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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 6, 1999
REGISTRATION NO. 333-58639
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ROSS SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-2170198
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
2 CONCOURSE PARKWAY, SUITE 800
ATLANTA, GEORGIA 30328
(770) 351-9600
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
DENNIS V. VOHS
CHIEF EXECUTIVE OFFICER
ROSS SYSTEMS, INC.
2 CONCOURSE PARKWAY, SUITE 800
ATLANTA, GEORGIA 30328
(770) 351-9600
(Name, address, including zip code and telephone number, including area code, of
agent for service)
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COPIES TO:
MARIO M. ROSATI, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304-1050
(650) 493-9300
FAX: (650) 845-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time as the several selling stockholders may decide.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED(2) SHARE(1) PRICE(1) FEE(3)
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per share.......... 965,588 $2.125 $2,051,874.50 $571.00
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the Registration
fee pursuant to Rule 457. Based on the last reported sale price for the
Company's Common Stock on April 5, 1999.
(2) Shares issuable upon conversion of subordinated debentures (and interest
accrued thereon) in the principal amount of $1,333,333.00 issued by the
Registrant to a certain accredited investor in a private placement
transaction. See "Selling Stockholder" for a description of certain
assumptions made by the Registrant to determine the number of shares of
Common Stock to be registered hereunder. Pursuant to Rule 416 under the
Securities Act of 1933, any additional shares of Common Stock issued either
as a result of the provisions of the subordinated debentures pursuant to
which the Common Stock will be issued or by reason of a reduction in the
conversion price of the subordinated debentures in accordance with the terms
thereof are deemed to be registered herewith.
(3) In connection with the Registration Statement on Form S-3 (Registration
Number 333-58639) originally filed by the Registrant on July 7, 1998, the
Registrant paid to the Commission a filing fee of $2,981.00.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION DATED APRIL 6, 1999
PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
ROSS SYSTEMS, INC.
COMMON STOCK
This Prospectus relates to the offering by an investor (the "Selling
Stockholder") of (i) shares (the "Conversion Shares") of common stock, $0.001
par value per share (the "Common Stock") issuable upon conversion of convertible
subordinated debentures in the principal amount of $1,333,333.00 (the
"Debentures") issued by Ross Systems, Inc. (the "Company" or "Ross") and (ii) an
additional indeterminate number of shares of Common Stock (the "PIK Shares")
that may be issued as interest accrued on the Debentures. The Conversion Shares
and the PIK Shares collectively are referred to herein as the "Securities." The
number of Conversion Shares and PIK Shares offered for resale hereby will be
determined by formulae set forth in the Debentures (see "Selling Stockholder").
The Securities may be sold from time to time through brokers, to dealers
acting as principals, directly to purchasers in negotiated transactions, or any
combination of these methods of sale. In addition, shares may be transferred in
connection with the settlement of call options, short sales or similar
transactions that may be effected by the Selling Stockholder. Sales may be made
at prevailing market prices at the time of such sales, at prices related to such
prevailing prices, at fixed prices that may be changed or at negotiated prices.
See "Selling Stockholder" and "Plan of Distribution."
None of the proceeds from the sale of the Securities by the Selling
Stockholder will be received by the Company. The Company has agreed to bear all
expenses (other than selling commissions) in connection with the registration
and sale of the Securities being offered by the Selling Stockholder. The Company
has agreed to indemnify the Selling Stockholder against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
In connection with any sales, the Selling Stockholder and any brokers
participating in such sales may be deemed to be "underwriters" within the
meaning of the Securities Act. See "Selling Stockholder."
On April 5, 1999, the last sale price of the Company's Common Stock on the
Nasdaq National Market was $2.125 per share (symbol ROSS).
THE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS," COMMENCING
ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
AVAILABLE INFORMATION
As used in this Prospectus, unless the context otherwise requires, the terms
"Ross" and the "Company" mean Ross Systems, Inc., a Delaware corporation, and
its subsidiaries. The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports and proxy
statements and other information filed with the Commission pursuant to the
informational requirements of the Exchange Act may 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 following regional
offices of the Commission: New York Regional Office, 7 World Trade Center, Suite
1300, New York, New York 10048; and Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that filed
electronically with the Commission. The address of the site is
http://www.sec.gov.
The Company's Common Stock is traded on the Nasdaq National Market. Reports
and other information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
This Prospectus constitutes part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits thereto, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement,
copies of which may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the
fees prescribed by the Commission. Statements contained in this Prospectus as to
the contents of any contract or any other document filed, or incorporated by
reference, as an exhibit to the Registration Statement, are qualified in all
respects by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents, previously filed by the Company with the Commission
pursuant to the Exchange Act, are hereby incorporated by reference, except as
superseded or modified herein:
The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed March 22, 1991.
Annual Report on Form 10-K for the fiscal year ended June 30, 1998 (the
"Form 10-K Report").
Quarterly Reports on Form 10-Q for the quarterly periods ended September 30,
1998 and December 31, 1998 (the "Form 10-Q Reports").
Current Report on Form 8-K Filed with the Commission on April 2, 1999.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of this offering shall be deemed to be incorporated by reference
into this Prospectus and shall be part hereof from the date of filing of such
document. Any statement contained in any document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this Prospectus modifies or supersedes
such statement. Any such statement so
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<PAGE>
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Ross Systems, Inc. at its principal
offices located at 2 Concourse Parkway, Suite 800, Atlanta, Georgia 30328,
telephone (770) 351-9600, attention: Chief Financial Officer.
3
<PAGE>
RISK FACTORS
An investment in the shares being offered by this Prospectus involves a high
degree of risk. The following factors, in addition to those discussed elsewhere
in this Prospectus, should be carefully considered in evaluating the Company and
its business prospects before purchasing shares offered by this Prospectus. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus.
HISTORY OF LOSSES. In each of fiscal 1994, 1995, 1996 and 1997, the Company
incurred operating losses and net losses. In the year ended June 30, 1998 and
for the period from July 1, 1998 to December 31, 1998, the Company operated
profitably. There can be no assurance that the Company will be profitable in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Results of Operations" in the Company's Form 10-K Report
and Form 10-Q Reports.
FLUCTUATIONS IN OPERATING RESULTS. The Company has experienced significant
quarterly fluctuations in operating results and anticipates that such
fluctuations may occur in the future. See quarterly financial information
contained in Note 15 to the Consolidated Financial Statements in the Form 10-K
Report. Quarterly revenues depend on the volume and timing of orders received
during the quarter, which are difficult to forecast. The Company generally ships
orders as received and, as a result, typically has little or no backlog.
Historically, the Company has often realized a substantial portion of its
software product license revenues in the last two weeks of a quarter. Due to the
Company's relatively low cost of incremental software product license revenues,
any shortfall or delay in software product license revenues has an immediate and
substantial impact on profitability in the quarter. Operating results may also
fluctuate due to factors such as the demand for the Company's products, the size
and timing of customer orders, the introduction of new products and product
enhancements by the Company or its competitors, changes in the proportion of
revenues attributable to software product licenses versus consulting and other
services, changes in the level of operating expenses, and competitive conditions
in the industry. Many of the factors that could result in quarterly fluctuations
are not within the Company's control. Fluctuations in operating results may
result in volatility in the price of the Company's Common Stock. During the
period including fiscal 1998 and 1999 through the date of this prospectus, the
market prices of the Common Stock have ranged from a high of $5.0625 to a low of
$2.375.
LIQUIDITY AND CAPITAL RESOURCES. In fiscal 1997 and for the period from
July 1, 1998 to December 31, 1998, the Company used cash of $7.1 million and
$6.5 million, respectively, for operations and for investments in capitalized
software, property and equipment. In fiscal 1998, the cash provided by the
Company's operations exceeded its investment in capitalized software, property
and equipment by $600,000. There can be no assurance that this positive cash
position will occur in future fiscal periods. At December 31, 1998, the Company
had cash deposits of $6.5 million and total borrowings of $11.6 million against
a $15 million revolving credit facility. Borrowings under the revolving credit
facility are collateralized by substantially all of the assets of the Company
and availability is based on eligible accounts receivable, as determined in the
lender's sole discretion. Based on eligible accounts receivable at December 31,
1998, the Company's borrowing power under the revolving credit facility,
combined with the Company's cash and cash equivalents, was $6.5 million.
In fiscal 1995, 1996, 1997 and 1998, the Company issued equity securities to
finance its operations. These issuances have increased the number of Common and
Common equivalent shares outstanding by approximately 51% since the end of
fiscal 1995. On February 6, 1998, the Company entered into an agreement with
certain qualified investors, including the Selling Stockholder (collectively,
the "Investors") relating to a private placement of convertible subordinated
debentures in the aggregate principal amount of up to $10,000,000. The Investors
invested $6,000,000 at the closing on February 6, 1998, and invested $4,000,000
on June 16, 1998 (the "Second Closing"). Substantially all of proceeds from the
debenture
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<PAGE>
financing have been used to improve the Company's balance sheet and lower its
debt service expense. To date, the Company has issued 924,701 shares of Common
Stock upon conversion of the debentures and the interest accrued thereon which
have increased the number of Common Stock and Common equivalent shares
outstanding by approximately 4.4% since the end of June 1998. Because the number
of shares of Common Stock issuable by the Company upon conversion of the
debentures and the interest accrued thereon is based on conversion formulae
which are set forth in the debentures and therefore is not fixed, it is not
possible to determine the increase in the number of shares of Common Stock and
Common equivalent shares outstanding as a result of the issuance of such shares
of Common Stock issuable by the Company upon conversion of the debentures and
the interest accrued thereon. However, the percentage increase could be greater
than 20%. On October 1, 1998, the Company redeemed $2,667,000 of the $4,000,000
Second Closing debentures at a redemption price of $2,880,000 (108% of the face
amount of the Second Closing debentures). The only Second Closing debentures not
redeemed are the Debentures held by the Selling Stockholder. The Company and the
Selling Stockholder agreed to certain changes to the conversion features of the
Debentures that, among other things, precludes conversion at the option of the
Selling Stockholder prior to October 7, 1999 and fixes a minimum conversion
price of $4.00 per share if conversion occurs prior to October 7, 1999 (after
October 7, 1999, the conversion price and the Selling Stockholder's ability to
convert the Debenture at its option will be on the terms set forth in the
original Debenture).
INTERNATIONAL SALES. The Company derived approximately 31%, 33%, 31% and
34% of its total revenues from international sales in fiscal 1996, 1997, 1998
and for the period from July 1, 1998 to December 31, 1998, respectively, and
expects that such sales will continue to generate a significant percentage of
total revenues. Pacific Rim software product license revenues were $3.3 million
and $2.9 million for fiscal year 1998 and the period from July 1, 1998 to
December 31, 1998, respectively. Pacific Rim software product license revenue is
heavily concentrated with with 58%, or $2.5 million, of the 1998 total with one
distributor in Japan. There can be no assurance that this distributor will
continue to distribute the Company's products beyond fiscal year 1999. To date,
the Company has not sought to hedge the risks associated with currency
fluctuations, but may engage in such transactions in the future in order to
reduce its exposure to currency fluctuations. The Company is also subject to
other risks associated with international operations, including tariff
regulations, unexpected changes in regulatory requirements, longer accounts
receivable payment cycles, potentially adverse tax consequences, economic and
political instability, restrictions on repatriation of earnings, and the burdens
of complying with a wide variety of foreign laws. There can be no assurance that
such factors will not have a material adverse effect on the Company's future
international sales and, consequently, on the Company's business, financial
condition and results of operations. See "Business--Marketing and Sales" in the
Form 10-K Report and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations" in the Form 10-K
Report and the Form 10-Q Reports.
RAPID TECHNOLOGICAL CHANGE; PRODUCT TRANSITIONS. The market for the
Company's products is characterized by ongoing technological developments,
evolving industry standards and rapid changes in customer requirements. As a
result, the Company's prospects depend upon its ability to continue to enhance
its existing products, develop and introduce in a timely manner new products
that take advantage of technological advances, and respond to new customer
requirements. There can be no assurance that the Company will be successful in
developing and marketing enhancements to its existing products or new products
incorporating new technology on a timely basis, or that its new products will
adequately address the changing needs of its markets. If the Company is unable
to develop and introduce new products, or enhancements to existing products, in
a timely manner in response to changing market conditions or customer
requirements, the Company's business and results of operations will be
materially and adversely affected. From time to time, the Company or its
competitors may announce new products, capabilities or technologies that have
the potential to replace or shorten the life cycles of the Company's existing
products. There can be no assurance that announcements of currently planned or
other new products will not cause customers to defer purchasing existing Company
products. Delays or difficulties associated with
5
<PAGE>
new product introductions or product enhancements could have a material adverse
effect on the Company's business, financial condition and results of operations.
Software products as complex as those offered by the Company may contain
undetected errors when first introduced or as new versions are released. There
can be no assurance that errors will not be found in new products after
commencement of commercial shipments, resulting in a loss of or delay in market
acceptance. See "Business--Competition" in the Form 10-K Report.
COMPETITION. The business applications software market is intensely
competitive. Due to the breadth of the Company's product line, it competes with
a broad range of applications software companies. The Company's primary
competitors include the following: business application software providers which
offer products on multiple platforms, such as Baan Company NV, Oracle
Corporation, PeopleSoft, Inc. and SAP AG; and business applications software
providers in vertical markets that offer products that compete with the
Company's process manufacturing products, such as J.D. Edwards & Company, Marcam
Solutions, Inc., QAD, Inc. and System Associates, Inc. Additionally, the Company
faces competition from third party business application processing providers
operating on minicomputers such as the IBM AS/400. Many of the Company's
competitors have substantially greater financial, technical, marketing and sales
resources than the Company. See "Business--Competition" in the Form 10-K Report.
DEPENDENCE ON AND RELATIONSHIP WITH MICROSOFT. A significant portion of the
Company's total revenues are derived from business application software products
and related services for users of client/server computers. The Company's
business therefore depends to a large extent on the success of client/server
computers in the commercial marketplace. In particular, the Company believes
that Microsoft's NT operating system plays and will continue to play an
important role in the client/server market as the operating system secures a
majority of new installations in the client/server environment due to its low
cost and ease of use. The Company's business would be materially and adversely
affected if commercial market share for client/server computers declined or if
their installed customer base in this market eroded. The Company considers its
close relationship with Microsoft in software product development activities to
be strategic to the Company's business. The Company would be materially and
adversely affected if Microsoft decided to terminate or significantly reduce its
cooperation with the Company in these development activities, or to market
products competitive with the Company's products.
KEY EMPLOYEES. The Company's success depends on a number of its key
employees, most of whom are not subject to employment contracts. The loss of the
services of these key employees could have a material adverse effect on the
Company. The Company believes that its future success will also depend in large
part on its ability to attract and retain highly-skilled technical, managerial
and marketing personnel. Competition for such personnel in the software industry
is intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel. See "Business--Employees" in the Form
10-K Report.
DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISK OF TECHNOLOGY LITIGATION. The
Company's success is dependent upon its proprietary technology and products. The
Company regards its software as proprietary and, to date, has relied principally
upon copyrights, trademarks, trade secrets and contractual restrictions to
protect its proprietary technology. The Company currently has no patents. The
Company generally enters into confidentiality agreements with employees and
confidentiality and license agreements with its distributors, customers and
potential customers, and limits access to and distribution of the source code to
its software and other proprietary information. Under some circumstances, the
Company grants licenses that give limited access to the source code of the
Company's products which increases the likelihood of misappropriation or misuse
of the Company's technology. Accordingly, despite precautions taken by the
Company, it may be possible for unauthorized third parties to copy certain
portions of the Company's technology or to obtain and use information that the
Company regards as proprietary. There can be no assurance that the steps taken
by the Company will be adequate to prevent misappropriation of its technology or
to provide an adequate remedy in the event of a breach by others. In addition,
the laws of
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some foreign countries do not protect the Company's proprietary rights to the
same extent as do the laws of the United States.
There has been substantial industry litigation regarding intellectual
property rights of technology companies. Although the Company is not aware of
any infringement by its products of any patents or proprietary rights of others,
patent protection for software is still a developing area of law. The Company
has, in the past, been subject to litigation related to alleged infringement by
the Company of a third party's rights, which resulted not only in the Company
incurring significant legal fees and settlement costs but also in a substantial
diversion of management attention and a loss of software product license
revenues due to prospective customer concerns related to such litigation. In the
future, the Company may be subject to additional litigation to defend the
Company against claimed infringement of the rights of others or to determine the
scope and validity of the proprietary rights of others. Any such litigation
could be costly and cause diversion of management's attention, either of which
could have a material adverse affect on the Company's business, results of
operations and financial condition. Adverse determinations in such litigation
could result in the loss of the Company's proprietary rights, subject the
Company to significant liabilities, require the Company to seek licenses from
third parties or prevent the Company from manufacturing or selling its products,
any one of which could have a material adverse effect on the Company's business,
financial condition and results of operations. Furthermore, there can be no
assurance that any necessary licenses will be available on reasonable terms, or
at all. See "Business--Proprietary Rights and Licenses" in the Form 10-K Report.
SHARES ELIGIBLE FOR FUTURE SALE. Depending upon the date on which the the
outstanding debentures issued in February and June 1998 (the "Aggregate
Debentures") are converted and the market price for the Common Stock on such
date, the number of shares of Common Stock issuable under the Aggregate
Debentures and the interest accrued thereon to the Investors could represent a
significant percentage of the outstanding shares of Common Stock. Sale of the
shares of Common Stock issuable under the Aggregate Debentures and the interest
accrued thereon or the sale of additional shares of the Company's Common Stock
after this offering in the public market could materially adversely affect the
market price of the Common Stock.
ANTI-TAKEOVER EFFECT OF PREFERRED SHARES RIGHTS PLAN AND CERTAIN CHARTER AND
BYLAW PROVISIONS. In September 1998, the Company's Board of Directors adopted a
Preferred Shares Rights Plan. The Preferred Shares Rights Plan provides for a
dividend distribution of one Preferred Shares Purchase Right (a Right) on each
outstanding share of the Company's Common Stock. Each Right entitles
stockholders to buy 1/1000th of a share of the Company's Series B Participating
Preferred Stock at an exercise price of $21.75. The Rights will become
exercisable following the tenth day after a person or group announces
acquisition of 15% or more of the Company's Common Stock, or announces
commencement of a tender offer, the consummation of which would result in
ownership by the person or group of 15% or more of the Company's Common Stock.
The Company will be entitled to redeem the Rights at $0.01 per Right at any time
on or before the tenth day following acquisition by a person or group of 15% or
more of the Company's Common Stock.
The Preferred Shares Rights Plan and certain provisions of the Company's
Certificate of Incorporation and Bylaws may have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire control of the Company. This could limit the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock. Certain provisions of the Company's Certificate of
Incorporation and Bylaws allow the Company to issue preferred stock without any
vote or further action by the stockholders, eliminate the right of stockholders
to act by written consent without a meeting, specify procedures for director
nominations by stockholders and submission of other proposals for consideration
at stockholder meetings, and eliminate cumulative voting in the election of
directors. Certain provisions of Delaware law applicable to the Company could
also delay or make more difficult a merger, tender offer or proxy contest
involving the Company, including Section 203, which prohibits a Delaware
corporation from engaging in any business combination with any
7
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interested stockholder for a period of three years unless certain conditions are
met. The Preferred Shares Rights Plan, the possible issuance of Preferred Stock,
the procedures required for director nominations and stockholder proposals and
Delaware law could have the effect of delaying, deferring or preventing a change
in control of the Company, including without limitation, discouraging a proxy
contest or making more difficult the acquisition of a substantial block of the
Company's Common Stock. These provisions could also limit the price that
investors might be willing to pay in the future for shares of the Company's
Common Stock.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES AND THE COMPANY'S CONTINGENCY
PLANS. The Year 2000 issue arises because certain electronic data processing
systems use two digits rather than four to define the applicable year which may
preclude proper date recognition after December 31, 1999. During fiscal 1997 and
1998, the Company empowered key individuals as responsible for identifying and
resolving Year 2000 dysfunction. These efforts include identification and review
of internal operating systems and applications, customer projects and services,
and discussions with third-party suppliers to the business.
A most reasonably likely worst case Year 2000 scenario is not known at this
time. This determination will be made after the receipt of the remaining
material third-party supplier questionnaires. However, the shipment of software
to customers is expected to continue with no interruption and no material loss
of revenues is anticipated. The Year 2000 project has had minimal impact on the
schedule of other major information technology projects.
The Company has not completed a contingency plan; however, each facility
will incorporate the Year 2000 scenario into their existing disaster contingency
plan by June 1999. The contingency plan will ensure that the necessary backup
measures for computer processing are identified. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results of
Operations" in the Form 10-Q Reports.
ABSENCE OF DIVIDENDS. The Company has never declared or paid any cash
dividends and does not anticipate paying cash dividends in the foreseeable
future.
8
<PAGE>
SELLING STOCKHOLDER
The following table sets forth certain information as of March 29, 1999 with
respect to the beneficial ownership by the Selling Stockholder of shares of the
Company's Common Stock. The Selling Stockholder purchased the Debentures from
the Company in a private transaction in June 1998. The Debentures were amended
in October 1998. The Securities offered by this Prospectus will be acquired by
the Selling Stockholder upon conversion of the Debentures and as interest
accrued on the Debentures. The Debentures are not convertible at the option of
the Selling Stockholder prior to October 7, 1999. If the Debentures are
otherwise converted prior to October 7, 1999, the conversion price will not be
less than $4.00 per share. If the Debentures are converted after October 7,
1999, the conversion price will be as set forth in the original Debentures. The
Amendment to the Debentures has been filed as Exhibit 4.5 hereto. All
information set forth in this Prospectus assumes that the Debentures are
converted after October 7, 1999.
The Debentures issued by the Registrant to the Selling Stockholder set forth
the terms for conversion of the Debentures into the Conversion Shares and the
terms of conversion of the interest accrued on the Debentures into the PIK
Shares (the "Conversion Formulae"). A form of the Debentures has been filed as
Exhibit 4.4 hereto. The number of shares of Common Stock issuable upon
conversion and in connection with payments of interest in shares of Common Stock
depends upon the "Market Price" of the Common Stock. "Market Price" is defined
as the lesser of (i) the Maximum Conversion Price and (ii) 101% of the average
of the two lowest closing bid prices of the Common Stock as reported by the
Bloomberg Service for the thirty trading days immediately preceding the
conversion date. The "Maximum Conversion Price" is defined as (a) $7.00 per
share for the period ending on December 31, 1998 and (b) for the period
beginning on January 1, 1999, 115% of the average closing bid price of the
Common Stock over the 1998 calendar year, in each instance subject to certain
adjustments. There is no maximum or minimum number of Conversion Shares or PIK
Shares that may be issued pursuant to the Debentures. If the aggregate number of
Conversion Shares and PIK Shares to be issued to the Selling Stockholder were to
increase above the aggregate number of shares set forth in the table, this
Prospectus will be amended to indicate the increased number. The Selling
Stockholder may sell all, less than all or none of the shares of Common Stock.
The Selling Stockholder is not an affiliate of the Company nor has it held a
position, office or had any other material relationship with the Company or any
of its affiliates within the past three years except as a security holder of the
Company.
<TABLE>
<CAPTION>
SHARES OWNED BEFORE
NAME OFFERING(1)(2)
- -------------------------------------------------------------------------- -------------------
<S> <C>
The Tail Wind Fund, Ltd. ................................................. 965,588
Windermere House
404 East Bay Street
P.O. Box SS-5539
Nassau, Bahamas
</TABLE>
- --------------------------
(1) The Selling Stockholder has the right to acquire the Conversion Shares and
may acquire PIK Shares. The number of Conversion Shares shown in the table
for the Selling Stockholder has been calculated assuming (i) that the the
Debentures are converted after October 7, 1999 and (ii) a conversion Market
Price of $2.7617 (for purposes of calculating a conversion market price that
reflects the recent closing prices of the Company's Common Stock, the
$2.7617 conversion Market Price assumes 101% of the Market Price using March
29, 1999 as a conversion date) multiplied by a factor of two, because the
number of shares issuable on conversion may increase without limit depending
on the Market Price of the Common Stock at the time of conversion. If the
Market Price on the relevant date(s) of conversion is greater than $2.7617,
fewer than half of the number of shares shown will be issued to the Selling
Stockholder. The Company also has registered for resale an indeterminate
number of shares of Common Stock which have been and may be issued as the
PIK Shares.
(2) Assumes that all shares offered hereby are sold by the Selling Stockholder
to non-affiliates of the Selling Stockholder.
9
<PAGE>
DESCRIPTION OF EQUITY SECURITIES
The authorized capital stock of the Company consists of 37,000,000 shares of
Common Stock, $0.001 par value per share, (35,000,000 of which are designated as
"Common Stock" and 2,000,000 of which are designated "Non-voting Common Stock")
and 5,000,000 shares of Preferred Stock, $0.001 par value per share. As of March
29, 1999, 22,621,567 shares of Common Stock were outstanding, held of record by
approximately 417 stockholders and no shares of Non-voting Common Stock were
outstanding. As of March 29, 1999, the Aggregate Debentures in the principal
amount of $3,333,333 were outstanding held of record by the Selling Stockholder
(convertible into 2,413,972 shares of Common Stock based upon the conversion
Market Price assumptions set forth in footnote one to the table above). The
interest accrued on the Aggregate Debentures is convertible into an
indeterminate number of shares of Common Stock.
PLAN OF DISTRIBUTION
The sale of all or a portion of the shares of Common Stock offered hereby by
the Selling Stockholder may be effected from time to time at prevailing market
prices at the time of such sales, at prices related to such prevailing prices,
at fixed prices that may be changed or at negotiated prices. The Selling
Stockholder may effect such transactions by selling directly to purchasers in
negotiated transactions, to dealers acting as principals or through one or more
brokers, or any combination of these methods of sale. In addition, shares may be
transferred in connection with the settlement of call options, short sales or
similar transactions that may be effected by the Selling Stockholder. Dealers or
brokers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholder. The Selling Stockholder and any
brokers or dealers that participate in the distribution may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such brokers or dealers and any
profits realized on the resale of shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. The Company and
the Selling Stockholder may agree to indemnify such brokers or dealers against
certain liabilities, including liabilities under the Securities Act.
Pursuant to the terms of the Registration Rights Agreement dated February 6,
1998 among the Company and the Selling Stockholder, the Company is obligated to
keep the Registration Statement effective for the period ending thirty-six
months after the initial effective date of the Registration Statement (which
period will be extended by the number of days dispositions of Conversion Shares
are suspended by the Company under the Registration Statement) or until the
holder of Conversion Shares has completed the distribution of the Conversion
Shares, whichever occurs first.
There is no assurance that the Selling Stockholder will sell any or all of
the shares of Common Stock offered hereby.
The Company has agreed to pay the expenses incurred in connection with the
registration of the shares of Common Stock offered hereby. The Selling
Stockholder will be responsible for all selling commissions, transfer taxes and
related charges in connection with the offer and sale of such shares.
LEGAL MATTERS
The validity of the Common Stock offered hereby has been passed upon for
Ross by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Mario M. Rosati, a Director and Assistant Secretary of the Company,
is a member of Wilson Sonsini Goodrich & Rosati, Professional Corporation, and
holds options to purchase 34,000 shares of Common Stock.
10
<PAGE>
EXPERTS
The consolidated balance sheet as of June 30, 1998, the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then
ended and schedule, incorporated by reference in this Prospectus and
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said report.
The consolidated balance sheet as of June 30, 1997 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years ended June 30, 1997 and 1996, incorporated by reference in this
Prospectus and Registration Statement from the Company's 1998 Annual Report on
Form 10-K, have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
that firm as experts in accounting and auditing.
11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED HEREBY, NOR DO THEY CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Information Incorporated by Reference..................................... 2
Risk Factors.............................................................. 4
Selling Stockholder....................................................... 9
Description of Equity Securities.......................................... 10
Plan of Distribution...................................................... 10
Legal Matters............................................................. 10
Experts................................................................... 11
</TABLE>
------------------------
ROSS SYSTEMS, INC.
---------------------
PROSPECTUS
---------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fee and the Nasdaq
National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 2,981
Nasdaq National Market listing fee................................. 17,500
Printing and engraving expenses.................................... 8,000
Legal fees and expenses............................................ 8,000
Accounting fees and expenses....................................... 24,000
Miscellaneous...................................................... 5,000
---------
Total.......................................................... $ 65,481
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation of the Registrant eliminates the liability
of directors to the Registrant for monetary damages for breach of fiduciary duty
as a director to the fullest extent permissible under Delaware law, as such law
exists currently or as it may be amended in the future. Under Delaware law, such
provision may not eliminate or limit director monetary liability for: (a)
breaches of the director's duty of loyalty to the Registrant or its
stockholders; (b) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (c) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (d) transactions in which the
director received an improper personal benefit. Such limitation of liability
provisions also may not limit a director's liability for violation of, or
otherwise relieve the Registrant or its directors from the necessity of
complying with, federal or state securities laws, or affect the availability of
non-monetary remedies such as injunctive relief or rescission.
The Registrant's Bylaws provide that the Registrant shall indemnify its
directors and officers and may indemnify its employees and other agents to the
fullest extent permitted by law. The Registrant believes that indemnification
under its Bylaws covers at least negligence and gross negligence on the part of
indemnified parties. The Registrant's Bylaws also permit the Registrant to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the Registrant would have the power to indemnify him or her against such
liability under the General Corporation Law of Delaware. The Registrant
currently has secured such insurance on behalf of its officers and directors.
The Registrant has entered into agreements to indemnify its directors and
officers, in addition to indemnification provided for in the Registrant's
Bylaws. Subject to certain conditions, these agreements, among other things,
indemnify the Registrant's directors and officers for certain expenses
(including attorney's fees), judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of the Registrant, arising out of such person's services as a director or
officer of the Registrant, any subsidiary of the Registrant or any other company
or enterprise to which the person provides services at the request of the
Registrant.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
3.1(1) Certificate of Incorporation of Registrant.
3.2(1) By-Laws of Registrant.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
4.1(2) Form of Convertible Securities Subscription Agreement between the Registrant and
each Investor.
4.2(2) Form of Subordinated Debenture Due February 6, 2003 issued by the Registrant to
each Investor on February 6, 1998.
4.3(2) Registration Rights Agreement among the Registrant and each Investor.
4.4 Form of Subordinated Debenture due February 6, 2003 issued by the Registrant to
each Investor on June 16, 1998.
4.5 Amendment Number One to the Convertible Subordinated Debenture between the
Registrant and the Selling Stockholder dated October 7, 1998.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.3 Consent of KPMG, Independent Auditors
23.4* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included in Exhibit 5.1)
24.1* Power of Attorney (included at page II-3)
</TABLE>
- ------------------------
* Previously filed.
(1) Incorporated by reference to the exhibit filed with Registrant's Current
Report on Form 8-K dated July 24, 1998.
(2) Incorporated by reference to the exhibit filed with the Registrant's Current
Report on Form 8-K filed February 12, 1998.
ITEM 17. UNDERTAKINGS
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sale 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;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in paragraph (i) and (ii)
above shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or 15(d) of the
Exchange Act that are incorporated by reference in this Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, 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.
(c) 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-2
<PAGE>
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this 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.
3. Insofar as indemnification of liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
4. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Pre-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on April 6, 1999.
<TABLE>
<S> <C> <C>
ROSS SYSTEMS, INC.
By /s/ ROBERT B. WEBSTER
-----------------------------------------
Robert B. Webster,
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities and on the date indicated:
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- ---------------
Chairman of the Board and
/s/ DENNIS V. VOHS Chief Executive Officer
- ------------------------------ (Principal Executive April 6, 1999
(Dennis V. Vohs) Officer)
Vice President, Chief
/s/ ROBERT B. WEBSTER Financial Officer
- ------------------------------ (Principal Financial and April 6, 1999
(Robert B. Webster) Accounting Officer) and
Secretary
* J. WILLIAM GOODHEW
- ------------------------------ Director April 6, 1999
(J. William Goodhew)
* MARIO M. ROSATI
- ------------------------------ Director April 6, 1999
(Mario M. Rosati)
- ------------------------------ Director
(Bruce J. Ryan)
* J. PATRICK TINLEY
- ------------------------------ Director April 6, 1999
(J. Patrick Tinley)
* /s/ DENNIS V. VOHS
- ------------------------------
(Dennis V. Vohs) April 6, 1999
(Attorney-In-Fact)
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
<TABLE>
<C> <S>
4.4 Form of Subordinated Debenture due February 6, 2003 issued by the Registrant to
each Investor on June 16, 1998.
4.5 Amendment Number 1 to the Convertible Subordinated Debenture between the Registrant
and the Selling Stockholder dated October 7, 1998.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.3 Consent of KPMG, Independent Auditors.
</TABLE>
<PAGE>
EXHIBIT 4.4
PURSUANT TO A DEBT SUBORDINATION AGREEMENT DATED FEBRUARY 6, 1998, IN FAVOR OF
COAST BUSINESS CREDIT, THIS DEBENTURE IS SUBORDINATED TO THE COAST DEBT (AS
DEFINED IN THE DEBT SUBORDINATION AGREEMENT).
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
No. CSD-98___ $_____________
ROSS SYSTEMS, INC.
CONVERTIBLE SUBORDINATED DEBENTURE DUE FEBRUARY 6, 2003
THIS DEBENTURE ("Debenture") is one of a duly authorized issue of
Debentures of Ross Systems, Inc., a corporation duly organized and existing
under the laws of the State of California (the "Company"), designated as its
Convertible Subordinated Debentures Due February 6, 2003 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to ________________, the
holder hereof, or its order (the "Holder"), the principal sum of
________________________________ United States Dollars (U.S. $____________) on
February 6, 2003 (subject to extension as provided herein, the "Maturity Date")
and to pay interest on the principal sum outstanding under this Debenture
("Outstanding Principal Amount"), at the rate of 4% per annum for the period
commencing on the date of issuance and ending on the date six months therefrom,
and at the rate of 6% per annum thereafter, in all cases due and payable semi-
annually in arrears on the last day of June and December of each year (each an
"Interest Payment Date"), with the first such payment due on June 30, 1998.
Interest shall be calculated based on a 360-day year of twelve 30-day months.
Accrual of interest shall commence on the most recent date on which interest has
been paid, or if no interest has been paid, on the first business day to occur
after the date hereof and shall continue until the following Interest Payment
Date. The interest so payable will be paid to the person in whose name this
Debenture (or one or more predecessor Debentures) is registered on the records
of the Company regarding registration and transfer of the Debentures (the
"Debenture Register") at the close of business on the record date for interest
payable on such Interest Payment Date; provided, however, that the Company's
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions of the
Convertible Securities Subscription Agreement dated as of February 6, 1998
between the Company and the Subscriber named therein (the "Subscription
Agreement"). The principal of
<PAGE>
this Debenture is payable in such coin or currency of the United States of
America as of the time of payment is legal tender for payment of public and
private debts, at the address last appearing on the Debenture Registrar of
the Company as designated in writing by the Holder hereof from time to time.
The interest on this Debenture for each Interest Payment Date shall be
payable in shares of the Company's Common Stock, no par value ("Common
Stock"), valued at the average of the two lowest closing bid prices for the
Common Stock as reported by the Bloomberg Service for the thirty (30) trading
days immediately preceding the Interest Payment Date ("PIK Interest"). The
Company shall deliver to the Holder within five (5) business days after the
applicable Interest Payment Date a statement in the form of Exhibit 2 hereto
("PIK Statement"). The Company shall cause such shares of Common Stock
representing the PIK Interest to be issued and delivered within 10 calendar
days following the applicable Interest Payment Date. The record date for any
interest payment shall be the tenth (10th) day prior to the applicable
Interest Payment Date. Payments shall be sent by overnight courier or
two-day courier to such Holder at the last address appearing on the Debenture
Register for such payments. Except as otherwise provided herein, the
Outstanding Principal Amount and interest due hereunder shall bear interest,
from and after the occurrence and during the continuance of a default
hereunder, at the rate equal to the lower of twenty percent (20%) per annum
or the highest rate permitted by applicable law to be charged on commercial
loans. In the event the Company pays any interest on the Debenture and it is
determined that such interest was paid at a rate in excess of the legal
maximum rate, then that portion of the interest payment representing an
amount in excess of the legal maximum rate shall be deemed a payment of
principal and shall be applied against the principal of the Debenture.
This Debenture is subject to the following additional provisions:
1. EXCHANGE. The Debentures in minimum principal amount of $50,000,
are exchangeable for an equal aggregate principal amount of Debentures of
different denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration or transfer or exchange.
2. [Intentionally Omitted]
3. TRANSFERS. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the United States only in compliance with the Securities Act of
1933, as amended (the "Act"), and applicable state securities laws. Prior to
due presentment for transfer of this Debenture, the Company may treat the person
in whose name this Debenture is duly registered on the Company's Debenture
Register as the owner hereof for the purpose of receiving payment as herein
provided and all other purposes, whether or not this Debenture be overdue, and
the Company shall not be affected by notice to the contrary.
-2-
<PAGE>
4. DEFINITIONS. For purposes hereof the following definitions shall
apply:
"CLOSING DATE" shall mean the date of original issuance of this
Debenture and "SECOND CLOSING DATE" shall mean June 15, 1998.
"COMMON STOCK" shall mean the Common Stock, no par value, of the
Company.
"CONVERSION DATE MARKET PRICE" shall mean, unless otherwise
specified herein, an amount that is equal to the lesser of (a) the Maximum
Conversion Price or (b) 101% of the average of the two lowest closing bid prices
of the Common Stock as reported by the Bloomberg Service for the thirty (30)
trading days immediately preceding the Holder Conversion Date, subject to
adjustment from time to time as set forth in Paragraph 8 hereof and/or in the
Subscription Agreement and/or Registration Rights Agreement (as defined in the
Subscription Agreement).
"CONVERSION DEFAULT" shall have the meaning set forth in
Paragraph 10(b).
"CONVERSION NOTICE" shall have the meaning set forth in Paragraph
6(c).
"CONVERSION RATE" shall have the meaning set forth in Paragraph
6(b).
"HOLDER CONVERSION DATE" shall have the meaning set forth in
Paragraph 6(c).
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of
one share of Common Stock determined as follows:
(i) If the Common Stock is listed on Nasdaq, the closing
bid price as reported by the Bloomberg Service on the date of valuation;
(ii) If the Common Stock is listed on a national securities
exchange, the lowest reported sales price on such exchange on the date of
valuation;
(iii) If neither (i) nor (ii) apply but the Common Stock is
quoted in the over-the-counter market on the pink sheets or bulletin board, the
lesser of (A) the lowest sales price or (B) the mean between the last reported
"bid" and "asked" prices thereof on the date of valuation; and
(iv) If neither clause (i), (ii) or (iii) above applies,
the market value as determined by a nationally recognized investment banking
firm or other nationally recognized financial advisor retained by the Company
for such purpose, taking into consideration, among other factors, the earnings
history, book value and prospects for the Company, and the prices at which
shares of Common Stock recently have been traded. Such determination shall be
conclusive and binding on all persons.
-3-
<PAGE>
"MAXIMUM CONVERSION PRICE" shall mean (i) for the period
commencing on the date of original issuance of this Debenture and ending
December 31, 1998, the amount of $7.00; provided, however, that in the event
that during the period expiring ninety (90) days following the Closing Date, the
Company offers, sells, contracts to sell or otherwise issues or agrees to issue
any securities of the Company, convertible or otherwise, in a private placement
financing transaction (other than pursuant to any existing plans or obligations
of the Company as set forth on Schedule 3.4 attached to the Convertible
Securities Subscription Agreement between the Company and the Holder), with a
maximum conversion price per share of Common Stock of, or in the case of a
Common Stock offering a purchase price per share equal to, an amount less than
$7.00, then the "Maximum Conversion Price" for such period ending December 31,
1998 shall mean such lower conversion price or offer price per share; and
provided further, that in the event of any stock split, subdivision,
combination, reorganization, exchange, substitution or reclassification, such
Maximum Conversion Price shall be equitably and appropriately adjusted to
reflect such change; and (ii) for the period commencing January 1, 1999, 115% of
the average closing bid price of the Common Stock as reported by the Bloomberg
Service over the 1998 calendar year.
"PARAGRAPH 5 TRANSACTION" shall mean a merger, consolidation, or
other transaction referred to in Paragraph 5.
"POST-DEFAULT CONVERSION" shall have the meaning set forth in
Paragraph 10(b).
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth
in the Subscription Agreement.
"SUBSCRIPTION AGREEMENT" shall have the meaning set forth on page
1 of this Debenture.
"UNDERLYING SHARES" shall mean (unless otherwise indicated where
used) the Common Stock issuable upon conversion of this Debenture and the Common
Stock issued as PIK Interest.
5. PARAGRAPH 5 TRANSACTIONS. If at any time (i) there occurs any
consolidation or merger of the Company with or into any other corporation or
other entity or person (whether or not the Company is the surviving corporation)
or there occurs any other corporate reorganization or transaction or series of
related transactions, and as a result thereof the shareholders of the Company
pursuant to such merger, consolidation, reorganization or other transaction own
in the aggregate less than 50% of the voting power and common equity of the
ultimate parent corporation or other entity surviving or resulting from such
merger, consolidation, reorganization or other transaction, (ii) the Company
transfers all or substantially all of the Company's assets to another
corporation or other entity or person or (iii) the Company shall fix a record
date for the declaration of a material special distribution or dividend, whether
payable in cash, securities or assets (other than shares of Common Stock) (a
"Paragraph 5 Transaction"), then subject to the Company's prior redemption
rights as provided in Paragraph
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5A below, the Holder of this Debenture, at its option, (a) may participate in
any such transaction as a class with common stockholders on the same basis as
if the Outstanding Principal Amount of this Debenture had been converted one
day prior to the announcement of such transaction, provided that in the event
of a transaction described in clause (i) or (ii) of this Paragraph 5, the
Holder elects to convert (which election may be made contingent on the
consummation of such transaction); or (b) may require that the Company redeem
this Debenture at a redemption price equal to 115% of the then Outstanding
Principal Amount of the Debenture, plus accrued but unpaid interest on the
Debenture. Notice of the Holder's election under this Paragraph 5 shall be
given not less than five (5) days prior to the effective date of such
transaction.
5A. REDEMPTION AT THE OPTION OF THE COMPANY. This Debenture may not
be redeemed or prepaid by the Company at its option except in accordance with
the terms of this Section 5A.
(a) (i) At any time during the period ending 180 days after the
Second Closing Date ("Initial Redemption Period"), the Company may, at its
option and for any reason, redeem any part of this Debenture which is then
outstanding, in whole but not in part, for cash at a redemption price equal to
(x) during the first 90 days of the Initial Redemption Period, 104% of the then
Outstanding Principal Amount of the Debenture, plus accrued but unpaid interest
on the Debenture, and (y) during the period from day 91 of the Initial
Redemption Period through the end of the Initial Redemption Period, 108% of the
then Outstanding Principal Amount of the Debenture, plus accrued but unpaid
interest on the Debenture; provided that the Company shall have funds legally
available for such redemption and that the notice provisions of paragraph
5A(b)(i) have been complied with.
(ii) If at any time during the period commencing 181 days after
the Second Closing Date and ending, to the extent this Debenture remains
outstanding, on the last day prior to the Maturity Date ("Special Redemption
Period"), there may occur a transaction described in clause (i) of Paragraph 5,
the Company shall have the right to redeem any part of this Debenture which
shall remain outstanding on the effective date of such Paragraph 5(i)
transaction for cash at a redemption price equal to 120% of the then Outstanding
Principal Amount of the Debenture, plus accrued but unpaid interest on the
Debenture; provided that the Company shall have funds legally available for such
redemption, that the notice provisions of paragraph 5A(b)(ii) have been complied
with, and that the Holder may elect to convert all or any part of this Debenture
prior to such redemption date at a conversion date market price equal to the
lesser of (x) the Maximum Conversion Price or (y) 101% of the average of the two
lowest closing bid prices of the Common Stock as reported by the Bloomberg
Service for the sixty (60) trading days immediately preceding the date of the
public announcement by the Company of such Paragraph 5(i) transaction, which
conversion may, at the Holder's option, be conditioned upon the effectiveness of
the Paragraph 5(i) transaction.
(b) (i) Notice of the Company's intention to redeem this Debenture
during the Initial Redemption Period pursuant to paragraph 5A(a)(i) above, shall
be given not less than twenty (20) days prior to the date of redemption of this
Debenture by personal delivery or by
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facsimile, followed by two-day courier to the Holder of this Debenture at the
address of the Holder provided for such notices. Each such notice shall
state: (I) a redemption date not less than twenty (20) days following the
date of mailing of the notice; (II) the place or places where this Debenture
is to be surrendered for payment of the redemption price; (III) that interest
on this Debenture will cease to accrue on such redemption date; and (IV) that
the Holder may elect to convert such Debenture prior to such redemption date
to the extent otherwise convertible.
(ii) Notice of the Company's intention to redeem this Debenture
during the Special Redemption Period pursuant to paragraph 5A(a)(ii) above,
shall be given not less than sixty (60) days prior to the date of redemption of
this Debenture by personal delivery or by facsimile, followed by two-day courier
to the Holder of this Debenture at this address of the Holder provided for such
notices. Such notice shall state: (I) the circumstances giving rise to the
Company's redemption; (II) a redemption date not less than sixty (60) days
following the date of mailing of the notice, which sixty (60) day period shall
be extended by that number of days following the date of mailing the notice
during which a Blocking Notice is in effect pursuant to Section 5A of the
Registration Rights Agreement; (III) whether such redemption is conditioned on
the effectiveness of the Paragraph 5(i) transaction giving rise to the
redemption right; (IV) the place or places where and the date on which this
Debenture is to be surrendered for payment of the redemption price; (V) that
interest on the Debenture will cease to accrue on such redemption date; and (VI)
that the Holder may elect to convert such Debenture on or prior to such
redemption date pursuant to the special conversion terms specified in paragraph
5A(a)(ii), above.
(c) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Company in providing money
for the payment of the redemption price) interest on the Debenture so called for
redemption shall cease to accrue. Upon surrender in accordance with such
redemption notice of this Debenture, this Debenture shall be redeemed by the
Company at the redemption price.
6. CONVERSION AT THE OPTION OF THE HOLDER. The Holder of this
Debenture shall have the following conversion rights.
(a) HOLDER'S RIGHT TO CONVERT. This Debenture shall be
convertible at any time on or after one hundred twenty (120) days after the
Second Closing Date (unless previously redeemed), in whole or in part, at the
option of the Holder hereof, into fully paid, validly issued and nonassessable
shares of Common Stock. If this Debenture is converted in part, the remaining
portion of this Debenture not so converted shall remain entitled to the
conversion and other rights provided herein.
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(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. The
Outstanding Principal Amount of this Debenture that is converted into shares of
Common Stock at the option of the Holder shall be convertible into the number of
shares of Common Stock which results from application of the following formula:
P+I
----------------------------------
Conversion Date Market Price
P = Outstanding Principal Amount of this Debenture submitted for conversion
I = accrued but unpaid interest on P as of the Holder Conversion Date
The number of shares of Common Stock into which each $1,000
principal amount of this Debenture hereto may be converted pursuant to this
paragraph hereof is hereafter referred to as the "Conversion Rate."
(c) MECHANICS OF CONVERSION. In order to convert this Debenture
(in whole or in part) into full shares of Common Stock, the Holder shall
surrender this Debenture, duly endorsed, by either overnight courier or 2-day
courier, to the principal office of the Company, and shall give written notice
in the form of Exhibit 1 hereto (the "Conversion Notice") by facsimile (with the
original of such notice forwarded with the foregoing courier) to the Company at
such office that the Holder elects to convert the Outstanding Principal Amount
(plus accrued but unpaid interest) specified therein, which such notice and
election shall be irrevocable by the Holder, subject to the conditional
conversion rights afforded the Holder in paragraph 5A above and subject to the
second paragraph of this paragraph 6(c), PROVIDED, HOWEVER, that the Company
shall not be obligated to issue certificates evidencing the shares of the Common
Stock issuable upon such conversion unless either the Debenture evidencing the
Outstanding Principal Amount is delivered to the Company as provided above, or
the Holder notifies the Company that such Debenture(s) have been lost, stolen or
destroyed and promptly executes an agreement reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection with
such Debentures.
The Company shall use its best efforts to issue and deliver
within three (3) business days after delivery to the Company of such
Debenture(s), or after receipt of such agreement and indemnification, to the
Holder of such Debenture(s) at the address of the Holder, or to its designee, a
certificate or certificates for the number of shares of Common Stock to which
the Holder shall be entitled as aforesaid, together with a calculation of the
Conversion Rate and a Debenture or Debentures for the principal amount of
Debentures not submitted for conversion. In addition to any other remedies
which may be available to the Holder, in the event the Company fails to effect a
delivery of such shares of Common Stock within five (5) business days after
delivery to the Company of such Debentures for conversion, the Holder will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the
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Company whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to delivery of such Notice of
Conversion. Unless otherwise specified in this Debenture, the effective date
of conversion (the "Holder Conversion Date") shall be deemed to be the date
on which the Company receives by facsimile the Conversion Notice, and the
person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on such date.
7. CONVERSION UPON MATURITY. At the Maturity Date, the Outstanding
Principal Amount of Debentures outstanding (plus all accrued and unpaid
interest) at such time shall be automatically converted into shares of Common
Stock of the Company in accordance with the terms of this Debenture, the
Subscription Agreement and the Registration Rights Agreement, without notice.
The Company shall use its best efforts to issue and deliver within three (3)
business days after delivery to the Company of this Debenture, or after receipt
of the agreement and indemnification described in paragraph 6(c) above, to the
Holder of the Debenture at the address of the Holder, or to its designee, a
certificate or certificates for the number of shares of Common Stock to which
the Holder shall be entitled hereunder, together with a calculation of the
Conversion Rate. The person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Maturity Date.
The Maturity Date shall be a "Holder Conversion Date" for purposes of this
Debenture.
8. STOCK SPLITS; DIVIDENDS; ADJUSTMENTS; REORGANIZATIONS.
(a) STOCK SPLITS AND COMBINATIONS. The Company shall not effect
any stock split, subdivision or combination with an effective date within thirty
(30) trading days of the Maturity Date.
(b) CERTAIN DIVIDENDS AND DISTRIBUTIONS. The Company shall not
make, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, with an effective date within thirty (30) trading days
of the Maturity Date.
(c) ADJUSTMENT FOR DIVIDENDS AND DISTRIBUTIONS. If at any time
not prohibited by paragraph 8(a) or (b), the number of outstanding shares of
Common Stock is changed by a stock split, subdivision, combination or stock
dividend or other distribution payable in additional shares of Common Stock, and
if the record date for such change occurs during a period that is used to
determine the number of shares of Common Stock into which the Debenture is
converted, then and in each such event the formulae set forth herein for
conversion shall be equitably adjusted to reflect such change in number of
shares. In the event the Company at any time or from time to time after the
Closing Date makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Company other than shares of Common Stock, then and in each
such event provision shall be made so that the Holders of Debentures shall
receive upon conversion thereof pursuant to Paragraph 6 hereof, in addition to
the number of shares of Common Stock
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receivable thereupon, the amount of such other securities of the Company to
which a Holder on the relevant record or payment date, as applicable, of the
number of shares of Common Stock so receivable upon conversion would have
been entitled, plus any dividends or other distributions which would have
been received with respect to such securities had such Holder thereafter,
during the period from the date of such event to and including the Holder
Conversion Date, retained such securities, subject to all other adjustments
called for during such period under this Paragraph 8 with respect to the
rights of the Holders of the Debentures. For purposes of this Paragraph
8(c), the number of shares of Common Stock so receivable upon conversion by
the Holder shall be deemed to be that number which the Holder would have
received upon conversion of the entire Outstanding Principal Amount (plus
accrued and unpaid interest) hereof if the Holder Conversion Date had been
the day preceding the date uon which the Company announced the making of such
dividend or other distribution.
(d) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
In the event that at any time or from time to time after the Closing Date, the
Common Stock issuable upon the conversion of the Debentures is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or reorganization provided for elsewhere
in this Paragraph 8 or a merger or consolidation, provided for in Paragraph 5),
then and in each such event each Holder of Debentures shall have the right
thereafter to convert such Debenture into the kind of stock receivable upon such
recapitalization, reclassification or other change by holders of shares of
Common Stock, all subject to further adjustment as provided herein. In such
event, the formulae set forth herein for conversion and redemption shall be
equitably adjusted to reflect such change in number of shares or, if shares of a
new class of stock are issued, to reflect the market price of the class or
classes of stock (applying the same factors used in determining the Market Price
for Shares of Common Stock) issued in connection with the above described
transaction.
(e) REORGANIZATIONS. If at any time or from time to time after
the Closing Date there is a capital reorganization of the Common Stock (other
than a recapitalization, subdivision, combination, reclassification or exchange
of shares provided for elsewhere in this Paragraph 8) then, as a part of such
reorganization, provision shall be made so that the Holders of the Debentures
shall thereafter be entitled to receive upon conversion of the Debentures the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Paragraph
8 with respect to the rights of the Holders of the Debentures after the
reorganization to the end that the provisions of this Paragraph 8 shall be
applicable after that event and be as nearly equivalent as may be practicable,
including, by way of illustration and not limitation, by equitably adjusting the
formulae set forth herein for conversion and redemption to reflect the market
price of the securities or property (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in connection
with the above described transaction.
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<PAGE>
(f) In the event of a dispute between a Holder of Debentures and
the Company with respect to any of the adjustments required pursuant to the
provisions of this Paragraph 8, then the Debentures shall be converted in a
manner consistent with the Schedule of Computations delivered as set forth in
paragraph (g) below. Such Holder of Debentures shall then be entitled, within
60 days of receipt of the Schedule of Computations, to submit such dispute to
the American Arbitration Association for resolution according to then applicable
rules thereof, which determination shall be final and binding. If it shall be
determined that a Holder of Debentures should have received additional shares of
Common Stock upon such conversion (the "Undelivered Shares") then, within three
trading days of receipt of written notice of such determination, the Company
shall issue to such holder that number of additional shares of Common Stock as
shall have a value, based upon the then Market Price for Shares of Common Stock,
as shall equal the Undelivered Shares times the Market Price for Shares of
Common Stock on the date of conversion. The cost of such proceeding shall be
shared 50% by the Holder or Holders of Debentures involved in such dispute and
50% by the Company, except that the prevailing party, as determined by the
arbitrator presiding over the arbitration, shall be entitled to recover
reasonable attorney's fees, in addition to other costs and expenses and any
other available remedy.
(g) The Company shall notify, in writing, the Holders of the
Debentures of all adjustments pursuant to this Paragraph 8 within three (3)
trading days of the occurrence thereof and such notice shall be accompanied by a
Schedule of Computations of such adjustments. If so requested by a Holder of
this Debenture, the Company shall provide to such Holder within ten (10) trading
days of its request therefor a certificate of concurrence to the Schedule of
Computations by the independent public accountants of the Company.
9. FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up or down to the nearest whole share.
10. RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
(a) RESERVATION REQUIREMENT. The Company shall reserve and keep
available at all times, free of preemptive rights shares of Common Stock for the
purpose of enabling the Company to satisfy any obligation to issue shares of its
Common Stock upon conversion of all of the Debentures pursuant hereto.
(b) DEFAULT. If the Company does not have a sufficient
number of shares of Common Stock available to satisfy the Company's
obligations to a Holder of Debentures upon receipt of a Conversion Notice or
is otherwise unable to issue such shares of Common Stock in accordance with
the terms of this Agreement and such condition shall remain unremedied for a
period of thirty (30) days after the Company's receipt of a Conversion Notice
(a "CONVERSION DEFAULT"), then from and after the fifth (5th) day following a
Conversion Default (which for all purposes shall be deemed to have occurred
upon the expiration of the applicable cure period following the Company's
receipt of the applicable Conversion Notice), each Holder
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of the Debentures shall have the right to demand from the Company immediate
redemption of the Debentures in cash at a redemption price per Debenture
equal to 120% of the then Outstanding Principal Amount of the Debenture
(including Debentures for which a Conversion Notice has not yet been sent),
plus accrued but unpaid interest on the Debenture. Within three days of the
occurrence of a Conversion Default, the Company shall notify each Holder in
writing of such occurrence. No notice of redemption may be delivered by a
Holder subsequent to receipt by such Holder of notice from the Company (sent
by overnight or 2-day courier with a copy sent by facsimile) of availability
of sufficient shares of Common Stock to perfect conversion (a "POST-DEFAULT
CONVERSION") of all the Debentures; PROVIDED FURTHER that such right to
demand redemption shall be reinstated if the Company shall thereafter fail to
perfect such Post-Default Conversion by delivery of Common Stock certificates
in accordance with the applicable provisions of Paragraph 6(b) hereof and
payment of all accrued and unpaid interest in cash with respect thereto
within five business days of delivery of the notice of Post-Default
Conversion. In addition to the foregoing, upon a Conversion Default, the
rate of interest on all of the Debentures (including Debentures for which a
Conversion Notice has not yet been sent), shall, to the maximum extent
allowed by applicable law, be permanently increased by two percent (2%) per
annum (i.e., from 6% to 8%) commencing on the first day of the thirty (30)
day period (or part thereof) following a Conversion Default; an additional
two percent (2%) per annum commencing on the first day of each of the second
and third such thirty (30) day periods (or part thereof); and an additional
one percent (1%) per annum on the first day of each consecutive thirty (30)
day period (or part thereof) thereafter until such securities have been duly
converted or redeemed as herein provided; provided that in no event shall the
rate of interest exceed the lower of 20% or the highest rate permitted by
applicable law to be charged on commercial loans. Any such interest which is
not paid when due shall, to the maximum extent permitted by law, accrue
interest until paid at the rate from time to time applicable to interest on
the Debentures as to which the Conversion Default has occurred. In the event
the Company pays any interest on the Debentures and it is determined that
such interest was paid at a rate in excess of the legal maximum rate, then
that portion of the interest payment representing an amount in excess of the
legal maximum rate shall be deemed a payment of principal and shall be
applied against the principal of the Debenture.
11. NO REISSUANCE OF DEBENTURES. No Debentures acquired by the
Company by reason of redemption, purchase, conversion or otherwise shall be
reissued, and all such Debentures shall be retired. No additional Debentures
shall be authorized or issued without the consent of at least 66 2/3% in
interest of the Holders of Debentures outstanding immediately prior thereto.
12. NO IMPAIRMENT. The Company shall not intentionally take any
action which would impair the rights and privileges of the Debentures set forth
herein or the Holders thereof.
13. HOLDER'S RIGHTS IF SHARES ARE DELISTED OR IF TRADING IN COMMON
STOCK IS SUSPENDED. In the event that at any time on or after the date hereof,
and prior to the Maturity Date, trading in the shares of the Company's Common
Stock is suspended on the Nasdaq
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National Market (and the Company's Common Stock does not contemporaneously
commence trading on a national securities exchange system) for a period of
five consecutive trading days, other than as a result of the suspension of
trading in securities in general, or if such Shares are delisted from the
Nasdaq National Market then, at a Holder's option, the Company shall redeem
such Holder's Debentures at a redemption date designated by such Holder, and
at the redemption price equal to 120% of the then Outstanding Principal
Amount of this Debenture, plus accrued but unpaid interest on this Debenture.
14. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. (a) Notwithstanding
anything to the contrary contained herein, each Conversion Notice shall contain
a representation that, after giving effect to the shares of the Company's Common
Stock to be issued pursuant to such conversion notice, the total number of
shares of the Company's Common Stock deemed beneficially owned by the Holder
(excluding shares that might otherwise be deemed beneficially owned by reason of
the conversion right in the Debentures owned by the Holder), together with all
shares of the Company's Common Stock deemed beneficially owned by the Holder's
"affiliates" as defined in Rule 144 of the Act, will not exceed 4.9% of the
total issued and outstanding shares of the Company's Common Stock.
(b) In the event that upon presentation of a Conversion Notice,
the Company would be obligated to issue an amount of shares of Common Stock
which, when aggregated with all shares of Common Stock issued on conversion of
all Debentures, would exceed 19.99% of the number of shares of Common Stock
outstanding on February 6, 1998 (such amount to be proportionately and equitably
adjusted from time to time in the event of stock dividends, subdivisions,
combinations, reclassifications, capital reorganizations and similar events
relating to the Common Stock) (the "Exchange Cap"), and such issuance would
constitute a breach of the Company's obligations under the rules or regulations
of Nasdaq as they apply to the Company, or any other principal securities
exchange or market upon which the Common Stock is or becomes traded (the "Cap
Regulations"), the Company shall not be obligated to issue any such shares of
Common Stock in excess of the Exchange Cap. Instead, the Company shall
immediately give notice of these facts to all Holders of outstanding Debentures
and shall within twenty (20) days of the Conversion Notice, commence taking all
steps reasonably necessary to be in a position to issue shares on conversion in
accordance with this Debenture without violating the Cap Regulations, which
steps shall include (but not be limited to) (i) the immediate preparation of all
necessary proxy solicitation materials for a meeting of the shareholders; (ii)
best efforts to obtain a waiver from the Cap Regulations for the issuances
hereunder; and (iii) the filing of such preliminary proxy solicitation materials
with the Securities and Exchange Commission within such twenty (20) day period.
If within ninety (90) days of such Conversion Notice, the Company still may not
issue such shares without violating the Cap Regulations, the Holder may elect to
require the Company to redeem the Debenture by providing the Company written
notice which shall require redemption within twenty (20) days at a redemption
price equal to 115% of the Outstanding Principal Amount which, if converted,
would result in the issuance of shares of Common Stock exceeding the Exchange
Cap. The Exchange Cap shall be allocated among all outstanding Debentures pro
rata based on the total Outstanding Principal Amount of all Debentures then
outstanding.
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15. REGISTRATION SUSPENSION. In the event that at any time or from
time to time any registration statement with respect to the Common Stock
issuable upon conversion of this Debenture is suspended or trading in the Common
Stock on the Nasdaq National Market System is suspended for a period of time
("Blackout Period"), the Maturity Date hereunder shall be extended for a period
equal to 1.5 times the number of days in such Blackout Period. Furthermore,
additional provisions pertaining to the suspension of effectiveness of such
registration statement set forth in Paragraph 5A of the Registration Rights
Agreement shall be applicable in the event of a Blackout Period, and are
specifically incorporated by reference herein.
16. OBLIGATIONS ABSOLUTE. No provision of this Debenture, other than
conversion as provided herein, shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place and rate, and in the manner,
herein prescribed.
17. WAIVERS OF DEMAND, ETC. The Company hereby expressly waives
demand and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and will be directly and primarily liable for the payment of all
sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
18. REPLACEMENT DEBENTURES. In the event that any Holder notifies
the Company that its Debenture(s) have been lost, stolen or destroyed, the
Company will issue replacement Debenture(s) identical in all respects to the
original Debenture(s) (except for registration number and Outstanding Principal
Amount, if different than that shown on the original Debenture(s)), provided
that the Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such Debenture(s).
19. PAYMENT OF EXPENSES. The Company agrees to pay all reasonable
debts and expenses, including reasonable attorneys' fees, which may be incurred
by the Holder in enforcing the provisions of this Debenture and/or collecting
any amount due under this Debenture, the Subscription Agreement or the
Registration Rights Agreement (as defined in the Subscription Agreement).
20. DEFAULTS. The following shall constitute "Events of Default":
(a) The Company refuses at any time to honor any Conversion
Notice issued in accordance with the terms of Paragraph 6 hereof; or
(b) The Company shall default in the payment of (i) interest
on this Debenture, and such default shall continue for three (3) business
days after the due date thereof, or (ii) the Outstanding Principal Amount of
this Debenture; or (iii) the redemption price on the applicable redemption
date as herein provided; or
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(c) Any of the representations or warranties made by the
Company herein, in the Subscription Agreement, or in any certificate or
financial or other statements heretofore or hereafter furnished by or on
behalf of the Company in connection with the execution and delivery of this
Debenture or the Subscription Agreement shall be false or misleading in any
material respect at the time made and such condition (to the extent capable
of being cured) shall continue uncured for a period of ten (10) business days
after notice from the Holder of such condition; or
(d) The Company shall fail to perform or observe in any
material respect any covenant or agreement in the Subscription Agreement, or
any other covenant, term, provision, condition, agreement or obligation of
the Company under this Debenture and such failure shall continue uncured for
a period of ten (10) business days after notice from the Holder of such
failure; or
(e) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as they mature; (3) make an
assignment for the benefit of creditors or commence proceedings for its
dissolution; or (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for it or for a substantial part of its property or
business; or
(f) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after such
appointment; or
(g) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
the Company and shall not be dismissed within sixty (60) days thereafter; or
(h) Any money judgment (including any arbitration award, but
only if reduced to a judgment), writ or warrant of attachment, or similar
process in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate
shall be entered or filed against the Company or any of its properties or other
assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of
sixty (60) days or in any event later than ten (10) days prior to the date of
any proposed sale thereunder; or
(i) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy law or any law
for the relief of debt shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit to any material
allegations of, or default in answering a petition filed in any such proceeding.
Unless an Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of and (except in the case
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<PAGE>
of clause (i) above) on notice by the Holder and in the Holder's sole
discretion, the Holder may by notice to the Company declare the Debenture
immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived, anything herein or in
any other instruments contained to the contrary notwithstanding, and the
Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein or
any other rights or remedies afforded by law. In such event, the Debenture
shall be redeemed at a redemption price equal to 120% of the Outstanding
Principal Amount of the Debenture, plus accrued but unpaid interest on the
Debenture. In the event of a Default hereunder, the Company agrees to use
commercially reasonable efforts to satisfy its senior lender (Coast Business
Credit) to enable Holder to exercise all its rights and remedies hereunder.
21. SAVINGS CLAUSE. In case any provision of this Debenture is held
by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
22. ENTIRE AGREEMENT. This Debenture and the agreements referred to
in this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof. Neither
this Debenture nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
23. ASSIGNMENT, ETC, The Holder may, subject to compliance with the
Subscription Agreement and to applicable Federal and state securities laws,
transfer or assign this Debenture or any interest herein and may mortgage,
encumber or transfer any of its rights or interest in and to this Debenture or
any part hereof and, without limitation, each assignee, transferee and mortgagee
(which may include any affiliate of the Holder) shall have the right to transfer
or assign its interest. Each such assignment shall be in the minimum principal
amount of $50,000, or shall be all of the Holder's interest in the Debenture.
Each such assignee, transferee and mortgagee shall have all of the rights of the
Holder under this Debenture. The Company agrees that, subject to compliance
with the Subscription Agreement, after receipt by the Company of written notice
of assignment from the Holder or from the Holder's assignee, all principal,
interest and other amounts which are then and thereafter become due under this
Debenture shall be paid to such assignee at the place of payment designated in
such notice. This Debenture shall be binding upon the Company and its
successors and shall inure to the benefit of the Holder and its successors and
assigns.
24. NO WAIVER. No failure on the part of the Holder to exercise, and
no delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
-15-
<PAGE>
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
25. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to a party hereunder shall be sufficiently given if in
writing and personally delivered or sent by facsimile to said party, followed by
two-day courier service, at its address set forth herein or such other address
as either may designate for itself in such notice to the other and
communications shall be deemed to have been received when delivered personally
or, if sent by facsimile, then when actually received by the party to whom it is
addressed. Whenever the sense of this Debenture requires, words in the singular
shall be deemed to include the plural and words in the plural shall be deemed to
include the singular. If more than one Company is named herein, the liability
of each shall be joint and several. Paragraph headings are for convenience only
and shall not affect the meaning of this document.
26. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS DEBENTURE
SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The Company hereby agrees that
all actions or proceedings arising directly or indirectly from or in connection
with this Debenture shall, at the Holder's sole option, be litigated only in the
Supreme Court of the State of New York or the United States District Court for
the Southern District of New York located in New York County, New York. To the
extent permitted by applicable law, the Company consents to the jurisdiction and
venue of the foregoing courts and consents that any process or notice of motion
or other application to either of said courts or a judge thereof may be served
inside or outside the State of New York or the Southern District of New York by
registered mail, return receipt requested, directed to the Company at its
address set forth in this Debenture (and service so made shall be deemed
complete five (5) days after the same has been posted as aforesaid) or by
personal service or in such other manner as may be permissible under the rules
of said courts. The parties hereto hereby waive any right to a jury trial in
connection with any litigation pursuant to this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
DATED: ______________
ROSS SYSTEMS, INC.
By: ___________________________________
Print Name: ___________________________
Print Title: ___________________________
ATTEST
___________________________
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<PAGE>
EXHIBIT 1
(To be Executed by Registered Holder
in order to Convert Debenture)
CONVERSION NOTICE
FOR
CONVERTIBLE DEBENTURE DUE FEBRUARY 6, 2003
The undersigned, as Holder of the Convertible Debenture Due February 6, 2003 of
Ross Systems, Inc. (the "Company"), No. CSD-98___, in the outstanding principal
amount of U.S. $_____________ (the "Debenture"), hereby irrevocably elects to
convert U.S. $__________ of the outstanding principal amount of the Debenture
into shares of Common Stock, no par value (the "Common Stock"), of the Company
according to the conditions of the Debenture, as of the date written below. The
undersigned hereby requests that share certificates for the Common Stock to be
issued to the undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as indicated below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any.
The undersigned represents that, after giving effect to the shares of the
Company's Common Stock to be issued pursuant to such conversion notice, the
total number of shares of the Company's Common Stock deemed beneficially owned
by the undersigned, together with all shares of the Company's Common Stock
deemed beneficially owned by the undersigned's "affiliates" as defined in Rule
144 of the Act, will not exceed 4.9% of the total issued and outstanding shares
of the Company's Common Stock.
Conversion Information: NAME OF HOLDER:
By: ______________________________
Print Name:
Print Title:
Print Address of Holder:
___________________________________
___________________________________
Issue Common Stock to: ___________
at: ______________________________
Date of Conversion
___________________________________
Applicable Conversion Rate
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<PAGE>
EXHIBIT 2
PIK STATEMENT
Date: _______________
To: [Name of Holder of Debenture] ("Holder")
RE: CONVERTIBLE DEBENTURE DUE FEBRUARY 6, 2003 ("DEBENTURE") OF ROSS SYSTEMS,
INC. (THE "COMPANY") NO. CSD-98___, IN THE FACE PRINCIPAL AMOUNT OF US
$_____________.
In payment of interest on the Debenture, for the Interest Payment Date
indicated below, the Company hereby certifies to the Holder that the average of
the two lowest closing bid prices for shares of the Company's common stock, no
par value ("Common Stock"), as reported by the Bloomberg Service for the thirty
(30) trading days immediately preceding the Interest Payment Date indicated
below was $______. The Company further represents and warrants to the Holder
that _____ shares of Common Stock will be issued by the Company's transfer agent
to and in the name of the Holder and delivered to the Holder within three (3)
business days of the date hereof. Capitalized terms used in this PIK Statement
and not otherwise defined shall have the meaning ascribed thereto in the
Debenture.
Interest Payment Date: _______________
Outstanding Principal Amount on
which interest is being paid: US$ _______________
PIK Interest: US$ _______________
IN WITNESS WHEREOF, this PIK Statement has been duly executed and
delivered on the date first written above.
ROSS SYSTEMS, INC.
By: ____________________________________
Print Name:
Print Title:
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<PAGE>
AMENDMENT NUMBER 1
TO
ROSS SYSTEMS, INC.
CONVERTIBLE SUBORDINATED DEBENTURE
This Amendment Number 1 to the Ross Systems, Inc. Convertible
Subordinated Debenture Due February 6, 2003, No. CSD-9809 (the "Amendment")
is made as of October 7, 1998 between Ross Systems, Inc., a Delaware
corporation (the "Company"), and The Tail Wind Fund, Ltd. (the "Holder").
WHEREAS, the Company and the Holder entered into a Convertible
Securities Subscription Agreement dated as of February 6, 1998 pursuant to
which the Holder made a loan to the Company of $1,333,333.34 and the Company
issued to the Holder a convertible subordinated debenture (the "Original
Debenture") dated June 11, 1998; and
WHEREAS, the Company has agreed not to exercise its right to redeem the
Original Debenture pursuant to Section 5A thereof and has granted to Holder a
right of first refusal to participate in convertible subordinated debt
financings until October 7, 1999 in exchange for Holder's agreement to amend
certain conversion terms in the Original Debenture; and
WHEREAS, the Company and the Holder have executed a Right of First Refusal
agreement of even date herewith; and
WHEREAS, the Company and the Holder wish to amend the Original Debenture
such that it is not convertible at the option of the Holder until after
October 7, 1999, and that for certain other purposes it sets a minimum
conversion price of $4.00 per share of the Company's Common Stock until
October 7, 1999, after which the Original Debenture's original conversion
terms will be reinstated;
NOW THEREFORE in consideration of the premises set forth above and for
other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Holder agree as follows:
1. The definition of "Conversion Date Market Price," defined in Section 4
of the Original Debenture, is amended to read:
"CONVERSION DATE MARKET PRICE" shall mean, unless otherwise specified
herein, an amount that is equal to the lesser of (a) the Maximum
Conversion Price or (b) 101% of the average of the two lowest closing bid
prices of the Common Stock as reported by the Bloomberg Service for the
thirty (30) trading days immediately preceding the Holder Conversion Date,
subject to adjustment from time to time as set forth in Paragraph 8
hereof and/or in the Subscription Agreement and/or Rights Agreement (as
defined in the Subscription Agreement); PROVIDED
<PAGE>
HOWEVER, that if the Holder Conversion Date is on or before October 7,
1999, in no event shall the Conversion Date Market Price be less than
$4.00.
2. Section 6(a) of the Original Debenture is amended in its entirety to
read:
HOLDER'S RIGHT TO CONVERT. This Debenture shall be convertible at any
time after October 7, 1999 (unless previously redeemed), in whole or
in part, at the option of the Holder hereof, into fully paid, validly
issued and nonassessable shares of Common Stock. If this Debenture is
converted in part, the remaining portion of this Debenture not so
converted shall remain entitled to the conversion and other rights
provided herein.
3. ORIGINAL DEBENTURE. Except as set forth above, the remainder of the
Original Debenture, including Exhibits 1 and 2 thereto, shall remain in
full force and effect as originally issued. After October 7, 1999, all
original terms of the Original Debenture shall be reinstated and fully
effective.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
date set forth above.
ROSS SYSTEMS, INC. THE TAIL WIND FUND, LTD.
By: /s/ Robert B. Webster By: [signature not legible]
----------------------------------- -----------------------------------
(Signature) (Signature)
Name: Name: BRIGHTON HOLDINGS LIMITED AS
Robert B. Webster SOLE DIRECTOR
--------------------------------- ---------------------------------
(Print name of signer) (Print name of signer)
Title: Title:
-------------------------------- --------------------------------
<PAGE>
EXHIBIT 23.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated August 17, 1998
(except with respect to the matter discussed in Note 11, to which the date is
September 25, 1998) included in Ross Systems, Inc.'s Form 10-K for the year
ended June 30, 1998 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Atlanta, Georgia
April 5, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Ross Systems, Inc. on Form S-3 of our report dated August 21, 1997 on our
audits of the consolidated financial statements and financial statement schedule
of Ross Systems, Inc. as of June 30, 1997 and for the years ended June 30, 1997
and 1996, which report is included in the Company's Annual Report on Form 10-K
for the year ended June 30, 1998. We also consent to the reference to our Firm
under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Atlanta, Georgia
April 5, 1999
<PAGE>
EXHIBIT 23.3
The Board of Directors
Ross Systems, Inc.
We consent to incorporation by reference in this Pre-Effective Amendment No. 1
to this registration statement on Form S-3 (registration no. 333-58639) of Ross
Systems, Inc. ("the Company") of our report dated September 26, 1996 relating to
the combined balance sheets of Ross Systems (UK) Limited, Ross Systems France
S.A., Ross Systems Deutschland GmbH, Ross Systems Europe N.V., and Ross Systems
Netherlands BV as of June 30, 1996 and the related combined statements of
operations and stockholders' equity for the year then ended and the related
schedule, which report appears in the June 30, 1998, annual report on Form 10-K
of the Company.
Our report dated September 26, 1996 contains an explanatory paragraph that
states that the Company declined to present a statement of cash flows for the
year ended June 30, 1996. Presentation of such statement summarising the
Company's operating, investing and financing activities is required by generally
accepted accounting principles.
/s/ KPMG
KPMG
CHARTERED ACCOUNTANTS
REGISTERED AUDITORS
BRISTOL, UNITED KINGDOM
April 6, 1999
