<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number 0-11965
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
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(Exact name of Registrant as specified in its charter)
California 13-3179284
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
440 Mission Court, Suite 250, California 94539
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 656-1855
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No __
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Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
(a limited partnership)
STATEMENT OF NET ASSETS
(in process of liquidation)
September 30, 1996
(Unaudited)
<TABLE>
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<S> <C>
Assets
Cash and cash equivalents $1,422,161
Royalty receivable 130,000
Investment in joint venture at net realizable value 550,000
------------
Total assets 2,102,161
------------
Liabilities
Estimated liquidation costs 226,027
Accrued expenses and other liabilities 69,704
------------
Total liabilities 295,731
------------
Contingencies
Net assets in liquidation $1,806,430
------------
------------
Net assets in liquidation
Limited partners (73,903 units issued and outstanding) $1,577,638
General partner 228,792
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Total net assets in liquidation $1,806,430
------------
------------
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</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
(in process of liquidation)
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
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<S> <C> <C> <C>
Net assets in liquidation--June 30, 1996 $ 901,269 $153,640 $1,054,909
Changes in estimated liquidation values of assets and
liabilities 676,369 75,152 751,521
---------- -------- ----------
Net assets in liquidation--September 30, 1996 $1,577,638 $228,792 $1,806,430
---------- -------- ----------
---------- -------- ----------
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</TABLE>
The accompanying notes are an integral part of these statements
2
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PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
(a limited partnership)
STATEMENT OF FINANCIAL CONDITION
(going concern basis)
December 31, 1995
(Unaudited)
<TABLE>
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<S> <C>
ASSETS
Cash and cash equivalents $1,308,343
Royalties receivable 105,564
------------
Total assets $1,413,907
------------
------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accrued expenses and other liabilities $ 250,281
------------
Contingencies
Partners' capital
Limited partners (73,903 units issued and outstanding) 999,114
General partner 164,512
------------
Total partners' capital 1,163,626
------------
Total liabilities and partners' capital $1,413,907
------------
------------
</TABLE>
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The accompanying notes are an integral part of these statements
3
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PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
(a limited partnership)
STATEMENTS OF OPERATIONS
(going concern basis)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Nine Months Three Months
Ended Ended Ended
June 30, September 30, September 30,
1996 1995 1995
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<S> <C> <C> <C>
REVENUES
Royalty income $ 311,819 $ 767,576 $ 300,008
Gain on sale of investments in equity securities -- 65,707 1,965
Interest and other income 32,126 281,565 23,044
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343,945 1,114,848 325,017
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GENERAL AND ADMINISTRATIVE EXPENSES 223,662 301,444 121,830
----------- ------------- -------------
Net operating income 120,283 813,404 203,187
Estimated liquidation costs 229,000 -- --
----------- ------------- -------------
Net income (loss) $(108,717) $ 813,404 $ 203,187
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----------- ------------- -------------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $ (97,845) $ 732,064 $ 182,868
----------- ------------- -------------
----------- ------------- -------------
General partner $ (10,872) $ 81,340 $ 20,319
----------- ------------- -------------
----------- ------------- -------------
Net income (loss) per limited partnership unit $ (1.32) $ 9.91 $ 2.47
----------- ------------- -------------
----------- ------------- -------------
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</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(going concern basis)
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNER TOTAL
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<S> <C> <C> <C>
Partners' capital--December 31, 1995 $999,114 $164,512 $1,163,626
Net loss (97,845) (10,872) (108,717)
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Net assets in liquidation--June 30, 1996 $901,269 $153,640 $1,054,909
-------- -------- ----------
-------- -------- ----------
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The accompanying notes are an integral part of these statements
</TABLE>
4
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<PAGE>
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
(a limited partnership)
STATEMENT OF CASH FLOWS
(going concern basis)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Nine Months
Ended Ended
June 30, September 30,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Royalty income received $ 203,199 $ 644,845
Interest and other income received 32,126 2,095,453
General and administrative expenses paid (235,763) (91,747)
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Net cash (used in) provided by operating activities (438) 2,648,551
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CASH FLOWS FROM INVESTING ACTIVITIES
Collection of note receivable -- 1,842,393
Proceeds from the sale of investments in equity securities -- 1,757,897
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Net cash provided by investing activities -- 3,600,290
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CASH FLOWS FROM FINANCING ACTIVITIES
Distribution -- (7,061,842)
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Net decrease in cash and cash equivalents (438) (813,001)
Cash and cash equivalents at beginning of period 1,308,343 2,010,931
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Cash and cash equivalents at end of period $1,307,905 $ 1,197,930
---------- -------------
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RECONCILIATION OF NET INCOME (LOSS) TO NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES
Net income (loss) $ (108,717) $ 813,404
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Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Gain on sale of investments in equity securities -- (65,707)
Changes in:
Royalties receivable (108,620) (122,731)
Interest receivable -- 1,813,888
Estimated liquidation costs 229,000 --
Accrued expenses and other liabilities (12,101) 209,697
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Total adjustments 108,279 1,835,147
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Net cash (used in) provided by operating activities $ (438) $ 2,648,551
---------- -------------
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SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
1995
Converted holdings in The Allen Group Inc. Series B convertible debenture (principal of $84,478)
into 6,047 shares of common stock of The Allen Group Inc.
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</TABLE>
The accompanying notes are an integral part of these statements
5
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<PAGE>
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments necessary to
fairly present the financial statements of the PruTech Research and Development
Partnership (the ``Partnership'') as of September 30, 1996 subject to the
effects of any further liquidation accounting adjustments that would have been
required had the realizable values of assets and the amounts of liabilities been
known when the Partnership first adopted the liquidation basis of accounting.
(See discussion below.)
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1995.
R&D Funding Corp (the ``General Partner'') mailed to all limited partners a
consent solicitation statement dated April 10, 1996 (the ``Statement'') asking
for their written consent to approve a plan of dissolution and liquidation of
the Partnership (the ``Plan''), as more fully described in the Statement.
Holders of 68.5% of the limited partnership units approved the Plan on June 10,
1996 and accordingly, the Plan was adopted.
In accordance with the terms of the Plan, the General Partner will attempt to
sell or otherwise dispose of the Partnership's remaining investments and
distribute the resulting proceeds (reduced by a working capital reserve to
satisfy any liabilities or contingencies of the Partnership) to the partners in
an amount equal to their respective capital account balances at the time of
liquidation under the terms of the Partnership Agreement. It is not expected
that the Partnership's eventual total distributions will equal the partners'
initial investment.
As a result of the adoption of the Plan, the Partnership adopted the
liquidation basis of accounting effective June 30, 1996, whereby assets are
valued at their estimated net realizable values and liabilities are stated at
their estimated settlement amounts. However, due to the nature of the
Partnership's remaining investments, the General Partner was not able to predict
with any degree of certainty the amounts which will be realized from these
investments and therefore, such assets were carried at zero. Accruals totaling
$229,000 were recorded as of June 30, 1996 for the estimated future costs of
liquidating the Partnership which include, but are not limited to, costs of
selling or otherwise disposing of the Partnership's remaining investments and
general and administrative costs through the estimated conclusion of
liquidation. The General Partner estimates that the final liquidation of the
Partnership's remaining investments will occur by December 31, 1996; however,
due to the nature of these investments, liquidation may take longer.
During the three months ended September 30, 1996, the Partnership reflected
an increase of $752,000 in the estimated net liquidation value of its assets and
liabilities. This increase is a result of valuing the Partnership's interest in
a joint venture with American Software, Inc. at $550,000 as further discussed in
Note D. In addition, the Partnership accrued an additional $130,000 for
royalties due from Syntro Corporation, received an additional $59,000 of
royalties from the joint venture with American Software, Inc. and earned
interest on its cash and cash equivalents. No significant adjustments to
previously recorded liability amounts were required.
Direct costs incurred during 1996 in connection with the preparation,
printing and mailing of the Statement and the solicitation of votes of the
limited partners were $94,000 and are included in general and administrative
expenses on the statements of operations for the six months ended June 30, 1996.
B. Related Parties
The General Partner and its affiliates perform services for the Partnership
which include, but are not limited to: accounting and financial management;
registrar, transfer and assignment functions; asset management; investor
communications; printing and other administrative services. The General Partner
and its
6
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<PAGE>
affiliates receive reimbursements for costs incurred in connection with these
services, the amount of which is limited by the provisions of the Partnership
Agreement. These costs and expenses were $104,000 and $165,000 for the six
months ended June 30, 1996 and the nine months ended September 30, 1995,
respectively. General and administrative expenses payable to the General Partner
and its affiliates (which are included in accrued expenses and other
liabilities) at September 30, 1996 and December 31, 1995 were $48,000 and
$159,000, respectively.
Additionally, in conjunction with the adoption of the liquidation basis of
accounting, the Partnership recorded an accrual for the estimated future costs
expected to be incurred to liquidate the Partnership, as discussed in Note A
above. Included in these liquidation cost estimates as of September 30, 1996 are
approximately $202,000 expected to be charged by the General Partner and its
affiliates during the anticipated remaining liquidation period. The actual
charges will depend primarily upon the length of time required to liquidate the
Partnership and may differ from the amount accrued.
The Partnership maintains an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of the General Partner, for investment of
its available cash in short-term instruments pursuant to the guidelines
established by the Partnership Agreement.
Prudential Securities Incorporated, an affiliate of the General Partner,
owned 145 limited partnership units at September 30, 1996.
The Partnership has engaged in research and development co-investment
projects with PruTech Research and Development Partnership II, PruTech Research
and Development Partnership III, and PruTech Project Development Partnership
(collectively, the ``PruTech R&D Partnerships'') for which R&D Funding Corp
serves as the general partner. The allocation of the co-investment projects'
profits or losses among the PruTech R&D Partnerships is consistent with the
costs incurred to fund the research and development projects.
C. Contingencies
On April 15, 1994 a multiparty petition entitled Mack et al. v. Prudential
Securities Incorporated et al. (Cause No. 94-17695) was filed in the 80th
Judicial District Court of Harris County, Texas, purportedly on behalf of
investors in the Partnership against the Partnership, the General Partner,
Prudential Securities Incorporated, The Prudential Insurance Company of America
and a number of other defendants. The petition alleges common law fraud and
fraud in the inducement and negligent misrepresentation in connection with the
offering of the Partnership units; negligence and breach of fiduciary duty in
connection with the operation of the Partnership; civil conspiracy; and
violations of the Federal Securities Act of 1933 (sections 11 and 12), and of
the Texas Securities and Deceptive Trade Practices statutes. The suit seeks
among other things, compensatory and punitive damages, costs and attorneys'
fees. The ultimate outcome of this litigation as well as the impact on the
Partnership cannot presently be determined.
The General Partner, Prudential Securities Incorporated and the Partnership
believe they have meritorious defenses to the complaint and intend to vigorously
defend themselves against this action. Additionally, the General Partner
believes that the litigation discussed above will not have an adverse impact on
its ability to liquidate the Partnership in accordance with the Plan and in the
time frame currently contemplated by the General Partner.
D. Subsequent Event
Pursuant to an agreement dated October 31, 1996 between the Partnership and
American Software, Inc., the Partnership assigned to American Software, Inc. its
right, title and interest in and to PruTech American Joint Venture, a joint
venture with American Software, Inc., in exchange for $550,000 in cash. No
further royalty payments will be received by the Partnership from PruTech
American Joint Venture as a result of this agreement. In accordance with the
liquidation basis of accounting, the Partnership recorded the $550,000 on its
statement of net assets as of September 30, 1996.
7
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<PAGE>
PRUTECH RESEARCH AND DEVELOPMENT PARTNERSHIP
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's cash and cash equivalents at September 30, 1996 totalled
approximately $1,422,000. This amount is approximately $114,000 greater than the
Partnership's cash and cash equivalents at December 31, 1995 principally due to
the collection of royalty and interest amounts partially offset by payments of
the Partnership's liabilities.
As more fully discussed in Note A to the financial statements, the General
Partner mailed to all limited partners a consent solicitation statement dated
April 10, 1996 (the ``Statement'') asking for their written consent to approve a
plan of dissolution and liquidation of the Partnership (the ``Plan''), as more
fully described in the Statement. Holders of 68.5% of the limited partnership
units approved the Plan on June 10, 1996 and accordingly, the Plan was adopted.
In accordance with the terms of the Plan, the General Partner will attempt to
sell or otherwise dispose of the Partnership's remaining investments and
distribute the resulting proceeds (reduced by a working capital reserve to
satisfy any liabilities or contingencies of the Partnership) to the partners in
accordance with the terms of the Partnership Agreement. Due to the nature of the
Partnership's remaining investments, the General Partner is not able to predict
with any degree of certainty the timing of any sales, the proceeds that will be
received or the cash amounts that may ultimately be available for distribution
by the Partnership. It is not expected that the Partnership's eventual total
distributions will equal the partners' initial investment.
During the three months ended September 30, 1996, the Partnership reflected
an increase of $752,000 in the estimated net liquidation value of its assets and
liabilities. This increase is a result of valuing the Partnership's interest in
a joint venture with American Software, Inc. at $550,000 as further discussed in
Note D to the financial statements. In addition, the Partnership accrued an
additional $130,000 for royalties due from Syntro Corporation, received an
additional $59,000 of royalties from the joint venture with American Software,
Inc. and earned interest on its cash and cash equivalents. No significant
adjustments to previously recorded liability amounts were required.
Results of Operations
The Partnership adopted the liquidation basis of accounting as of June 30,
1996 in accordance with generally accepted accounting principles and no longer
reports results of operations. As such, there is no management's discussion
comparing the corresponding 1996 and 1995 periods.
8
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings--
This information is incorporated by reference to Note C to the financial
statements filed herewith in Item 1 of Part I of the Registrant's
Quarterly Report
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K--
(a) Exhibits:
PruTech Research and Development Partnership Amended and Restated
Agreement of Limited Partnership (incorporated by reference to
Exhibit 3.1 included with Registrant's Form S-1 Registration
Statement, File No. 2-86528, filed on November 16, 1983)
First Amendment to the Amended and Restated Agreement of Limited
Partnership of PruTech Research and Development Partnership
(incorporated by reference to Exhibit 3 included with Registrant's
Annual Report on Form 10-K filed March 28, 1992)
Second Amendment to the Amended and Restated Agreement of Limited
Partnership of PruTech Research and Development Partnership
(incorporated by reference to Exhibit 3 included with Registrant's
Annual Report on Form 10-K filed March 31, 1994)
Joint Venture Interest Purchase Agreement between the Registrant and
American Software, Inc. dated October 31, 1996 (filed herewith)
Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K--None
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PruTech Research and Development Partnership
By: R&D Funding Corp
A Delaware corporation, General Partner
By: /s/ Michael S. Hasley Date: November 14, 1996
----------------------------------------
Michael S. Hasley
President for the Registrant
By: R&D Funding Corp
A Delaware corporation, General Partner
By: /s/ Steven Carlino Date: November 14, 1996
----------------------------------------
Steven Carlino
Vice President
Chief Accounting Officer for the
Registrant
10
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JOINT VENTURE INTEREST PURCHASE AGREEMENT
THIS JOINT VENTURE INTEREST PURCHASE AGREEMENT (the
"Agreement") is made and entered into as of the 31st day of
October, 1996 (the "Effective Date"), by and between PRUTECH
RESEARCH AND DEVELOPMENT PARTNERSHIP, a California limited
partnership whose sole general partner is R&D Funding Corp., a
Delaware corporation ("Seller"), and AMERICAN SOFTWARE, INC.,
a Georgia corporation ("Buyer").
BACKGROUND INFORMATION
A. Pursuant to the Joint Venture Agreement of Prutech-
American (as amended by that certain First Amendment to Joint
Venture Agreement of Prutech-American, dated December 28, 1984,
the "Joint Venture Agreement"), made and entered into as of the
29th day of December, 1983, between Buyer and Seller, Buyer and
Seller formed Prutech-American to manufacture and market certain
existing mainframe software products (as more particularly
described in the Joint Venture Agreement) and to conduct
research into and to design, develop, produce, and, market
certain new computer software (as more particularly described
in the Joint Venture Agreement).
B. Immediately following the formation of the Joint
Venture, Buyer and Seller caused the Joint Venture to enter into
the following agreements to effectuate its purposes, as
described above (all such agreements are hereinafter
collectively referred to as the "Ancillary Agreements"):
(i) Base Technology Agreement, dated as of December
29, 1983, by and between Buyer and the Joint Venture,
as amended by that certain First Amendment to Base
Technology Agreement, dated December 28, 1984;
(ii) Contract for Research and Development, dated as
of December 29, 1983, by and between American
Software Research and Development Corp. and the Joint
Venture, as amended by that certain First Amendment
to Contract for Research and Development, dated
December 28, 1984, and as guaranteed by that certain
Guaranty from Buyer in favor of the Joint Venture,
dated as of December 29, 1983; and
(iii) Agreement for License or Sale of
Technology, dated as of December 29, 1983, by and
between Buyer and the Joint Venture, as amended by
that certain First Amendment to Agreement for License
or Sale of Technology, dated December 28, 1984.
<PAGE>
C. Seller proposes to sell and assign to Buyer, and Buyer
proposes to purchase from Seller, on the terms and subject to
the conditions set forth in this Agreement, Seller's entire
right, title, and interest in the Joint Venture ("Seller's
Interest"), including (i) Seller's entire economic and ownership
interest in the Joint Venture, including any and all rights to
distributions of money and/or property, whether accrued or
unaccrued, and regardless of whether currently owed or owing to
Seller, and (ii) to the extent such rights may exist, any right,
title, and interest of Seller in any real or personal property
of the Joint Venture, including without limitation, Intellectual
Property Rights (as hereinafter defined) of the Joint Venture.
D. In connection with Seller's sale and assignment of
Seller's Interest, Seller and Buyer agree to dissolve the Joint
Venture as of the Effective Date and commence the winding up of
its affairs pursuant to Section 9.01(c) of the Joint Venture
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual benefits contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Sale and Purchase. On November 6, 1996 (the "Closing
Date"), but effective as of the Effective Date, Seller agrees
to sell, assign, and transfer to Buyer, and Buyer agrees to
purchase from Seller, Seller's Interest upon the terms and
subject to the conditions hereinafter set forth. On the Closing
Date, Seller shall execute and deliver to Buyer the Bill of Sale
and Assignment of Joint Venture Interest (the "Bill of Sale and
Assignment"), in the form of Exhibit "A", attached hereto and
incorporated herein by reference, pursuant to which Seller shall
assign and deliver Seller's Interest to Buyer. The parties
expressly acknowledge and agree that the terms set forth in this
Agreement deviate from the purchase option terms in favor of
Buyer set forth in Section 8 of the Joint Venture Agreement, and
the parties expressly waive any rights or obligations arising
out of such Section of the Joint Venture Agreement.
2. Purchase Price. The purchase price for Seller's
Interest is the sum of Five Hundred Fifty Thousand and No/100
Dollars ($550,000.00) to be paid by Buyer to Seller on the
Closing Date, in cash or by wire transfer of immediately
available funds pursuant to wire instructions from Seller
attached hereto as Exhibit "B".
3. Representations and Warranties by Seller. As an
inducement to Buyer to enter into this Agreement, Seller
represents and warrants to Buyer as follows:
3.1 Organization. Seller is a limited partnership duly
organized, validly existing, and in good standing under the laws
of the State of California and has the requisite partnership
power to consummate the transactions contemplated herein.
2
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3.2 Authorization. Seller has full partnership power
and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions
contemplated hereby, and the execution, delivery, and
performance of this Agreement by Seller has been duly authorized
by all necessary partnership action. This Agreement has been
duly executed and delivered by Seller and, assuming the due
authorization, execution, and delivery by Buyer, constitutes the
legal, valid, and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
3.3 Seller's Interest. At the closing of the transactions
contemplated by this Agreement, Seller will transfer to Buyer
good, valid, and marketable title to Seller's Interest, free and
clear of all liens, charges, claims, encumbrances, and
restrictions.
3.4 No Conflict. Neither the execution, delivery, and
performance of this Agreement nor the consummation by Seller of
the transactions contemplated hereby (i) conflicts with,
violates, causes a default under, or, to Seller's knowledge,
requires consent, authorization, or approval under (A) any law,
regulation, order, writ, injunction, decree, determination, or
award by any court, governmental department, board, or agency,
(B) the Partnership Agreement or Certificate of Partnership of
Seller, or (C) any contract, agreement, instrument, mortgage,
note, lease, or other arrangement to which Seller is a party or
by which Seller, Seller's Interest, or any of Seller's property
may be bound; or (ii) results in the creation of any lien,
charge, claim, encumbrance, or restriction upon Seller's
Interest or any of the assets of Seller.
3.5 Litigation. There is no action, suit, or proceeding
pending or, to the knowledge of Seller, investigation pending
or action, suit, proceeding, or investigation threatened,
against or affecting Seller which would affect the ability of
Seller to transfer Seller's Interest to Buyer.
3.6 Intellectual Property Rights.
(a) It is the intent of the parties that Seller's
Interest shall expressly include, to the extent such rights
may exist by law or agreement, all right, title, and interest of
Seller in any real or personal property of the
Joint Venture, including, without limitation, all
Intellectual Property Rights (as hereinafter
defined) owned or used by Buyer or the Joint Venture
with respect to the business of the Joint
Venture, including, without limitation, those
Intellectual Property Rights arising out of or
relating to the Ancillary Agreements, and, effective
as of the Effective Date, Seller claims no rights of
ownership, license, or use over such Intellectual
Property Rights, and Seller makes no representations or
warranties regarding the Intellectual Property
Rights. For purposes hereof, "Intellectual
Property Rights" means (i) inventions, whether or not
patentable, whether or not reduced to practice, and
whether or not yet made the subject of a pending patent
application, (ii) ideas and conceptions or potentially
patentable subject matter, (iii) national and
multinational statutory invention registrations, patents, patent
registrations, and patent
3
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applications, and all rights therein, (iv)
trademarks, service marks, trade dress, logos, and
trade names, whether or not registered, including all
common law rights thereto, (v) copyrights (registered
or otherwise) and registrations and
applications for registration thereof and
all rights therein, (vi) computer software
(including, without limitation, "Research
Products", "Existing Products", and
"Derivatives", as such terms are defined in the
Joint Venture Agreement and the Ancillary Agreements),
including source codes, operating systems and
specifications, data, data bases, files,
documentation, and other materials related thereto,
(vii) trade secrets and confidential, technical,
and business information, (viii) whether or not
confidential, all technology (including,
without limitations, all "Technology" as defined in
the Joint Venture Agreement), including,
without limitation, know-how and show-how,
manufacturing and production processes and
techniques, research and development information,
drawings, specifications, designs, plans, proposals,
technical data, copyrightable works,
financial, marketing, and business data, pricing and
cost information, business and marketing plans, and
customer and supplier lists and information, (ix)
copies and tangible embodiments of all of the
foregoing, regardless of form or medium, and (x) all
revenues derived by Buyer, Seller or the Joint Venture
from any sale, license, or lease of all of the
foregoing, including without limitation "Sales
and Licensing Income", as such term is defined in the
Ancillary Agreements.
(b) Seller shall, and shall use reasonable efforts
to cause its personnel and agents to, hold in strict
confidence, not disclose to any person without the prior
written consent of Buyer, and not use in any manner
whatsoever, any confidential information remaining in its
possession concerning the Joint Venture and its
Intellectual Property Rights (except those Intellectual
Property Rights identified in subsection (a)(x) above,
which items may be reported by Seller to its equity
participants and as otherwise required by regulatory
authorities and governmental agencies). Seller shall
promptly destroy all materials remaining in its possession
containing any such confidential information, including
all copies, extracts, adaptations, and transcriptions
thereof. The foregoing notwithstanding, Seller may
disclose confidential information (a) where necessary to
any regulatory authorities or governmental agencies
pursuant to legal process or (b) if required by court
order or decree. For purposes of this Agreement,
information shall not be deemed confidential (a) to the
extent that such information is available from public
sources; (b) if such information is received from a third
party not under an obligation to keep such information
confidential; or (c) if the recipient can conclusively
demonstrate that such information was independently
developed by the recipient.
3.7 Tax Matters. All federal, state, and local returns,
declarations, reports, or statements filed by Seller, or caused
to be filed by Seller, in the name of or on behalf of the Joint
Venture have been timely filed. In acting as tax matters
partner for the Joint Venture, pursuant to Section 4.05 of the
Joint Venture Agreement, Seller has not negligently prepared,
distributed,
4
<PAGE>
or filed any tax returns or tax information reports
either on behalf of the Joint Venture, Buyer, Seller, or
Seller's partners and limited partners. The last filing for
federal and state income taxes was for the year ending December
31, 1995. To the knowledge of Seller, there are no federal,
state, or local tax liens upon any property of the Joint
Venture.
4. Representations and Warranties by Buyer. As an inducement
to Seller to enter into this Agreement, Buyer represents and
warrants to Seller as follows:
4.1 Organization. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Georgia and has the requisite corporate power to
consummate the transactions contemplated herein.
4.2 Authorization. Buyer has full corporate power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions
contemplated hereby, and the execution, delivery, and
performance of this Agreement by Buyer has been duly authorized
by all necessary corporate actions. This Agreement has been
duly executed and delivered by Buyer and, assuming the due
authorization, execution, and delivery by Seller, constitutes
the legal, valid, and binding obligations of Buyer, enforceable
against Buyer in accordance with its terms.
4.3 No Conflict. Neither the execution, delivery, and
performance of this Agreement nor the consummation by Buyer of
the transactions contemplated hereby conflicts with, violates,
or causes a default under, or, to Buyer's knowledge, requires
consent, authorization, or approval under (i) any law,
regulation, order, writ, injunction, decree, determination, or
award by any court, governmental department, board, or agency,
(ii) the Articles of Incorporation or By-Laws of Buyer, or (iii)
any contract, agreement, instrument, mortgage, note, lease, or
other arrangement to which Buyer is a party or by which Buyer
or any of Buyer's property may be bound.
5. Indemnification.
5.1 Indemnification by Seller. Upon consummation of the
closing of the transactions contemplated in this Agreement,
Seller shall indemnify, defend, and hold harmless Buyer and its
successors and assigns and the shareholders, directors,
officers, employees, and agents of each (collectively, the
"Buyer Group"), at, and at any time after, the Effective Date,
from and against any and all demands, claims, actions, or causes
of action, assessments, losses, damages, liabilities, costs, and
expenses, including reasonable fees and expenses of counsel,
other reasonable expenses of investigation, handling, and
litigation, and settlement amounts, together with interest and
penalties (collectively, a "Loss" or "Losses"), imposed upon,
or incurred by the Buyer Group by reason of, resulting from or
arising in connection with any breach of any representation or
warranty of Seller expressly contained in this Agreement or the
Bill of Sale and Assignment, excluding those liabilities arising
out of Buyer's indemnification obligation under Section 5.2
5
<PAGE>
below or otherwise owing to Buyer's fraud, bad faith, willful
misconduct, or gross negligence.
5.2 Indemnification by Buyer. Upon consummation of the
closing of the transactions
contemplated in this Agreement, Buyer shall indemnify, defend,
and hold harmless Seller and its successors and assigns and the
partners, directors, officers, employees and agents of each
(collectively, the "Seller Group"), at, and at any time after,
the Effective Date, from and against any and all Losses imposed
upon or incurred by the Seller Group by reason of, resulting
from or arising in connection with (i) any breach of any
representation or warranty of Buyer expressly contained in this
Agreement, (ii) all responsibilities and liabilities of the
Joint Venture, whether accrued or unaccrued, and regardless of
when arising, excluding those liabilities arising out of
Seller's indemnification obligation under Section 5.1 above or
otherwise owing to Seller's fraud, bad faith, willful
misconduct, or gross negligence, and (iii) Buyer's negligent
preparation, distribution, or filing of any tax return to be
prepared, distributed or filed by Buyer pursuant to Section 6
below.
5.3 Mutual Release. Upon consummation of the closing of
the transactions contemplated in this Agreement, each of Seller
and Buyer hereby agrees to the complete discharge, settlement,
and release of all claims, rights, causes of actions, suits,
matters and issues, whether known or unknown, accrued or
unaccrued, that either party may have, could have had, or in the
future might acquire in any court or proceeding (including, but
not limited to, any claims arising under federal or state law
relating to breach of contract, whether relating to the payment
of funds or otherwise), whether individual, class, derivative,
representative, legal, equitable, or any type or in any other
capacity against the other party hereto or any of its respective
associates, affiliates, subsidiaries, present or former
officers, directors, employees, attorneys, financial advisors
or other advisors or agents, heirs, executors, personal
representatives, estates, administrators, and successors and
assigns (collectively, the "Released Persons") which have
arisen, could have arisen, arise now or hereafter arise of, or
relate in any way to the rights or obligations of either party
under one or more of the Joint Venture Agreement, the Ancillary
Agreements and any other agreements or documents executed or
delivered by either party in connection therewith (collectively,
the "Settled Claims"); provided, however, that the Settled
Claims shall not include the rights of either party to enforce
the terms of this Agreement. Each party is hereby forever
barred and enjoined from commencing or prosecuting any action
asserting any claims, either directly, representatively,
derivatively or in any other capacity, against the other party
or any other Released Persons, which have been or could have
been asserted, or which arise out of or relate in any way to,
the Settled Claims.
6. Dissolution of the Joint Venture. By execution hereof,
Buyer and Seller (i) elect to immediately dissolve the Joint
Venture pursuant to Section 9.01(c) of the Joint Venture
Agreement, and (ii) acknowledge and consent to the termination,
as of the Effective Date, of the Ancillary Agreements. Seller
hereby authorizes Buyer to take any and all actions which Buyer
deems necessary or appropriate to wind up the affairs of, and
otherwise liquidate, the Joint
6
<PAGE>
Venture as of the Effective Date.
Buyer's and Seller's respective distributive shares of the Joint
Venture's income, gain, loss, and deduction for calendar year
1996 shall be determined on the basis of an interim closing of
all books of the Joint Venture as of the close of business on
the Effective Date, and shall not be based upon a proration of
such items for the entire taxable year. Buyer and Seller shall
cooperate in the filing of all required federal, state, and
local income tax returns and related returns and reports in a
manner consistent with this paragraph. The foregoing
notwithstanding, and notwithstanding anything to the contrary
contained in the Joint Venture Agreement, Seller acknowledges
and agrees that upon execution and delivery of this Agreement,
Seller shall retain no interest in, and shall not be entitled
to receive any distributions of money and/or property, whether
accrued or unaccrued prior to the Effective Date. Seller
acknowledges that Buyer's sole responsibility in connection with
the liquidation of the Joint Venture shall be to provide Seller
with a Form K-1 (and any other records required by law), and,
upon request, a copy of the return for the taxable year ended
October 31, 1996, which return shall be prepared in accordance
with historical tax reporting practices for the Joint Venture
indicating net income and the items thereof through the
Effective Date.
7. Miscellaneous
7.1 Survival. Each representation and warranty contained
herein or made pursuant hereto shall be deemed to be material
and to have been relied upon, and shall survive (a) the
execution and delivery of the Agreement for a period of six (6)
years from the Closing Date, and (b) any investigation at any
time made by or on behalf of any party hereto.
7.2 Entire Agreement Amendment. This Agreement, and the
documents executed and delivered pursuant hereto, constitute the
entire agreement between the parties with respect to the subject
matter hereof, and may be amended only by a writing signed on
behalf of each party.
7.3 Notices. Any notices or consents required or
permitted by this Agreement shall be in writing and shall be
deemed delivered if delivered in person or if sent by certified
mail, postage prepaid, return receipt requested, as follows,
unless such address is changed by written notice hereunder:
(a) If to Seller:
PruTech Research and Development Partnership
c/o R&D Funding Corp.
440 Mission Court, Suite 250
Fremont, California 94539
ATTN: Michael S. Hasley
7
<PAGE>
(b) If to Buyer:
American Software, Inc.
470 East Paces Ferry Road, N.E.
Atlanta, Georgia 30305
ATTN: President
7.4 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties, nor is this Agreement
intended to confer upon any other person except
the parties any rights or remedies hereunder.
7.5 Governing Law. This Agreement shall be construed as to
both validity and performance and enforced in accordance with and
governed by the laws of the State of California.
7.6 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and
the same instrument.
7.7 Captions. The section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
7.8 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes
of this Agreement, including, without limitation, all actions
necessary or appropriate, in the discretion of Buyer, to dissolve
and liquidate the Joint Venture pursuant to Section 6 above.
7.9 Expenses, Etc. Except as otherwise provided in this
Agreement, whether or not the transactions contemplated by this
Agreement are consummated, Seller and Buyer shall pay their
own expenses and the fees and expenses of their counsel, financial
advisors, accountants and other experts.
7.10 No Waiver Remedies. No failure on the part of any party
hereto to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
8
<PAGE>
7.11 Severability. Each provision of this Agreement is intended
to be severable, and if any term or provision of this Agreement
is determined to be illegal or invalid for any
reason whatsoever, such illegality or invalidity shall
not affect the validity or legality of the
remainder of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
BUYER:
AMERICAN SOFTWARE, INC. a Georgia
corporation
By: /s/ Peter Pamplin
---------------------------------
Its: Controller
--------------------------------
SELLER:
PRUTECH RESEARCH AND
DEVELOPMENT PARTNERSHIP,
a California limited partnership
By: R&D Funding Corp., a Delaware
corporation
Its: General Partner
By: /s/ Michael S. Hasley
---------------------------------
Its: President
--------------------------------
9
<PAGE>
<PAGE>
EXHIBIT "A"
BILL OF SALE OF ASSIGNMENT OF JOINT VENTURE INTEREST
KNOW ALL MEN BY THESE PRESENTS THAT Prutech Research and
Development Partnership ("Seller"), a California limited
partnership whose sole general partner is R&D Funding Corp.,
a Delaware corporation, hereby warrants to American
Software, Inc. ("Buyer"), a Georgia corporation, that
Seller is a joint venturer in Prutech-American (the "Joint Venture").
THAT FOR GOOD AND VALUABLE CONSIDERATION, receipt of which is
hereby acknowledged, Seller does hereby sell, assign, transfer,
convey, grant, bargain, set over, release, deliver, and confirm
unto Buyer, its successors and assigns, Seller's entire
right, title, and interest in the Joint Venture, including,
to the extent such rights may exist, any right, title, and
interest in any real or personal property of the Joint Venture, including
without limitation, Intellectual Property Rights (as defined in
the Joint Venture Interest Purchase Agreement (the "Agreement"),
dated as of even date herewith, between Seller and
Buyer) of the Joint Venture ("Seller's Interest"), free
and clear of all liens, charges, claims, encumbrances, and
restrictions, and Buyer hereby accepts Seller's Interest from Seller, TO
HAVE AND TO HOLD the same unto Buyer, forever.
IN WITNESS WHEREOF, Seller has caused this Assignment to be
duly executed as of the 31st day of October, 1996.
PRUTECH RESEARCH AND
DEVELOPMENT PARTNERSHIP, a
California limited partnership
By: R&D Funding Corp., a Delaware
corporation
Its: General Partner
By: /s/ Michael S. Hasley
--------------------------
Its: President
-------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information
extracted from the financial statements for PruTech
Research and Development Partnership and is qualified
in its entirety by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000728248
<NAME> PruTech Research and Development Partnership
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Sep-30-1996
<PERIOD-TYPE> 9-Mos
<CASH> 1,422,161
<SECURITIES> 0
<RECEIVABLES> 680,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,102,161
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,102,161
<CURRENT-LIABILITIES> 295,731
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,806,430
<TOTAL-LIABILITY-AND-EQUITY> 2,102,161
<SALES> 311,819<F1>
<TOTAL-REVENUES> 343,945<F1>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 452,662<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (108,717)<F1>
<EPS-PRIMARY> (1.32)<F1>
<EPS-DILUTED> 0
<FN>
<F1>
Reflects operations for the six months ended June 30, 1996
when the liquidation basis of accounting was adopted. See
Note A to the financial statements for further details.
</FN>
</TABLE>
