warburg Shares".
"TSW Unpaid Dividends" means the amount of any unpaid dividends
on each series of TSW Preferred Stock, including any
proportionate amounts unpaid with respect to any uncompleted
dividend periods, set forth with respect to each such series of
TSW Preferred Stock in Section 1.5(d)(ii) of the TSW Disclosure
Letter.
(e) The "TSW Applicable Ratio" shall be a fraction, the numerator
of which shall be the TSW Number minus the number of New Warburg
Shares and the denominator of which shall be the total number of
shares of TSW Common Stock outstanding immediately prior to the TSW
Effective Time, assuming that each share of TSW Preferred Stock is
converted immediately prior thereto into TSW Common Stock pursuant
to the terms of the applicable series of TSW Preferred Stock, plus
the total number of shares of TSW Common Stock issuable upon
exercise of the TSW Options (as defined below) and the TSW Warrants
(as defined below).
(f) Each share of TSW Common Stock or TSW Preferred Stock held in
the treasury of TSW or any of such shares which are owned by Newco,
INDUS, TSW or any direct or indirect wholly-owned subsidiary of
Newco, INDUS or TSW immediately prior to the TSW Effective Time will
by virtue of the INDUS Merger and at the TSW Effective Time be
canceled and extinguished without any conversion thereof.
1.4 TSW EFFECTIVE TIME. The TSW Merger shall be effective when a
properly executed Certificate of Merger (the "TSW Certificate of
Merger") is filed with the Secretary of State of the State of Georgia
in accordance with the relevant provisions of the GBCC (the "TSW
Effective Time"). The TSW Certificate of Merger shall be filed with the
Secretary of State of the State of Georgia on the Closing Date
substantially simultaneously with the INDUS Effective Time (as defined
in the Plan).
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<PAGE>
1.5 DISSENTING SHARES.
(a) Notwithstanding anything in the Plan or this Agreement to the
contrary, shares of TSW Common Stock and TSW Preferred Stock that
are outstanding immediately prior to the TSW Effective Time and that
are held by any shareholder who has delivered to TSW, prior to the
TSW Shareholder Approval (as defined below), a written notice of
such shareholder's intent to demand payment for such holder's shares
of TSW Common Stock or TSW Preferred Stock if the TSW Merger is
effected, in accordance with Article 13 of the GBCC, and who shall
have not voted such shares in favor of the approval and adoption of
this Agreement and the TSW Agreement ("TSW Dissenting Shares") shall
not be converted into the right to receive Newco Common Stock as
provided in Section 1.3, but the holders of TSW Dissenting Shares
shall be entitled to payment of the fair value of such TSW
Dissenting Shares in accordance with the provisions of such Article
13; provided, however, that if any such holder shall fail to perfect
or shall otherwise waive the right to demand payment under Article
13 of the GBCC or a court of competent jurisdiction shall determine
that such holder is not entitled to the relief provided by such
Article 13, then the right of such holder of TSW Dissenting Shares
to be paid the fair value of such holder's TSW Dissenting Shares
shall cease and such TSW Dissenting Shares shall be treated as if
they had been converted as of the TSW Effective Time into the right
to receive the shares of Newco Common Stock as provided in Section
1.3, and any cash in lieu of fractional shares as provided in
Section 1.8 of the Plan, without any interest thereon.
(b) TSW shall give Newco (A) prompt notice of any notices or other
instruments received by TSW pursuant to Article 13 of the GBCC and
(B) the opportunity to participate in all negotiations and
proceedings with respect to demands for payment for TSW Dissenting
Shares. TSW shall not, except with the prior written consent of
Newco, voluntarily offer to make or make any payment with respect to
any demands for payment for TSW Dissenting Shares or offer to settle
or settle any such demands.
1.6 CONVERSION OF TSW OPTIONS AND WARRANTS.
(a) At the TSW Effective Time, each of the then outstanding
options to purchase TSW Common Stock (collectively, the "TSW
Options") (consisting of all outstanding options granted under TSW's
1984 Stock Option Plan, 1994 Stock Option Plan, 1995 Stock Option
Plan for Outside Directors and 1995 Consultants Stock Option Plan
(collectively, the "TSW Plans"), and any individual non-Plan options
set forth in Section 1.10 of the TSW Disclosure Letter issued by TSW
pursuant to an option agreement or otherwise) and each of the then
outstanding warrants to purchase TSW Common Stock set forth in
Section 1.10 of the TSW Disclosure Letter issued by TSW (the "TSW
Warrants") will by virtue of the TSW Merger, and without any further
action on the part of any holder thereof, be assumed by Newco and
converted into a Newco Option or warrant (a "Newco Warrant"), as the
case may be, to purchase that number of shares of Newco Common Stock
determined by multiplying the number of shares of TSW Common Stock
subject to such TSW Option or TSW Warrant at the TSW Effective Time
by the TSW Applicable Ratio, at an exercise price per share of Newco
Common Stock equal to the exercise price per share of such TSW
Option or TSW Warrant immediately prior to the TSW Effective Time
divided by the Applicable Ratio rounded up to the nearest cent. If
the foregoing calculation results in an assumed TSW Option or TSW
Warrant being exercisable for a fraction of a share of Newco Common
Stock, then the number of shares of Newco Common Stock subject to
such option or warrant, as the case may be, will be rounded down to
the nearest whole number of shares, with no cash being payable for
such fractional share. The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986, as amended, if applicable, and all
other terms and conditions of each Newco Option and each Newco
Warrant will otherwise remain as set forth in the TSW Option or TSW
Warrant assumed by such Newco Option Newco Warrant. Continuous
service as an employee or consultant with TSW or any of the
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<PAGE>
TSW Subsidiaries will be credited to an optionee of TSW for purposes
of determining the number of shares of Newco Common Stock subject to
exercise under a Newco Option after the TSW Effective Time.
(b) In any case in which the TSW Board of Directors has
discretionary authority to grant or withhold consent to any
treatment of any TSW Option other than the treatment of such option
provided for in the immediately preceding paragraph, the TSW Board
of Directors shall withhold such consent.
1.7 DIRECTORS AND OFFICERS. The directors and officers to be
determined by the parties to the Plan shall become the directors and
officers of TSW after the TSW Effective Time. Such directors and
officers shall hold their position as directors and officers until the
election and qualification of their respective successors or until
their tenure is otherwise terminated in accordance with the Bylaws of
TSW.
1.8 FURTHER ASSIGNMENTS. After the TSW Effective Time, TSW and its
officers and directors may execute and deliver such deeds, assignments
and assurances and do all other things necessary or desirable to vest,
perfect or confirm title to TSW Sub's property or rights in TSW and
otherwise to carry out the purposes of the Plan in the name of TSW Sub
or otherwise.
1.9 FURTHER EFFECTS OF THE TSW MERGER. At the TSW Effective Time: (a)
the Articles of Incorporation of TSW as in effect immediately prior to
the TSW Effective Time shall be the Articles of Incorporation of the
TSW Surviving Corporation; (b) the Bylaws of TSW Sub as in effect
immediately prior to the TSW Effective Time, which will be as set forth
in Annex A hereto, will be the Bylaws of the TSW Surviving Corporation;
and (c) the TSW Merger shall have the effects set forth in Section 14-
2-1106 of the GBCC.
1.10 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. ChaseMellon Shareholder Services LLC shall act
as exchange agent (the "Exchange Agent") in the TSW Merger. Promptly
after the TSW Effective Time, Newco shall deposit with the Exchange
Agent, for the benefit of the holders of shares of TSW Common Stock,
TSW Preferred Stock and TSW Subordinated Notes, for exchange in
accordance with the Plan, certificates representing the shares of
Newco Common Stock (such shares of Newco Common Stock, together with
any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to
the Plan and this Agreement, and each in an amount sufficient for
payment in lieu of fractional shares pursuant to Section 1.8 of the
Plan, in exchange for outstanding shares of TSW Common Stock and TSW
Preferred Stock.
(b) Exchange Procedures.
(i) As soon as practicable after the TSW Effective Time, Newco
shall cause the Exchange Agent to mail to each holder of record
of a certificate or certificates which immediately prior to the
TSW Effective Time represented issued and outstanding shares of
TSW Common Stock and TSW Preferred Stock (collectively, the
"Certificates") whose shares are converted into the right to
receive Newco Common Stock pursuant to Section 1.3, (A) a letter
of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions
as TSW may reasonably specify) and (B) instructions for use in
effecting the surrender of the Certificates in exchange for
certificates representing Newco Common Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent, together
with a duly executed letter of transmittal and such other
documents as may be reasonably required by the Exchange Agent,
the holder of
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such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares
of Newco Common Stock and cash in lieu of fractional shares
which such holder has the right to receive pursuant to the
provisions of this Agreement, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of
ownership of shares of TSW Common Stock or TSW Preferred Stock
which is not registered on the transfer records of TSW, a
certificate representing the proper number of shares of Newco
Common Stock may be issued to a transferee if the Certificate
representing such TSW Common Stock or TSW Preferred Stock is
presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 1.10, each
Certificate shall be deemed, on and after the TSW Effective
Time, to evidence the ownership of the number of full shares of
Newco Common Stock into which such shares of TSW Common Stock or
TSW Preferred Stock shall have been so converted and the right
to receive an amount in lieu of any fractional shares of Newco
Common Stock as contemplated by Section 1.8 of the Plan.
(ii) As soon as practicable after the TSW Effective Time,
Newco shall cause the Exchange Agent to mail to each holder of a
TSW Subordinated Note (A) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and
title to the TSW Subordinated Notes shall pass, only upon
delivery of the TSW Subordinated Notes to the Exchange Agent and
shall be in such form and have such other provisions as INDUS
and TSW may reasonably specify) and (B) instructions for use in
effecting the surrender of the TSW Subordinated Notes in
exchange for certificates representing Newco Common Stock. Upon
surrender of a TSW Subordinated Note for cancellation to the
Exchange Agent, together with a duly executed letter of
transmittal and such other documents as may reasonably be
required by the Exchange Agent, the holder as such TSW
Subordinated Note shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares
of Newco Common Stock and cash in lieu of fractional shares
which such holders has the right to receive pursuant to the
provisions of this Agreement, and the TSW Subordinated Note so
surrendered shall forthwith be canceled. Until surrendered as
contemplated by this Section 1.10, each TSW Subordinated Note
shall be deemed, on and after the TSW Effective Time, to
evidence the ownership of the number of full shares of Newco
Common Stock into which such TSW Subordinated Note shall have
been so exchanged and the right to receive an amount in lieu of
any fractional shares of Newco Common Stock as contemplated by
Section 1.8 of the Plan.
(c) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the TSW
Effective Time with respect to Newco Common Stock with a record date
after the TSW Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Newco Common
Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 1.8 of
the Plan until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole
shares of Newco Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender the amount of any cash
payable in lieu of a fractional share of Newco Common Stock to which
such holders is entitled pursuant to Section 1.8 of the Plan and the
amount of dividends or other distributions with a record date after
the TSW Effective Time theretofore paid with respect to such whole
shares of Newco Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record
date after the TSW Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such
whole shares of Newco Common Stock.
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(d) No Further Ownership Rights. All shares of Newco Common Stock
issued upon the surrender for exchange of shares of TSW Common Stock
or TSW Preferred Stock in accordance with the terms of this
Agreement and the Plan (including any cash paid pursuant to Section
1.8 of the Plan and Section 1.10(c) hereof) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such
shares of TSW Common Stock or TSW Preferred Stock. After the TSW
Effective Time there shall be no further registration of transfers
on the stock transfer books of the TSW Surviving Corporation of the
shares of TSW Common Stock or TSW Preferred Stock, which were
outstanding immediately prior to the TSW Effective Time. If, after
the TSW Effective Time, Certificates are presented to the TSW
Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Section 1.10.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to shareholders six months after the TSW
Effective Time shall be delivered to Newco, upon demand, and any
former shareholders of TSW who have not theretofore complied with
this Section 1.10 shall thereafter look only to Newco for payment of
their claim for Newco Common Stock, any cash in lieu of fractional
shares of Newco Common Stock and any dividends or distributions with
respect to Newco Common Stock.
(f) No Liability. Neither the Exchange Agent, Newco, INDUS or TSW
shall be liable to any holder of shares of TSW Common Stock or Newco
Common Stock, as the case may be, for any amount delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the
holder thereof and the posting of reasonable bond therefor, such
shares of Newco Common Stock, cash for fractional shares, if any, as
may be required pursuant to Section 1.8 of the Plan and any
dividends or distributions payable pursuant to Section 1.10(c).
2. MISCELLANEOUS
2.1 PLAN. The Plan and this Agreement are intended to be construed
together in order to effectuate their purposes.
2.2 SHAREHOLDER APPROVAL.
(a) INDUS, as the sole stockholder of Newco, has approved and adopted
this Agreement, the Plan and the transactions contemplated hereby and
thereby, including the TSW Merger.
(b) Newco, as the sole stockholder of TSW Sub, has approved and
adopted this Agreement, the Plan and the transactions contemplated
hereby and thereby, including the TSW Merger.
(c) The affirmative vote of (i) a majority of all the votes entitled
to be cast by holders of the outstanding shares of TSW Common Stock and
TSW Preferred Stock, voting together as a single class, and (ii) a
majority of all of the votes entitled to be cast by holders of the
outstanding shares of each series of TSW Preferred Stock, each series
voting separately as a separate class, are the only votes
(collectively, the "TSW Shareholder Approval") of the holders of any
class or series of TSW's capital stock necessary to approve this
Agreement, the Plan, and the transactions contemplated hereby and
thereby, including the TSW Merger.
2.3 CONDITIONS TO OBLIGATION TO CONSUMMATE THE TSW MERGER.
(a) Newco. The obligations of Newco hereunder are subject to the
fulfillment or satisfaction on or before the Closing Date of each of
the conditions set forth in Section 8 of the Plan.
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(b) TSW. The obligations of TSW hereunder are subject to the
fulfillment or satisfaction on or before the Closing Date of each of
the conditions set forth in Section 7 of the Plan (any one or more of
which may be waived by TSW, but only in a writing signed by TSW).
2.4 TERMINATION. Notwithstanding the approval of this Agreement by the
stockholders of NEWCO, TSW Sub and TSW, this Agreement may be terminated at
any time prior to the TSW Effective Time by the mutual written agreement of
TSW, NEWCO and TSW Sub. Notwithstanding the approval of this Agreement by
the stockholders of NEWCO, TSW Sub and TSW, this Agreement will terminate
forthwith in the event that the Plan is terminated in accordance with its
terms. In the event of the termination of this Agreement as provided above,
this Agreement will forthwith become void and there will be no liability on
the part of either NEWCO, INDUS, TSW Sub or TSW or their respective
officers and directors, except as otherwise provided in the Plan.
2.5 AMENDMENT. This Agreement may be amended by the parties hereto at any
time before or after approval by the stockholders of TSW, but, after such
approval, no amendment will be made which, by applicable law, requires the
further approval of stockholders without obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed
on behalf of TSW Sub and TSW.
2.6 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. No party may assign
any of its rights or obligations under this Agreement without the prior
written consent of the other parties hereto. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
2.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with laws of the State of Georgia, without giving effect to the
principles of conflicts of laws thereof.
2.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date and year first above written.
TSW INTERNATIONAL, INC.
By: _________________________________
NAME
TITLE
TSW MERGER SUB, INC.
By: _________________________________
NAME
TITLE
INDUS INTERNATIONAL, INC.
By: _________________________________
NAME
TITLE
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APPENDIX B-1
June 5, 1997
Board of Directors
The Indus Group, Inc.
60 Spear Street San Francisco, CA 94105
Gentlemen:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to The Indus Group, Inc. ("Indus" or the
"Company"), of the financial terms of the proposed Merger (as hereinafter
defined) with TSW International, Inc. ("TSW"). For purposes of this opinion,
"Merger" means, collectively, the Merger described below pursuant to that
certain Agreement and Plan of Merger and Reorganization among the Company, TSW
and Newco Group, Inc. ("Newco"), a wholly-owned subsidiary of Indus, to be
dated June 5, 1997 (the "Merger Agreement").
As more specifically set forth in the Merger Agreement, and subject to the
terms and conditions thereof, pursuant to the Merger Indus and TSW each will
become a wholly-owned subsidiary of Newco. Upon effectiveness of the Merger,
among other things,
(i) a wholly-owned subsidiary of Newco will merge with and into Indus,
with Indus as the surviving corporation, and (a) each outstanding share of
common stock, $0.001 par value, of Indus ("Indus Common Stock") (other than
shares held in the treasury of Indus, owned by any direct or indirect
subsidiary of Indus or TSW, or which are dissenting shares) will be
converted into the right to receive one share of common stock, $0.001 par
value, of Newco ("Newco Common Stock") and (b) each then outstanding option
to purchase shares of Indus Common Stock ("Indus Option") will be converted
into an option to purchase that number of shares of Newco Common Stock
equivalent to the number of shares of Indus Common Stock subject to such
Indus Option, at an exercise price per share of Newco Common Stock equal to
the exercise price per share of Indus Common Stock pursuant to such Indus
Option; and
(ii) a wholly-owned subsidiary of Newco will merge with and into TSW,
with TSW as the surviving corporation, and (a) each outstanding share of
common stock, $0.01 par value, of TSW ("TSW Common Stock"), and each
outstanding share of preferred stock, $0.01 par value, of TSW ("TSW
Preferred Stock") (other than shares of TSW Common Stock or TSW Preferred
Stock held in the treasury of TSW, owned by any direct or indirect
subsidiary of Indus or TSW, or which are dissenting shares), (b) each
subordinated floating rate note of TSW described in Section 1.5(d) of the
TSW Disclosure Schedule (as defined in the Merger Agreement), (c) all
rights to receive any unpaid dividends on TSW Preferred Stock and (d) all
then outstanding options and warrants to purchase TSW Common Stock ("TSW
Options" and "TSW Warrants") will be converted into the right to receive
(or, in the case of the TSW Options and TSW Warrants, into options or
warrants to purchase, for an aggregate purchase price equal to the
aggregate purchase price payable under the terms of the TSW Options and TSW
Warrants) an aggregate number of shares of Newco Common Stock equal to the
product of (1) the number of shares of Newco Common Stock to be issued or
potentially issuable to former Indus shareholders and optionholders as
described in clause (i) above, and (2) .86047.
Consummation of the Merger will be subject to approvals of the holders of
shares of Indus Common Stock and the holders of shares of TSW Common Stock and
TSW Preferred Stock.
In the ordinary course of its services, Cowen & Company ("Cowen") is
regularly engaged in the valuation and pricing of businesses and their
securities and in advising corporate securities issuers on related matters.
In arriving at our opinion, Cowen has, among other things:
(1) reviewed the June 3, 1997 draft of the Merger Agreement;
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(2) held meetings and discussions with representatives of the management
of Indus and TSW to discuss the business, operations, historical financial
results and prospects of Indus, TSW and the combined company;
(3) reviewed certain information of a business and financial nature
regarding the Company, obtained by Cowen through publicly available filings
of the Company with the Securities and Exchange Commission or furnished to
Cowen by management of the Company, including consolidated financial
statements for the fiscal years ended December 31, 1993, 1994, 1995 and
1996, interim financial statements for the three-month period ending March
31, 1997, and certain projected financial data and operating data for the
fiscal years ended December 31, 1997 and 1998, prepared by Company
management based on third-party research reports;
(4) reviewed certain information of a business and financial nature
regarding TSW, furnished to Cowen by management of TSW, including
consolidated financial statements for the fiscal years ended March 31,
1995, 1996 and 1997 and certain projected financial data and operating data
for the fiscal years ended March 31, 1998 and 1999, prepared by management
of TSW;
(5) discussed with the Company's management the Company's competitive
position and current and anticipated future conditions in the enterprise
software industry;
(6) compared certain financial and stock market information regarding
Indus and TSW with similar information regarding certain other publicly
traded companies Cowen deemed relevant;
(7) considered the financial terms, to the extent publicly available, of
selected recent business transactions deemed to be comparable in whole or
in part to the Merger;
(8) analyzed the potential financial effects of the Merger and the pro
forma earnings to be "owned" by the holders of shares of Indus Common
Stock;
(9) reviewed the historical market prices and trading volumes of the
stock of the Company Common Stock from February 29, 1996 to June 4, 1997
and compared those trading histories with those of other companies deemed
relevant; and
(10) reviewed other publicly available information and conducted such
other studies, analyses, inquiries and investigations as we deemed
appropriate.
On June 4, 1997, the closing price of Indus Common Stock in the last
transaction reported by the NASDAQ National Market was $15.75 per share.
In rendering our opinion, we assumed, upon the advice of the Company's
management and with your consent, the accuracy and completeness of the
financial and other information furnished to us as described above. With
respect to the financial projections for the Company and TSW furnished to us
by their respective managements and the financial pro forma projections for
the combined company furnished by the managements of Indus and TSW jointly, we
also have assumed, with your consent, the attainability of the financial
results therein and that they have been reasonably prepared. In addition, we
have in consultation with management of the Company and with your consent
adjusted the financial projections of TSW to reflect more conservative
assumptions. We have assumed with your consent that all such projections
provide a reasonable basis on which we can form our opinion. We have not
assumed any responsibility for independent verification of any such
information, including any projected financial information. We have not made
an independent evaluation or appraisal of any of the properties or assets of
the Company or TSW, nor have we been furnished with any such valuations or
appraisals.
We have assumed that there have been no material changes in the assets,
financial conditions, results of operations, business or prospects of Indus
since the date of the last financial statements made available to us. In
addition, our opinion is based on economic, monetary and market and other
conditions existing on the date hereof.
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We have acted as financial advisor to the Board of Directors of the Company
in connection with the transaction contemplated by the Merger Agreement and
will receive a fee for our services, a significant portion of which is
contingent upon the consummation of such transaction. In the past, Cowen and
its affiliates have provided financing services for the Company and have
received fees for the rendering of these services. In addition, in the
ordinary course of its business, Cowen trades the debt and equity securities
of the Company for its own account and for the accounts of its customers, and,
accordingly, it may at any time hold a long or short position in such
securities.
On the basis of our review and analysis, as described above, it is our
opinion as investment bankers that, as of the date hereof, the financial terms
of the Merger, taken as a whole, are fair, from a financial point of view, to
the Company.
Very truly yours,
Cowen & Company
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APPENDIX B-2
[LETTERHEAD OF ALEX. BROWN & SONS INCORPORATED]
June 5, 1997
Board of Directors
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
Dear Sirs:
TSW International, Inc. ("TSW" or the "Company"), The Indus Group, Inc.
("Indus"), and Newco ("Newco"), a Delaware corporation, propose to enter into
an Agreement and Plan of Merger and Reorganization (the "Agreement"). Pursuant
to the Agreement, the implementation of which is contingent on stockholder
approval by TSW and Indus stockholders, (i) Newco will form two new Delaware
corporations ("TSW Sub" and "Indus Sub", respectfully) as wholly-owned
subsidiaries of Newco, (ii) Indus Sub will merge with and into Indus (the
"Indus Merger"), and each share of Indus common stock issued and outstanding
immediately prior to the effective time of the Indus Merger will be converted
into 1.0 shares (the "Indus Applicable Ratio") of common stock Newco and (iii)
TSW Sub will merge with and into TSW (the "TSW Merger"), and that number of
shares of common stock of Newco ("Newco Shares") constituting 46.25% of the
number of Newco Shares to be issued (or reserved for issuance) in the Merger
(the "TSW Number" as defined in the Agreement) will be issued (or reserved for
issuance) to the former holders of TSW common stock, preferred stock, options,
warrants and subordinated floating rate notes (collectively, the "TSW
Securityholders"). We have assumed, with your consent, that the Merger will
qualify as a tax-free transaction for federal income tax and for pooling-of-
interests accounting treatment. You have requested our opinion as to whether
the TSW Number is fair, from a financial point of view, to the TSW
Securityholders, taken as a whole.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and
other purposes. We have acted as financial advisor to the Board of Directors
of TSW in connection with the transaction described above and will receive a
fee for our services, a portion of which is contingent upon the consummation
of the Merger. We also have been selected as the lead-managing underwriter in
the Company's planned 1997 initial public offering. In addition, we have
provided financial advisory services to Indus in the past, for which we
received a customary fee for our services. Alex. Brown regularly publishes
research reports regarding the enterprise systems software industry and the
businesses and securities of publicly owned companies in the enterprise
systems software industry. In the ordinary course of business, Alex. Brown may
actively trade the securities of Indus for our own account and the account of
our customers and, accordingly, may at any time hold a long or short position
in securities of Indus.
In connection with this opinion, we have reviewed certain publicly available
financial information and other information concerning TSW and Indus and
certain internal analyses and other information furnished to us by TSW and
Indus. We have also held discussions with the members of the senior management
of TSW and Indus regarding the businesses and prospects of their respective
companies and the joint prospects of a combined company including potential
cost savings which may be realized. In addition, we have (i) reviewed the
reported prices and trading activity for the common stock of Indus, (ii)
compared certain financial and (in the case of Indus) stock market information
for TSW and Indus with similar information for certain other companies whose
securities are publicly traded, (iii) reviewed the financial terms of certain
recent business combinations, (iv) reviewed the financial terms of the
Agreement and certain related documents, and (v) performed such other studies
and analyses and considered such other factors as we deemed appropriate.
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We have not independently verified the information described above and for
purposes of this opinion have assumed and relied upon the accuracy,
completeness and fairness thereof including information furnished to us orally
or otherwise discussed with us by management of TSW and Indus. With respect to
the information relating to the prospects of TSW and Indus, we have assumed
that such information reflects the best currently available judgments and
estimates of the management of TSW and Indus. In addition, we have not made
nor been provided with an independent evaluation or appraisal of the assets of
TSW and Indus, nor have we been furnished with any such evaluations or
appraisals. Our opinion is based on market, economic and other conditions as
they exist or as disclosed to us as of the date of such disclosure and can be
evaluated as of the date of this letter.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the
Company or any of its assets.
Our opinion expressed herein was prepared for the use of the Board of
Directors of TSW and does not constitute a recommendation to TSW's
stockholders as to how they should vote at the stockholders' meeting in
connection with the Merger.
Based upon and subject to the foregoing review and assumptions, it is our
opinion that, as of the date of this letter, the TSW Number is fair, from a
financial point of view, to the TSW Securityholders, taken as a whole.
Very truly yours,
Alex. Brown & Sons Incorporated
/s/ Alex. Brown & Sons Incorporated
B-2-2
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APPENDIX C-1
CALIFORNIA GENERAL CORPORATION LAW
CHAPTER 13
DISSENTERS' RIGHTS
SECTION 1300. RIGHT TO REQUIRE PURCHASE--"DISSENTING SHARES" AND "DISSENTING
SHAREHOLDER" DEFINED.
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to
vote on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair
market value the shares owned by the shareholder which are dissenting shares
as defined in subdivision (b). The fair market value shall be determined as of
the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or
depreciation in consequence of the proposed action, but adjusted for any stock
split, reverse stock split, or share dividend which becomes effective
thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; PROVIDED, HOWEVER, that this provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and PROVIDED, FURTHER, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; PROVIDED, HOWEVER, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
SECTION 1301. DEMAND FOR PURCHASE.
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval,
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accompanied by a copy of Sections 1300, 1302, 1303, 1304 and this section, a
statement of the price determined by the corporation to represent the fair
market value of the dissenting shares, and a brief description of the
procedure to be followed if the shareholder desires to exercise the
shareholder's right under such sections. The statement of price constitutes an
offer by the corporation to purchase at the price stated any dissenting shares
as defined in subdivision (b) of Section 1300, unless they lose their status
as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such
price.
SECTION 1302. ENDORSEMENT OF SHARES.
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder
demands that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new certificates,
initial transaction statement, and other written statements issued therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.
SECTION 1303. AGREED PRICE--TIME FOR PAYMENT.
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
SECTION 1304. DISSENTER'S ACTION TO ENFORCE PAYMENT.
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of
the shares, then the shareholder demanding purchase of such shares as
dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152)
or notice pursuant to subdivision (i) of Section 1110 was mailed to the
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shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION 1305. APPRAISERS' REPORT--PAYMENT--COSTS.
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed
by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of
any party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time
as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market
value of each dissenting share multiplied by the number of dissenting shares
which any dissenting shareholder who is a party, or who has intervened, is
entitled to require the corporation to purchase, with interest thereon at the
legal rate from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than
125 percent of the price offered by the corporation under subdivision (a) of
Section 1301).
SECTION 1306. DISSENTING SHAREHOLDERS' STATUS AS CREDITOR.
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SECTION 1307. DIVIDENDS PAID AS CREDIT AGAINST PAYMENT.
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
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SECTION 1308. CONTINUING RIGHTS AND PRIVILEGES OF DISSENTING SHAREHOLDERS.
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
SECTION 1309. TERMINATION OF DISSENTING SHAREHOLDER STATUS.
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to
require the corporation to purchase their shares upon the happening of any of
the following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION 1310. SUSPENSION OF PROCEEDINGS FOR PAYMENT PENDING LITIGATION.
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
SECTION 1311. EXEMPT SHARES.
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect
to such shares in the event of a reorganization or merger.
SECTION 1312. ATTACKING VALIDITY OF REORGANIZATION OR MERGER.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set
aside or rescinded, except in an action to test whether the number of shares
required to authorize or approve the reorganization have been legally voted in
favor thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event
of a reorganization or short-form merger is entitled to payment in accordance
with those terms and provisions or, if the principal terms of the
reorganization are approved pursuant to subdivision (b) of Section 1202, is
entitled to payment in accordance with the terms and provisions of the
approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash
for such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or
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<PAGE>
short-form merger or to have the reorganization or short-form merger set aside
or rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable
as to the shareholders of any party so controlled.
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<PAGE>
APPENDIX C-2
BUSINESS CORPORATION CODE OF THE STATE OF GEORGIA
ARTICLE 13
DISSENTERS' RIGHTS
PART 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through 14-2-
1327.
(5) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale
or exchange pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
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(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action
was obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or share
exchange or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf
he asserts dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he dissents and his
other shares were registered in the names of different shareholders.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
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(b) If corporate action creating dissenters' rights under Code Section 14-2-
1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Code Section 14-2-
1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection
(a) of this Code section is not entitled to payment for his shares under this
article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certified shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered;
and
(4) Be accompanied by a copy of this article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code Section
14-2-1322 must demand payment and deposit his certificates in accordance with
the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this article.
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
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<PAGE>
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a
payment demand, the corporation shall by notice to each dissenter who complied
with Code Section 14-2-1323 offer to pay to such dissenter the amount the
corporation estimates to be the fair value of his or her shares, plus accrued
interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment
for his or her shares shall be made within 60 days after the making of the
offer or the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section 14-
2-1325 is less than the fair value of his shares or that the interest due
is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under subsection
(a) of this Code section within 30 days after the corporation offered payment
for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325;
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written
demand for the information; and
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<PAGE>
(2) The shareholder may at any time, subject to the limitations period of
Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his shares and the amount of interest due and demand payment
of his estimate of the fair value of his shares and interest due.
PART 3
JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided
by law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provided in this chapter, Chapter 11 of Title 9, known as the
"Georgia Civil Practice Act," applies to any proceeding with respect to
dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective
parties. The court shall assess the costs against the corporation, except that
the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor or any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
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<PAGE>
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given
by the corporation in compliance with the provisions of Code Section 14-2-1320
and Code Section 14-2-1322.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors for monetary damages for breach or
alleged breach of their duty of care. In addition, as permitted by Section 145
of the Delaware General Corporation Law, the Bylaws of Registrant provide
that: (i) the Registrant is required to indemnify its directors and officers
and employees, and persons serving in such capacities in other business
enterprises (including, for example, subsidiaries of the Registrant) at the
Registrant's request, to the fullest extent permitted by Delaware law,
including those circumstances in which indemnification would otherwise be
discretionary; (ii) the Registrant is required to advance expenses, as
incurred, to such directors, officers and employees in connection with
defending a proceeding (except that it is not required to advance expenses to
a person against whom the Registrant brings a claim for breach of the duty of
loyalty, failure to act in good faith, intentional misconduct, knowing
violation of law or deriving an improper personal benefit); (iii) the rights
conferred in the Bylaws are not exclusive and the Registrant is authorized to
enter into indemnification agreements with its directors, officers and
employees; and (iv) the Registrant is required to maintain director and
officer liability insurance to the extent reasonably available; and (v) the
Registrant may not retroactively amend the Bylaw provisions in a way that is
adverse to such directors, officers and employees.
The Registrant intends to provide the maximum indemnity allowed to officers
and directors by Section 145 of the Delaware General Corporation Law and the
Bylaws, as well as certain additional procedural protections. In addition, the
indemnity agreements will provide that officers and directors will be
indemnified to the fullest possible extent not prohibited by law against all
expenses (including attorney's fees) and settlement amounts paid or incurred
by them in any action or proceeding, including any derivative action by or in
the right of the Registrant, on account of their services as directors or
officers of the Registrant or as directors or officers of any other company or
enterprise when they are serving in such capacities at the request of the
Registrant. No indemnity will be provided, however, to any director or officer
on account of conduct that is adjudicated to be knowingly fraudulent,
deliberately dishonest or willful misconduct. The indemnity provisions of the
Bylaws will also provide that no indemnification will be available if a final
court adjudication determines that such indemnification is not lawful, or in
respect of any accounting of profits made from the purchase or sale of
securities of the Registrant in violation of Section 16(b) of the Exchange
Act.
The indemnification provision in the Bylaws may be sufficiently broad to
permit indemnification of the Registrant's officers and directors for
liability arising under the Securities Act.
The Registrant also intends to obtain director and officer liability
insurance.
The Reorganization Agreement contains covenants on the part of the
Registrant to maintain indemnification provisions in the charter documents of
each surviving corporation of the Indus Merger and the TSW Merger which are
identical to those provisions contained in the charter documents of Indus and
TSW prior to the Merger. In addition, Newco is also required to maintain
director and officer liability insurance with coverages, which are similar to
the coverages Indus and TSW maintained prior to the Merger. A description of
these covenants are contained in the Joint Proxy Statement/Prospectus and
under the heading "THE REORGANIZATION AGREEMENT--Indemnification."
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<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A)EXHIBITS
The following exhibits are filed herewith or incorporated by reference
herein:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
2.1 Agreement and Plan of Merger and Reorganization dated as of June 5,
1997 ("Agreement of Merger"), by and among the Registrant, The Indus
Group, Inc. ("Indus") and TSW International, Inc. ("TSW") (see
Appendix A-1 to the Joint Proxy Statement/Prospectus)
2.2 First Amendment to Agreement of Merger dated as of July 21, 1997 by
and among the Registrant, Indus and TSW
2.3 Form of Agreement of Merger to be entered into by and among the
Registrant, Indus Sub, Inc. and Indus (see Appendix A-2 to the Joint
Proxy Statement/Prospectus)
2.4 Form of Agreement of Merger to be entered into by and among the
Registrant, TSW Sub, Inc. and TSW (see Appendix A-3 to the Joint Proxy
Statement/Prospectus)
3.1 Registrant's Certificate of Incorporation, as amended
3.2 Registrant's Bylaws
4.1 Form of Registration Rights Agreement to be entered into among the
Registrant, Warburg, Pincus Investors, L.P. ("Warburg"), Robert W.
Felton, Richard W. MacAlmon, John W. Blend, III and John R. Oltman
4.2 Form of Indus Affiliate Agreement dated as of June 5, 1997 entered
into by the Registrant, Indus, TSW and each of Robert W. Felton,
Richard W. MacAlmon, Michael E. Percy, Alan G. Merten, Donald F.
Robertson, Douglas R. Piper, Frank M. Siskowski and Edward R. Koepfler
4.3 Form of TSW Affiliate Agreement dated as of June 5, 1997 entered into
by the Registrant, Indus, TSW and each of Warburg, Christopher R.
Lane, John F. Bartels, John W. Blend, III, Kenneth C. Colby, Jr.,
David J. Loesch, Allen D. Vaughn, John R. Oltman, George D. Busbee,
William H. Janeway and Joseph P. Landy
4.4 Felton Affiliate Agreement dated as of June 5, 1997 entered into among
the Registrant, Indus, TSW and Robert W. Felton
4.5 Warburg Affiliate Agreement dated as of June 5, 1997 entered into
among the Registrant, Indus, TSW and Warburg
4.6 Nomination Agreement to be entered into among the Registrant, Warburg
and Robert W. Felton
4.7 Specimen certificate for Registrant's Common Stock
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
8.1 Tax Opinion of Wachtell, Lipton, Rosen & Katz
8.2 Tax Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
9.1 Indus Voting Agreement dated as of June 5, 1997 entered into among
TSW, Robert W. Felton, Richard W. MacAlmon, Michael E. Percy and
Douglas R. Piper
9.2 TSW Voting Agreement dated as of June 5, 1997 entered into among the
Registrant, Indus, Warburg, John W. Blend, III and John R. Oltman
10.1 Indus International, Inc. 1997 Stock Plan
10.2 Indus International, Inc. 1997 Employee Stock Purchase Plan
10.3 Indus International, Inc. 1997 Director Option Plan
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.4 Form of Tax Indemnification Agreement of Indus (incorporated by
reference to Exhibit 10.6 to Indus' Registration Statement on Form S-1
(File No. 33-80573) declared effective on February 26, 1996, as
amended (the "Indus Form S-1"))
10.5 Software Master License Agreement between Indus and Felton
Enterprises, dated January 2, 1990, as amended to date (incorporated
herein by reference to Exhibit 10.7 to the Indus Form S-1)
10.6 Conditional Assignment of Software Master License Agreement and
Underlying Software between Indus and Felton Enterprises dated
February 24, 1996 (incorporated herein by reference to Exhibit 10.8 to
the Indus Form S-1)
10.7 Amended and Restated Commercial Loan Agreement dated June 30, 1995
between Indus and Sumitomo Bank of California, as amended through
December 19, 1995 (incorporated herein by reference to Exhibit 10.9 to
the Indus Form S-1)
10.8 Third Amendment to Commercial Loan Agreement dated May 29, 1996
between Indus and Sumitomo Bank of California (incorporated herein by
reference to Exhibit 10.1 to the Indus Quarterly Report on Form 10-Q
(Filed No. 0-27806) filed with the Securities and Exchange Commission
on August 13, 1996)
10.9 Fourth Amendment to Commercial Loan Agreement dated September 6, 1996
between Indus and Sumitomo Bank of California (incorporated herein by
reference to Exhibit 10.1 to the Indus Quarterly Report on Form 10-Q
(Filed No. 0-27806) filed with the Securities and Commission on
November 13, 1996) (the "November 1996 Form 10-Q")
10.10 Asset Acquisition Agreement between Indus and Indus International,
Inc. (incorporated herein by reference to Exhibit 10.10 to Amendment
No. 3 to the Company's Registration Statement on Form S-1 (Reg. No.
33-80573) filed with the Securities and Exchange Commission on
February 28, 1996)
10.11 Lease for Indus' San Francisco, CA headquarters dated January 24,
1990, as amended (incorporated herein by reference to Exhibit 10.11 to
the Indus Form S-1)
10.12 Lease for Indus' Pittsburgh, PA sales office (incorporated herein by
reference to Exhibit 10.12 to Amendment No. 1 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-80574) filed with the
Securities and Exchange Commission on January 31, 1996)
10.13 Loan and Security Agreement dated November 17, 1995 between TSW and
Greyrock Business Credit, a division of Greyrock Capital Group Inc.
("Greyrock")
10.14 Patent and Trademark Security Agreement dated November 17, 1995
between TSW and Greyrock
10.15 Security Agreement in Copyrighted Works dated February 28, 1996
between TSW and Greyrock
10.16 Amendment to Loan Documents, dated August 1, 1996, between TSW and
Greyrock
10.17 Secured Promissory Note dated August 1, 1996 between TSW and Greyrock
10.18 Guarantee dated November 6, 1996 between TSW International Limited and
Greyrock
10.19 Deed of Guarantee and Indemnity dated November 14, 1996 between TSW
and International Pty Ltd and Greyrock
10.20 Second Amendment to Loan Documents dated April 3, 1997 between TSW and
Greyrock
10.21 Securities Purchase Agreement dated as of June 20, 1994, between TSW
and Warburg, Pincus Investors, L.P. ("Warburg")
10.22 Amended and Restated Stockholders Agreement dated June 20, 1994
between TSW, Warburg, John W. Blend, III ("Blend") and David P. Welden
10.23 Stockholder's Rights Agreement dated as of August 30, 1994 between
TSW, Warburg and Alan Johnston
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.24 Form of Stock Purchase Warrant between TSW and Warburg and schedule of
substantially similar agreements
10.25 Form of Subordinated Floating Rate Note payable by TSW to Warburg and
schedule of substantially similar agreements
10.26 Employment Agreement dated July 19, 1994 between TSW and Christopher
R. Lane ("Lane")
10.27 Loan Agreement dated December 22, 1996 between TSW and Lane
10.28 Supplemental Severance Agreement dated December 15, 1994 between TSW
and Lane
10.29 Promissory Note dated December 22, 1996 between TSW and Lane
10.30 Collateral Assignment Agreement dated December 22, 1996 between TSW
and Lane
10.31 Nonrecourse Loan Agreement dated September 16, 1992 between TSW and
Blend
10.32 Stock Pledge Agreement dated September 16, 1992 between TSW and Blend
10.33 Collateral Assignment and Agreement dated September 16, 1992 between
TSW and Blend
10.34 Nonrecourse Promissory Note dated September 16, 1992 between TSW and
Blend
10.35 Lease Agreement dated June 8, 1993 between TSW and Cousins Properties
Incorporated, as amended
11.1 Statement Re: Computation of Earnings Per Share of Indus (incorporated
herein by reference to Exhibit 11.1 of Indus' Annual Report on Form
10-K for the year ended December 31, 1996 filed with the SEC on March
26, 1997)
11.2 Statement Re: Computation of Per Share Earnings of TSW
21.1 Subsidiaries of Registrant
21.2 Subsidiaries of Indus (incorporated by reference to Exhibit 21.1 to
the Indus Form S-1)
21.3 Subsidiaries of TSW
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1)
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.2)
23.5 Consent of Cowen and Company
23.6 Consent of Alex. Brown & Sons, Incorporated
24.1 Power of Attorney (see page II-7)
27.1 Financial Data Schedule
99.1 Form of Consent of Directors of Indus International, Inc.
99.2 Form of Proxy for Indus shareholders
99.3 Form of Proxy for TSW shareholders
99.4 Consent of John W. Blend, III
99.5 Consent of Edward R. Koepfler
99.6 Consent of Richard W. Macalmon
99.7 Consent of Alan G. Merten
99.8 Consent of William H. Janeway
99.9 Consent of Joseph P. Landy
</TABLE>
II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES.
II--Indus Valuation and Qualifying Accounts
II--TSW Valuation and Qualifying Accounts
All other Schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements or
related notes.
(C) OPINIONS OF FINANCIAL ADVISORS.
Opinion of Cowen & Company (see Appendix B-1 to the Joint Proxy
Statement/Prospectus).
Opinion of Alex. Brown & Sons Incorporated (see Appendix B-2 to the Joint
Proxy Statement/ Prospectus).
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of Form S-4, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when it
became effective.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the Certificate of
Incorporation and the Bylaws of the Registrant and the Delaware General
Corporation Law, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful 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 question 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.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) (A) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
II-5
<PAGE>
(B) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (A) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment 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.
(6) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
INDUS INTERNATIONAL, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM
S-4 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN THE CITY OF SAN FRANCISCO, COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA, ON
THIS 6TH DAY OF AUGUST, 1997.
Indus International, Inc.
/s/ Robert W. Felton
By___________________________________
ROBERT W. FELTON
Chairman of the Board Chief
Executive Officer and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Robert W. Felton, Frank M. Siskowski and Edward
R. Koepfler, and each or any one of them, his true and lawful attorneys-in-
fact and agents with full power of substitution, 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 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 substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Robert W. Felton Chairman of the Board, August 6, 1997
- ------------------------------------- Chief Executive Officer
ROBERT W. FELTON and President
(Principal Executive
Officer)
/s/ Frank M. Siskowski Chief Financial Officer August 6, 1997
- ------------------------------------- and Treasurer
FRANK M. SISKOWSKI (Principal Financial
and Accounting Officer)
II-7
<PAGE>
THE INDUS GROUP, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT END
DESCRIPTION PERIOD EXPENSES DEDUCTIONS (1) OF PERIOD
----------- ------------ ---------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended December 31,
1994:
Allowance for doubtful
accounts.............. $150 $ 436 $ -- $586
Year ended December 31,
1995:
Allowance for doubtful
accounts.............. $586 $ 66 $ -- $652
Year ended December 31,
1996:
Allowance for doubtful
accounts.............. $652 $ -- $(203) $449
</TABLE>
- --------
(1) Uncollectible accounts written off, net of recoveries.
S-1
<PAGE>
TSW INTERNATIONAL, INC.
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
DESCRIPTION PERIOD EXPENSES DEDUCTIONS (1) OF 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.
S-2
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
2.1 Agreement and Plan of Merger and Reorganization dated as of June 5,
1997 "(Agreement of Merger"), by and among the Registrant, The Indus
Group, Inc. ("Indus") and TSW International, Inc. ("TSW") (see
Appendix A-1 to the Joint Proxy Statement/Prospectus)
2.2 First Amendment to Agreement of Merger dated as of July 21, 1997 by
and among the Registrant, Indus and TSW
2.3 Form of Agreement of Merger to be entered into by and among the
Registrant, Indus Sub, Inc. and Indus (see Appendix A-2 to the Joint
Proxy Statement/Prospectus)
2.4 Form of Agreement of Merger to be entered into by and among the
Registrant, TSW Sub, Inc. and TSW (see Appendix A-3 to the Joint Proxy
Statement/Prospectus)
3.1 Registrant's Certificate of Incorporation, as amended
3.2 Registrant's Bylaws
4.1 Form of Registration Rights Agreement to be entered into among the
Registrant, Warburg, Pincus Investors, L.P. ("Warburg"), Robert W.
Felton, Richard W. MacAlmon, John W. Blend, III and John R. Oltman
4.2 Form of Indus Affiliate Agreement dated as of June 5, 1997 entered
into by the Registrant, Indus, TSW and each of Robert W. Felton,
Richard W. MacAlmon, Michael E. Percy, Alan G. Merten, Donald F.
Robertson, Douglas R. Piper, Frank M. Siskowski and Edward R. Koepfler
4.3 Form of TSW Affiliate Agreement dated as of June 5, 1997 entered into
by the Registrant, Indus, TSW and each of Warburg, Christopher R.
Lane, John F. Bartels, John W. Blend, III, Kenneth C. Colby, Jr.,
David J. Loesch, Allen D. Vaughn, John R. Oltman, George D. Busbee,
William H. Janeway and Joseph P. Landy
4.4 Felton Affiliate Agreement dated as of June 5, 1997 entered into among
the Registrant, Indus, TSW and Robert W. Felton
4.5 Warburg Affiliate Agreement dated as of June 5, 1997 entered into
among the Registrant, Indus, TSW and Warburg
4.6 Nomination Agreement to be entered into among the Registrant, Warburg
and Robert W. Felton
4.7 Specimen certificate for Registrant's Common Stock
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
8.1 Tax Opinion of Wachtell, Lipton, Rosen & Katz
8.2 Tax Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
9.1 Indus Voting Agreement dated as of June 5, 1997 entered into among
TSW, Robert W. Felton, Richard W. MacAlmon, Michael E. Percy and
Douglas R. Piper
9.2 TSW Voting Agreement dated as of June 5, 1997 entered into among the
Registrant, Indus, Warburg, John W. Blend, III and John R. Oltman
10.1 Indus International, Inc. 1997 Stock Plan
10.2 Indus International, Inc. 1997 Employee Stock Purchase Plan
10.3 Indus International, Inc. 1997 Director Option Plan
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.4 Form of Tax Indemnification Agreement of Indus (incorporated by
reference to Exhibit 10.6 to
Indus' Registration Statement on Form S-1 (File No. 33-80573) declared
effective on February 26, 1996, as amended (the "Indus Form S-1"))
10.5 Software Master License Agreement between Indus and Felton
Enterprises, dated January 2, 1990, as amended to date (incorporated
herein by reference to Exhibit 10.7 to the Indus Form S-1)
10.6 Conditional Assignment of Software Master License Agreement and
Underlying Software between Indus and Felton Enterprises dated
February 24, 1996 (incorporated herein by reference to Exhibit 10.8 to
the Indus Form S-1)
10.7 Amended and Restated Commercial Loan Agreement dated June 30, 1995
between Indus and Sumitomo Bank of California, as amended through
December 19, 1995 (incorporated herein by reference to Exhibit 10.9 to
the Indus Form S-1)
10.8 Third Amendment to Commercial Loan Agreement dated May 29, 1996
between Indus and Sumitomo Bank of California (incorporated herein by
reference to Exhibit 10.1 to the Indus Quarterly Report on Form 10-Q
(Filed No. 0-27806) filed with the Securities and Exchange Commission
on August 13, 1996)
10.9 Fourth Amendment to Commercial Loan Agreement dated September 6, 1996
between Indus and Sumitomo Bank of California (incorporated herein by
reference to Exhibit 10.1 to the Indus Quarterly Report on Form 10-Q
(Filed No. 0-27806) filed with the Securities and Commission on
November 13, 1996) (the "November 1996 Form 10-Q")
10.10 Asset Acquisition Agreement between Indus and Indus International,
Inc. (incorporated herein by reference to Exhibit 10.10 to Amendment
No. 3 to the Company's Registration Statement on Form S-1 (Reg. No.
33-80573) filed with the Securities and Exchange Commission on
February 28, 1996)
10.11 Lease for Indus' San Francisco, CA headquarters dated January 24,
1990, as amended (incorporated herein by reference to Exhibit 10.11 to
the Indus Form S-1)
10.12 Lease for Indus' Pittsburgh, PA sales office (incorporated herein by
reference to Exhibit 10.12 to Amendment No. 1 to the Company's
Registration Statement on Form S-1 (Reg. No. 33-80574) filed with the
Securities and Exchange Commission on January 31, 1996)
10.13 Loan and Security Agreement dated November 17, 1995 between TSW and
Greyrock Business Credit, a division of Greyrock Capital Group Inc.
("Greyrock")
10.14 Patent and Trademark Security Agreement dated November 17, 1995
between TSW and Greyrock
10.15 Security Agreement in Copyrighted Works dated February 28, 1996
between TSW and Greyrock
10.16 Amendment to Loan Documents, dated August 1, 1996, between TSW and
Greyrock
10.17 Secured Promissory Note dated August 1, 1996 between TSW and Greyrock
10.18 Guarantee dated November 6, 1996 between TSW International Limited and
Greyrock
10.19 Deed of Guarantee and Indemnity dated November 14, 1996 between TSW
and International Pty Ltd and Greyrock
10.20 Second Amendment to Loan Documents dated April 3, 1997 between TSW and
Greyrock
10.21 Securities Purchase Agreement dated as of June 20, 1994, between TSW
and Warburg, Pincus Investors, L.P. ("Warburg")
10.22 Amended and Restated Stockholders Agreement dated June 20, 1994
between TSW, Warburg, John W. Blend, III ("Blend") and David P. Welden
10.23 Stockholder's Rights Agreement dated as of August 30, 1994 between
TSW, Warburg and Alan Johnston
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
10.24 Form of Stock Purchase Warrant between TSW and Warburg and schedule of
substantially similar agreements
10.25 Form of Subordinated Floating Rate Note payable by TSW to Warburg and
schedule of substantially similar agreements
10.26 Employment Agreement dated July 19, 1994 between TSW and Christopher
R. Lane ("Lane")
10.27 Loan Agreement dated December 22, 1996 between TSW and Lane
10.28 Supplemental Severance Agreement dated December 15, 1994 between TSW
and Lane
10.29 Promissory Note dated December 22, 1996 between TSW and Lane
10.30 Collateral Assignment Agreement dated December 22, 1996 between TSW
and Lane
10.31 Nonrecourse Loan Agreement dated September 16, 1992 between TSW and
Blend
10.32 Stock Pledge Agreement dated September 16, 1992 between TSW and Blend
10.33 Collateral Assignment and Agreement dated September 16, 1992 between
TSW and Blend
10.34 Nonrecourse Promissory Note dated September 16, 1992 between TSW and
Blend
10.35 Lease Agreement dated June 8, 1993 between TSW and Cousins Properties
Incorporated, as amended
11.1 Statement Re: Computation of Earnings Per Share of Indus (incorporated
herein by reference to Exhibit 11.1 of Indus' Annual Report on Form
10-K for the year ended December 31, 1996 filed with the SEC on March
26, 1997)
11.2 Statement Re: Computation of Per Share Earnings of TSW
21.1 Subsidiaries of Registrant
21.2 Subsidiaries of Indus (incorporated by reference to Exhibit 21.1 to
the Indus Form S-1)
21.3 Subsidiaries of TSW
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1)
23.4 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.2)
23.5 Consent of Cowen and Company
23.6 Consent of Alex. Brown & Sons, Incorporated
24.1 Power of Attorney (see page II-7)
27.1 Financial Data Schedule
99.1 Form of Proxy for Indus shareholders
99.2 Form of Proxy for TSW shareholders
99.3 Consent of Christopher R. Lane
99.4 Consent of John W. Blend, III
99.5 Consent of Edward R. Koepfler
99.6 Consent of Richard W. Macalmon
99.7 Consent of Alan G. Merten
99.8 Consent of William H. Janeway
99.9 Consent of Joseph P. Landy
</TABLE>
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT TO
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS FIRST AMENDMENT (the "AMENDMENT") TO THE AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION (the "AGREEMENT") dated as of June 5, 1997, by and among THE
INDUS GROUP, INC., a California corporation ("INDUS"), INDUS/TSW, INC., a
Delaware corporation ("INDUS/TSW"), and TSW International, Inc., a Georgia
corporation ("TSW") is entered into as of July 21, 1997. All capitalized terms
used herein but not otherwise defined shall have the meaning set forth in the
Agreement.
RECITALS
--------
A. The parties entered into the Agreement which provides for the formation
of one California corporation and one Georgia corporation (collectively, the
"Subs"), as wholly-owned subsidiaries of Newco, and the statutory merger of one
Sub with and into INDUS and the other Sub with and into TSW, all pursuant to the
terms and conditions of the Agreement and the Agreements of Merger to be entered
into between the one Sub and INDUS and the other Sub and TSW.
B. The parties wish to amend the Agreement to eliminate the additional
obligations of Warburg and Felton to restrict the disposition of TSW Common
Stock and Indus Common Stock, respectively, or Newco Common Stock received in
exchange therefore until 180 days after the effective time.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. That the last sentence of Sections 4.5(a) and 5.5(a) be deleted.
2. All other provisions of the Agreement shall remain in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
THE INDUS GROUP, INC. TSW INTERNATIONAL, INC.
a California Corporation a Georgia corporation
By: /s/ Robert W. Felton By: /s/ John F. Bartels
------------------------------------- -------------------------------
Name: Robert W. Felton Name: John F. Bartels
Title: President Title: Chief Financial Officer
and Chief Executive Officer
INDUS/TSW, INC.
a Delaware corporation
By: /s/ Robert W. Felton
------------------------------------------------
Name: Robert W. Felton
Title: President and Chief Executive Officer
[Signature Page to Amendment]
-2-
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
NEWCO GROUP, INC.
FIRST. The name of the Corporation is Newco Group, Inc.
SECOND. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which Corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. The aggregate number of shares which the Corporation shall have
authority to issue is one hundred ten million (110,000,000), divided into one
hundred million (100,000,000) shares of Common Stock with the par value of $.001
per share, and ten million (10,000,000) shares of Preferred Stock with the par
value of $.001 per share.
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article FOURTH, to provide for the issuance of
the shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
<PAGE>
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such privileges, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per share
payable on case of redemption, which amount may vary under different conditions
and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(h) Any other relative rights, preferences and limitations of that
series.
FIFTH. The name and mailing address of the incorporator are as follows:
Elizabeth M. Kurr
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
SIXTH: The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the bylaws of the Corporation, but the stockholders may
make additional bylaws and may alter or repeal any bylaw whether adopted by them
or otherwise.
SEVENTH: Elections of directors need not be by written ballot except and to
the extent provided in the bylaws of the Corporation.
EIGHTH: No action shall be taken by the stockholders of the Corporation
except at an annual or special meeting of the stockholders called in accordance
with the bylaws and no action shall be taken by the stockholders by written
consent.
NINTH: Advance notice of stockholder nomination for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
bylaws of the Corporation.
TENTH: Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
(subject to any provision
-2-
<PAGE>
contained in the statutes) outside of the State of Delaware at such place or
places as may be designated from time to time by the Board of Directors or in
the bylaws of the Corporation.
ELEVENTH: The Corporation reserves the right at any time from time to time
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and any other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
TWELFTH: The liability of the directors of the Corporation for monetary
damages shall be eliminated to the fullest extent permissible under Delaware
law.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of this Article Twelfth shall be prospective and
shall not affect the rights under this Article Twelfth in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
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<PAGE>
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is her act and deed and that the facts stated
therein are true.
Date:
/s/ Elizabeth M. Kurr
-------------------------
Incorporator
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<PAGE>
Exhibit 3.2
BYLAWS
OF
NEWCO GROUP, INC.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
PAGE
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE I CORPORATE OFFICES................................................ -1-
1.1 REGISTERED OFFICE................................................. -1-
1.2 OTHER OFFICES..................................................... -1-
1.3 BOOKS AND RECORDS The books and records......................... -1-
ARTICLE II MEETINGS OF STOCKHOLDERS........................................ -1-
2.1 PLACE OF MEETINGS................................................. -1-
2.2 ANNUAL MEETING.................................................... -1-
2.3 SPECIAL MEETING................................................... -2-
2.4 NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.................... -2-
2.6 NOTICE OF STOCKHOLDERS' MEETINGS.................................. -4-
2.7 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE...................... -4-
2.8 QUORUM............................................................ -5-
2.9 ADJOURNED MEETING; NOTICE......................................... -5-
2.10 VOTING............................................................ -5-
2.11 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT................. -6-
2.12 RECORD DATE FOR STOCKHOLDER NOTICE;VOTING; GIVING CONSENTS........ -6-
2.13 PROXIES........................................................... -7-
2.14 INSPECTORS OF ELECTION............................................ -7-
ARTICLE III DIRECTORS...................................................... -8-
3.1 POWERS............................................................ -8-
3.2 NUMBER AND TERM OF OFFICE......................................... -8-
3.3 RESIGNATION AND VACANCIES......................................... -8-
3.4 REMOVAL........................................................... -9-
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.......................... -9-
3.6 FIRST MEETINGS....................................................-10-
3.7 REGULAR MEETINGS..................................................-10-
3.8 SPECIAL MEETINGS; NOTICE..........................................-10-
3.9 QUORUM............................................................-11-
3.10 WAIVER OF NOTICE..................................................-11-
3.11 ADJOURNMENT.......................................................-11-
3.12 NOTICE OF ADJOURNMENT.............................................-11-
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................-11-
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
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<TABLE>
<CAPTION>
<S> <C>
3.14 ORGANIZATION......................................................-12-
3.15 FEES AND COMPENSATION OF DIRECTORS................................-12-
3.16 APPROVAL OF LOANS TO OFFICERS.....................................-12-
ARTICLE IV COMMITTEES......................................................-12-
4.1 COMMITTEES OF DIRECTORS...........................................-12-
4.2 MEETINGS AND ACTION OF COMMITTEES.................................-13-
ARTICLE V OFFICERS.........................................................-13-
5.1 OFFICERS..........................................................-13-
5.2 ELECTION OF OFFICERS..............................................-13-
5.3 SUBORDINATE OFFICERS..............................................-14-
5.4 REMOVAL AND RESIGNATION OF OFFICERS...............................-14-
5.5 VACANCIES IN OFFICES..............................................-14-
5.6 CHAIRMAN OF THE BOARD.............................................-14-
5.7 CHIEF EXECUTIVE OFFICER...........................................-15-
5.9 VICE PRESIDENTS...................................................-15-
5.10 SECRETARY.........................................................-15-
5.11 CHIEF FINANCIAL OFFICER...........................................-16-
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS...........................................................-16-
6.6 INSURANCE.........................................................-18-
6.7 NON-EXCLUSIVITY OF RIGHTS.........................................-19-
6.8 SURVIVAL OF RIGHTS................................................-19-
6.9 CORPORATION BOUND.................................................-19-
6.10 PRECLUSION........................................................-19-
6.11 INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE......................-19-
6.12 AMENDMENTS........................................................-20-
ARTICLE VII RECORDS AND REPORTS............................................-20-
7.1 MAINTENANCE AND INSPECTION OF RECORDS.............................-20-
7.2 INSPECTION BY DIRECTORS...........................................-20-
7.3 ANNUAL STATEMENT TO STOCKHOLDERS..................................-21-
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS....................-21-
ARTICLE VIII GENERAL MATTERS...............................................-21-
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.............-21-
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS.........................-22-
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED................-22-
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
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<TABLE>
<CAPTION>
<S> <C>
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES............................-22-
8.5 SPECIAL DESIGNATION ON CERTIFICATES...............................-23-
8.6 LOST CERTIFICATES.................................................-23-
8.7 CONSTRUCTION; DEFINITIONS.........................................-23-
ARTICLE IX AMENDMENTS......................................................-23-
ARTICLE X DISSOLUTION......................................................-24-
ARTICLE XI CUSTODIAN.......................................................-24-
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.......................-24-
11.2 DUTIES OF CUSTODIAN...............................................-25-
</TABLE>
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<PAGE>
BYLAWS
OF
NEWCO GROUP, INC.
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the Certificate
of Incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
1.3 BOOKS AND RECORDS
The books and records of the Corporation may be kept outside the State of
Delaware at such place or places as may from time to time be designated by the
Board of Directors.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
(a) The annual meeting of stockholders shall be held each year on a
date and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stock holders shall be held on the first
Tuesday in May of each year at 2:00 p.m. However, if such day falls on
<PAGE>
a legal holiday, then the meeting shall be held at the same time and place on
the next succeeding full business day. At the meeting, directors shall be
elected, and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by (i) the
chairman of the Board of Directors, (ii) the president, (iii) the chief
executive officer or (iv) any two directors, but such special meetings may not
be called by any other person or persons.
2.4 NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
-------------------------------
election to the Board of Directors of the Corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or
at the direction of the Board of Directors or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this Bylaw, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this Bylaw.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Bylaw, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the l0th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a stockholder's notice as described above. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class
-2-
<PAGE>
and number of shares of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased Board of Directors at least
70 days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Bylaw, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Bylaw. In the event the
Corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In
no event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
(C) General. (1) Only such persons who are nominated in accordance
-------
with the procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Bylaw. Except as otherwise provided by law, the Certificate
of Incorporation or these Bylaws, the Chairman of the meeting shall have the
power and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national
-3-
<PAGE>
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
2.5 ORGANIZATION
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his absence by the vice chairman of the board, if any, or
in his absence by the chief executive officer, if any, or in his absence by the
president, if any, or in his absence a vice president, or in the absence of the
foregoing persons by a chairman designated by the board of directors, or in the
absence of such designation by a chairman chosen at the meeting. The secretary
shall act as secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the meeting.
2.6 NOTICE OF STOCKHOLDERS' MEETINGS
Except as set forth in Section 2.3, all notices of meetings of stockholders
shall be sent or otherwise given in accordance with Section 2.6 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting. The notice shall specify the place, date, and hour of the meeting and
(i) in the case of a special meeting, the general nature of the business to be
transacted (no business other than that specified in the notice may be
transacted) or (ii) in the case of the annual meeting, those matters which the
board of directors, at the time of giving the notice, intends to present for
action by the stockholders (but any proper matter may be presented at the
meeting for such action). The notice of any meeting at which directors are to
be elected shall include the name of any nominee or nominees who, at the time of
the notice, the board intends to present for election.
2.7 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that stockholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
-4-
<PAGE>
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.8 QUORUM
The presence in person or by proxy of the holders of a majority the voting
power of the shares entitled to vote thereat constitutes a quorum for the
transaction of business at all meetings of stock holders; provided, however,
that in the case of any vote to be taken by classes, the holders of a majority
of the votes entitled to be cast by the stockholders of a particular class shall
constitute a quorum for the transaction of business by such class. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the voting
power of the shares required to constitute a quorum.
2.9 ADJOURNED MEETING; NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the chairman of the meeting or by
the vote of the majority of the voting power of the shares represented at that
meeting, either in person or by proxy. In the absence of a quorum, no other
business may be transacted at that meeting except as provided in Section 2.7 of
these Bylaws.
When any meeting of stockholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
However, if a new record date for the adjourned meeting is fixed or if the
adjournment is for more than thirty (30) days from the date set for the original
meeting, then notice of the adjourned meeting shall be given. Notice of any
such adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 2.5
and 2.6 of these Bylaws. At any adjourned meeting the corporation may transact
any business which might have been transacted at the original meeting.
2.10 VOTING
Voting at any meeting of stockholders need not be by ballot; provided,
however, that elections for directors shall be by written ballot, unless
otherwise provided for in the Certificate of Incorporation.
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Each stockholder shall be entitled to that number of votes for each share
held as it set forth in the Certificate of Incorporation of the corporation, as
amended or restated, or in the resolution or resolutions
-5-
<PAGE>
adopted by the board of directors providing for the issuance of such stock,
except as may otherwise be required by law.
Any stockholder entitled to vote on any matter may vote part of the shares
in favor of the proposal and refrain from voting the remaining shares or, except
when the matter is the election of directors, may vote them against the
proposal; but if the stockholder fails to specify the number of shares which
the stockholder is voting affirmatively, it will be conclusively presumed that
the stockholder's approving vote is with respect to all shares which the
stockholder is entitled to vote.
If a quorum is present, the affirmative vote of the voting power of the
shares represented, in person or by proxy, and voting at a duly held meeting
(which shares voting affirmatively also constitute at least a majority of the
voting power of the required quorum) shall be the act of the stockholders,
unless the vote of a greater number or a vote by classes is required by law or
by the Certificate of Incorporation.
2.11 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of any such meeting, and in such event only stockholders of
record on the date so fixed are entitled to notice and to vote notwithstanding
any transfer of any shares on the books of the corporation after the record
date.
If the board of directors does not so fix a record date, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held. The record date for any other purpose shall be as provided in
Article VIII of these Bylaws.
-6-
<PAGE>
2.13 PROXIES
Every person entitled to vote for Directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A stockholder may revoke any proxy which is not irrevocable by attending
the meeting and voting in person or by filing an instrument in writing revoking
the proxy or another duly executed proxy bearing a later date with the secretary
of the corporation.
2.14 INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any stockholder or a stockholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (1) or more stockholders
or proxies, then the holders of a majority of the voting power of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, then the chairman of the meeting may, and
upon the request of any stockholder or a stockholder's proxy shall, appoint a
person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
-7-
<PAGE>
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and to
any limitations in the Certificate of Incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER AND TERM OF OFFICE
The authorized number of directors shall be one (1). An indefinite number
of directors may be fixed, or the definite number of directors may be changed,
by a duly adopted amendment to the Certificate of Incorporation or by an
amendment to this bylaw adopted by the vote or written consent of holders of a
majority of the voting power of the outstanding shares entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires. If for any
cause, the directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
3.3 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman
of the board, the chief executive officer, the president, the secretary or the
board of directors, unless the notice specifies a later time for that
resignation to become effective. If the resignation of a director is effective
at a future time, the board of directors may elect a successor to take office
when the resignation becomes effective.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(i) Vacancies in the board of directors may be filled by a majority
of the remaining directors, even if less than a quorum, or by a sole remaining
director. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified.
-8-
<PAGE>
(ii) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(iii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
Certificate of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
3.4 REMOVAL
Subject to any limitations imposed by law, and unless otherwise provided in
the Certificate of Incorporation, the board of directors, or any individual
director, may be removed from office at any time by the affirmative vote of the
holders of at least a majority of the voting power of the then outstanding
shares of the capital stock of the corporation entitled to vote at an election
of directors.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board of directors. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the
corporation. Special meetings of the board of directors may be held at any
place within or outside the State of Delaware that has been designated in the
notice of the meeting or, if not stated in the notice or if there is no notice,
at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
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3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the chief executive officer,
the president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least seven (7) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
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3.9 QUORUM
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.12
of these Bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
Certificate of Incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.11 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.12 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given if announced unless the meeting is adjourned for more than twenty-four
(24) hours. If the meeting is adjourned for more than twenty-four (24) hours,
then notice of the time and place of the adjourned meeting shall be given before
the adjourned meeting takes place, in the manner specified in Section 3.8 of
these Bylaws, to the directors who were not present at the time of the
adjournment.
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board of directors
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
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3.14 ORGANIZATION
Meetings of the board of directors shall be presided over by the chairman
of the board, if any, or in his absence by the vice chairman of the board, if
any, or in his absence by the chief executive officer, or in his absence, the
president, or in their absence by a chairman chosen at the meeting. The
secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IV
COMMITTEES
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4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board of
directors. The board of directors may designate one (1) or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. The appointment of members or alternate members of a
committee requires the vote of a majority of the authorized number of directors.
Any committee, to the extent provided in the resolution of the board, shall have
all the authority of the board, but no such committee shall have the power or
authority to (i) amend the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the board
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of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation), (ii) adopt an agreement of merger or
consolidation under Sections 251, 252, 255, 256, 257, 258, 263 or 264 of the
General Corporation Law of Delaware, (iii) recommend to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, (iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (v) amend the Bylaws of the
corporation; and, unless the board resolution establishing the committee, the
Bylaws or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these Bylaws, Section 3.5
(place of meetings), Section 3.7 (regular meetings), Section 3.8 (special
meetings and notice), Section 3.9 (quorum), Section 3.10 (waiver of notice),
Section 3.11 (adjournment), Section 3.12 (notice of adjournment), and Section
3.13 (action without meeting), with such changes in the context of those Bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws.
ARTICLE V
OFFICERS
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5.1 OFFICERS
The officers of the corporation shall be a chairman of the board, a chief
executive officer, a president, a secretary and a chief financial officer. The
corporation may also have, at the discretion of the board of directors, one or
more vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 5.3 of these Bylaws. Any number of offices may be held by
the same person.
5.2 ELECTION OF OFFICERS
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The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these Bylaws,
shall be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the chief executive
officer to appoint, such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these Bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall serve as
the corporation's general manager, and shall have general supervision, direction
and control of the corporation's business and its officers, and, if present,
preside at meetings of the stockholders and the board of directors and exercise
and perform such other powers and duties as may from time to time be assigned to
him by the board of directors or as may be prescribed by these Bylaws. If there
is no chief executive officer, then the chairman of the board shall also be the
chief executive officer of the corporation and shall have the powers and duties
prescribed in Section 5.7 of these Bylaws. The chairman of the board shall
report to the board of directors.
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5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the chief
executive officer of the corporation shall, subject to the control of the board
of directors, have general supervision, direction, and control of the business
and the officers of the corporation. The chief executive officer shall preside
at all meetings of the stockholders and, in the absence or nonexistence of a
chairman of the board, at all meetings of the board of directors. The chief
executive officer shall have the general powers and duties of management usually
vested in the chief executive officer of a corporation, and shall have such
other powers and duties as may be prescribed by the board of directors or these
Bylaws.
5.8 PRESIDENT
The president may assume and perform the duties of the chief executive
officer in the absence or disability of the chief executive officer or chairman
of the board or whenever the office of the chief executive officer or chairman
of the board is vacant. The president of the corporation shall exercise and
perform such powers and duties as may from time to time be assigned to the
president by the board of directors or as may be prescribed by these Bylaws.
The president shall have authority to execute in the name of the corporation
bonds, contracts, deeds, leases and other written instruments to be executed by
the corporation. In the absence or nonexistence of the chairman of the board or
chief executive officer, the president shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board or
the chief executive officer, at all meetings of the board of directors and shall
perform such other duties as the board of directors may from time to time
determine.
5.9 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these Bylaws, the
chairman of the board or the chief executive officer.
5.10 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board
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of directors, a share register, or a duplicate share register, showing the names
of all stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these Bylaws.
5.11 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He or she shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
chief executive officer and directors, whenever they request it, an account of
all of his or her transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these Bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
------------------------------------------------------------------
6.1 ACTIONS BY OTHERS
The Corporation (1) 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
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director or an officer of the Corporation and (2)
except as otherwise required by Section 6.4 of this Article VI, may 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 (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was an employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee, agent of or participant in another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action,
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suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
- ---------------
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The Corporation 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 or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director or officer of the
Corporation, and the Corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he or she is or was an employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the Corporation unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that a person who is or was a director, officer, employee or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Section 6.1 or Section
6.2 of this Article, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
6.4 RIGHT TO INDEMNIFICATION
The right to indemnification conferred in this Article VI shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition, such expenses to be paid by the Corporation within 20 days after
the receipt by the Corporation of a statement or statements from the claimant
requesting such payment or payments of expenses from time to time; provided,
--------
however, that if the General Corporation Law of the
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State of Delaware requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Article VI or otherwise.
6.5 SPECIFIC AUTHORIZATION
To obtain indemnification under this Article VI, a claimant shall submit to
the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Any indemnification under Section 6.1 or Section
6.2 of this Article VI (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections 6.1 and 6.2. Such determination shall be made by (a) the
stockholders, (b) the Board of Directors by a majority vote of a quorum
consisting of Disinterested Directors, or (c) (1) even if such quorum is not
obtainable, if a quorum of Disinterested Directors so directs or (2) if a Change
of Control shall have occurred, by an Independent Counsel in a written opinion,
which Independent Counsel shall be selected by a majority vote of a quorum of
Disinterested Directors or, if a Change of Control shall have occurred, by the
claimant. If it is so determined that the claimant is entitled to
indemnification, payment to the claimant shall be made within 10 days after such
determination.
6.6 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
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6.7 NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Bylaw shall not be exclusive of
any other right which such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding office.
The corporation is specifically authorized to enter into individual contracts
with any or all of its directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
General Corporation Law of Delaware.
6.8 SURVIVAL OF RIGHTS
The rights conferred on any person by this Bylaw shall continue as to a
person who has ceased to be a director, officer, employee or other agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
6.9 CORPORATION BOUND
If a determination shall have been made pursuant to Section 6.5 of this
Article VI that the claimant is entitled to indemnification, the corporation
shall be bound by such determination.
6.10 PRECLUSION
The corporation shall be precluded from asserting that the procedures and
presumptions of this Article VI are not valid, binding and enforceable and shall
stipulate in any judicial proceeding that the corporation is bound by all the
provisions of Article VI.
6.11 INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE
The invalidity or unenforceability of any provision of this Article VI
shall not affect the validity or enforceability of the remaining provisions of
this Article VI, and, to the fullest extent possible, such provisions of this
Article VI (including, without limitation, each such portion of any Section of
this Article VI containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
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6.12 AMENDMENTS
Any repeal or modification of this Bylaw shall only be prospective and
shall not affect the rights under this Bylaw in effect at the time of the
alleged occurrence of any action or omission to act that is the cause of any
proceeding against any agent of the corporation.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit
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the director to inspect any and all books and records, the stock ledger, and the
stock list and to make copies or extracts therefrom. The Court may, in its
discretion, prescribe any limitations or conditions with reference to the
inspection, or award such other and further relief as the Court may deem just
and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, the president, any
vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the board of
directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
ARTICLE VII
GENERAL MATTERS
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8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action (other than action by stockholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
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8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the chief executive officer or the president or
vice-president, and by the chief financial officer, the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
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8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board of directors may require;
the board of directors may require indemnification of the corporation secured by
a bond or other adequate security sufficient to protect the corporation against
any claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate.
8.7 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE IX
AMENDMENTS
----------
Subject to Section 6.9 hereof, the Bylaws of the corporation may be
adopted, amended or repealed and new Bylaws adopted by the affirmative vote of
stockholders holding a majority of the voting power of stock entitled to vote or
by the board of directors.
ARTICLE X
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DISSOLUTION
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If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the voting power of the outstanding stock of the
corporation entitled to vote thereon votes for the proposed dissolution, then a
certificate stating that the dissolution has been authorized in accordance with
the provisions of Section 275 of the General Corporation Law of Delaware and
setting forth the names and residences of the directors and officers shall be
executed, acknowledged, and filed and shall become effective in accordance with
Section 103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
Whenever stockholders holding a majority of the voting power of stock
entitled to vote on a dissolution consent in writing, either in person or by
duly authorized attorney, to a dissolution, no meeting of directors or
stockholders shall be necessary. The consent shall be filed and shall become
effective in accordance with Section 103 of the General Corporation Law of
Delaware. Upon such consent's becoming effective in accordance with Section 103
of the General Corporation Law of Delaware, the corporation shall be dissolved.
If the consent is signed by an attorney, then the original power of attorney or
a photocopy thereof shall be attached to and filed with the consent. The
consent filed with the Secretary of State shall have attached to it the
affidavit of the secretary or some other officer of the corporation stating that
the consent has been signed by or on behalf of all the stockholders entitled to
vote on a dissolution; in addition, there shall be attached to the consent a
certification by the secretary or some other officer of the corporation setting
forth the names and residences of the directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
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(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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Exhibit 4.1
NEWCO CORPORATION
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of [_____] 1997, by
and between Newco Group, Inc., a Delaware corporation (the "COMPANY"), and
Warburg, Pincus Investors, L.P. ("Warburg"), Robert W. Felton ("Felton"),
Richard W. MacAlmon ("MacAlmon"), John W. Blend, III ("Blend") and John R.
Oltman ("Oltman") (Warburg, Felton, MacAlmon, Blend and Oltman together, the
"STOCKHOLDERS").
RECITALS
WHEREAS, the Stockholders acquired shares of Common Stock of the Company
pursuant to an Agreement and Plan of Merger and Reorganization by and among the
Company, The Indus Group, Inc., a California corporation ("INDUS") and TSW
International, Inc., a Georgia corporation ("TSW") dated June 5, 1997 (the
"MERGER AGREEMENT") in connection with the merger of the Company's two
subsidiaries with and into INDUS and TSW, respectively (collectively, the
"MERGERS"). Pursuant to Section 5.16 of the Merger Agreement, the Company agreed
to provide the Stockholders certain registration rights as provided herein; and
WHEREAS, as an inducement for TSW to enter into the Merger Agreement, the
Company desires to grant the registration rights to the Stockholders as
contained herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Company and each of the Stockholders agree as
follows:
SECTION 1
REGISTRATION RIGHTS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(b) "EXPIRATION DATE" shall mean the date the Company has published
(in accordance with applicable pooling of interest accounting rules) the
combined financial results of the Company, INDUS and TSW for a period of at
least thirty (30) days of combined operations of the Company, INDUS and TSW.
<PAGE>
(c) "HOLDER" shall mean any holder of outstanding Registerable
Securities which have not been sold to the public or anyone who holds
outstanding Registerable Securities to whom the registration rights conferred by
this Agreement have been transferred in compliance with Section 1.11 hereof.
(d) "INITIATING HOLDERS" shall mean Warburg or Felton, or their
respective transferees pursuant to Section 1.11 hereof, so long as any such
person is a Holder of Registerable Securities.
(e) "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registerable Securities.
(f) "REGISTERABLE SECURITIES" shall mean all of the following to the
extent the same have not been sold to the public (i) any and all shares of
Common Stock of the Company issued to the Stockholders pursuant to the Merger
Agreement or upon the exercise of warrants to purchase Common Stock of the
Company granted to the holder thereof in the Mergers in respect of warrants to
purchase shares of capital stock of TSW held by the holder thereof prior to the
Mergers, (ii) stock issued in respect of stock referred to in (i) above in any
reorganization, or (iii) stock issued in respect of the stock referred to in (i)
and (ii) as a result of a stock split, stock dividend, recapitalization or
combination.
(g) "REGISTRATION EXPENSES" shall mean all expenses incurred in
connection with a registration hereunder, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
(h) "SEC" shall mean the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
(i) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(j) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registerable Securities and all
fees and disbursements of counsel for the Holders.
1.2 RESTRICTIVE LEGEND.
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(a) Each certificate representing Registerable Securities held by any
Holder who is a party to an TSW Affiliate Agreement (as defined in Section 4.5
of the Merger Agreement) or an INDUS Affiliate Agreement (as defined in Section
5.5 of the Merger Agreement) shall be stamped or otherwise imprinted with a
legend as provided in the TSW Affiliate Agreement.
(b) The Company agrees to remove promptly stop transfer instructions
and the legend provided in Section 1.2(a) above when (i) such proposed sale,
transfer or other distribution is permitted pursuant to Rule 145(d) under the
Securities Act; (ii) counsel representing the Holder, which counsel is
reasonably satisfactory to the Company, shall have advised the Company in a
written opinion letter satisfactory to the Company and Company's legal counsel,
and upon which the Company and its legal counsel may rely, that no registration
under the Securities Act would be required in connection with the proposed sale,
transfer or other disposition; (iii) a registration statement under the
Securities Act covering the Registerable Securities proposed to be sold,
transferred or otherwise disposed of, describing the manner and terms of the
proposed sale, transfer or other dispositions, and containing a current
prospectus, shall have been filed with the SEC and made effective under the
Securities Act; (iv) an authorized representative of the SEC shall have rendered
written advice to Holder (sought by Holder or counsel to Holder, with a copy
thereof and all other related communications delivered to the Company) to the
effect that the SEC would take no action, or that the staff of the SEC would not
recommend that the SEC take any action, with respect to the proposed disposition
if consummated; or (v) when the Holder of Registerable Securities is no longer
subject to the restrictions in Rule 145 under Rule 145(d)(2) or (3).
(c) Each Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Registerable
Securities in order to implement the restrictions on transfer established in
this Agreement.
1.3 REQUESTED REGISTRATION.
(a) At any time after the Expiration Date, in case the Company shall
receive a written request from an Initiating Holder or Initiating Holders that
the Company effect a registration with respect to Registerable Securities, the
Company shall:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable use its best efforts to register
(including, without limitation, the execution of an undertaking to file post-
effective amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with federal government
requirements) the sale and distribution of the Registerable Securities as
specified in such request, together with all or such portion of the Registerable
Securities of any other Holder or Holders as are specified in a written request
given within ten (10) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to file a
registration statement pursuant to this Section:
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(A) within two hundred seventy (270) days after the
effectiveness of the registration statement relating to a registration effected
pursuant to this Section 1.3(a) or Section 1.4(a);
(B) in any particular state in which the Company would be
required to execute a general consent to service of process in effecting such
registration;
(C) in any registration having an aggregate sales price
(before deduction of underwriting discounts and commissions) of less than
$5,000,000; or
(D) after the Company has effected four such registrations
pursuant to this Section 1.3(a) and such registrations have been declared or
ordered effective; provided, however, that any registration request which is
subsequently withdrawn shall not be deemed to be a registration under this
subsection (D) if the Holders requesting such registration shall have reimbursed
the Company for all Registration Expenses related to such withdrawn registration
and provided further, that Initiating Holder shall be entitled to request no
more than two registrations pursuant to this Section 1.3(a). Notwithstanding the
foregoing, if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and such registration shall
not be counted as a registration pursuant to this Section 1.3(a)(ii)(D).
Subject to the foregoing clauses (A) through (D), the Company shall file a
registration statement covering the Registerable Securities so requested to be
registered as soon as is practicable after receipt of the request or requests of
the Holders; provided, however, that (i) if the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be detrimental to the
Company and its shareholders for such registration statement to be filed within
such period, then the Company may defer the filing of such registration
statement for a period of not more than sixty (60) days, provided that the
Company may not exercise such sixty (60) day hold off more than once during any
two hundred seventy (270) day period, or (ii) if at the time of such request the
Company determines it desires to register shares for the account of the Company,
then the Company can so notify the Holders who shall then have rights to
participate in such registration statement as provided in Section 1.4.
(b) If the Holders intend to distribute the Registerable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 1.3. In such event,
the Company shall include such information in the written notice referred to in
Section 1.3(a)(i), and the Holders shall select an underwriter or underwriters
reasonably acceptable to the Company. The right of any Holder to registration
pursuant to Section 1.3 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registerable Securities
in the underwriting to the extent provided herein. The Company shall (together
with all Holders distributing their Registerable Securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or under writers selected for such underwriting. Notwithstanding
any other provision of this Section 1.3, if the
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managing underwriter advises the participating Holders in writing that marketing
factors, so as to not materially adversely impact the market price of the
Company's Common Stock, require a limitation of the number of shares to be
underwritten (an "UNDERWRITER'S CUTBACK"), the Company shall so advise all
participating Holders, and the number of shares of Registerable Securities that
may be included in the registration and underwriting shall be allocated among
all participating Holders thereof in proportion, as nearly as practicable, to
the respective amounts of Registerable Securities held by such Holders. If any
Holder disapproves of the terms of the underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. If, by
the withdrawal of such Registerable Securities a greater number of Registerable
Securities held by other Holders may be included in such registration (up to the
limit imposed by the underwriters) the Company shall offer to all Holders who
have included Registerable Securities in the registration the right to include
additional Registerable Securities in the same proportion used in determining
the limitation as set forth above. Any Registerable Securities which are
excluded from the underwriting by reason of the underwriter's marketing
limitation or withdrawn from such underwriting shall be withdrawn from such
registration.
1.4 PIGGYBACK REGISTRATION.
(a) If at any time or from time to time, the Company shall determine
to register any of its securities, for its own account or the account of any of
its shareholders, other than a registration relating solely to employee benefit
plans, a registration statement related to the offering of debt securities of
the Company, a registration relating solely to a Securities Act Rule 145 trans
action, a registration relating to any acquisition by the Company or a
registration on any form (other than Form S-1, S-2 or S-3, or their successor
forms) which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
Registerable Securities, the Company will:
(i) give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement; and
(ii) include in such registration and in any underwriting
involved therein, all the Registerable Securities specified in a written request
or requests, made within ten (10) days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth in Subsection (b)
below.
(b) If the registration 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 Subsection 1.4(a)(i). In such event the right
of any Holder to registration pursuant to Section 1.4 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registerable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. Notwithstanding any other provision of this
Section 1.4, if the managing underwriter determines that marketing factors so as
to not materially adversely impact the market price of the Company's Common
Stock require a limitation of the number of shares to be
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<PAGE>
underwritten, the managing underwriter may limit the number of Registerable
Securities to be included in the registration and underwriting on behalf of the
Holders on a pro rata basis to not less than thirty-five percent (35%) of total
number of shares to be included in the registration. In such event, the Company
shall so advise all Holders of Registerable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of shares of
Registerable Securities that may be included in the registration and
underwriting shall be allocated among the Holders in proportion, as nearly as
practicable, to the respective amounts of Registerable Securities held by each
of the Holders seeking to register shares under this Section 1.4. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. If, by
the withdrawal of such Registerable Securities a greater number of Registerable
Securities held by other Holders may be included in such registration (up to the
limit imposed by the underwriters), the Company shall offer to all Holders who
have included Registerable Securities in the registration the right to include
additional Registerable Securities in the same proportion used in determining
the limitation as set forth above. Any Registerable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
1.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 or 1.4 shall be borne by the Company, and all Selling Expenses shall
be borne by the Holders of the securities so registered pro rata on the basis of
the number of their shares so registered; provided, however, that the Company
shall not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by any of the Holders, as applicable,
the registration statement does not become effective, in which case each of the
Holders withdrawing from the requested registration shall bear such Registration
Expenses pro rata; and, provided, further, that such registration shall not be
counted as a registration pursuant to Section 1.3(a)(ii)(D). Notwithstanding
the foregoing, if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and such registration shall
not be counted as a registration pursuant to Section 1.3(a)(ii)(D).
1.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registerable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registerable Securities and use its reasonable best efforts to
cause such registration statement to become effective, and keep such
registration statement effective until the distribution is completed, but not
longer than ninety (90) days after the effective date thereof (excluding any
days in which the Company requires the Holders to cease sales of shares as
provided below); provided, however, that (A) the Company may by written notice
require that the Holders immediately cease sales of shares (for a period not to
exceed sixty (60) days) pursuant to such registration statement at any time that
(i) the Company becomes engaged in business activity or negotiation which is not
disclosed in the registration statement (or the prospectus included therein)
which the Company reasonably believes
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must be disclosed therein under applicable law and which the Company desires to
keep confidential for business purposes, (ii) the Company determines that a
particular disclosure so determined to be required to be disclosed therein would
be premature or would adversely affect the Company or its business or prospects,
or (iii) the registration statement can no longer be used under the existing
rules and regulations promulgated under the Securities Act, and (B) if such
registration statement is not kept effective for such period, such registration
shall not be counted as a registration pursuant to Section 1.3(a)(ii)(D). The
Company shall not be required to disclose to the Holders which of the reasons
specified in clauses (i), (ii) or (iii) above are the basis for requiring a
suspension of sales hereunder.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registerable Securities owned by them that
are included in such registration.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) Enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
(f) Notify each Holder of Registerable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish to the underwriters for sale of Registerable Securities on
the date that such Registerable Securities are delivered to the underwriters (i)
an opinion, dated as of such date, of the counsel representing the Company for
the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering addressed to the
underwriters, and (ii) a "comfort" letter dated as of such date, from the
independent certified public accountants of
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the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering
addressed to the underwriters.
1.7 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 1.3 or 1.4
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registerable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of Registerable Securities.
1.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
1.9 INDEMNIFICATION. In the event any Registerable Securities are
included in a registration statement under Sections 1.3 or 1.4:
(a) By the Company. To the extent permitted by law, the Company will
--------------
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act against any losses, claims,
damages or liabilities (joint or several) to which they may become subject under
the Securities Act, the Exchange Act or other federal or state securities law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto;
(ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances in which made, not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
federal or state securities law in connection with the offering covered by such
registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the
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<PAGE>
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder, partner,
officer, director, underwriter or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each selling
------------------
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter (as defined in the Securities Act) and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such underwriter or
other Holder within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, partner or director, officer or controlling person of such
underwriter or other Holder may become subject under the Securities Act, the
Exchange Act or other federal or state securities law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, partner, officer, director or
controlling person of such other Holder or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
1.9(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the written
consent of the Holder, which consent shall not be unreasonably withheld; and,
provided, further, that the total amounts payable in indemnity by a Holder under
this subsection 1.9(b) in respect of any Violation shall not exceed the proceeds
(net of underwriting discounts and commissions) received by such Holder in the
registered offering out of which such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party under
------
Section 1.9 of notice of the commencement of any action (including, without
limitation, any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under Section 1.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding; and, provided, further,
that the indemnifying party shall not be required to pay for more than one
separate counsel for all indemnified parties. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its
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<PAGE>
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under Section 1.9, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under Section
1.9.
(d) Contribution. In order to provide for just and equitable
------------
contribution to joint liability under the Securities Act, the Exchange Act or
any federal or state securities laws in any case in which either (i) any Holder
exercising rights under this Agreement, or any controlling person of any such
Holder, makes a claim for indemnification pursuant to Section 1.9 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 1.9 provides for indemnification in such
case, or (ii) contribution under the Securities Act, the Exchange Act or any
federal or state securities laws may be required on the part of any such selling
Holder or any such controlling person in circumstances for which indemnification
is provided under Section 1.9, then, and in each such case, the Company and such
Holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
as is appropriate to reflect the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party or parties on the one hand or the indemnified party on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission; provided,
however, that, in any such case, (A) no such Holder will be required to
contribute any amount in excess of the proceeds (net of underwriting discounts
and commissions) received by such Holder from all such Registerable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and Holders under
--------
Section 1.9 shall survive the completion of any offering of Registerable
Securities in a registration statement.
1.10 "MARKET STAND-OFF" AGREEMENT. Each Holder who sells Registerable
Securities pursuant to a registration under Section 1.3 or 1.4 hereof hereby
agrees that it shall not, to the extent requested by the Company or the managing
underwriter, sell or otherwise transfer or dispose of any Registerable
Securities or other shares of stock of the Company then owned by such Holder
(other than to donees, affiliates or partners of the Holder who agree to be
similarly bound) for the period from the filing of the registration statement
until up to sixty (60) days following the date of the final prospectus in
connection with the registration statement. In order to enforce the foregoing
covenant, the Company shall have the right to place restrictive legends on the
certificates representing the shares subject to this Section 1.10 and to impose
stop transfer instructions with respect to the Registerable
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<PAGE>
Securities of such Holders until the end of such period. The provisions of this
Section 1.10 shall be binding upon any transferee of any Registerable
Securities.
1.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted Holders under Sections 1.3 and 1.4 may be assigned
to any constituent partner of a Holder, where such Holder is a partnership, or
to any parent or subsidiary corporation or any officer, director or principal
shareholder thereof, where such Holder is a corporation, provided that (i) such
transfer may otherwise be effected in accordance with the applicable securities
laws, and (ii) the Company is given written notice of such assignment prior to
such assignment.
1.12 TERMINATION OF RIGHTS. The rights granted pursuant to this Agreement
(a) shall terminate as to any Holder when the aggregate number of Registerable
Securities which such Holder holds (together with other Holders whose sales may
be aggregated) could all be sold in a three (3) month period in a public sale in
compliance with Rule 144 under the Securities Act using the 1% volume limitation
contained in Rule 144(e)(1)(i), and (b) shall not be exercisable by any Holder
if at the time of the request for or notice of registration under Section 1.3
and 1.4 such Holder could sell (together with other Holders whose sales may be
aggregated) in a three (3) month period all Registerable Securities then held by
such Holder in compliance with Rule 144 using the Company's average weekly
trading volume calculation at such time.
1.13 RULE 144 REPORTING. With a view to make available the benefits of
Rule 144 the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its reasonable best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to the Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144,
and provide a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents of the Company as a Holder may reasonably
request in availing itself of Rule 144.
SECTION 2
MISCELLANEOUS
2.1 WAIVERS AND AMENDMENTS. The rights and obligations of the Company and
the rights and obligations of a Holder under this Agreement may be waived
(either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely) or
amended, only with the written consent of such Holder.
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<PAGE>
2.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware, without giving effect to the principles
of conflicts of laws thereof.
2.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
2.4 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
2.5 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first class, postage
prepaid, addressed as follows:
(a) if to a Holder, at such Holder's address set forth in Schedule A
hereto, or at such other address as such Holder shall have furnished to the
Company in writing, with copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Telecopier: (212) 403-2000
and
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Robert W. Grout, Esq.
Telecopier (404) 885-3900
or (b) if to the Company:
Newco Group, Inc.
60 Spear Street
San Francisco, California 94105
Attention: Chief Executive Officer
Telecopier: (415) 904-5050
with a copy to:
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<PAGE>
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Henry P. Massey, Jr., Esq.
Telecopier: (415) 496-4092
2.6 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
2.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
2.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
2.9 PARTNERSHIP. The Company recognizes that Warburg is a limited
partnership and agrees that Warburg's general and limited partners shall in no
event be liable for any obligation or liabilities of Warburg under this
Agreement.
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<PAGE>
The foregoing Registration Rights Agreement is hereby executed as of the
date first above written.
"COMPANY"
NEWCO GROUP, INC.
A DELAWARE CORPORATION
---------------------------------
Signature of Authorized Signatory
---------------------------------
Print Name and Title
"STOCKHOLDERS"
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co.
General Partner
By:
------------------------------
Partner
ROBERT W. FELTON
---------------------------------
Signature
RICHARD W. MACALMON
---------------------------------
Signature
<PAGE>
Exhibit 4.2
INDUS AFFILIATE AGREEMENT
This Affiliate Agreement (this "Affiliate Agreement") is made and entered
into as of June 5, 1997 (the "Effective Date") among THE INDUS GROUP, Inc. a
California corporation ("INDUS"), Newco Group, Inc., a Delaware corporation
("Newco"), TSW International, Inc., a Georgia corporation ("TSW") and __________
("Shareholder").
RECITALS
--------
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Merger and Reorganization dated as of June 5, 1997, as
such may be amended (the "Plan of Reorganization"), entered into by and among
INDUS, Newco and TSW. The Plan of Reorganization provides for the formation of
one California corporation and one Georgia corporation (collectively, the
"Subs"), as wholly-owned subsidiaries of Newco, and the statutory merger of one
Sub with and into INDUS (the "INDUS Merger") and the other Sub with and into TSW
(the "TSW Merger") (collectively, the "Merger"), all pursuant to the terms and
conditions of the Plan of Reorganization and the Agreements of Merger to be
entered into between the one Sub and INDUS and the other Sub and TSW
(collectively, the "Agreements of Merger"). The Plan of Reorganization and the
Agreements of Merger are collectively referred to herein as the "Merger
Agreements." Capitalized terms used herein and not defined herein shall have
the meanings that such terms have in the Plan of Reorganization.
B. The Merger Agreements provide for the conversion of all of the issued
and outstanding stock of INDUS and TSW at the Effective Time of the Merger into
shares of Newco's Common Stock, all as more particularly set forth in the Plan
of Reorganization.
C. As a condition to the willingness of TSW to enter into the Plan of
Reorganization, TSW has required that Shareholder agree, and in order to induce
TSW to enter into the Plan of Reorganization Shareholder has agreed, to enter
into this Affiliate Agreement.
D. Shareholder understands that because (i) the Merger is intended by the
parties to qualify for "pooling-of-interests" accounting treatment and
Shareholder may be deemed to be an "affiliate" of INDUS within the meaning of
the Securities Act of 1933, as amended (the "1933 Act"), and (ii) the Merger
will be treated as a "reorganization" within the meaning of Section 368 of the
Internal Revenue Code, the shares of INDUS Common Stock which Shareholder owns,
any shares of INDUS Common Stock which Shareholder may hereafter acquire, and
any shares of Newco Common Stock (the "Newco Common Stock") acquired by
Shareholder pursuant to the Merger may be disposed of only in conformity with
the limitations described herein.
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<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. INDUS SECURITIES
Attachment 1 hereto sets forth all shares of INDUS capital stock and any
------------
other securities of INDUS owned by Shareholder, including all securities of
INDUS as to which Shareholder has sole or shared voting or investment power, and
all rights, options and warrants to acquire shares of capital stock or other
securities of INDUS granted to or held by Shareholder (such shares of INDUS
capital stock, other securities of INDUS and rights, options and warrants to
acquire shares of INDUS capital stock and other securities of INDUS are
hereinafter collectively referred to as "INDUS Stock"). As used herein, the
term "New INDUS Securities" means, collectively, any and all shares of INDUS
capital stock, other securities of INDUS and rights, options and warrants to
acquire shares of INDUS capital stock and other securities of INDUS that
Shareholder may purchase or otherwise acquire any interest in (whether of record
or beneficially), on and after the Effective Date of this Affiliate Agreement
and prior to the Expiration Date (as defined below). All New INDUS Securities
will be subject to the terms of this Affiliate Agreement to the same extent and
in the same manner as if they were INDUS Stock. The INDUS Stock and the New
INDUS Securities shall be collectively referred to herein as the "INDUS
Securities." As used herein, the term "Expiration Date" means the earliest to
occur of (i) the Effective Time of the Merger, or (ii) such time as the Plan of
Reorganization may be terminated in accordance with its terms.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SHAREHOLDER
2.1 Reliance Upon Representations, Warranties and Covenants. Shareholder
-------------------------------------------------------
understands that the representations, warranties and covenants of Shareholder
set forth herein will be relied upon by INDUS, TSW and Newco and their
respective counsel and accounting firms and by INDUS's shareholders.
2.2 Representations, Warranties and Covenants of Shareholder. Shareholder
--------------------------------------------------------
represents, warrants and covenants as follows:
(i) Authority; Affiliate Status. Shareholder has full power and
---------------------------
authority to enter into, execute, deliver and perform Shareholder's obligations
under this Affiliate Agreement and to make the representations, warranties and
covenants herein contained. Shareholder further understands and agrees that
Shareholder may be deemed to be an "affiliate" of INDUS within the meaning of
the 1933 Act and, in particular, Rule 145 promulgated under the 1933 Act ("Rule
145").
(ii) INDUS Securities Owned. Except as otherwise disclosed in the
----------------------
INDUS Disclosure Letter, at the date hereof, all the INDUS Stock owned by
Shareholder are, and at all times until and through the Expiration Date all the
INDUS Securities owned by Shareholder will be, free and clear of any rights of
first refusal, co-sale rights, security interests, liens, pledges, claims,
options, charges or other encumbrances.
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<PAGE>
(iii) Transfer Restrictions on INDUS Securities. Shareholder agrees
-----------------------------------------
with INDUS not to sell, transfer, encumber or dispose of, or offer to sell,
transfer, encumber or dispose of any INDUS Securities until the Expiration Date,
and at such time, only as agreed pursuant to the terms hereof.
(iv) Further Assurances. Shareholder agrees to execute and deliver
------------------
any additional documents reasonably necessary or desirable, in the opinion of
INDUS or TSW, to carry out the purposes and intent of this Affiliate Agreement.
(v) Transfer Restrictions on Merger Securities. As used herein, the
------------------------------------------
term "Merger Securities" means, collectively, all shares of Newco Common Stock
that are or may be issued by Newco in connection with the Merger or the
transactions contemplated by the Merger Agreements, or to any former holder of
INDUS options, warrants or rights to acquire shares of INDUS Common Stock, and
any securities that may be paid as a dividend or otherwise distributed thereon
or with respect thereto or issued or delivered in exchange or substitution
therefor or upon conversion thereof. Shareholder agrees not to sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or agreement
relating to, any of the Merger Securities and/or any option, right or other
interest with respect to any Merger Securities that Shareholder may acquire,
unless: (i) such sale, transfer, exchange, pledge or disposition is permitted
pursuant to Rule 145(d)(3) under the Securities Act (as contemplated by Section
3 hereof) and Newco's accountants have advised such Shareholder in writing that
such sale, transfer, exchange, pledge or disposition would not preclude pooling
of interests accounting treatment of the Merger; (ii) Newco's legal counsel or
legal counsel representing Shareholder, which counsel is reasonably satisfactory
to Newco, shall have advised Newco in a written opinion letter reasonably
satisfactory to Newco and Newco's legal counsel, and upon which Newco and its
legal counsel may rely, that no registration under the 1933 Act would be
required in connection with the proposed sale, transfer, exchange, pledge or
other disposition of Merger Securities by Shareholder; or (iii) a registration
statement under the 1933 Act covering the Merger Securities proposed to be sold,
transferred, exchanged, pledged or otherwise disposed of, describing the manner
and terms of the proposed sale, transfer, exchange, pledge or other disposition,
and containing a current prospectus, shall have been filed with the Securities
and Exchange Commission ("SEC") and been declared effective by the SEC under the
1933 Act; or (iii) an authorized representative of the SEC shall have rendered
written advice to Shareholder (sought by Shareholder or counsel to Shareholder,
with a copy thereof and all other related communications delivered to Newco and
its legal counsel) to the effect that the SEC would take no action, or that the
staff of the SEC would not recommend that the SEC take action, with respect to
the proposed disposition of Merger Securities, if consummated. Nothing herein
imposes upon Newco any obligation to register any Merger Securities under the
1933 Act.
(vi) Pooling Lock-Up. Notwithstanding any other provision of this
---------------
Affiliate Agreement to the contrary, from and after the date of this Agreement,
Shareholder will not further sell, transfer, exchange, pledge or otherwise
dispose of, or in any other way reduce Shareholder's risk of ownership or
investment in, or make any offer or agreement relating to any of the foregoing
with respect to any INDUS Securities or any rights, options or warrants to
purchase INDUS Securities or any Merger Securities or other securities of Newco
during the time period (the "Lock-Up Period")
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<PAGE>
beginning thirty (30) days immediately preceding the Effective Time and ending
at such time after the Effective Time as Newco has publicly released the
combined financial results of Newco, INDUS and TSW for a period of at least
thirty (30) days of combined operations of Newco, INDUS and TSW after the
Effective Time of the Merger. Newco agrees to publish such financial results
expeditiously in a manner consistent with INDUS' prior practices.
Notwithstanding the foregoing, Newco agrees that any "affiliates" of INDUS
within the meaning of Rule 145 will be allowed, as a group, to sell up to 1% of
INDUS Stock under the "de minimis" exceptions to the pooling of interest
requirements, with each transaction to be approved in advance by Newco's
auditors.
(vii) Intent. Shareholder does not now have, and as of the Effective
------
Time of the Merger will not have, any present plan or intention to engage in a
further sale, exchange, transfer, distribution, pledge, disposition or any other
transaction which would result in a direct or indirect disposition or an equity
swap or other risk diminishing transaction (a "Sale") of more than fifty
percent (50%) of the Newco Common Stock (or other Merger Securities) that
Shareholder may acquire in connection with the Merger, or any securities that
may be paid as a dividend or otherwise distributed thereon or with respect
thereto or issued or delivered in exchange or substitution therefor or upon
conversion thereof ("Derivative Securities"). Shareholder is not aware of, nor
is Shareholder participating in, any plan on the part of INDUS shareholders to
engage in Sales of Newco Common Stock (or other Merger Securities) to be issued
in the Merger such that the aggregate fair market value, as of the Effective
Time of the Merger, of the shares subject to such Sales would exceed fifty
percent (50%) of the aggregate fair market value of all shares of outstanding
INDUS Securities immediately prior to the Merger. For purposes of this
representation, INDUS Securities (or any portion thereof) (i) with respect to
which a INDUS shareholder receives consideration in the Merger other than Newco
Common Stock (including, without limitation, cash received in lieu of fractional
shares) and/or (ii) with respect to which a Sale occurs during the period
beginning with the commencement of negotiations (whether formal or informal)
between INDUS and TSW regarding the Merger and ending on the Effective Time of
the Merger (the "Pre-Merger Period"), shall be considered shares of outstanding
INDUS Common Stock exchanged for Newco Common Stock received in the Merger and
then disposed of pursuant to any plan on the part of INDUS shareholders.
SECTION 3. RESTRICTIONS ON RESALES
Shareholder understands that, in addition to the restrictions imposed under
Section 2 of this Affiliate Agreement, the provisions of Rule 145 currently
limit Shareholder's public resales of Merger Securities, in the manner set forth
in subsections (i), (ii) and (iii) below, until such time as Shareholder has
beneficially owned, within the meaning of Rule 144(d) under the 1933 Act, the
Merger Securities for a period of at least one (1) year (or in some cases two
(2) years) after the Effective Time of the Merger, and thereafter if and for so
long as Shareholder is an affiliate of Newco:
(i) 145(d)(1). Unless and until the restriction "cut-off" provisions
---------
of Rule 145(d)(2) or Rule 145(d)(3) set forth below become available, public
resales of Merger Securities may be made by Shareholder only in compliance with
the requirements of Rule 145(d)(1). Rule 145(d)(1) permits such resales only:
(i) if Newco meets the public information requirements of Rule 144(c); (ii) in
brokers' transactions or in transactions with a market maker; and (iii) where
the
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<PAGE>
aggregate number of Merger Securities sold at any time together with all
sales of restricted Newco Common Stock sold by or for Shareholder's account
during the preceding three-month period does not exceed the greater of: (A) one
percent (1%) of the shares of Newco Common Stock outstanding as shown by the
most recent report or statement published by Newco; or (B) the average weekly
volume of trading in Newco Common Stock on all national securities exchanges, or
reported through the automated quotation system of a registered securities
association, during the four calendar weeks preceding the date of receipt of the
order to execute the sale.
(ii) 145(d)(2). Shareholder may make unrestricted resales of
---------
Merger Securities pursuant to Rule 145(d)(2) if: (i) Shareholder has
beneficially owned (within the meaning of Rule 144(d) under the 1933 Act) the
Merger Securities for at least one (1) year after the Effective Time of the
Merger; (ii) Shareholder is not an affiliate of Newco; and (iii) Newco meets the
public information requirements of Rule 144(c).
(iii) 145(d)(3). Shareholder may make unrestricted resales of
---------
Merger Securities pursuant to Rule 145(d)(3) if Shareholder has beneficially
owned (within the meaning of Rule 144(d) under the 1933 Act) the Merger
Securities for at least two (2) years after the Effective Time of the Merger and
is not, and has not been for at least three (3) months, an affiliate of Newco.
INDUS and Newco each acknowledges that the provisions of Section 2.2(v) of
this Affiliate Agreement will be satisfied as to any sale by the undersigned of
the Merger Securities pursuant to Rule 145(d), by a broker's letter and a letter
from Shareholder with respect to that sale stating either that (i) each of the
above-described requirements of Rule 145(d)(1) has been met or (ii) are
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3) and each of the
above-described requirements of Rule 145(d)(2) or (d)(3) (as applicable) have
been met; provided that in each case Newco has no reasonable basis to believe
such sales were not made in compliance with such provisions of Rule 145(d).
SECTION 4. LEGENDS
Shareholder also understands and agrees that stop transfer instructions
will be given to Newco's transfer agent with respect to certificates evidencing
the Merger Securities to enforce (i) Shareholder's compliance with Shareholder's
representations in Subsections 2.2 (vi), (ii) Shareholders' agreements in
Section 3, and (iii) Shareholder's compliance with applicable securities laws
regarding the Merger Securities, and that there will be placed on the
certificates evidencing such Merger Securities such legends as Newco or its
counsel may reasonably require, including without limitation, a legend providing
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
ANY APPLICABLE STATE SECURITIES LAWS, AND THE OTHER CONDITIONS SPECIFIED IN
THAT CERTAIN AFFILIATE AGREEMENT DATED AS OF JUNE 5, 1997 AMONG THE INDUS
GROUP, INC., NEWCO GROUP, INC., TSW INTERNATIONAL,
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<PAGE>
INC. AND THE HOLDER OF SUCH SHARES, A COPY OF WHICH MAY BE INSPECTED BY THE
HOLDER OF THIS CERTIFICATE AT THE OFFICES OF NEWCO. NEWCO WILL FURNISH,
WITHOUT CHARGE, A COPY THEREOF TO THE HOLDER OF THIS CERTIFICATE, UPON
WRITTEN REQUEST THEREFOR."
SECTION 5. MISCELLANEOUS
5.1 Notices. Any notice or other communication required or permitted to
-------
be given under this Affiliate Agreement will be in writing, will be delivered
personally, by telecopier (with a hard copy also mailed), or by registered or
certified mail, postage prepaid and will be deemed given upon delivery, if
delivered personally, one business day after transmission by telecopier with
confirmation of receipt, or three (3) days after deposit in the mails, if
mailed, to the following addresses:
(i) If to INDUS or to Newco:
THE INDUS GROUP, Inc.
60 Spear Street
San Francisco, CA 94105
Attn: Chief Financial Officer
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: Henry P. Massey, Jr.
(ii) If to TSW:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, GA 30339
Attention: Chief Financial Officer
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 51st Street
New York, NY 10019
Attn: Andrew Brownstein
(iii) If to Shareholder:
To the address for notice for such Shareholder set forth on
Attachment I hereto or to such other address as a party may have
furnished to the other parties in writing pursuant to this
Section 5.1.
-6-
<PAGE>
5.2 Termination. This Affiliate Agreement shall be terminated and shall
-----------
be of no further force and effect upon the termination of the Plan of
Reorganization pursuant to its terms.
5.3 Counterparts. This Affiliate Agreement may be executed in any number
------------
of counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
5.4 Assignment; Binding Upon Successors and Assigns. Neither party hereto
-----------------------------------------------
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Affiliate Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
5.5 Waiver and Amendment. The waiver by a party of any breach hereof or
--------------------
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default. This Affiliate Agreement
may be amended by the parties hereto upon the execution and delivery of a
written agreement executed by the parties hereto at any time before or after
approval of the Merger by the INDUS shareholders, but, after such approval, no
amendment will be made which by applicable law requires the further approval of
the INDUS shareholders without obtaining such further approval.
5.6 Governing Law. The internal laws of the State of Delaware
-------------
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
5.7 Severability. If any term, provision, covenant or restriction of this
------------
Affiliate Agreement (or of the Plan of Reorganization) is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Affiliate Agreement
(or of the Plan of Reorganization, as the case may be) will remain in full force
and effect and will in no way be effected, impaired or invalidated. The parties
further agree to replace such invalid or unenforceable term with a valid and
enforceable provision that will achieve, to the greatest extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.
5.8 Construction of Agreement. This Affiliate Agreement has been
-------------------------
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section will mean a Section in this Affiliate Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Affiliate
Agreement which will be considered as a whole.
5.9 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Affiliate Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation,
-7-
<PAGE>
costs, expenses and fees on any appeal). The prevailing party will be entitled
to recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
5.10 Partnership. Newco, INDUS and TSW agree that if Shareholder is a
-----------
limited partnership, Shareholder's general and limited partners shall in no
event be liable for any obligations or liabilities of Shareholder under this
Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Affiliate
Agreement as of the date first set forth above.
THE INDUS GROUP, INC. TSW INTERNATIONAL, INC.
a California corporation a Georgia corporation
By: By:
----------------------- -------------------------
Name: Name:
--------------------- ------------------------
Title: Title:
-------------------- ----------------------
NEWCO GROUP, INC. SHAREHOLDER:
a Delaware corporation
By:
----------------------- ----------------------------
Name: Name:
--------------------- -----------------------
Title:
--------------------
[SIGNATURE PAGE TO INDUS AFFILIATE AGREEMENT]
-9-
<PAGE>
ATTACHMENT 1
INDUS STOCK
Shareholder's Address for Notice:
----------------------
----------------------
----------------------
Number of shares of INDUS capital stock
beneficially owned by the undersigned:
----------------------
Number of options, warrants or other
convertible securities convertible into
INDUS capital stock beneficially owned by
the undersigned:
----------------------
[SIGNATURE PAGE TO INDUS AFFILIATE AGREEMENT]
-10-
<PAGE>
Exhibit 4.3
TSW AFFILIATE AGREEMENT
This Affiliate Agreement (this "Affiliate Agreement") is made and entered
into as of June 5, 1997 (the "Effective Date") among The Indus Group, Inc., a
California corporation ("INDUS"), Newco Group, Inc., a Delaware corporation
("Newco"), TSW International, Inc., a Georgia corporation ("TSW"), and
______________ ("Stockholder").
RECITALS
--------
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Merger and Reorganization dated as of June 5, 1997, as
such may be amended (the "Plan of Reorganization"), entered into by and among
INDUS, Newco and TSW. The Plan of Reorganization provides for the formation of
one California corporation and one Georgia corporation (collectively, the
"Subs"), as wholly-owned subsidiaries of Newco, and the statutory merger of one
Sub with and into INDUS (the "INDUS Merger") and the other Sub with and into TSW
(the "TSW Merger") (collectively, the "Merger"), all pursuant to the terms and
conditions of the Plan of Reorganization and the Agreements of Merger to be
entered into between the one Sub and INDUS and the other Sub and TSW
(collectively, the "Agreements of Merger"). The Plan of Reorganization and the
Agreements of Merger are collectively referred to herein as the "Merger
Agreements." Capitalized terms used herein and not defined herein shall have
the meanings that such terms have in the Plan of Reorganization.
B. The Merger Agreements provide for the conversion of all of the issued
and outstanding stock of INDUS and TSW at the Effective Time of the Merger into
shares of Newco's Common Stock, all as more particularly set forth in the Plan
of Reorganization.
C. As a condition to the willingness of INDUS to enter into the Plan of
Reorganization, INDUS has required that Stockholder agree, and in order to
induce INDUS to enter into the Plan of Reorganization Stockholder has agreed, to
enter into this Affiliate Agreement.
D. Stockholder understands that because (i) the Merger is intended by the
parties to qualify for "pooling-of-interests" accounting treatment and
Stockholder may be deemed to be an "affiliate" of TSW within the meaning of the
Securities Act of 1933, as amended (the "1933 Act"), and (ii) the Merger will be
treated as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code, the shares of TSW Common Stock or TSW Preferred Stock which
Stockholder owns, any shares of TSW Common Stock or TSW Preferred Stock which
Stockholder may hereafter acquire, and any shares of Newco Common Stock (the
"Newco Common Stock") acquired by Stockholder pursuant to the Merger may be
disposed of only in conformity with the limitations described herein.
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. TSW SECURITIES
Attachment 1 hereto sets forth all shares of TSW capital stock and any
------------
other securities of TSW owned by Stockholder, including all securities of TSW as
to which Stockholder has sole or shared voting or investment power, and all
rights, options and warrants to acquire shares of capital stock or other
securities of TSW granted to or held by Stockholder (such shares of TSW capital
stock, other securities of TSW and rights, options and warrants to acquire
shares of TSW capital stock and other securities of TSW are hereinafter
collectively referred to as "TSW Stock"). As used herein, the term "New TSW
Securities" means, collectively, any and all shares of TSW capital stock, other
securities of TSW and rights, options and warrants to acquire shares of TSW
capital stock and other securities of TSW that Stockholder may purchase or
otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Affiliate Agreement and prior to the Expiration
Date (as defined below). All New TSW Securities will be subject to the terms of
this Affiliate Agreement to the same extent and in the same manner as if they
were TSW Stock. The TSW Stock and the New TSW Securities shall be collectively
referred to herein as the "TSW Securities". As used herein, the term
"Expiration Date" means the earliest to occur of (i) the Effective Time of the
Merger, or (ii) such time as the Plan of Reorganization may be terminated in
accordance with its terms.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF STOCKHOLDER
2.1 Reliance Upon Representations, Warranties and Covenants. Stockholder
-------------------------------------------------------
understands that the representations, warranties and covenants of Stockholder
set forth herein will be relied upon by INDUS, TSW and Newco and their
respective counsel and accounting firms and by TSW's stockholders.
2.2 Representations, Warranties and Covenants of Stockholder. Stockholder
--------------------------------------------------------
represents, warrants and covenants as follows:
(i) Authority: Affiliate Status. Stockholder has full power and
---------------------------
authority to enter into, execute, deliver and perform Stockholder's obligations
under this Affiliate Agreement and to make the representations, warranties and
covenants herein contained. Stockholder further understands and agrees that
Stockholder may be deemed to be an "affiliate" of TSW within the meaning of the
1933 Act and, in particular, Rule 145 promulgated under the 1933 Act ("Rule
145").
(ii) TSW Securities Owned. Except as otherwise disclosed in the
--------------------
TSW Disclosure Letter, at the date hereof, all the TSW Stock owned by
Stockholder are, and at all times until and through the Expiration Date all the
TSW Securities owned by Stockholder will be, free and clear of any rights of
first refusal, co-sale rights, security interests, liens, pledges, claims,
options, charges or other encumbrances.
-2-
<PAGE>
(iii) Transfer Restrictions on TSW Securities. Stockholder agrees
---------------------------------------
with INDUS not to sell, transfer, encumber or dispose of, or offer to sell,
transfer, encumber or dispose of any TSW Securities until the Expiration Date,
and at such time, only as agreed pursuant to the terms hereof.
(iv) Waivers. Except as contemplated, created or granted by the
-------
Plan of Reorganization, Stockholder hereby waives, effective as of the Effective
Time, any liquidation, redemption, antidilution, registration rights,
information rights, preemptive rights, priority rights, rights or first refusal,
co-sale or other similar rights under the terms of the Articles of Incorporation
or Bylaws of TSW or any agreement with TSW or its security holders in effect
immediately prior to the Effective Time.
(v) Further Assurances. Stockholder agrees to execute and
------------------
deliver any additional documents reasonably necessary or desirable, in the
opinion of INDUS or TSW, to carry out the purposes and intent of this Affiliate
Agreement.
(vi) Transfer Restrictions on Merger Securities. As used herein,
------------------------------------------
the term "Merger Securities" means, collectively, all shares of Newco Common
Stock that are or may be issued by Newco in connection with the Merger or the
transactions contemplated by the Merger Agreements, or to any former holder of
TSW options, warrants or rights to acquire shares of TSW Common Stock, and any
securities that may be paid as a dividend or otherwise distributed thereon or
with respect thereto or issued or delivered in exchange or substitution therefor
or upon conversion thereof. Stockholder agrees not to sell, transfer, exchange,
pledge, or otherwise dispose of, or make any offer or agreement relating to, any
of the Merger Securities and/or any option, right or other interest with respect
to any Merger Securities that Stockholder may acquire, unless: (i) such sale,
transfer, exchange, pledge or disposition is permitted pursuant to Rule
145(d)(3) under the Securities Act (as contemplated by Section 3 hereof) and
Newco's accountants have advised such Stockholder in writing that such sale,
transfer, exchange, pledge or disposition would not preclude pooling of
interests accounting treatment of the Merger; (ii) Newco's legal counsel or
legal counsel representing Stockholder, which counsel is reasonably satisfactory
to Newco, shall have advised Newco in a written opinion letter reasonably
satisfactory to Newco and Newco's legal counsel, and upon which Newco and its
legal counsel may rely, that no registration under the 1933 Act would be
required in connection with the proposed sale, transfer, exchange, pledge or
other disposition of Merger Securities by Stockholder, or (iii) a registration
statement under the 1933 Act covering the Merger Securities proposed to be sold,
transferred, exchanged, pledged or otherwise disposed of, describing the manner
and terms of the proposed sale, transfer, exchange, pledge or other disposition,
and containing a current prospectus, shall have been filed with the Securities
and Exchange Commission ("SEC") and been declared effective by the SEC under
the 1933 Act; or (iii) an authorized representative of the SEC shall have
rendered written advice to Stockholder (sought by Stockholder or counsel to
Stockholder, with a copy thereof and all other related communications delivered
to Newco and its legal counsel) to the effect that the SEC would take no action,
or that the staff of the SEC would not recommend that the SEC take action, with
respect to the proposed disposition of Merger Securities, if consummated.
Nothing herein imposes upon Newco any obligation to register any Merger
Securities under the 1933 Act.
-3-
<PAGE>
(vii) Pooling Lock-Up. Notwithstanding any other provision of this
---------------
Affiliate Agreement to the contrary, from and after the date of this Agreement,
Stockholder will not further sell, transfer, exchange, pledge or otherwise
dispose of, or in any other way reduce Stockholder's risk of ownership or
investment in, or make any offer or agreement relating to any of the foregoing
with respect to any TSW Securities or any rights, options or warrants to
purchase TSW Securities or any Merger Securities or other securities of Newco
during the time period (the "Lock-Up Period") beginning thirty (30) days
immediately preceding the Effective Time and ending at such time after the
Effective Time as Newco has publicly released the combined financial results of
Newco, INDUS and TSW for a period of at least thirty (30) days of combined
operations of Newco, INDUS and TSW after the Effective Time of the Merger. Newco
agrees to publish such financial results expeditiously in a manner consistent
with INDUS' prior practices. Notwithstanding the foregoing, Newco agrees that
any "affiliates" of TSW within the meaning of Rule 145 will be allowed as a
group to sell up to an aggregate of 1% of TSW Stock under the "de minimis"
exceptions to the pooling of interest requirements, with each transaction to be
approved in advance by Newco's auditors.
(viii) Intent. Stockholder does not now have, and as of the
------
Effective Time of the Merger will not have, any present plan or intention to
engage in a further sale, exchange, transfer, distribution, pledge, disposition
or any other transaction which would result in a direct or indirect disposition
or an equity swap or other risk diminishing transaction (a "Sale") of more than
fifty percent (50%) of the Newco Common Stock (or other Merger Securities) that
Stockholder may acquire in connection with the Merger, or any securities that
may be paid as a dividend or otherwise distributed thereon or with respect
thereto or issued or delivered in exchange or substitution therefor or upon
conversion thereof ("Derivative Securities"). Stockholder is not aware of, nor
is Stockholder participating in, any plan on the part of TSW stockholders to
engage in Sales of Newco Common Stock (or other Merger Securities) to be issued
in the Merger such that the aggregate fair market value, as of the Effective
Time of the Merger of the shares subject to such Sales would exceed fifty
percent (50%) of the aggregate fair market value of all shares of outstanding
TSW Securities immediately prior to the Merger. For purposes of this
representation, TSW Securities (or any portion thereof) (i) with respect to
which a TSW stockholder receives consideration in the Merger other than Newco
Common Stock (including, without limitation, cash received in lieu of fractional
shares) and/or (ii) with respect to which a Sale occurs during the period
beginning with the commencement of negotiations (whether formal or informal)
between INDUS and TSW regarding the Merger and ending on the Effective Time of
the Merger (the "Pre-Merger Period"), shall be considered shares of outstanding
TSW Common Stock exchanged for Newco Common Stock received in the Merger and
then disposed of pursuant to any plan on the part of TSW stockholders.
SECTION 3. RESTRICTIONS ON RESALES
Stockholder understands that, in addition to the restrictions imposed under
Section 2 of this Affiliate Agreement, the provisions of Rule 145 currently
limit Stockholder's public resales of Merger Securities, in the manner set forth
in subsections (i), (ii) and (iii) below, until such time as Stockholder has
beneficially owned, within the meaning of Rule 144(d) under the 1933 Act, the
Merger Securities for a period of at least one (1) year (or in some cases two
(2) years) after the Effective Time of the Merger, and thereafter if and for so
long as Stockholder is an affiliate of Newco:
-4-
<PAGE>
(i) 145(d)(1). Unless and until the restriction "cut-off"
---------
provisions of Rule 145(d)(2) or Rule 145(d)(3) set forth below become available,
public resales of Merger Securities may be made by Stockholder only in
compliance with the requirements of Rule 145(d)(1). Rule 145(d)(1) permits such
resales only: (i) if Newco meets the public information requirements of Rule
144(c); (ii) in brokers' transactions or in transactions with a market maker;
and (iii) where the aggregate number of Merger Securities sold at any time
together with all sales of restricted Newco Common Stock sold by or for
Stockholder's account during the preceding three-month period does not exceed
the greater of: (A) one percent (1%) of the shares of Newco Common Stock
outstanding as shown by the most recent report or statement published by Newco;
or (B) the average weekly volume of trading in Newco Common Stock on all
national securities exchanges, or reported through the automated quotation
system of a registered securities association, during the four calendar weeks
preceding the date of receipt of the order to execute the sale.
(ii) 145(d)(2). Stockholder may make unrestricted resales of
---------
Merger Securities pursuant to Rule 145(d)(2) if: (i) Stockholder has
beneficially owned (within the meaning of Rule 144(d) under the 1933 Act) the
Merger Securities for at least one (1) year after the Effective Time of the
Merger; (ii) Stockholder is not an affiliate of Newco; and (iii) Newco meets the
public information requirements of Rule 144(c).
(iii) 145(d)(3). Stockholder may make unrestricted resales of
---------
Merger Securities pursuant to Rule 145(d)(3) if Stockholder has beneficially
owned (within the meaning of Rule 144(d) under the 1933 Act) the Merger
Securities for at least two (2) years after the Effective Time of the Merger and
is not, and has not been for at least three (3) months, an affiliate of Newco.
INDUS and Newco each acknowledge that the provisions of Section 2.2(vi) of
this Affiliate Agreement will be satisfied as to any sale by the undersigned of
the Merger Securities pursuant to Rule 145(d), by a broker's letter and a letter
from Stockholder with respect to that sale stating either that (i) each of the
above-described requirements of Rule 145(d)(1) has been met or (ii) are
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3) and each of the
above-described requirements of Rule 145(d)(2) or (d)(3) (as applicable) have
been met; provided that in each case Newco has no reasonable basis to believe
such sales were not made in compliance with such provisions of Rule 145(d).
SECTION 4. LEGENDS
Stockholder also understands and agrees that stop transfer instructions
will be given to Newco's transfer agent with respect to certificates evidencing
the Merger Securities to enforce (i) Stockholder's compliance with Stockholder's
representations in Subsection 2.2(vii), (ii) Stockholders' agreements in Section
3, and (iii) Stockholder's compliance with applicable securities laws regarding
the Merger Securities, and that there will be placed on the certificates
evidencing such Merger Securities such legends as Newco or its counsel may
reasonably require, including without limitation, a legend providing
substantially as follows:
-5-
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933. AS
AMENDED, ANY APPLICABLE STATE SECURITIES LAWS, AND THE OTHER CONDITIONS
SPECIFIED IN THAT CERTAIN AFFILIATE AGREEMENT DATED AS OF JUNE 5, 1997
AMONG THE INDUS GROUP, INC., NEWCO GROUP, INC., TSW INTERNATIONAL, INC. AND
THE HOLDER OF SUCH SHARES, A COPY OF WHICH MAY BE INSPECTED BY THE HOLDER
OF THIS CERTIFICATE AT THE OFFICES OF NEWCO. NEWCO WILL FURNISH, WITHOUT
CHARGE, A COPY THEREOF TO THE HOLDER OF THIS CERTIFICATE, UPON WRITTEN
REQUEST THEREFOR."
SECTION 5. MISCELLANEOUS
5.1 Notices. Any notice or other communication required or permitted to
-------
be given under this Affiliate Agreement will be in writing, will be delivered
personally, by telecopier (with a hard copy also mailed), or by registered or
certified mail, postage prepaid and will be deemed given upon delivery, if
delivered personally, one business day after transmission by telecopier with
confirmation of receipt, or three (3) days after deposit in the mails, if
mailed, to the following addresses:
(i) If to INDUS or to Newco:
THE INDUS GROUP, Inc.
60 Spear Street
San Francisco, CA 94105
Attn: Chief Financial Officer
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: Henry P. Massey, Jr.
(ii) If to TSW:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, GA 30339
Attn: Chief Financial Officer
With a copy to:
-6-
<PAGE>
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, NY 10019
Attn: Andrew Brownstein
If to Stockholder:
To the address for notice for such Stockholder set forth on
Attachment I hereto, or to such other address as a party may have furnished
to the other parties in writing pursuant to this Section 5.1.
5.2 Termination. This Affiliate Agreement shall be terminated and shall
-----------
be of no further force and effect upon the termination of the Plan of
Reorganization pursuant to its terms.
5.3 Counterparts. This Affiliate Agreement may be executed in any number
------------
of counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
5.4 Assignment; Binding Upon Successors and Assigns. Neither party hereto
-----------------------------------------------
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Affiliate Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
5.5 Waiver and Amendment. The waiver by a party of any breach hereof or
--------------------
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default. This Affiliate Agreement
may be amended by the parties hereto upon the execution and delivery of a
written agreement executed by the parties hereto at any time before or after
approval of the Merger by the TSW stockholders, but, after such approval, no
amendment will be made which by applicable law requires the further approval of
the TSW stockholders without obtaining such further approval.
5.6 Governing Law. The internal laws of the State of Delaware
-------------
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
5.7 Severability. If any term, provision, covenant or restriction of this
------------
Affiliate Agreement (or of the Plan of Reorganization) is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Affiliate Agreement
(or of the Plan of Reorganization, as the case may be) will remain in full force
and effect and will in no way be effected, impaired or invalidated. The parties
further agree to replace such invalid or unenforceable term with a valid and
enforceable provision that will achieve, to the greatest extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.
-7-
<PAGE>
5.8 Construction of Agreement. This Affiliate Agreement has been
-------------------------
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section will mean a Section in this Affiliate Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Affiliate
Agreement which will be considered as a whole.
5.9 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Affiliate Agreement, the prevailing party will be entitled to
recover as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
5.10 Partnership. Newco, INDUS and TSW agree that if Stockholder is a
-----------
limited partnership, Stockholder's general and limited partners shall in no
event be liable for any obligations or liabilities of Stockholder under this
Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Affiliate
Agreement as of the date first set forth above.
THE INDUS GROUP, INC. TSW INTERNATIONAL, INC.
a California corporation a Georgia corporation
By:______________________________ By:_____________________________
Name:____________________________ Name:___________________________
Title:___________________________ Title:__________________________
NEWCO GROUP, INC. STOCKHOLDER:
a Delaware corporation
By:______________________________ ________________________________
Name:____________________________ Name:___________________________
Title:___________________________
[SIGNATURE PAGE TO TSW AFFILIATE AGREEMENT]
-9-
<PAGE>
ATTACHMENT 1
TSW STOCK
Affiliate's Address for Notice:
Class and Number of shares of TSW capital stock
beneficially owned by the undersigned:
Number of options, warrants or other convertible
securities convertible into TSW capital stock
beneficially owned by the undersigned:
-10-
<PAGE>
Exhibit 4.4
FELTON AFFILIATE AGREEMENT
This Affiliate Agreement (this "Affiliate Agreement") is made and entered
into as of June 5, 1997 (the "Effective Date") among THE INDUS GROUP, Inc. a
California corporation ("INDUS"), Newco Group, Inc., a Delaware corporation
("Newco"), TSW International, Inc., a Georgia corporation ("TSW") and Robert W.
Felton ("Shareholder").
RECITALS
--------
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Merger and Reorganization dated as of June 5, 1997, as
such may be amended (the "Plan of Reorganization"), entered into by and among
INDUS, Newco and TSW. The Plan of Reorganization provides for the formation of
one California corporation and one Georgia corporation (collectively, the
"Subs"), as wholly-owned subsidiaries of Newco, and the statutory merger of one
Sub with and into INDUS (the "INDUS Merger") and the other Sub with and into TSW
(the "TSW Merger") (collectively, the "Merger"), all pursuant to the terms and
conditions of the Plan of Reorganization and the Agreements of Merger to be
entered into between the one Sub and INDUS and the other Sub and TSW
(collectively, the "Agreements of Merger"). The Plan of Reorganization and the
Agreements of Merger are collectively referred to herein as the "Merger
Agreements." Capitalized terms used herein and not defined herein shall have
the meanings that such terms have in the Plan of Reorganization.
B. The Merger Agreements provide for the conversion of all of the issued
and outstanding stock of INDUS and TSW at the Effective Time of the Merger into
shares of Newco's Common Stock, all as more particularly set forth in the Plan
of Reorganization.
C. As a condition to the willingness of TSW to enter into the Plan of
Reorganization, TSW has required that Shareholder agree, and in order to induce
TSW to enter into the Plan of Reorganization Shareholder has agreed, to enter
into this Affiliate Agreement.
D. Shareholder understands that because (i) the Merger is intended by the
parties to qualify for "pooling-of-interests" accounting treatment and
Shareholder may be deemed to be an "affiliate" of INDUS within the meaning of
the Securities Act of 1933, as amended (the "1933 Act"), and (ii) the Merger
will be treated as a "reorganization" within the meaning of Section 368 of the
Internal Revenue Code, the shares of INDUS Common Stock which Shareholder owns,
any shares of INDUS Common Stock which Shareholder may hereafter acquire, and
any shares of Newco Common Stock (the "Newco Common Stock") acquired by
Shareholder pursuant to the Merger may be disposed of only in conformity with
the limitations described herein.
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. INDUS SECURITIES
Attachment 1 hereto sets forth all shares of INDUS capital stock and any
------------
other securities of INDUS owned by Shareholder, including all securities of
INDUS as to which Shareholder has sole or shared voting or investment power, and
all rights, options and warrants to acquire shares of capital stock or other
securities of INDUS granted to or held by Shareholder (such shares of INDUS
capital stock, other securities of INDUS and rights, options and warrants to
acquire shares of INDUS capital stock and other securities of INDUS are
hereinafter collectively referred to as "INDUS Stock"). As used herein, the
term "New INDUS Securities" means, collectively, any and all shares of INDUS
capital stock, other securities of INDUS and rights, options and warrants to
acquire shares of INDUS capital stock and other securities of INDUS that
Shareholder may purchase or otherwise acquire any interest in (whether of record
or beneficially), on and after the Effective Date of this Affiliate Agreement
and prior to the Expiration Date (as defined below). All New INDUS Securities
will be subject to the terms of this Affiliate Agreement to the same extent and
in the same manner as if they were INDUS Stock. The INDUS Stock and the New
INDUS Securities shall be collectively referred to herein as the "INDUS
Securities." As used herein, the term "Expiration Date" means the earliest to
occur of (i) the Effective Time of the Merger, or (ii) such time as the Plan of
Reorganization may be terminated in accordance with its terms.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SHAREHOLDER
2.1 Reliance Upon Representations, Warranties and Covenants. Shareholder
-------------------------------------------------------
understands that the representations, warranties and covenants of Shareholder
set forth herein will be relied upon by INDUS, TSW and Newco and their
respective counsel and accounting firms and by INDUS's shareholders.
2.2 Representations, Warranties and Covenants of Shareholder. Shareholder
--------------------------------------------------------
represents, warrants and covenants as follows:
(i) Authority; Affiliate Status. Shareholder has full power and
---------------------------
authority to enter into, execute, deliver and perform Shareholder's obligations
under this Affiliate Agreement and to make the representations, warranties and
covenants herein contained. Shareholder further understands and agrees that
Shareholder may be deemed to be an "affiliate" of INDUS within the meaning of
the 1933 Act and, in particular, Rule 145 promulgated under the 1933 Act ("Rule
145").
(ii) INDUS Securities Owned. Except as otherwise disclosed in the
----------------------
INDUS Disclosure Letter, at the date hereof, all the INDUS Stock owned by
Shareholder are, and at all times until and through the Expiration Date all the
INDUS Securities owned by Shareholder will be, free and clear of any rights of
first refusal, co-sale rights, security interests, liens, pledges, claims,
options, charges or other encumbrances.
-2-
<PAGE>
(iii) Transfer Restrictions on INDUS Securities. Shareholder agrees
-----------------------------------------
with INDUS not to sell, transfer, encumber or dispose of, or offer to sell,
transfer, encumber or dispose of any INDUS Securities until the Expiration Date,
and at such time, only as agreed pursuant to the terms hereof.
(iv) Further Assurances. Shareholder agrees to execute and deliver
------------------
any additional documents reasonably necessary or desirable, in the opinion of
INDUS or TSW, to carry out the purposes and intent of this Affiliate Agreement.
(v) Transfer Restrictions on Merger Securities. As used herein, the
------------------------------------------
term "Merger Securities" means, collectively, all shares of Newco Common Stock
that are or may be issued by Newco in connection with the Merger or the
transactions contemplated by the Merger Agreements, or to any former holder of
INDUS options, warrants or rights to acquire shares of INDUS Common Stock, and
any securities that may be paid as a dividend or otherwise distributed thereon
or with respect thereto or issued or delivered in exchange or substitution
therefor or upon conversion thereof. Shareholder agrees not to sell, transfer,
exchange, pledge, or otherwise dispose of, or make any offer or agreement
relating to, any of the Merger Securities and/or any option, right or other
interest with respect to any Merger Securities that Shareholder may acquire,
unless: (i) such sale, transfer, exchange, pledge or disposition is permitted
pursuant to Rule 145(d)(3) under the Securities Act (as contemplated by Section
3 hereof) and Newco's accountants have advised such Shareholder in writing that
such sale, transfer, exchange, pledge or disposition would not preclude pooling
of interests accounting treatment of the Merger; (ii) Newco's legal counsel or
legal counsel representing Shareholder, which counsel is reasonably satisfactory
to Newco, shall have advised Newco in a written opinion letter reasonably
satisfactory to Newco and Newco's legal counsel, and upon which Newco and its
legal counsel may rely, that no registration under the 1933 Act would be
required in connection with the proposed sale, transfer, exchange, pledge or
other disposition of Merger Securities by Shareholder; or (iii) a registration
statement under the 1933 Act covering the Merger Securities proposed to be sold,
transferred, exchanged, pledged or otherwise disposed of, describing the manner
and terms of the proposed sale, transfer, exchange, pledge or other disposition,
and containing a current prospectus, shall have been filed with the Securities
and Exchange Commission ("SEC") and been declared effective by the SEC under the
1933 Act; or (iii) an authorized representative of the SEC shall have rendered
written advice to Shareholder (sought by Shareholder or counsel to Shareholder,
with a copy thereof and all other related communications delivered to Newco and
its legal counsel) to the effect that the SEC would take no action, or that the
staff of the SEC would not recommend that the SEC take action, with respect to
the proposed disposition of Merger Securities, if consummated. Nothing herein
imposes upon Newco any obligation to register any Merger Securities under the
1933 Act.
(vi) Pooling Lock-Up. Notwithstanding any other provision of this
---------------
Affiliate Agreement to the contrary, from and after the date of this Agreement,
Shareholder will not further sell, transfer, exchange, pledge or otherwise
dispose of, or in any other way reduce Shareholder's risk of ownership or
investment in, or make any offer or agreement relating to any of the foregoing
with respect to any INDUS Securities or any rights, options or warrants to
purchase INDUS Securities or any Merger Securities or other securities of Newco
during the time period (the "Lock-Up Period")
-3-
<PAGE>
beginning thirty (30) days immediately preceding the Effective Time and ending
at such time after the Effective Time as Newco has publicly released the
combined financial results of Newco, INDUS and TSW for a period of at least
thirty (30) days of combined operations of Newco, INDUS and TSW after the
Effective Time of the Merger. Newco agrees to publish such financial results
expeditiously in a manner consistent with INDUS' prior practices.
Notwithstanding the foregoing, Newco agrees that any "affiliates" of INDUS
within the meaning of Rule 145 will be allowed, as a group, to sell up to 1% of
INDUS Stock under the "de minimis" exceptions to the pooling of interest
requirements, with each transaction to be approved in advance by Newco's
auditors.
(vii) Intent. Shareholder does not now have, and as of the Effective
------
Time of the Merger will not have, any present plan or intention to engage in a
further sale, exchange, transfer, distribution, pledge, disposition or any other
transaction which would result in a direct or indirect disposition or an equity
swap or other risk diminishing transaction (a "Sale") of more than fifty
percent (50%) of the Newco Common Stock (or other Merger Securities) that
Shareholder may acquire in connection with the Merger, or any securities that
may be paid as a dividend or otherwise distributed thereon or with respect
thereto or issued or delivered in exchange or substitution therefor or upon
conversion thereof ("Derivative Securities"). Shareholder is not aware of, nor
is Shareholder participating in, any plan on the part of INDUS shareholders to
engage in Sales of Newco Common Stock (or other Merger Securities) to be issued
in the Merger such that the aggregate fair market value, as of the Effective
Time of the Merger, of the shares subject to such Sales would exceed fifty
percent (50%) of the aggregate fair market value of all shares of outstanding
INDUS Securities immediately prior to the Merger. For purposes of this
representation, INDUS Securities (or any portion thereof) (i) with respect to
which a INDUS shareholder receives consideration in the Merger other than Newco
Common Stock (including, without limitation, cash received in lieu of fractional
shares) and/or (ii) with respect to which a Sale occurs during the period
beginning with the commencement of negotiations (whether formal or informal)
between INDUS and TSW regarding the Merger and ending on the Effective Time of
the Merger (the "Pre-Merger Period"), shall be considered shares of outstanding
INDUS Common Stock exchanged for Newco Common Stock received in the Merger and
then disposed of pursuant to any plan on the part of INDUS shareholders.
(viii) Felton Lock-up. Notwithstanding any other provision of this
--------------
Affiliate Agreement to the contrary, from and after the date of this Agreement,
Shareholder will not further sell, transfer, exchange, pledge or otherwise
dispose of, or in any other way reduce Shareholder's risk of ownership or
investment in, or make any offer or agreement relating to any of the foregoing
with respect to any INDUS Securities or any rights, options or warrants to
purchase INDUS Securities or any Merger Securities or other securities of Newco
during the time period (the "Felton Lock-up Period") beginning the date hereof
and ending six months after the Effective Time.
SECTION 3. RESTRICTIONS ON RESALES
Shareholder understands that, in addition to the restrictions imposed under
Section 2 of this Affiliate Agreement, the provisions of Rule 145 currently
limit Shareholder's public resales of Merger Securities, in the manner set forth
in subsections (i), (ii) and (iii) below, until such time as Shareholder has
beneficially owned, within the meaning of Rule 144(d) under the 1933 Act, the
Merger Securities
-4-
<PAGE>
for a period of at least one (1) year (or in some cases two (2) years) after the
Effective Time of the Merger, and thereafter if and for so long as Shareholder
is an affiliate of Newco:
(i) 145(d)(1). Unless and until the restriction "cut-off"
---------
provisions of Rule 145(d)(2) or Rule 145(d)(3) set forth below become available,
public resales of Merger Securities may be made by Shareholder only in
compliance with the requirements of Rule 145(d)(1). Rule 145(d)(1) permits such
resales only: (i) if Newco meets the public information requirements of Rule
144(c); (ii) in brokers' transactions or in transactions with a market maker;
and (iii) where the aggregate number of Merger Securities sold at any time
together with all sales of restricted Newco Common Stock sold by or for
Shareholder's account during the preceding three-month period does not exceed
the greater of: (A) one percent (1%) of the shares of Newco Common Stock
outstanding as shown by the most recent report or statement published by Newco;
or (B) the average weekly volume of trading in Newco Common Stock on all
national securities exchanges, or reported through the automated quotation
system of a registered securities association, during the four calendar weeks
preceding the date of receipt of the order to execute the sale.
(ii) 145(d)(2). Shareholder may make unrestricted resales of
---------
Merger Securities pursuant to Rule 145(d)(2) if: (i) Shareholder has
beneficially owned (within the meaning of Rule 144(d) under the 1933 Act) the
Merger Securities for at least one (1) year after the Effective Time of the
Merger; (ii) Shareholder is not an affiliate of Newco; and (iii) Newco meets the
public information requirements of Rule 144(c).
(iii) 145(d)(3). Shareholder may make unrestricted resales of
---------
Merger Securities pursuant to Rule 145(d)(3) if Shareholder has beneficially
owned (within the meaning of Rule 144(d) under the 1933 Act) the Merger
Securities for at least two (2) years after the Effective Time of the Merger and
is not, and has not been for at least three (3) months, an affiliate of Newco.
INDUS and Newco each acknowledges that the provisions of Section 2.2(v) of
this Affiliate Agreement will be satisfied as to any sale by the undersigned of
the Merger Securities pursuant to Rule 145(d), by a broker's letter and a letter
from Shareholder with respect to that sale stating either that (i) each of the
above-described requirements of Rule 145(d)(1) has been met or (ii) are
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3) and each of the
above-described requirements of Rule 145(d)(2) or (d)(3) (as applicable) have
been met; provided that in each case Newco has no reasonable basis to believe
such sales were not made in compliance with such provisions of Rule 145(d).
SECTION 4. LEGENDS
Shareholder also understands and agrees that stop transfer instructions
will be given to Newco's transfer agent with respect to certificates evidencing
the Merger Securities to enforce (i) Shareholder's compliance with Shareholder's
representations in Subsections 2.2 (vi) and (viii), (ii) Shareholders'
agreements in Section 3, and (iii) Shareholder's compliance with applicable
securities laws regarding the Merger Securities, and that there will be placed
on the certificates evidencing such
-5-
<PAGE>
Merger Securities such legends as Newco or its counsel may reasonably require,
including without limitation, a legend providing substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
ANY APPLICABLE STATE SECURITIES LAWS, AND THE OTHER CONDITIONS SPECIFIED IN
THAT CERTAIN AFFILIATE AGREEMENT DATED AS OF JUNE 5, 1997 AMONG THE INDUS
GROUP, INC., NEWCO GROUP, INC., TSW INTERNATIONAL, INC. AND THE HOLDER OF
SUCH SHARES, A COPY OF WHICH MAY BE INSPECTED BY THE HOLDER OF THIS
CERTIFICATE AT THE OFFICES OF NEWCO. NEWCO WILL FURNISH, WITHOUT CHARGE, A
COPY THEREOF TO THE HOLDER OF THIS CERTIFICATE, UPON WRITTEN REQUEST
THEREFOR."
SECTION 5. MISCELLANEOUS
5.1 Notices. Any notice or other communication required or permitted to
-------
be given under this Affiliate Agreement will be in writing, will be delivered
personally, by telecopier (with a hard copy also mailed), or by registered or
certified mail, postage prepaid and will be deemed given upon delivery, if
delivered personally, one business day after transmission by telecopier with
confirmation of receipt, or three (3) days after deposit in the mails, if
mailed, to the following addresses:
(i) If to INDUS or to Newco:
THE INDUS GROUP, Inc.
60 Spear Street
San Francisco, CA 94105
Attn: Chief Financial Officer
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: Henry P. Massey, Jr.
(ii) If to TSW:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, GA 30339
Attention: Chief Financial Officer
-6-
<PAGE>
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 51st Street
New York, NY 10019
Attn: Andrew Brownstein
(iii) If to Shareholder:
To the address for notice for such Shareholder set forth on
Attachment I hereto or to such other address as a party may have
furnished to the other parties in writing pursuant to this
Section 5.1.
5.2 Termination. This Affiliate Agreement shall be terminated and shall
-----------
be of no further force and effect upon the termination of the Plan of
Reorganization pursuant to its terms.
5.3 Counterparts. This Affiliate Agreement may be executed in any number
------------
of counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
5.4 Assignment; Binding Upon Successors and Assigns. Neither party hereto
-----------------------------------------------
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Affiliate Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
5.5 Waiver and Amendment. The waiver by a party of any breach hereof or
--------------------
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default. This Affiliate Agreement
may be amended by the parties hereto upon the execution and delivery of a
written agreement executed by the parties hereto at any time before or after
approval of the Merger by the INDUS shareholders, but, after such approval, no
amendment will be made which by applicable law requires the further approval of
the INDUS shareholders without obtaining such further approval.
5.6 Governing Law. The internal laws of the State of Delaware
-------------
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
5.7 Severability. If any term, provision, covenant or restriction of this
------------
Affiliate Agreement (or of the Plan of Reorganization) is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Affiliate Agreement
(or of the Plan of Reorganization, as the case may be) will remain in full force
and effect and will in no way be effected, impaired or invalidated. The parties
further agree to replace such
-7-
<PAGE>
invalid or unenforceable term with a valid and enforceable provision that will
achieve, to the greatest extent possible, the economic, business and other
purposes of the invalid or unenforceable provision.
5.8 Construction of Agreement. This Affiliate Agreement has been
-------------------------
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section will mean a Section in this Affiliate Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Affiliate
Agreement which will be considered as a whole.
5.9 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Affiliate Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
5.10 Partnership. Newco, INDUS and TSW agree that if Shareholder is a
-----------
limited partnership, Shareholder's general and limited partners shall in no
event be liable for any obligations or liabilities of Shareholder under this
Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Affiliate
Agreement as of the date first set forth above.
THE INDUS GROUP, INC. TSW INTERNATIONAL, INC.
a California corporation a Georgia corporation
By: By:
----------------------------- -------------------------------
Name: Name:
--------------------------- -------------------------------
Title: Title:
-------------------------- ------------------------------
NEWCO GROUP, INC. SHAREHOLDER:
a Delaware corporation
By:
---------------------------- -------------------------------------
Name: Name:
-------------------------- -------------------------
Title:
-------------------------
[SIGNATURE PAGE TO FELTON AFFILIATE AGREEMENT]
-9-
<PAGE>
ATTACHMENT 1
INDUS STOCK
Shareholder's Address for Notice
----------------------------------
----------------------------------
----------------------------------
Number of shares of INDUS capital stock
beneficially owned by the undersigned:
----------------------------------
Number of options, warrants or other
convertible securities convertible into
INDUS capital stock beneficially owned by
the undersigned:
----------------------------------
-10-
<PAGE>
Exhibit 4.5
WARBURG AFFILIATE AGREEMENT
This Affiliate Agreement (this "Affiliate Agreement") is made and entered
into as of June 5, 1997 (the "Effective Date") among THE INDUS GROUP, Inc., a
California corporation ("INDUS"), Newco Group, Inc., a Delaware corporation
("Newco"), TSW International, Inc., a Georgia corporation ("TSW"), and Warburg,
Pincus Investors, L.P. ("Stockholder").
RECITALS
--------
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Merger and Reorganization dated as of June 5, 1997, as
such may be amended (the "Plan of Reorganization"), entered into by and among
INDUS, Newco and TSW. The Plan of Reorganization provides for the formation of
one California corporation and one Georgia corporation (collectively, the
"Subs"), as wholly-owned subsidiaries of Newco, and the statutory merger of one
Sub with and into INDUS (the "INDUS Merger") and the other Sub with and into TSW
(the "TSW Merger") (collectively, the "Merger"), all pursuant to the terms and
conditions of the Plan of Reorganization and the Agreements of Merger to be
entered into between the one Sub and INDUS and the other Sub and TSW
(collectively, the "Agreements of Merger"). The Plan of Reorganization and the
Agreements of Merger are collectively referred to herein as the "Merger
Agreements." Capitalized terms used herein and not defined herein shall have
the meanings that such terms have in the Plan of Reorganization.
B. The Merger Agreements provide for the conversion of all of the issued
and outstanding stock of INDUS and TSW at the Effective Time of the Merger into
shares of Newco's Common Stock, all as more particularly set forth in the Plan
of Reorganization.
C. As a condition to the willingness of INDUS to enter into the Plan of
Reorganization, INDUS has required that Stockholder agree, and in order to
induce INDUS to enter into the Plan of Reorganization Stockholder has agreed, to
enter into this Affiliate Agreement.
D. Stockholder understands that because (i) the Merger is intended by the
parties to qualify for "pooling-of-interests" accounting treatment and
Stockholder may be deemed to be an "affiliate" of TSW within the meaning of the
Securities Act of 1933, as amended (the "1933 Act"), and (ii) the Merger will be
treated as a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code, the shares of TSW Common Stock or TSW Preferred Stock which
Stockholder owns, any shares of TSW Common Stock or TSW Preferred Stock which
Stockholder may hereafter acquire, and any shares of Newco Common Stock (the
"Newco Common Stock") acquired by Stockholder pursuant to the Merger may be
disposed of only in conformity with the limitations described herein.
<PAGE>
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. TSW SECURITIES
Attachment 1 hereto sets forth all shares of TSW capital stock and any
------------
other securities of TSW owned by Stockholder, including all securities of TSW as
to which Stockholder has sole or shared voting or investment power, and all
rights, options and warrants to acquire shares of capital stock or other
securities of TSW granted to or held by Stockholder (such shares of TSW capital
stock, other securities of TSW and rights, options and warrants to acquire
shares of TSW capital stock and other securities of TSW are hereinafter
collectively referred to as "TSW Stock"). As used herein, the term "New TSW
Securities" means, collectively, any and all shares of TSW capital stock, other
securities of TSW and rights, options and warrants to acquire shares of TSW
capital stock and other securities of TSW that Stockholder may purchase or
otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Affiliate Agreement and prior to the Expiration
Date (as defined below). All New TSW Securities will be subject to the terms of
this Affiliate Agreement to the same extent and in the same manner as if they
were TSW Stock. The TSW Stock and the New TSW Securities shall be collectively
referred to herein as the "TSW Securities". As used herein, the term
"Expiration Date" means the earliest to occur of (i) the Effective Time of the
Merger, or (ii) such time as the Plan of Reorganization may be terminated in
accordance with its terms.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF STOCKHOLDER
2.1 Reliance Upon Representations, Warranties and Covenants. Stockholder
-------------------------------------------------------
understands that the representations, warranties and covenants of Stockholder
set forth herein will be relied upon by INDUS, TSW and Newco and their
respective counsel and accounting firms and by TSW's stockholders.
2.2 Representations, Warranties and Covenants of Stockholder. Stockholder
--------------------------------------------------------
represents, warrants and covenants as follows:
(i) Authority: Affiliate Status. Stockholder has full power and
---------------------------
authority to enter into, execute, deliver and perform Stockholder's obligations
under this Affiliate Agreement and to make the representations, warranties and
covenants herein contained. Stockholder further understands and agrees that
Stockholder may be deemed to be an "affiliate" of TSW within the meaning of the
1933 Act and, in particular, Rule 145 promulgated under the 1933 Act ("Rule
145").
(ii) TSW Securities Owned. Except as otherwise disclosed in the TSW
--------------------
Disclosure Letter, at the date hereof, all the TSW Stock owned by Stockholder
are, and at all times until and through the Expiration Date all the TSW
Securities owned by Stockholder will be, free and clear of any rights of first
refusal, co-sale rights, security interests, liens, pledges, claims, options,
charges or other encumbrances.
-2-
<PAGE>
(iii) Transfer Restrictions on TSW Securities. Stockholder agrees with
---------------------------------------
INDUS not to sell, transfer, encumber or dispose of, or offer to sell, transfer,
encumber or dispose of any TSW Securities until the Expiration Date, and at such
time, only as agreed pursuant to the terms hereof.
(iv) Waivers. Except as granted, created or contemplated by the Plan
-------
of Reorganization, Stockholder hereby waives, effective as of the Effective
Time, any liquidation, redemption, antidilution, registration rights,
information rights, preemptive rights, priority rights, rights or first refusal,
co-sale or other similar rights under the terms of the Articles of Incorporation
or Bylaws of TSW or any agreement with TSW or its security holders in effect
immediately prior to the Effective Time.
(v) Further Assurances. Stockholder agrees to execute and deliver
------------------
any additional documents reasonably necessary or desirable, in the opinion of
INDUS or TSW, to carry out the purposes and intent of this Affiliate Agreement.
(vi) Transfer Restrictions on Merger Securities. As used herein, the
------------------------------------------
term "Merger Securities" means, collectively, all shares of Newco Common Stock
that are or may be issued by Newco in connection with the Merger or the
transactions contemplated by the Merger Agreements, or to any former holder of
TSW options, warrants or rights to acquire shares of TSW Common Stock, and any
securities that may be paid as a dividend or otherwise distributed thereon or
with respect thereto or issued or delivered in exchange or substitution therefor
or upon conversion thereof. Stockholder agrees not to sell, transfer, exchange,
pledge, or otherwise dispose of, or make any offer or agreement relating to, any
of the Merger Securities and/or any option, right or other interest with respect
to any Merger Securities that Stockholder may acquire, unless: (i) such sale,
transfer, exchange, pledge or disposition is permitted pursuant to Rule
145(d)(3) under the Securities Act (as contemplated by Section 3 hereof) and
Newco's accountants have advised such Stockholder in writing that such sale,
transfer, exchange, pledge or disposition would not preclude pooling of
interests accounting treatment of the Merger; (ii) Newco's legal counsel or
legal counsel representing Stockholder, which counsel is reasonably satisfactory
to Newco, shall have advised Newco in a written opinion letter reasonably
satisfactory to Newco and Newco's legal counsel, and upon which Newco and its
legal counsel may rely, that no registration under the 1933 Act would be
required in connection with the proposed sale, transfer, exchange, pledge or
other disposition of Merger Securities by Stockholder, or (iii) a registration
statement under the 1933 Act covering the Merger Securities proposed to be sold,
transferred, exchanged, pledged or otherwise disposed of, describing the manner
and terms of the proposed sale, transfer, exchange, pledge or other disposition,
and containing a current prospectus, shall have been filed with the Securities
and Exchange Commission ("SEC ") and been declared effective by the SEC under
the 1933 Act; or (iii) an authorized representative of the SEC shall have
rendered written advice to Stockholder (sought by Stockholder or counsel to
Stockholder, with a copy thereof and all other related communications delivered
to Newco and its legal counsel) to the effect that the SEC would take no action,
or that the staff of the SEC would not recommend that the SEC take action, with
respect to the proposed disposition of Merger Securities, if consummated.
Nothing herein imposes upon Newco any obligation to register any Merger
Securities under the 1933 Act.
-3-
<PAGE>
(vii) Pooling Lock-Up. Notwithstanding any other provision of this
---------------
Affiliate Agreement to the contrary, from and after the date of this Agreement,
Stockholder will not further sell, transfer, exchange, pledge or otherwise
dispose of, or in any other way reduce Stockholder's risk of ownership or
investment in, or make any offer or agreement relating to any of the foregoing
with respect to any TSW Securities or any rights, options or warrants to
purchase TSW Securities or any Merger Securities or other securities of Newco
during the time period (the "Lock-Up Period ") beginning thirty (30) days
immediately preceding the Effective Time and ending at such time after the
Effective Time as Newco has publicly released the combined financial results of
Newco, INDUS and TSW for a period of at least thirty (30) days of combined
operations of Newco, INDUS and TSW after the Effective Time of the Merger.
Newco agrees to publish such financial results expeditiously in a manner
consistent with INDUS' prior practices. Notwithstanding the foregoing, Newco
agrees that any "affiliates" of TSW within the meaning of Rule 145 will be
allowed as a group to sell up to an aggregate of 1% of TSW Stock under the "de
minimis" exceptions to the pooling of interest requirements, with each
transaction to be approved in advance by Newco's auditors.
(viii) Intent. Stockholder does not now have, and as of the Effective
------
Time of the Merger will not have, any present plan or intention to engage in a
further sale, exchange, transfer, distribution, pledge, disposition or any other
transaction which would result in a direct or indirect disposition or an equity
swap or other risk diminishing transaction (a "Sale") of more than fifty percent
(50%) of the Newco Common Stock (or other Merger Securities) that Stockholder
may acquire in connection with the Merger, or any securities that may be paid as
a dividend or otherwise distributed thereon or with respect thereto or issued or
delivered in exchange or substitution therefor or upon conversion thereof
("Derivative Securities"). Stockholder is not aware of, nor is Stockholder
participating in, any plan on the part of TSW stockholders to engage in Sales of
Newco Common Stock (or other Merger Securities) to be issued in the Merger such
that the aggregate fair market value, as of the Effective Time of the Merger of
the shares subject to such Sales would exceed fifty percent (50%) of the
aggregate fair market value of all shares of outstanding TSW Securities
immediately prior to the Merger. For purposes of this representation, TSW
Securities (or any portion thereof) (i) with respect to which a TSW stockholder
receives consideration in the Merger other than Newco Common Stock (including,
without limitation, cash received in lieu of fractional shares) and/or (ii) with
respect to which a Sale occurs during the period beginning with the commencement
of negotiations (whether formal or informal) between INDUS and TSW regarding the
Merger and ending on the Effective Time of the Merger (the "Pre-Merger Period"),
shall be considered shares of outstanding TSW Common Stock exchanged for Newco
Common Stock received in the Merger and then disposed of pursuant to any plan on
the part of TSW stockholders.
(ix) Warburg Lock-up. Notwithstanding any other provision of this
---------------
Affiliate Agreement to the contrary, from and after the date of this Agreement,
Stockholder will not further sell, transfer, exchange, pledge or otherwise
dispose of, or in any other way reduce Stockholder's risk of ownership or
investment in, or make any offer or agreement relating to any of the foregoing
with respect to any TSW Securities or any rights, options or warrants to
purchase TSW Securities or any Merger Securities or other securities of Newco
during the time period (the "Warburg Lock-up Period") beginning the date hereof
and ending six months after the Effective Time.
-4-
<PAGE>
SECTION 3. RESTRICTIONS ON RESALES
Stockholder understands that, in addition to the restrictions imposed under
Section 2 of this Affiliate Agreement, the provisions of Rule 145 currently
limit Stockholder's public resales of Merger Securities, in the manner set forth
in subsections (i), (ii) and (iii) below, until such time as Stockholder has
beneficially owned, within the meaning of Rule 144(d) under the 1933 Act, the
Merger Securities for a period of at least one (1) year (or in some cases two
(2) years) after the Effective Time of the Merger, and thereafter if and for so
long as Stockholder is an affiliate of Newco:
(i) 145(d)(1). Unless and until the restriction "cut-off'
---------
provisions of Rule 145(d)(2) or Rule 145(d)(3) set forth below become available,
public resales of Merger Securities may be made by Stockholder only in
compliance with the requirements of Rule 145(d)(1). Rule 145(d)(1) permits such
resales only: (i) if Newco meets the public information requirements of Rule
144(c); (ii) in brokers' transactions or in transactions with a market maker;
and (iii) where the aggregate number of Merger Securities sold at any time
together with all sales of restricted Newco Common Stock sold by or for
Stockholder's account during the preceding three-month period does not exceed
the greater of: (A) one percent (1%) of the shares of Newco Common Stock
outstanding as shown by the most recent report or statement published by Newco;
or (B) the average weekly volume of trading in Newco Common Stock on all
national securities exchanges, or reported through the automated quotation
system of a registered securities association, during the four calendar weeks
preceding the date of receipt of the order to execute the sale.
(ii) 145(d)(2). Stockholder may make unrestricted resales of Merger
---------
Securities pursuant to Rule 145(d)(2) if: (i) Stockholder has beneficially owned
(within the meaning of Rule 144(d) under the 1933 Act) the Merger Securities for
at least one (1) year after the Effective Time of the Merger; (ii) Stockholder
is not an affiliate of Newco; and (iii) Newco meets the public information
requirements of Rule 144(c).
(iii) 145(d)(3). Stockholder may make unrestricted resales of Merger
---------
Securities pursuant to Rule 145(d)(3) if Stockholder has beneficially owned
(within the meaning of Rule 144(d) under the 1933 Act) the Merger Securities for
at least two (2) years after the Effective Time of the Merger and is not, and
has not been for at least three (3) months, an affiliate of Newco.
INDUS and Newco each acknowledge that the provisions of Section 2.2(vi) of
this Affiliate Agreement will be satisfied as to any sale by the undersigned of
the Merger Securities pursuant to Rule 145(d), by a broker's letter and a letter
from Stockholder with respect to that sale stating either that (i) each of the
above-described requirements of Rule 145(d)(1) has been met or (ii) are
inapplicable by virtue of Rule 145(d)(2) or Rule 145(d)(3) and each of the
above-described requirements of Rule 145(d)(2) or (d)(3) (as applicable) have
been met; provided that in each case Newco has no reasonable basis to believe
such sales were not made in compliance with such provisions of Rule 145(d).
-5-
<PAGE>
SECTION 4. LEGENDS
Stockholder also understands and agrees that stop transfer instructions
will be given to Newco's transfer agent with respect to certificates evidencing
the Merger Securities to enforce (i) Stockholder's compliance with Stockholder's
representations in Subsection 2.2(vii) and (ix), (ii) Stockholders' agreements
in Section 3, and (iii) Stockholder's compliance with applicable securities laws
regarding the Merger Securities, and that there will be placed on the
certificates evidencing such Merger Securities such legends as Newco or its
counsel may reasonably require, including without limitation, a legend providing
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933. AS
AMENDED, ANY APPLICABLE STATE SECURITIES LAWS, AND THE OTHER CONDITIONS
SPECIFIED IN THAT CERTAIN AFFILIATE AGREEMENT DATED AS OF JUNE 5, 1997
AMONG THE INDUS GROUP, INC., NEWCO GROUP, INC., TSW INTERNATIONAL, INC. AND
THE HOLDER OF SUCH SHARES, A COPY OF WHICH MAY BE INSPECTED BY THE HOLDER
OF THIS CERTIFICATE AT THE OFFICES OF NEWCO. NEWCO WILL FURNISH, WITHOUT
CHARGE, A COPY THEREOF TO THE HOLDER OF THIS CERTIFICATE, UPON WRITTEN
REQUEST THEREFOR."
SECTION 5. MISCELLANEOUS
5.1 Notices. Any notice or other communication required or permitted to
-------
be given under this Affiliate Agreement will be in writing, will be delivered
personally, by telecopier (with a hard copy also mailed), or by registered or
certified mail, postage prepaid and will be deemed given upon delivery, if
delivered personally, one business day after transmission by telecopier with
confirmation of receipt, or three (3) days after deposit in the mails, if
mailed, to the following addresses:
(i) If to INDUS or to Newco:
THE INDUS GROUP, Inc.
60 Spear Street
San Francisco, CA 94105
Attn: Chief Financial Officer
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attn: Henry P. Massey, Jr.
-6-
<PAGE>
(ii) If to TSW:
TSW International, Inc.
3301 Windy Ridge Parkway
Atlanta, GA 30339
Attn: Chief Financial Officer
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, NY 10019
Attn: Andrew Brownstein
If to Stockholder:
To the address for notice for such Stockholder set forth on
Attachment I hereto, or to such other address as a party may have
furnished to the other parties in writing pursuant to this
Section 5.1.
5.2 Termination. This Affiliate Agreement shall be terminated and shall
-----------
be of no further force and effect upon the termination of the Plan of
Reorganization pursuant to its terms.
5.3 Counterparts. This Affiliate Agreement may be executed in any number
------------
of counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
5.4 Assignment; Binding Upon Successors and Assigns. Neither party hereto
-----------------------------------------------
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Affiliate Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
5.5 Waiver and Amendment. The waiver by a party of any breach hereof or
--------------------
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default. This Affiliate Agreement
may be amended by the parties hereto upon the execution and delivery of a
written agreement executed by the parties hereto at any time before or after
approval of the Merger by the TSW stockholders, but, after such approval, no
amendment will be made which by applicable law requires the further approval of
the TSW stockholders without obtaining such further approval.
-7-
<PAGE>
5.6 Governing Law. The internal laws of the State of Delaware
-------------
(irrespective of its choice of law principles) will govern the validity of this
Affiliate Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto.
5.7 Severability. If any term, provision, covenant or restriction of this
------------
Affiliate Agreement (or of the Plan of Reorganization) is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Affiliate Agreement
(or of the Plan of Reorganization, as the case may be) will remain in full force
and effect and will in no way be effected, impaired or invalidated. The parties
further agree to replace such invalid or unenforceable term with a valid and
enforceable provision that will achieve, to the greatest extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.
5.8 Construction of Agreement. This Affiliate Agreement has been
-------------------------
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section will mean a Section in this Affiliate Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Affiliate
Agreement which will be considered as a whole.
5.9 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Affiliate Agreement, the prevailing party will be entitled to
recover as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
5.10 Partnership. Newco, INDUS and TSW agree that if Stockholder is a
-----------
limited partnership, Stockholder's general and limited partners shall in no
event be liable for any obligations or liabilities of Stockholder under this
Agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Affiliate
Agreement as of the date first set forth above.
THE INDUS GROUP, INC. TSW INTERNATIONAL, INC.
a California corporation a Georgia corporation
By: By:
-------------------------- --------------------------
Name: Name:
------------------------ ------------------------
Title: Title:
----------------------- -----------------------
NEWCO GROUP, INC. STOCKHOLDER:
a Delaware corporation
By:
-------------------------- -----------------------------
Name: Name:
------------------------ ------------------------
Title:
-----------------------
[SIGNATURE PAGE TO WARBURG AFFILIATE AGREEMENT]
<PAGE>
ATTACHMENT 1
TSW STOCK
Affiliate's Address for Notice:
Class and Number of shares of TSW capital stock
beneficially owned by the undersigned:
Number of options, warrants or other convertible
securities convertible into TSW capital stock
beneficially owned by the undersigned:
<PAGE>
Exhibit 4.6
NEWCO GROUP, INC.
NOMINATION AGREEMENT
THIS NOMINATION AGREEMENT is entered into as of [______] 1997, by and
between Newco Group, Inc., a Delaware corporation (the "COMPANY"), and Robert W.
Felton ("FELTON") and Warburg, Pincus Investors, L.P. ("WARBURG").
RECITALS
WHEREAS, each of Felton and Warburg acquired shares of Common Stock of the
Company pursuant to an Agreement and Plan of Merger and Reorganization by and
among the Company, THE INDUS GROUP, Inc., a California corporation ("INDUS"),
and TSW International, Inc. ("TSW"), dated June 5, 1997 (the "MERGER AGREEMENT")
in connection with the merger of the Company's two subsidiaries with and into
INDUS and TSW, respectively. Pursuant to Section 5.18 of the Merger Agreement,
the Company agreed to provide each of Felton and Warburg certain director
nomination rights as provided herein.
WHEREAS, as an inducement for each of INDUS and TSW to enter into the
Merger Agreement, the Company desires to grant the director nomination rights to
each of Felton and Warburg as contained herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the Company, Felton and Warburg agree as follows:
SECTION 1
DIRECTOR NOMINATION RIGHTS
1.1 DEFINITION.
For purposes of this Agreement, a party shall be deemed to own as
"Common Stock of the Company on a fully diluted basis" all shares of Common
Stock of the Company subject to all warrants, options and purchase rights owned
by such party.
1.2 WARBURG NOMINATION RIGHTS.
(a) TWO DESIGNEES. For so long as Warburg continues to own more than
15% of the outstanding Common Stock of the Company on a fully diluted basis, the
Company shall nominate, in connection with each stockholder solicitation
relating to the election of directors, two candidates designated by Warburg.
(b) ONE DESIGNEE. For so long as Warburg continues to own equal to or
less than 15% and more than 7% of the outstanding Common Stock of the Company on
a fully diluted basis, the
<PAGE>
Company shall nominate, in connection with each stockholder solicitation
relating to the election of directors, one candidate designated by Warburg.
1.3 FELTON NOMINATION RIGHTS.
------------------------
(a) TWO DESIGNEES. For so long as Felton continues to own more than
15% of the outstanding Common Stock of the Company on a fully diluted basis, the
Company shall nominate, in connection with each stockholder solicitation
relating to the election of directors, two candidates designated by Felton, one
of which may be Felton.
(b) ONE DESIGNEE. In so long as Felton continues to own equal to or
less than 15% and more than 7% of the outstanding Common Stock of the Company on
a fully diluted basis, the Company shall nominate, in connection with each
stockholder solicitation relating to the election of directors, one candidate
designated by Felton, which may be Felton.
1.4 AFFILIATES. For purposes of this Agreement, all shares held by an
affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933,
as amended) of Warburg and Felton, will be deemed to be owned by Warburg and
Felton, respectively.
1.5 VOTING OF MANAGEMENT SHARES. The Company shall use its best efforts
(i) to cause to be voted the shares for which the Company's management or Board
of Directors holds proxies or is otherwise entitled to vote in favor of the
election of such designee(s) nominated pursuant to this Agreement (the "WARBURG
DESIGNEE(S)" and the "FELTON DESIGNEE(S)"); and (ii) to cause the Board of
Directors of the Company to unanimously recommend to its stockholders to vote in
favor of the Warburg Designee(s) and the Felton Designee(s).
1.6 VACANCIES. In the event that any Warburg Designee shall cease to
serve as a director of the Company for any reason, the vacancy resulting
therefrom shall be filled by another Designee selected by Warburg. In the
event any Felton Designee shall cease to serve as a director of the Company for
any reason, the resulting vacancy therefrom shall be filled by another Designee
selected by Felton. Any such successor designee who becomes a director of the
Company by virtue of this Agreement shall serve until the next succeeding annual
meeting at the Company's stockholders and until his or her successor is duly
elected and qualified.
1.7 EQUAL TREATMENT. The Company shall provide the same compensation and
rights and benefits of indemnity to the Warburg Designee(s) and the Felton
Designee(s) as are provided to other non-employee directors, provided that if
Felton is one of the Felton Designees, for so long as he continues to be
employed by the Company, he shall receive no additional compensation in respect
of his service as a director.
-2-
<PAGE>
SECTION 2.
MISCELLANEOUS
2.1 TERMINATION. This Agreement shall terminate and have no further force
or effect at such time as neither Warburg, nor Felton hold more than 5% of the
outstanding Common Stock of the Company.
2.2 WAIVERS AND AMENDMENTS. The rights and obligations of the Company and
the rights of Warburg and Felton under this Agreement may be waived (either
generally or in a particular instance, either retroactively or prospectively,
and either for a specified period of time or indefinitely) or amended, only with
the written consent of the party whose rights are being waived.
2.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
2.4 SPECIFIC ENFORCEMENT. It is agreed and understood that monetary
damages would not adequately compensate Warburg and Felton for the breach of
this Agreement by the Company, that this Agreement shall be specifically
enforceable, and that any breach or threatened breach of this Agreement shall be
the proper subject of a temporary or permanent injunction or restraining order.
Further, the Company waives any claim or defense that there is an adequate
remedy at law for such breach or threatened breach.
2.5 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
2.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
-3-
<PAGE>
The foregoing Nomination Agreement is hereby executed as of the date first
above written.
"COMPANY"
NEWCO GROUP, INC.
A DELAWARE CORPORATION
______________________________________
Signature of Authorized Signatory
______________________________________
Print Name and Title
"WARBURG"
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co.
General Partner
By:___________________________________
Partner
"FELTON"
______________________________________
Robert W. Felton
-4-
<PAGE>
EXHIBIT 4.7
LOGO
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR STATEMENTS
This Certifies that
Is the Corporation of
FULLY PAID AND SHARES OF COMMON STOCK, $0.001 PAR VALUE, OF
INDUS INTERNATIONAL, INC.
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
/s/ /s/
SECRETARY CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Secretary of the Corporation at the principal office of the
Corporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ___________ Custodian______________________
TEN ENT -- as tenants by the entities (Cust.) (Minor)
JT TEN -- as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as tenants Act________________________________________
in common (State)
COM PROP -- as community property UNIF TRF MIN ACT -- ______________Custodian ____________________
(Cust.)
____________________ under Uniform Transfers
(Minor)
to Minors Act_______________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
POR VALUE RECEIVED._____________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated_________________________
X ________________________________________
X ________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER
Signature(s) Guaranteed
By_____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM
PURSUANT TO S.E.C. RULE 17.
<PAGE>
EXHIBIT 5.1
August 6, 1997
Indus/TSW, Inc.
60 Spear Street
San Francisco, CA 94105
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4, filed by you with
the Securities and Exchange Commission (the "Commission") on or about August 7,
1997 (the "Registration Statement") in connection with the registration under
the Securities Act of 1933, as amended, of shares of your Common Stock with a
proposed maximum offering price of $322,149,870 (the "Shares"). As your counsel
in connection with this transaction, we have examined the proceedings taken and
are familiar with the proceedings proposed to be taken by you in connection with
the sales and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares, when issued and sold in the
manner described in the Registration Statement, will be legally and validly
issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the proxy statement/prospectus and consent
solicitation statement constituting a part thereof, and any amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE>
EXHIBIT 8.1
[WLRK Letterhead]
August 6, 1997
TSW International Inc.
3301 Windy Ridge Parkway
Atlanta, Georgia 30339
Ladies And Gentlemen:
We have acted as counsel for TSW International Inc., a Georgia corporation
("TSW") in connection with the preparation and execution of the Agreement and
Plan of Merger and Reorganization (the "Reorganization Agreement") dated as of
June 5, 1997, among The Indus Group, Inc., a California corporation ("Indus"),
Newco Group, Inc.(subsequently renamed Indus International, Inc.), a Delaware
corporation ("Newco"), and TSW. This opinion is being delivered to you pursuant
to Section 7.10 of the Reorganization Agreement. Pursuant to the Reorganization
Agreement, two newly-formed subsidiaries of Newco ("Merger Subs") will merge
with and into Indus and TSW, and Indus and TSW will survive as wholly-owned
subsidiaries of Newco. Unless otherwise defined, capitalized terms referred to
herein have the meanings set forth in the Reorganization Agreement. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
You have requested our opinion regarding certain United States federal
income tax consequences of the merger of one of the Merger Subs into TSW (the
"Merger"). In delivering this opinion, we have reviewed and relied upon the
accuracy of the facts, statements, descriptions and representations set forth in
the Form S-4, the Reorganization Agreement (including Schedules and Exhibits),
and such other documents pertaining to the Merger as we have deemed necessary or
appropriate. We have
<PAGE>
TSW International Inc.
August 6, 1997
Page 2
also reviewed and relied upon certificates of officers of TSW, Indus and Newco
respectively (the "Officers' Certificates") and have assumed that the statements
and representations contained therein will be complete and accurate as of the
Effective Time of the Merger.
In connection with rendering this opinion, we have assumed or obtained
representations (without any independent investigation) that:
1. Original documents (including signatures) are authentic,
documents submitted to us as copies conform to the original documents, and there
has been (or will be by the Effective Time) due execution and delivery of all
documents where due execution and delivery are prerequisites to effectiveness
thereof;
2. Any statement made in any of the documents referred to herein
"to the best of the knowledge" of any person or party is correct without such
qualification;
3. All statements, descriptions and representations contained in any
of the documents referred to herein or otherwise made to us are true and correct
in all material respects and no actions have been (or will be) taken which are
inconsistent with such representations;
4. The Merger will be reported by TSW and Newco on their respective
federal income tax returns in a manner consistent with the opinion set forth
below; and
5. The shareholders of TSW will not at the Effective Time have an
existing plan or intent to dispose of an amount of Newco Common Stock to be
received in the Merger (or to dispose of TSW Common Stock or TSW Preferred Stock
in anticipation of the Merger) such that the stockholders of TSW will not
receive and retain a meaningful continuing equity ownership in Newco that is
sufficient to satisfy the continuity of interest requirement as specified in
Treasury Regulations Section 1.368-1(b) and as interpreted in certain Internal
Revenue Service rulings and judicial decisions.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, if the Merger is consummated in accordance with the
Reorganization Agreement (and without any waiver, breach or amendment of any of
the provisions thereof) and the statements set forth in the Officers'
Certificates are true and correct at the Effective Time, then:
<PAGE>
TSW International Inc.
August 6, 1997
Page 3
(a) The Merger will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code;
(b) TSW and Newco will each be parties to the reorganization within
the meaning of Section 368(b);
(c) No gain or loss will be recognized by TSW or Newco in the TSW
Merger; and
(d) The discussion entitled "Certain Federal Income Tax
Considerations" in the Prospectus constituting a part of the Registration
Statement accurately summarizes the material tax consequences of the Merger.
This opinion is based upon the Code, published judicial decisions,
administrative regulations and published rulings and procedures as in existence
on the date hereof. Our opinion is not binding upon the Internal Revenue Service
or the courts, and there is no assurance that the Internal Revenue Service will
not successfully assert a contrary position. Furthermore, no assurance can be
given that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
This opinion addresses only certain federal income tax consequences of
the Merger under the Code, and does not address any other federal, state, local
or foreign tax consequences that may result from the Merger or any other
transaction (including any transaction undertaken in connection with the
Merger).
No opinion is expressed as to any transaction other than the Merger as
described in the Reorganization Agreement or to any transaction whatsoever,
including the Merger, if all the transactions described in the Reorganization
Agreement are not consummated in accordance with the terms of such
Reorganization Agreement and without waiver or breach of any material provision
thereof or if all of the representations, warranties, statements and assumptions
upon which we relied are not true and accurate at all relevant times. In the
event any one of the statements, representations, warranties or assumptions upon
which we have relied to issue this opinion is incorrect, our opinion might be
adversely affected and may not be relied upon.
This opinion has been delivered to you only for the purposes stated.
It may not be relied upon for any other purpose or by any other person or entity
and may not be made
<PAGE>
TSW International Inc.
August 6, 1997
Page 4
available to any other person or entity without our prior written consent. We
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name in the Registration
Statement in connection with references to this opinion and the tax consequences
of the Merger. In giving this consent, however, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
Wachtell, Lipton, Rosen & Katz
<PAGE>
Exhibit 8.2
Form of WSGR
Tax Opinion
[WSGR Letterhead]
August 6, 1997
The Indus Group, Inc.
60 Spear Street
San Francisco, California 94105
Ladies and Gentlemen:
We have acted as counsel for The Indus Group, Inc., a California
corporation ("Indus") in connection with the preparation and execution of the
Agreement and Plan of Merger and Reorganization (the "Reorganization Agreement")
dated as of June 5, 1997, among Indus, Newco Group, Inc. a Delaware corporation
("Newco") and TSW International, Inc., a Georgia corporation ("TSW"). This
opinion is being delivered to you pursuant to Section 8.10 of the Reorganization
Agreement. Pursuant to the Reorganization Agreement, Indus, Inc., a newly-formed
Delaware subsidiaries of Newco ("Indus Sub") will merge with and into Indus and
Indus will survive as wholly-owned subsidiary of Newco. Unless otherwise
defined, capitalized terms referred to herein have the meanings set forth in the
Reorganization Agreement. All section references, unless otherwise indicated,
are to the Internal Revenue Code of 1986, as amended (the "Code").
You have requested our opinion regarding certain United States federal
income tax consequences of the Merger. In delivering this opinion, we have
reviewed and relied upon the facts, statements, descriptions and representations
set forth in the Joint Proxy Statement/Prospectus dated August 7, 1997 included
in the registration statement on Form S-4 with the Securities and Exchange
Commission, the Reorganization Agreement (including Schedules and Exhibits), and
such other documents pertaining to the Merger as we have deemed necessary or
appropriate. We have also reviewed and relied upon certificates of officers of
Indus and Newco respectively (the "Officers' Certificates").
In connection with rendering this opinion, we have assumed or obtained
representations (without any independent investigation) that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time) due execution and delivery of all documents
where due execution and delivery are prerequisites to effectiveness thereof;
2. Any statement made in any of the documents referred to herein, "to the
best of the knowledge' of any person or party is correct without such
qualification;
<PAGE>
The Indus Group, Inc.
August 6, 1997
Page 2
3. All statements, descriptions and representations contained in any of
the documents referred to herein or otherwise made to us are true and correct in
all material respects and no actions have been (or will be) taken which are
inconsistent with such representations;
4. The Merger will be reported by Indus and Newco on their respective
federal income tax returns in a manner consistent with the opinion set forth
below; and
5. The Shareholders of Indus will not at the Effective Time, have an
existing plan or intent to dispose of an amount of Newco Common Stock to be
received in the Merger (or to dispose of Indus Common Stock in anticipation of
the Merger) such that the stockholders of Indus will not receive and retain a
meaningful continuing equity ownership in Newco that is sufficient to satisfy
the continuity of interest requirement as specified in Treasury Regulations
Section 1.368-1(b) and as interpreted in certain Internal Revenue Service
rulings and judicial decisions.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, if the Merger is consummated in accordance with the
Reorganization Agreement (and without any waiver, breach or amendment of any of
the provisions thereof) and the statements set forth in the Officers'
Certificates are true and correct at the Effective Time, then for federal income
tax purposes: the Merger will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code; (ii) Indus and Newco will each be a party to such
a reorganization within the meaning of Section 368(b) of the Code; and (iii) no
gain or loss will be recognized by Indus or Newco as a result of the Merger.
This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
Federal income tax laws.
This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger).
<PAGE>
The Indus Group, Inc.
August 6, 1997
Page 3
No opinion is expressed as to any transaction other than the Merger as
described in the Reorganization Agreement or to any transaction whatsoever,
including the Merger, if all the transactions described in the Reorganization
Agreement are not consummated in accordance with the terms of such
Reorganization Agreement and without waiver or breach of any material provision
thereof or if all of the representations, warranties, statements and assumptions
upon which we relied are not true and accurate at all relevant times. In the
event any one of the statements, representations, warranties or assumptions upon
which we have relied to issue this opinion is incorrect, our opinion might be
adversely affected and may not be relied upon.
This opinion has been delivered to you only for the purposes stated. It may
not be relied upon for any other purpose or by any other person or entity and
may not be made available to any other person or entity without our prior
written consent. We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and further consent to the use of our name in the
Registration Statement in connection with references to this opinion and the tax
consequences of the Merger. In giving this consent, however, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/WILSON SONSINI GOODRICH & ROSATI
-------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
Exhibit 9.1
INDUS VOTING AGREEMENT
This Voting Agreement (this "Voting Agreement") is made and entered into as
of June 5, 1997 (the"Effective Date") between TSW International, a Georgia
corporation ("TSW") and Robert W. Felton, Richard W. MacAlmon, Michael E. Percy
and Douglas R. Piper ("Shareholders").
RECITALS
--------
A. This Voting Agreement is entered into pursuant to that certain
Agreement and Plan of Merger and Reorganization dated as of June 5, 1997, as
such may be amended (the "Plan of Reorganization"), entered into by and among
THE INDUS GROUP, Inc., a California corporation ("INDUS"), Newco Group, Inc., a
California corporation ("Newco") and TSW. The Plan of Reorganization provides
for the formation of a California corporation ("Sub"), a wholly owned subsidiary
of Newco, and the statutory merger of Sub with and into INDUS (the "INDUS
Merger"), all pursuant to the terms and conditions of the Plan of Reorganization
and the Agreement of Merger to be entered into between Sub and INDUS in the form
attached to the Plan of Reorganization (the "Agreement of Merger"). The Plan of
Reorganization and the Agreement of Merger are collectively referred to herein
as the "Merger Agreements." Capitalized terms used herein and not defined herein
shall have the meanings that such terms have in the Plan of Reorganization.
B. The Merger Agreements provide for the conversion of all of the issued
and outstanding stock of INDUS at the Effective Time of the Merger into shares
of Newco's Common Stock, all as more particularly set forth in the Plan of
Reorganization.
C. As a condition to the willingness of TSW to enter into the Plan of
Reorganization, TSW has required that each Shareholder agree, and in order to
induce TSW to enter into the Plan of Reorganization each Shareholder has agreed,
to enter into this Voting Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. VOTING OF INDUS SECURITIES
1.1 INDUS Securities. Each Shareholder's signature page attached hereto
----------------
sets forth all shares of INDUS capital stock and any other securities of INDUS
owned by each Shareholder, including all securities of INDUS as to which each
Shareholder has sole or shared voting or investment power, and all rights,
options and warrants to acquire shares of capital stock or other securities of
INDUS granted to or held by each Shareholder (such shares of INDUS capital
stock, other securities of INDUS and rights, options and warrants to acquire
shares of INDUS capital stock and other securities of INDUS are hereinafter
collectively referred to as "INDUS Stock"). As used herein, the term "New INDUS
Securities" means, collectively, any and all shares of INDUS capital stock,
other securities of INDUS and rights, options and warrants to acquire shares of
INDUS capital
<PAGE>
stock and other securities of INDUS that each Shareholder may purchase or
otherwise acquire any interest in (whether of record or beneficially), on and
after the Effective Date of this Voting Agreement and prior to the Expiration
Date (as defined below). All New INDUS Securities will be subject to the terms
of this Voting Agreement to the same extent and in the same manner as if they
were INDUS Stock. The INDUS Stock and the New INDUS Securities shall be
collectively referred to herein as the "INDUS Securities." As used herein, the
term "Expiration Date" means the earliest to occur of (i) the Effective Time or
(ii) such time as the Plan of Reorganization is terminated in accordance with
its terms.
1.2 Voting Agreement. Each Shareholder hereby agrees with TSW that, prior
----------------
to the Expiration Date, at any meeting of the shareholders of INDUS, however
called, and in any written action by consent of shareholders of INDUS, unless
otherwise directed in writing by TSW, each Shareholder shall vote the INDUS
Securities:
(i) for the approval of the Merger Agreements, and the transactions
contemplated thereby, including the INDUS Merger, and for the approval of any
action required in furtherance hereof and thereof.
(ii) against any action or agreement that would result in a breach of
any representation, warranty, covenant or obligation of INDUS in the Plan of
Reorganization; and
(iii) against the following actions (other than those actions that
relate to the INDUS Merger and the transactions contemplated by the Plan of
Reorganization): (A) any merger, consolidation or other business combination
involving INDUS or any subsidiary of INDUS with any party other than Newco, TSW
or their respective affiliates; (B) any sale, lease or transfer of more than any
significant part of the assets of INDUS or any subsidiary of INDUS to any party
other than Newco, TSW or their affiliates (except in the ordinary course of
business); (C) any reorganization, recapitalization, dissolution or liquidation
of INDUS or any subsidiary of INDUS; (D) any change in a majority of the board
of directors of INDUS; (E) any amendment to the INDUS Articles of Incorporation,
(F) any material change in the capitalization of INDUS or INDUS's corporate
structure; or (G) any other action which is intended, or could reasonably be
expected to, impede, interfere with, delay, postpone, discourage or adversely
affect the Merger or any of the other transactions contemplated by the Plan of
Reorganization or this Voting Agreement.
Prior to the Expiration Date, each Shareholder shall not enter into any
agreement or understanding with any person to vote or give instructions in any
manner inconsistent with clause "(i)," "(ii)" or "(iii)" of the preceding
sentence.
1.3 Proxy: Further Assurances.
-------------------------
(i) Contemporaneously with the execution of this Voting Agreement,
each Shareholder shall deliver to TSW a proxy in the form attached hereto as
Attachment 2, which shall be
- ------------
irrevocable to the fullest extent permitted by law, with respect to the INDUS
Securities (the "Proxy").
-2-
<PAGE>
(ii) Each Shareholder shall perform such further acts and execute
such further documents and instruments as may reasonably be required to vest in
TSW the power to carry out and give effect to the provisions of this Voting
Agreement.
SECTION 2. WAIVER OF APPRAISAL RIGHTS
Shareholder hereby waives any rights of appraisal and any dissenters'
rights that Shareholder may have in connection with the INDUS Merger.
SECTION 3. NO SOLICITATION
Each Shareholder covenants and agrees with TSW that, during the period
commencing on the date of this Voting Agreement and ending on the Expiration
Date, each Shareholder shall not, directly or indirectly, (i) solicit or
initiate discussions or engage in negotiations with any person other than TSW or
take any action intended, designed or reasonably likely to facilitate the
efforts of any person, other than TSW, relating to the possible acquisition of
INDUS (whether by way of merger, purchase of its capital stock, purchase of
assets or otherwise) or any material portion of its capital stock or assets
("Acquisition Proposal"), (ii) furnish any nonpublic information regarding INDUS
to any person in connection with or in response to an Acquisition Proposal or
potential Acquisition Proposal; (iii) engage in discussions with any person with
respect to any Acquisition Proposal; (iv) approve, endorse or recommend any
Acquisition Proposal; or (v) enter into any letter of intent or other similar
document or any contract contemplating or otherwise relating to any Acquisition
Proposal. Each Shareholder shall immediately cease any existing discussions
with any persons other than TSW that relate to any Acquisition Proposal.
SECTION 4. OBLIGATIONS AS A DIRECTOR AND/OR OFFICER OF INDUS
If at any time prior to the Expiration Date any Shareholder or a
representative of any Shareholder is a member of the Board of Directors of INDUS
("Director") or an officer of INDUS, nothing in this Agreement shall limit or
restrict the Director or officer in acting in his capacity as a Director or
officer, as the case may be, of INDUS and in the exercise of his fiduciary
duties and responsibilities in such capacity, it being agreed and understood
that this Agreement shall apply to such Shareholder solely in his capacity as a
shareholder and shall not apply to the Director's or officer's actions,
judgments or decisions as a Director or officer of INDUS.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SHAREHOLDER
5.1 Representations, Warranties and Covenants of Shareholders. Each
---------------------------------------------------------
Shareholder represents, warrants and covenants as follows:
(i) Authority. Shareholder has full power and authority to enter
---------
into, execute, deliver and perform Shareholder's obligations under this Voting
Agreement and to make the representations, warranties and covenants herein
contained.
-3-
<PAGE>
(ii) INDUS Securities Owned. Except as otherwise disclosed in the
----------------------
INDUS Disclosure Letter, at the date hereof, all the INDUS Stock owned by
Shareholder are, and at all times until and through the Expiration Date all the
INDUS Securities owned by Shareholder will be, free and clear of any rights of
first refusal, co-sale rights, security interests, liens, pledges, claims,
options, charges or other encumbrances.
(iii) Transfer Restrictions on INDUS Securities. Shareholder agrees
-----------------------------------------
with TSW not to sell, transfer, encumber or dispose of, or offer to sell,
transfer, encumber or dispose of any INDUS Securities (other than to a party
that agrees in writing to be bound by the terms hereof and if such Transfer is
not restricted by the Affiliate Agreement dated the date hereof between
Shareholder and INDUS, Newco and TSW) until the INDUS Shareholder Approval is
granted.
(iv) Further Assurances. Shareholder agrees to execute and deliver
------------------
any additional documents reasonably necessary or desirable, in the opinion of
INDUS or TSW, to carry out the purposes and intent of this Voting Agreement.
SECTION 6. MISCELLANEOUS
6.1 Notices. Any notice or other communication required or
-------
permitted to be given under this Voting Agreement will be in writing, will be
delivered personally, by telecopier (with a hard copy also mailed), or by
registered or certified mail, postage prepaid and will be deemed given upon
delivery, if delivered personally, one business day after transmission by
telecopier with confirmation of receipt, or three (3) days after deposit in the
mails, if mailed, to the following addresses:
(i) If to TSW:
TSW, Inc.
3301 Windy Ridge Parkway
Atlanta, GA 30339
Telecopier: (770) 989-4461
Attention: Chief Executive Officer
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, NY 10019
Attention: Andrew Brownstein
Telecopier: (212) 403-2000
(ii) If to Shareholder:
To the address for notice for such Shareholder set forth on the
relevant Attachment I hereto,
-4-
<PAGE>
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Henry T. Massey, Jr., Esq.
Telephone: (415) 493-6811
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 6. 1.
6.2 Termination. This Voting Agreement shall be terminated and shall be
-----------
of no further force and effect upon the Expiration Date.
6.3 Counterparts. This Voting Agreement may be executed in any number of
------------
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Voting Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
6.4 Assignment; Binding Upon Successors and Assigns. Neither party hereto
-----------------------------------------------
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Voting Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
6.5 Waiver and Amendment. The waiver by a party of any breach hereof or
--------------------
default in the performance hereof will not be deemed to constitute a waiver of
any other default or any succeeding breach or default. This Voting Agreement
may be amended by the parties hereto upon the execution and delivery of a
written agreement executed by the parties hereto.
6.6 Governing Law. This Voting Agreement shall be governed by the laws of
-------------
the State of Delaware without giving effect to the principles of conflicts of
laws thereof.
6.7 Severability. If any term, provision, covenant or restriction of this
------------
Voting Agreement (or of the Plan of Reorganization) is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Voting Agreement (or
of the Plan of Reorganization, as the case may be) will remain in full force and
effect and will in no way be affected, impaired or invalidated. The parties
further agree to replace such invalid or unenforceable term with a valid and
enforceable provision that will achieve, to the greatest extent possible, the
economic, business and other purposes of the invalid or unenforceable provision.
6.8 Construction of Agreement. This Voting Agreement has been negotiated
-------------------------
by the respective parties hereto and their attorneys and the language hereof
will not be construed for or against either party. A reference to a Section
will mean a Section in this Voting Agreement unless
-5-
<PAGE>
otherwise explicitly set forth. The titles and headings herein are for reference
purposes only and will not in any manner limit the construction of this Voting
Agreement which will be considered as a whole.
6.9 Attorneys' Fees. Should suit be brought to enforce or interpret any
---------------
part of this Voting Agreement, the prevailing party will be entitled to recover,
as an element of the costs of suit and not as damages, reasonable attorneys'
fees to be fixed by the court (including without limitation, costs, expenses and
fees on any appeal). The prevailing party will be entitled to recover its costs
of suit, regardless of whether such suit proceeds to final judgment.
6.10 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that TSW will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Shareholders set forth herein. Therefore it is agreed that, in addition to any
other remedies that may be available to TSW upon any such violation, TSW shall
have the right to enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to TSW at law or in equity.
6.1 Partnership. TSW agrees that if a Shareholder is a limited
-----------
partnership, such Shareholder's general and limited partners shall in no event
be liable for any obligations or liabilities of such Shareholder under this
Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Voting Agreement
as of the date first set forth above.
TSW INTERNATIONAL, INC.
a Georgia corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
[SIGNATURE PAGE TO INDUS VOTING AGREEMENT]
[SIGNATURES OF SHAREHOLDERS FOLLOW]
-7-
<PAGE>
INDUS STOCK
Shareholder's Address for Notice:
---------------------------
---------------------------
---------------------------
Number of shares of INDUS capital stock
beneficially owned by the undersigned:
--------------------------
Number of options, warrants or other
convertible securities convertible into
INDUS capital stock beneficially owned by
the undersigned: --------------------------
SIGNATURE:
- ----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
ATTACHMENT 1
IRREVOCABLE PROXY
The undersigned shareholder of THE INDUS GROUP, Inc., a California
corporation (the "Company"), hereby irrevocably (to the fullest extent permitted
by law) appoints and constitutes ______ and TSW International, Inc., a Georgia
corporation ("TSW"), and each of them, the attorneys and proxies of the
undersigned with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to (i) the shares of capital
stock of the Company owned by the undersigned as of the date of this proxy,
which shares are specified on the final page of this proxy, and (ii) any and all
other shares of capital stock of the Company which the undersigned may acquire
after the date hereof until such time as this Proxy terminates in accordance
with its terms. (The shares of the capital stock of the Company referred to in
clauses (i) and (ii) of the immediately preceding sentence are collectively
referred to as the "Shares.") Upon the execution hereof, all prior proxies
given by the undersigned with respect to any of the Shares are hereby revoked,
and no subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting Agreement, dated as of the date hereof, between TSW
and the undersigned (the "Voting Agreement"), and is granted in consideration of
TSW entering into the Agreement and Plan of Merger and Reorganization, dated as
of the date hereof, among TSW, Newco Group, Inc. and the Company (the
"Reorganization Agreement"). Capitalized terms used but not otherwise defined
in this proxy have the meanings ascribed to such terms in the Reorganization
Agreement.
The attorneys and proxies named above will be empowered, and may exercise
this proxy, to vote the Shares at any time until the earlier to occur (the
"Expiration Date") of (i) the valid termination of the Reorganization Agreement
or (ii) the Effective Time (as defined in the Reorganization Agreement) at any
meeting of the shareholders of the Company, however called, or in any written
action by consent of shareholders of the Company:
(i) for the approval of the Merger Agreements, and the transactions
contemplated thereby, including the INDUS Merger, and for the approval of any
action required in furtherance hereof and thereof.
(ii) against any action or agreement that would result in a breach of any
representation, warranty, covenant or obligation of the Company in the Plan of
Reorganization; and
(ii) against the following actions (other than those actions that relate to
the INDUS Merger and the transactions contemplated by the Plan of
Reorganization): (A) any merger, consolidation or other business combination
involving the Company or any subsidiary of the Company with any party other than
Newco, TSW or their respective affiliates; (B) any sale, lease or transfer of
more than any significant part of the assets of the Company or any subsidiary of
the Company to any party other than Newco, TSW or their respective affiliates
(except in the ordinary course of business); (C) any reorganization,
recapitalization, dissolution or liquidation of the Company or any subsidiary
<PAGE>
of the Company; (D) any change in a majority of the board of directors of the
Company; (E) any amendment to the Company Articles of Incorporation; (F) any
material change in the capitalization of the Company or the Company's corporate
structure except as contemplated by the Reorganization Agreement; or (G) any
other action which is intended, or could reasonably be expected to, impede,
interfere with, delay, postpone, discourage or adversely affect the INDUS Merger
or any of the other transactions contemplated by the Reorganization Agreement or
the Voting Agreement.
Prior to the Expiration Date, at any meeting of the shareholders of the
Company, the attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares in their discretion with respect to (i)
any Acquisition Proposal (as such term is defined in the Voting Agreement) and
any related transaction or agreement and (ii) any action which is intended, or
could reasonably be expected, to facilitate the consummation of any Acquisition
Proposal.
The undersigned shareholder may vote the Shares on all other matters. This
proxy shall be binding upon the heirs, successors and assigns of the undersigned
(including any transferee of any of the Shares).
Any obligation of the undersigned hereunder shall be binding upon the
heirs, successors and assigns of the undersigned (including any transferee of
any of the Shares).
This proxy shall terminate upon the Expiration Date.
Dated:
----------------------------
---------------------------------------
Name:
----------------------------------
Number of Shares of Company
Common Stock:
--------------------------
<PAGE>
Exhibit 9.2
TSW VOTING AGREEMENT
This Voting Agreement (this "VOTING AGREEMENT") is made and entered
into as of June 5, 1997 (the "EFFECTIVE DATE") among The Indus Group, Inc., a
California corporation ("INDUS"), Newco Group, Inc., a Delaware corporation
("NEWCO"), Warburg, Pincus Investors, L.P. ("WARBURG"), John W. Blend, III and
John R. Oltman (together with Warburg, the "SHAREHOLDERS").
RECITALS
--------
A. This Voting Agreement is entered into pursuant to that certain
Agreement and Plan of Merger and Reorganization dated as of June 5, 1997, as
such may be amended (the "PLAN") entered into by and among INDUS, Newco and TSW
International, Inc., a Georgia corporation ("TSW"). The Plan provides for the
formation of a Georgia corporation ("SUB"), a wholly owned subsidiary of Newco,
and the statutory merger of Sub with and into TSW (the "TSW MERGER"), all
pursuant to the terms and conditions of the Plan and the Agreement of Merger to
be entered into between Sub and TSW in the form attached to the Plan (the
"AGREEMENT OF MERGER"). The Plan and the Agreement of Merger are collectively
referred to herein as the "MERGER AGREEMENTS." Capitalized terms used herein
and not defined herein shall have the meanings that such terms have in the Plan.
B. The Merger Agreements provide for the conversion of all of the
issued and outstanding stock of TSW at the Effective Time into shares of Newco
Common Stock, all as more particularly set forth in the Plan.
C. As a condition to the willingness of INDUS to enter into the Plan,
INDUS has required that Shareholders agree, and in order to induce INDUS to
enter into the Plan the Shareholders have agreed, to enter into this Voting
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. VOTING OF TSW SECURITIES
1.1 TSW Securities. Each Shareholder's signature page attached
--------------
hereto sets forth all shares of TSW capital stock and any other securities of
TSW owned by each Shareholder, including all securities of TSW as to which each
Shareholder has sole or shared voting or investment power, and all rights,
options and warrants to acquire shares of capital stock or other securities of
TSW granted to or held by each Shareholder (such shares of TSW capital stock,
other securities of TSW and rights, options and warrants to acquire shares of
TSW capital stock and other securities of TSW are hereinafter collectively
referred to as "TSW STOCK"). As used herein, the term "NEW TSW SECURITIES"
means, collectively, any and all shares of TSW capital stock, other securities
of TSW and rights, options and warrants to acquire shares of TSW capital stock
and other securities of TSW that each Shareholder may purchase or otherwise
acquire any interest in (whether of record or beneficially), on and after the
Effective Date
<PAGE>
of this Voting Agreement and prior to the Expiration Date (as defined below).
All New TSW Securities will be subject to the terms of this Voting Agreement to
the same extent and in the same manner as if they were TSW Securities. The TSW
Stock and the New TSW Securities shall be collectively referred to herein as the
"TSW SECURITIES". As used herein, the term "EXPIRATION DATE" means the earliest
to occur of (i) the Effective Time, or (ii) such time as the Plan may be
terminated in accordance with its terms.
1.2 Voting Agreement. Each Shareholder hereby agrees with INDUS and
----------------
Newco that, prior to the Expiration Date, at any meeting of the shareholders of
TSW, however called, and in any written action by consent of shareholders of
TSW, unless otherwise directed in writing by INDUS, each Shareholder shall vote
the TSW Securities:
(i) for approval of the Plan, the Agreement of Merger, and the
transactions contemplated thereby, including the TSW Merger, and for
approval of any action required in furtherance hereof and thereof;
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of TSW in
the Plan; and
(iii) against the following actions (other than those actions that
relate to the TSW Merger and the transactions contemplated by the Plan):
(A) any merger, consolidation or other business combination involving TSW
or any subsidiary of TSW with any party other than Newco, INDUS or their
respective affiliates; (B) any sale, lease or transfer of more than a
significant part of the assets of TSW or any subsidiary of TSW to any party
other than Newco, INDUS or their respective affiliates (except in the
ordinary course of business); (C) any reorganization, recapitalization,
dissolution or liquidation of TSW or any subsidiary of TSW; (D) any change
in a majority of the board of directors of TSW; (E) any amendment to the
Articles of Incorporation of TSW; (F) any material change in the
capitalization of TSW or TSW's corporate structure; or (G) any other
action which is intended, or could reasonably be expected to, impede,
interfere with, delay, postpone, discourage or adversely affect the TSW
Merger or any of the other trans actions contemplated by the Plan or this
Voting Agreement.
Prior to the Expiration Date, each Shareholder shall not enter into
any agreement or understanding with any person to vote or give instructions in
any manner inconsistent with clause "(i)", "(ii)" or "(iii)" of the preceding
sentence.
1.3 Proxy: Further Assurances.
--------------------------
(i) Contemporaneously with the execution of this Voting
Agreement, each Shareholder shall deliver to TSW a proxy in the form attached
hereto as Attachment 1, which shall be irrevocable to the fullest extent
------------
permitted by law, with respect to the INDUS Securities (the "PROXY").
(ii) Each Shareholder shall perform such further acts and execute
such further documents and instruments as may reasonably be required to vest in
TSW the power to carry out and give effect to the provisions of this Voting
Agreement.
<PAGE>
SECTION 2. WAIVER OF APPRAISAL RIGHTS
Each Shareholder hereby waives any rights of appraisal and any
dissenters' rights that such Shareholder may have in connection with the TSW
Merger and further specifically waives any rights to receive material required
by the Georgia Business Combination Code (the "GBCC") to be sent to such
Shareholder in a notice of the meeting of TSW shareholders held with respect to
the TSW Merger, including notice of any applicable dissenter's rights as
provided in Sections 14-2-1320 and 14-2-1322 of the GBCC.
SECTION 3. NO SOLICITATION
Each Shareholder covenants and agrees with INDUS and Newco that,
during the period commencing on the date of this Voting Agreement and ending on
the Effective Date, each Shareholder shall not, directly or indirectly, (i)
solicit or initiate discussions or engage in negotiations with any person other
than INDUS and Newco or take any action intended, designed or reasonably likely
to facilitate the efforts of any person, other than INDUS and Newco, relating to
the possible acquisition of TSW or any TSW Subsidiary (whether by way of merger,
purchase of its capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets ("ACQUISITION PROPOSAL"), (ii) furnish
any nonpublic information regarding TSW to any person in connection with or in
response to an Acquisition Proposal or potential Acquisition Proposal; (iii)
engage in discussions with any person with respect to any Acquisition Proposal;
(iv) approve, endorse or recommend any Acquisition Proposal; or (v) enter into
any letter of intent or other similar document or any contract contemplating or
otherwise relating to any Acquisition Proposal. Each Shareholder shall
immediately cease any existing discussions with any persons other than INDUS and
Newco that relate to any Acquisition Proposal.
SECTION 4. OBLIGATIONS AS A DIRECTOR AND/OR OFFICER OF TSW
If at any time prior to the Expiration Date any Shareholder or a
representative of any Shareholder is a member of the Board of Directors of TSW
("DIRECTOR") or an officer of TSW, nothing in this Agreement shall limit or
restrict the Director or officer in acting in his or its capacity as a Director
or officer, as the case may be, of TSW and in the exercise of his or its
fiduciary duties and responsibilities in such capacity, it being agreed and
understood that this Agreement shall apply to such Shareholder solely in his or
its capacity as a shareholder and shall not apply to the Director's or officer's
actions, judgments or decisions as a Director or officer of TSW.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS
OF SHAREHOLDERS
5.1 Representations, Warranties and Covenants of Shareholders. Each
---------------------------------------------------------
Shareholder represents, warrants and covenants as follows:
<PAGE>
(a) Authority. Shareholder has full power and authority to enter
---------
into, execute, deliver and perform Shareholder's obligations under this Voting
Agreement and to make the representations, warranties and covenants herein
contained.
(b) TSW Securities Owned. Except as otherwise disclosed in the TSW
--------------------
Disclosure Letter, at the date hereof, all the TSW Stock owned by Shareholder
are, and at all times until and through the Expiration Date all the TSW
Securities owned by Shareholder will be, free and clear of any rights of first
refusal, co-sale rights, security interests, liens, pledges, claims, options,
charges or other encumbrances.
(c) Transfer Restrictions on TSW Securities. Shareholder agrees with
---------------------------------------
INDUS not to sell, transfer, encumber or dispose of, or offer to sell, transfer,
encumber or dispose of (a "TRANSFER") any TSW Securities (other than to a party
that agrees in writing to be bound by the terms hereof (provided such Transfer
is not restricted by the Affiliate Agreement, dated the date hereof among
Shareholder and INDUS, Newco and TSW)) until the date on which the TSW
Shareholder Approval is granted.
(d) Further Assurances. Shareholder agrees to execute and deliver
------------------
any additional documents reasonably necessary or desirable, in the opinion of
TSW or INDUS, to carry out the purposes and intent of this Voting Agreement.
SECTION 6. MISCELLANEOUS
6.1 Notices. Any notice or other communication required or permitted
-------
to be given under this Voting Agreement will be in writing, will be delivered
personally, by telecopier (with a hard copy also mailed), or by registered or
certified mail, postage prepaid and will be deemed given upon delivery, if
delivered personally, one business day after transmission by telecopier with
confirmation of receipt, or three (3) days after deposit in the mails, if
mailed, to the following addresses:
(i) If to INDUS or to Newco:
THE INDUS GROUP, Inc.
60 Spear Street
San Francisco, California 94105
Attention: Chief Executive Officer
Telecopier: (415) 904-5050
With a copy to:
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Henry T. Massey, Jr., Esq.
Telecopier: (415) 493-6811
<PAGE>
(ii) If to a Shareholder: To the address for notice for such
Shareholder set forth on the relevant signature page attached hereto,
With copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
Telecopier: (212) 403-2000
and
Troutman Sanders LLP
NationsBank Plaza
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Attention: Robert W. Grout, Esq.
Telecopier (404) 885-3900
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 6.1.
6.2 Termination. This Voting Agreement shall be terminated and shall
-----------
be of no further force and effect upon the Expiration Date.
6.3 Counterparts. This Voting Agreement may be executed in any
------------
number of counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument. This Voting Agreement will become binding when one or
more counterparts hereof, individually or taken together, will bear the
signatures of both parties reflected hereon as signatories.
6.4 Assignment: Binding Upon Successors and Assigns. Neither party
------------------------------------------------
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other party hereto. This Voting Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
6.5 Waiver and Amendment. The waiver by a party of any breach hereof
--------------------
or default in the performance hereof will not be deemed to constitute a waiver
of any other default or any succeeding breach or default. This Voting Agreement
may be amended by the parties hereto upon the execution and delivery of a
written agreement executed by the parties hereto.
<PAGE>
6.6 Governing Law. This Voting Agreement shall be governed by the
-------------
laws of the State of Delaware, without giving effect to the principles of
conflicts of laws thereof. The parties consent to the personal jurisdiction of
and the venue in the state and federal courts within such county.
6.7 Severability. If any term, provision, covenant or restriction of
------------
this Voting Agreement (or of the Plan) is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Voting Agreement (or of the Plan,
as the case may be) will remain in full force and effect and will in no way be
effected, impaired or invalidated. The parties further agree to replace such
invalid or unenforceable term with a valid and enforceable provision that will
achieve, to the greatest extent possible, the economic, business and other
purposes of the invalid or unenforceable provision.
6.8 Construction of Agreement. This Voting Agreement has been
-------------------------
negotiated by the respective parties hereto and their attorneys and the language
hereof will not be construed for or against either party. A reference to a
Section will mean a Section in this Voting Agreement unless otherwise explicitly
set forth. The titles and headings herein are for reference purposes only and
will not in any manner limit the construction of this Voting Agreement which
will be considered as a whole.
6.9 Attorneys' Fees. Should suit be brought to enforce or interpret
---------------
any part of this Voting Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
6.10 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that INDUS and Newco will be irreparably harmed and that there will
be no adequate remedy at law for a violation of any of the covenants or
agreements of the Shareholders set forth herein. Therefore it is agreed that, in
addition to any other remedies that may be available to INDUS upon any such
violation, INDUS shall have the right to enforce such covenants and agreements
by specific performance, injunctive relief or by any other means available to
INDUS at law or in equity.
6.11 Partnership. Newco and INDUS agree that if a Shareholder is a
-----------
limited partnership, such Shareholder's general and limited partners shall in no
event be liable for any obligations or liabilities of such Shareholder under
this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Voting
Agreement as of the date first set forth above.
THE INDUS GROUP INC. NEWCO CORPORATION,
a California corporation a Delaware corporation
By:____________________________ By:________________________________
Name:__________________________ Name:______________________________
Title:_________________________ Title:_____________________________
[SIGNATURE PAGE TO TSW VOTING AGREEMENT]
[Signatures of Shareholders Follow]
<PAGE>
Shareholder's Address for Notice: ______
-----------------------------
-----------------------------
Name of class and series and
number of shares of TSW
capital stock beneficially
owned by the undersigned: ______
-----------------------------
-----------------------------
-----------------------------
Number of options, warrants
or other convertible securities
convertible into TSW
capital stock beneficially
owned by the undersigned: ______
SIGNATURE:
WARBURG, PINCUS INVESTORS, L.P.
By: Warburg, Pincus & Co.
General Partner
By:___________________________________
Partner
<PAGE>
Shareholder's Address for Notice: ______
-----------------------------
-----------------------------
Name of class and series and
number of shares of TSW
capital stock beneficially
owned by the undersigned: ______
-----------------------------
-----------------------------
-----------------------------
Number of options, warrants
or other convertible securities
convertible into TSW
capital stock beneficially
owned by the undersigned: ______
SIGNATURE: ____________________________
Print Name:
<PAGE>
Shareholder's Address for Notice: ______
-----------------------------
-----------------------------
Name of class and series and
number of shares of TSW
capital stock beneficially
owned by the undersigned: ______
-----------------------------
-----------------------------
-----------------------------
Number of options, warrants
or other convertible securities
convertible into TSW
capital stock beneficially
owned by the undersigned: ______
SIGNATURE: ____________________________
Print Name:
<PAGE>
ATTACHMENT 1
IRREVOCABLE PROXY
The undersigned shareholder of TSW International, Inc., a Georgia
corporation (the "Company"), hereby irrevocably (to the fullest extent permitted
by law) appoints and constitutes _______________ and THE INDUS GROUP, Inc., a
California corporation ("INDUS"), and each of them, the attorneys and proxies of
the undersigned with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to (i) the shares of capital
stock of the Company owned by the undersigned as of the date of this proxy,
which shares are specified on the final page of this proxy, and (ii) any and all
other shares of capital stock of the Company which the undersigned may acquire
after the date hereof until such time as this Proxy terminates in accordance
with its terms. (The shares of the capital stock of the Company referred to in
clauses (i) and (ii) of the immediately preceding sentence are collectively
referred to as the "Shares.") Upon the execution hereof, all prior proxies given
by the undersigned with respect to any of the Shares are hereby revoked, and no
subsequent proxies will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted
in connection with the Voting Agreement, dated as of the date hereof, between
INDUS, Newco Group, Inc. and the undersigned (the "Voting Agreement"), and is
granted in consideration of INDUS entering into the Agreement and Plan of Merger
and Reorganization, dated as of the date hereof, among TSW, Newco and the
Company (the "Reorganization Agreement"). Capitalized terms used but not
otherwise defined in this proxy have the meanings ascribed to such terms in the
Reorganization Agreement.
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the earlier to occur
(the "Expiration Date") of (i) the valid termination of the Reorganization
Agreement or (ii) the Effective Time (as defined in the Reorganization
Agreement), at any meeting of the shareholders of the Company, however called,
or in any written action by consent of shareholders of the Company:
(i) for the approval of the Merger Agreements, and the
transactions contemplated thereby, including the TSW Merger, and for the
approval of any action required in furtherance hereof and thereof.
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the Company in
the Plan of Reorganization; and
-1-
<PAGE>
(iii) against the following actions (other than those actions that
relate to the TSW Merger and the transactions contemplated by the Plan of
Reorganization): (A) any merger, consolidation or other business combination
involving the Company or any subsidiary of the Company with any party other than
Newco, INDUS or their respective affiliates; (B) any sale, lease or transfer of
more than any significant part of the assets of the Company or any subsidiary of
the Company to any party other than Newco, INDUS or their respective affiliates
(except in the ordinary course of business); (C) any reorganization,
recapitalization, dissolution or liquidation of the Company or any subsidiary of
the Company; (D) any change in a majority of the board of directors of the
Company; (E) any amendment to the Company Articles of Incorporation; (F) any
material change in the capitalization of the Company or the Company's corporate
structure except as contemplated by the Reorganization Agreement; or (G) any
other action which is intended, or could reasonably be expected to, impede,
interfere with, delay, postpone, discourage or adversely affect the TSW Merger
or any of the other transactions contemplated by the Reorganization Agreement or
the Voting Agreement.
Prior to the Expiration Date, at any meeting of the shareholders of
the Company, the attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares in their discretion with respect to (i)
any Acquisition Proposal (as such term is defined in the Voting Agreement) and
any related transaction or agreement and (ii) any action which is intended, or
could reasonably be expected, to facilitate the consummation of any Acquisition
Proposal.
The undersigned shareholder may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, successors and assigns of the
undersigned (including any transferee of any of the Shares).
-2-
<PAGE>
Any obligation of the undersigned hereunder shall be binding upon the
heirs, successors and assigns of the undersigned (including any transferee of
any of the Shares).
This proxy shall terminate upon the Expiration Date.
Dated:____________________
--------------------------
Name:_____________________
Name of class and series and
number of shares of TSW
capital stock represented
hereby:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
<PAGE>
EXHIBIT 10.1
INDUS INTERNATIONAL, INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
--------------------
. to attract and retain the best available personnel for positions of
substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall be
-------------
administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means Indus International, Inc., a Delaware corporation.
-------
(h) "Consultant" means any person, including an advisor, engaged by the
----------
Company or a Parent or Subsidiary to render services to such entity.
<PAGE>
(i) "Director" means a member of the Board.
--------
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors, who
--------
is employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
-2-
<PAGE>
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
-------------------------
as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within the
-------
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
------
(s) "Option Agreement" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
-----------------------
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
--------------
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Stock Plan.
----
(y) "Restricted Stock" means shares of Common Stock acquired pursuant to
----------------
a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
-----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
----------
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
-3-
<PAGE>
(cc) "Service Provider" means an Employee, Director or Consultant.
----------------
(dd) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 5,000,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be administered by
------------------------------
different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator determines
--------------
it to be desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.
(ii) Rule 16b-3. To the extent desirable to qualify transactions
----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
--------------------
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.
-4-
<PAGE>
(b) Powers of the Administrator. Subject to the provisions of the Plan,
---------------------------
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(ii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right of the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;
(vi) to institute an Option Exchange Program;
(vi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be
-5-
<PAGE>
withheld. The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined. All
elections by an Optionee to have Shares withheld for this purpose shall be made
in such form and under such conditions as the Administrator may deem necessary
or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
----------------------------------
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
-----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
-6-
<PAGE>
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
------------
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
-7-
<PAGE>
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share on
the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
-----------------------------------------------
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting
of Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
-8-
<PAGE>
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, upon the date of such
termination, the Optionee shall fully vest in and have the right to exercise the
Option as to all of the Optioned Stock, including Shares as to which the Option
would not otherwise be vested or exercisable, within such period of time as is
specified in the Option Agreement (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for twelve (12) months following the Optionee's termination. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant) by the Optionee's
-9-
<PAGE>
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance as to all of the Optioned Stock, including Shares as to which it
would not otherwise be vested or exercisable. In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
-10-
<PAGE>
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
------------------------------------------------------------------------
Sale.
----
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued 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." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
--------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding
-11-
<PAGE>
Option and Stock Purchase Right shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option or Stock Purchase Right, the Optionee shall
fully vest in and have the right to exercise the Option or Stock Purchase Right
as to all of the Optioned Stock, including Shares as to which it would not
otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option or Stock Purchase Right shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option or Stock Purchase Right shall terminate upon the
expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
-------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend, alter,
-------------------------
suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to
-12-
<PAGE>
exercise the powers granted to it hereunder with respect to Options granted
under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan, will
---------------------
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Stockholder Approval. The Plan shall be subject to approval by the
--------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
-13-
<PAGE>
INDUS INTERNATIONAL, INC.
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number ______________________________
Date of Grant ______________________________
Vesting Commencement Date ______________________________
Exercise Price per Share $______________________________
Total Number of Shares Granted ______________________________
Total Exercise Price $______________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ______________________________
Vesting Schedule:
----------------
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
[20% of the Shares subject to the Option shall vest twelve (12) months after
the Vesting Commencement Date, and twenty percent (20%) of the Shares subject to
the Option shall vest at the end of each subsequent twelve-month period
thereafter, so that all of the Shares shall be vested five (5) years after the
Vesting Commencement Date.]
<PAGE>
Termination Period:
------------------
This Option may be exercised for ninety days after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants to
---------------
the Optionee named in the Notice of Grant attached as Part I of this Agreement
(the "Optionee") an option (the "Option") to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the "Exercise Price"), subject to the terms and conditions
of the Plan, which is incorporated herein by reference. Subject to Section
15(c) of the Plan, in the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to Stock Administrator of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
3. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, AND (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares.
4. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to this
----------------
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Nonstatutory Stock Option. The Optionee may incur regular
-------------------------
federal and state income tax liability upon exercise of a NSO. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
-3-
<PAGE>
(ii) Incentive Stock Option. If this Option qualifies as an ISO,
----------------------
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one year,
---
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
-------------------------------------------------
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) two years after the grant date, or (ii) one year
after the exercise date, the Optionee shall immediately notify the Company in
writing of such disposition. The Optionee agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
from such early disposition of ISO Shares by payment in cash or out of the
current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING
-4-
<PAGE>
SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL
OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION
OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: INDUS INTERNATIONAL, INC.
_________________________________ ______________________________________
Signature By
_________________________________ ______________________________________
Print Name Title
_________________________________
Residence Address
_________________________________
-5-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
-6-
<PAGE>
EXHIBIT A
---------
1997 STOCK PLAN
EXERCISE NOTICE
Indus International, Inc.
60 Spear Street
San Francisco, CA 94105
Attention: Stock Administrator
1. Exercise of Option. Effective as of today, ________________, 199__, the
------------------
undersigned ("Purchaser") hereby elects to purchase ______________ shares (the
"Shares") of the Common Stock of Indus International, Inc. (the "Company") under
and pursuant to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement
dated _____________, 19___ (the "Option Agreement"). The purchase price for the
Shares shall be $_____________, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
----------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing
<PAGE>
signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: INDUS INTERNATIONAL, INC.
__________________________________ ___________________________________
Signature By
__________________________________ ___________________________________
Print Name Its
Address: Address:
- ------- -------
_________________________________ 60 Spear Street
_________________________________ San Francisco, CA 94105
_____________________________________
Date Received
-2-
<PAGE>
EXHIBIT 10.2
INDUS INTERNATIONAL, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the Common Stock of the Company.
------------
(d) "Company" shall mean Indus International, Inc., a Delaware
-------
corporation, and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
---------------
Period.
(i) "Exercise Date" shall mean the last day of each Offering Period.
-------------
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a
<PAGE>
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system for the last market trading
day on the date of such determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board.
(4) For purposes of the Enrollment Date under the first Offering
Period, the Fair Market Value shall be the initial price to the public as set
forth in the final Prospectus included within the Registration Statement on Form
S-1 filed with the Securities and Exchange Commission for the initial public
offering of the Company's Common Stock.
(k) "Offering Period" shall mean a period of approximately six (6)
---------------
months during which an option granted pursuant to the Plan may be exercised,
commencing on the first Trading Day on or after May 1 and terminating on the
last Trading Day in the period ending the following October 31, or commencing on
the first Trading Day on or after November 1 and terminating on the last Trading
Day in the period ending the following April 30; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and ending on the last Trading
Day on or before April 31, 1998. The duration of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
----
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Reserves" shall mean the number of shares of Common Stock
--------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the
-2-
<PAGE>
Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive
----------------
Offering Periods with a new Offering Period commencing on the first Trading Day
on or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 20 hereof; provided, however, that the first Offering Period under the
Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and ending on the last Trading Day on or before April 31, 1998. The
Board shall have the power to change the duration of Offering Periods (including
the commencement dates thereof) with respect to future offerings without
stockholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office at
least two weeks prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
-3-
<PAGE>
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than 2,000
shares (subject to any adjustment pursuant to Section 19), and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof,
-4-
<PAGE>
unless the participant has withdrawn pursuant to Section 10 hereof. The Option
shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
-------------------------
Employee for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
-5-
<PAGE>
period in which the participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be One Million (1,000,000)
shares, subject to adjustment upon changes in capitalization of the Company as
provided in Section 19 hereof. If, on a given Exercise Date, the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under the Plan who is living
at the time of such participant's death, the Company
-6-
<PAGE>
shall deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its discretion, may
deliver such shares and/or cash to the spouse or to any one or more dependents
or relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
----------------------------------------------------------------------
Merger or Asset Sale.
--------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase per Offering Period (pursuant to Section 7), as well as
the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of 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". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the
-7-
<PAGE>
consummation of such proposed dissolution or liquidation, unless provided
otherwise by the Board. The New Exercise Date shall be before the date of the
Company's proposed dissolution or liquidation. The Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, the Offering Period
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"). The New Exercise Date shall be before the date of the
Company's proposed sale or merger. The Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any other applicable law, regulation or
stock exchange rule), the Company shall obtain stockholder approval in such a
manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
-8-
<PAGE>
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
-9-
<PAGE>
EXHIBIT A
---------
INDUS INTERNATIONAL, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in the
Newco Group, Inc. 1997 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (up to 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note
that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):
__________________________________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I will be treated
for federal income tax purposes as having received ordinary income at the
time of such disposition in an amount equal to the excess of the fair
market value of the shares at the time such shares were purchased by me
over the price which I paid for the shares. I hereby agree to notify the
----------------------------
Company in writing within 30 days after the date of any disposition of
----------------------------------------------------------------------
shares and I will make adequate provision for Federal, state or other tax
-------------------------------------------------------------------------
<PAGE>
withholding obligations, if any, which arise upon the disposition of the
------------------------------------------------------------------------
Common Stock. The Company may, but will not be obligated to, withhold from
------------
my compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to the
Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time
after the expiration of the 2-year holding period, I understand that I will
be treated for federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of (1)
the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15%
of the fair market value of the shares on the first day of the Offering
Period. The remainder of the gain, if any, recognized on such disposition
will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
_______________________________________________________
(First) (Middle) (Last)
_____________________ ____________________________________________________
Relationship
____________________________________________________
(Address)
Employee's Social
Security Number: ____________________________________________________
Employee's Address: ___________________________________________________
___________________________________________________
___________________________________________________
-2-
<PAGE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: _________________ ______________________________________________________
Signature of Employee
______________________________________________________
Spouse's Signature (If beneficiary other than spouse)
-3-
<PAGE>
EXHIBIT B
---------
INDUS INTERNATIONAL, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Indus
International, Inc. 1997 Employee Stock Purchase Plan which began on ___________
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
____________________________________
____________________________________
____________________________________
Signature:
____________________________________
Date: ______________________________
<PAGE>
EXHIBIT 10.3
INDUS INTERNATIONAL, INC.
1997 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1997 Director Option Plan
--------------------
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the common stock of the Company.
------------
(d) "Company" means Indus International, Inc., a Delaware corporation.
-------
(e) "Director" means a member of the Board.
--------
(f) "Employee" means any person, including officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(h) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable; or
<PAGE>
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(i) "Inside Director" means a Director who is an Employee.
---------------
(j) "Option" means a stock option granted pursuant to the Plan.
------
(k) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(l) "Optionee" means a Director who holds an Option.
--------
(m) "Outside Director" means a Director who is not an Employee.
----------------
(n) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1997 Director Option Plan.
----
(p) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares of Common Stock (the "Pool"). The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
---------------------------------------------------
(a) Procedure for Grants. All grants of Options to Outside Directors
--------------------
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
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<PAGE>
(ii) Each Outside Director shall be automatically granted an
Option to purchase 10,000 Shares (the "First Option") on the date on which such
person first becomes an Outside Director, whether through election by the
stockholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that a Director who is an Outside Director on the date of
adoption of this Plan shall not receive a First Option; provided, further, that
an Inside Director who ceases to be an Inside Director but who remains a
Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 5,000 Shares (a "Subsequent Option") on the date of the
Company's annual meeting of stockholders upon such Outside Director's reelection
to the Board, provided that on such date the Outside Director shall have served
as a Director for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any exercise of an Option granted before the Company has obtained
stockholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be
as follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the First Option. In the event
that the date of grant of the First Option is not a trading day, the exercise
price per Share shall be the Fair Market Value on the next trading day
immediately following the date of grant of the First Option.
(D) subject to Section 10 hereof, the First Option shall
become exercisable as to 25% percent of the Shares subject to the First Option
on each anniversary of its date of grant, provided that the Optionee continues
to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of the Subsequent Option shall be ten (10)
years.
(B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Subsequent Option. In the
event that the date of grant of
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<PAGE>
the Subsequent Option is not a trading day, the exercise price per Share shall
be the Fair Market Value on the next trading day immediately following the date
of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent Option
shall become exercisable as to 25% percent of the Shares subject to the
Subsequent Option on each anniversary of its date of grant, provided that the
Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the stockholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the Shares to
---------------------
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
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<PAGE>
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
----------------------------------------------
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of such termination, and to the extent that the Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
----------------------
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such termination, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option
on the date of termination, or if he or she does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein, the Option
shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to
-5-
<PAGE>
exercise such Option does not exercise such Option (to the extent otherwise so
entitled) within the time specified herein, the Option shall terminate.
9. Non-Transferability of Options. Unless determined otherwise by the
------------------------------
Administrator, an option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares 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." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the
Option or equivalent option shall continue to be exercisable as provided in
Section 4 hereof for so long as the Optionee serves as a Director or a director
of the Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(b) through (d)
above.
-6-
<PAGE>
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
-7-
<PAGE>
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
16. Stockholder Approval. The Plan shall be subject to approval by the
--------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
-8-
<PAGE>
EXHIBIT 10.13
LOAN AND SECURITY AGREEMENT
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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<PAGE>
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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<PAGE>
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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"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
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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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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 10.14
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 10.15
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>
EXHIBIT 10.16
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>
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 10.17
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 10.18
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 FROM 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 10.19
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.
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(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.
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(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.
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(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.
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(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.
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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.
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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.
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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.
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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.
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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.
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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.
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(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.
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(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.
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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 10.20
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
works 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 10.21
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 10.22
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
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<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
-3-
<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
(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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<PAGE>
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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<PAGE>
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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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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(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 10.23
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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<PAGE>
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
-10-
<PAGE>
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
-11-
<PAGE>
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.
-12-
<PAGE>
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.
-13-
<PAGE>
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 10.24
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 10.25
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 11/20/99
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 10.25
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 10.24
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 10.26
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
<PAGE>
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;
3
<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
4
<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
6
<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.
7
<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
9
<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 10.27
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
((Pounds)100,000.00) 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 ((Pounds)100,00.00) (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 and penalty or premium
therefor, prepay all or any portion of the outstanding principal of the Loan;
provided, however, that Borrower first pay 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,
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<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 30338. 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 interest 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 an 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
Pound 100,000.00 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
TWS 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
(Pound 100,000.OO), 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 dishoner, 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 10.28
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
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<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.
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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
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<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 10.29
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
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<PAGE>
EXHIBIT 10.30
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.
2
<PAGE>
(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)
--------------------------
3
<PAGE>
EXHIBIT 10.31
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
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(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
6
<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
2
<PAGE>
EXHIBIT 10.32
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.
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.
"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 10.33
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>
EXHIBIT 10.34
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 10.35
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
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TABLE OF CONTENTS
Page
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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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LEASE AGREEMENT
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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:
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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
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(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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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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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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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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(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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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.
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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)
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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
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<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.
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<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.
<PAGE>
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.
- 2 -
<PAGE>
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
- 3 -
<PAGE>
(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"
- 4 -
<PAGE>
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.
- 5 -
<PAGE>
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.
<PAGE>
(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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<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
(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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<PAGE>
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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<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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:
14
<PAGE>
(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.
15
<PAGE>
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
16
<PAGE>
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.
17
<PAGE>
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)
---------------------
Walter Ashmore
19 May 1993 Revised
Page Two
<TABLE>
<CAPTION>
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
Second Expansion Space
(Crosshatched)
[Graphic]
[Drawing of Second Expansion Space]
<PAGE>
EXHIBIT 11.2
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 Registrant
INDUS, INC. CALIFORNIA
TSW, INC. GEORGIA
<PAGE>
EXHIBIT 21.3
SUBSIDIARIES OF TSW INTERNATIONAL, INC.
<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 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" and
"Indus Selected Historical Financial Information" and to the use of our report
dated January 24, 1997, included in the Joint Proxy Statement of The Indus
Group, Inc. and TSW International, Inc., that is made a part of the
Registration Statement (Form S-4) and related Prospectus of Indus
International, Inc.
We also consent to the incorporation by reference therein of our report
dated January 24, 1997 with respect to the financial statement schedule of The
Indus Group, Inc. for the years ended December 31, 1996, 1995 and 1994
included in the Annual Report (Form 10-K) for 1996 filed with the Securities
and Exchange Commission.
/s/ ERNST & YOUNG LLP
Palo Alto, California
August 6, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" and
"TSW Selected Historical Financial Information" and to the use of our report
dated April 18, 1997, included in the Joint Proxy Statement of The Indus
Group, Inc. and TSW International, Inc., that is made a part of the
Registration Statement (Form S-4) and related Prospectus of Indus
International, Inc.
Our audit also included the financial statement schedule of TSW
International, Inc. included in Part 2 of the Registration Statement (Form S-
4). This 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.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
August 6, 1997
<PAGE>
EXHIBIT 23.5
CONSENT OF COWEN & COMPANY
We hereby consent to the use of Appendix B-1 containing our opinion letter
dated June 5, 1997 (the "Opinion") to the board of directors of The Indus
Group, Inc. ("Indus") in the Joint Proxy Statement/Prospectus constituting a
part of the registration statement on Form S-4 of Indus International, Inc.
relating to the business combination of Indus and TSW International, Inc. and
to the references to our firm name in the Joint Proxy Statement/Prospectus in
connection with references to the Opinion. In giving this consent, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
(collectively, the "Act"), nor do we admit that we are experts within the
meaning of the term "experts" as used in the Act.
Cowen & Company
Date: August 6, 1997 By: /s/ Timothy J. Ng
----------------------------------
Name: Timothy J. Ng
Title: Director
<PAGE>
EXHIBIT 23.6
CONSENT OF ALEX. BROWN & SONS INCORPORATED
We hereby consent to the use of Appendix B-2 containing our opinion letter
dated June 5, 1997 (the "Opinion") to the board of directors of TSW
International, Inc. ("TSW") in the Joint Proxy Statement/Prospectus
constituting a part of the registration statement on Form S-4 of Indus
International, Inc. relating to the business combination of TSW and The Indus
Group, Inc. and to the references to our firm name in the Joint Proxy
Statement/Prospectus in connection with references to the Opinion. In giving
this consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder (collectively, the "Act"), nor do we admit
that we are experts with respect to any part of such registration statement
within the meaning of the term "experts" as used in the Act.
Alex. Brown & Sons Incorporated
Date: By: /s/ ALEX. BROWN & SONS INCORPORATED
-----------------------------------
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 0 6,215
<SECURITIES> 0 27,422
<RECEIVABLES> 0 55,093
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 94,388
<PP&E> 0 13,107
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 119,044
<CURRENT-LIABILITIES> 0 69,363
<BONDS> 0 0
0 0
0 0
<COMMON> 0 84,855
<OTHER-SE> 0 (711)
<TOTAL-LIABILITY-AND-EQUITY> 0 47,555
<SALES> 143,038 43,908
<TOTAL-REVENUES> 143,038 43,908
<CGS> 63,738 19,316
<TOTAL-COSTS> 64,739 18,833
<OTHER-EXPENSES> (1,887) (532)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,278 957
<INCOME-PRETAX> 12,674 5,227
<INCOME-TAX> 6,849 2,138
<INCOME-CONTINUING> (875) 3,089
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,825 3,089
<EPS-PRIMARY> 0.20 0.10
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
PROXY THE INDUS GROUP, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR 1997 SPECIAL MEETING OF SHAREHOLDERS
AUGUST 25,1997
The undersigned shareholder(s) of The Indus Group, Inc., a California
corporation, hereby acknowledges recept of the Notice of Special Meeting of
Shareholders and Proxy Statement, each dated August 12, 1997, and hereby
appoints Robert W. Felton, Frank W. Siskowski and Edward R. Koepfler as Proxies,
with full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 1997 Special Meeting of
Shareholders of The Indus Group, Inc. to be held on August 25, 1997 at 8:30
a.m., local time, at the corporate headquarters located at 60 Spear Street, San
Francisco, California and at any adjournment or postponement thereof, and to
vote all shares of Common Stock which the undersigned would be entitled to vote
if personally present on any of the following matters and with discretionary
authority as to any and all other matters that may properly come before the
meeting.
(CONTINUED, AND TO BE SIGNED ON THE OTHER SIDE)
<PAGE>
[X] Please mark
your votes
as this
1. Proposal to approve and adopt the Agreement and Plan FOR AGAINST ABSTAIN
of Merger and Reorganization, as amended, the Indus [ ] [ ] [ ]
Merger Agreement and the Merger, which transaction
provides for, among other things, the merger of Indus
Inc., a California corporation and a wholly-owned
subsidiary of Indus International, Inc. ("Indus
International"), with and into The Indus Group, Inc.
("Indus"), with the result that Indus will become a
wholly-owned subsidiary of Indus International;
the conversion of each outstanding share of Common
Stock of Indus, par value $0.0001 per share, into one
share of Common Stock of Indus International ("Indus
International Common Stock"); and the conversion of all
outstanding options to purchase an equivalent number of
shares of Indus International Common Stock, all as described
in the accompanying Joint Proxy Statement/Prospectus.
I PLAN TO ATTEND THE MEETING [ ] THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF NO
SPECIFICATION IS MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED
FOR EACH OF THE ABOVE PERSONS AND
PROPOSALS, AND FOR SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING
AS THE PROXY HOLDERS DEEM ADVISABLE.
SIGNATURE(S)_______________________________________ DATED _____________, 1997
(THIS PROXY SHOULD BE MARKED, DATED, AND SIGNED BY EACH SHAREHOLDER EXACTLY AS
SUCH SHAREHOLDER'S NAME APPEARS HEREON, AND RETURNED PROMPTLY IN THE ENCLOSED
ENVELOPE. PERSONS SIGNING IN A FIDUCIARY CAPACITY SHOULD SO INDICATE. A
CORPORATION IS REQUESTED TO SIGN ITS NAME BY ITS PRESIDENT OR OTHER AUTHORIZED
OFFICER, WITH THE OFFICE HELD DESIGNATED. IF SHARES ARE HELD BY JOINT TENANTS OR
AS COMMUNITY PROPERTY, BOTH HOLDERS SHOULD SIGN.)
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
<PAGE>
EXHIBIT 99.2
TSW INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 25, 1997
The undersigned hereby revokes all previous proxies, acknowledges receipt of
the Notice of Special Meeting of Shareholders to be held on August 25, 1997
(the "Notice") and appoints Christopher R. Lane and John F. Bartels as proxies,
each with the power to appoint his substitute, and hereby authorizes either of
them to act and vote all shares held by the undersigned at the special meeting
of shareholders of TSW International, Inc. ("TSW") to be held on August 25,
1997, and at any adjournments or postponement thereof, as indicated upon all
matters referred to on this proxy card and described in the Notice and, in
their discretion, upon any other matters which may properly come before the
meeting.
1.Approval and adoption of:
(i) an Agreement and Plan of Merger and Reorganization dated June 5, 1997
by and among TSW, The Indus Group, Inc., a California corporation
("Indus"), and Indus/TSW, Inc., a Delaware corporation ("Newco"), and
(ii) an Agreement of Merger among Newco, TSW and TSW Sub, Inc., a Georgia
corporation and a wholly-owned subsidiary of Newco,
pursuant to which, among other things, TSW and Indus will each become
wholly-owned subsidiaries of the Delaware corporation named "Indus
International, Inc."
FOR [_] AGAINST [_] ABSTAIN [_]
The Board of Directors recommends a vote FOR Proposal 1 which is described in
the Joint Proxy Statement/Prospectus of TSW dated August 12, 1997. This proxy,
when properly executed, will be voted as specified above, and in the discretion
of the proxy holders as to any other matter that may properly come before the
meeting. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR
PROPOSAL 1.
Dated: _____________________________________
______________________________________(SEAL)
(SIGNATURE)
______________________________________(SEAL)
(SIGNATURE)
NOTE: Please sign above exactly as name
appears on the Stock Certificate. If stock
is held in the name of two or more persons,
all must sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such.
<PAGE>
Exhibit 99.3
CONSENT OF CHRISTOPHER R. LANE
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by Indus International, Inc., a
Delaware corporation ("Newco"), to the undersigned being named as a director of
Newco upon the consummation of the Merger described in such Registration
Statement.
/s/CHRISTOPHER R. LANE
------------------------------
<PAGE>
Exhibit 99.4
CONSENT OF JOHN W. BLEND, III
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by Indus International, Inc., a
Delaware corporation ("Newco"), to the undersigned being named as a director of
Newco upon the consummation of the Merger described in such Registration
Statement.
/s/JOHN W. BLEND, III
------------------------------------------------
<PAGE>
Exhibit 99.5
CONSENT OF EDWARD R. KOEPFLER
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by Indus International, Inc., a
Delaware corporation ("Newco"), to the undersigned being named as a director of
Newco upon the consummation of the Merger described in such Registration
Statement.
/s/EDWARD R. KOEPFLER
------------------------------------------------
<PAGE>
Exhibit 99.6
CONSENT OF RICHARD W. MACALMON
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by Indus International, Inc., a
Delaware corporation ("Newco"), to the undersigned being named as a director of
Newco upon the consummation of the Merger described in such Registration
Statement.
/s/RICHARD W. MACALMON
------------------------------------------------
<PAGE>
Exhibit 99.7
CONSENT OF ALAN G. MERTEN
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by Indus International, Inc., a
Delaware corporation ("Newco"), to the undersigned being named as a director of
Newco upon the consummation of the Merger described in such Registration
Statement.
/s/ALAN G. MERTEN
------------------------------------------------
<PAGE>
Exhibit 99.8
CONSENT OF WILLIAM H. JANEWAY
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by Indus International, Inc., a
Delaware corporation ("Newco"), to the undersigned being named as a director of
Newco upon the consummation of the Merger described in such Registration
Statement.
/s/WILLIAM H. JANEWAY
------------------------------
<PAGE>
Exhibit 99.9
CONSENT OF JOSEPH P. LANDY
In accordance with Rule 438 promulgated under the Securities Act of
1933, as amended, the undersigned hereby consents to reference in the
Registration Statement on Form S-4 filed by Indus International, Inc., a
Delaware corporation ("Newco"), to the undersigned being named as a director of
Newco upon the consummation of the Merger described in such Registration
Statement.
/s/JOSEPH P. LANDY
-----------------------------
