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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-22154
MANUGISTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-1469385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2115 EAST JEFFERSON STREET, ROCKVILLE, MARYLAND 20852
(Address of principal executive offices) (Zip code)
</TABLE>
(301) 984-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 10,575,987 shares of common
stock, $.002 par value per share, as of July 8, 1996.
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MANUGISTICS GROUP, INC.
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets -
May 31, 1996 (unaudited) and February 29, 1996 3
Condensed Consolidated Statements of Income -
Three months ended May 31, 1996 and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Three months ended May 31, 1996 and 1995 (unaudited) 5
Notes to Consolidated Financial Statements - May 31, 1996 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
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<CAPTION>
May 31, February 29,
1996 1996
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,919 $ 4,921
Marketable securities 13,294 18,558
Accounts receivable (net of allowance for returns and uncollectible 19,743 19,281
accounts - May 31, 1996, $1,351; February 29, 1996, $711)
Inventory 309 549
Deferred tax asset 1,991 809
Other current assets 876 805
------------ ------------
Total current assets 40,132 44,923
PROPERTY AND EQUIPMENT - NET 7,180 6,046
NONCURRENT ASSETS:
Capitalized software costs - net 7,127 6,084
Intangibles - net 2,938 2,927
Other noncurrent assets 470 451
------------ ------------
TOTAL $ 57,847 $ 60,431
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,595 $ 3,282
Other accrued expenses 5,023 4,911
Deferred revenue 6,995 6,652
Current portion of long-term debt 264 155
Income taxes payable 322 722
------------ ------------
Total current liabilities 14,199 15,722
LONG-TERM DEBT 381 182
DEFERRED INCOME TAXES 2,435 1,585
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,750,000 authorized; none issued -- --
Common stock, $.002 par value; 30,000,000 shares authorized;
shares issued, 10,931,107 at May 31, 1996; 10,846,502 at
February 29, 1996; shares outstanding, 10,540,852 at May 31,
1996; 10,456,247 at February 29, 1996 22 22
Additional paid-in capital 33,502 33,131
Retained earnings 8,050 10,628
Translation adjustment 2 (95)
Treasury stock - 390,255 shares, at cost (744) (744)
------------ ------------
Total stockholders' equity 40,832 42,942
------------ ------------
TOTAL $ 57,847 $ 60,431
============ ============
</TABLE>
See accompanying notes to the financial statements.
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MANUGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
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Three months ended May 31,
-----------------------------
1996 1995
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REVENUES:
Software products $ 8,732 $ 5,929
Consulting, maintenance
and other services 9,709 7,538
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Total revenues 18,441 13,467
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OPERATING EXPENSES:
Cost of software sold 1,344 652
Cost of consulting, maintenance
and other services 4,042 3,300
Sales and marketing 6,134 4,891
Product development 3,557 2,198
General and administrative 1,737 1,335
Purchased research and development 3,697 -
------------ ------------
Total operating expenses 20,511 12,376
------------ ------------
(LOSS) INCOME FROM OPERATIONS (2,070) 1,091
OTHER INCOME (EXPENSE):
Interest income 251 288
Interest expense (16) (14)
Other (19) 60
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Total other income (expense) 216 334
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(LOSS) INCOME BEFORE INCOME TAXES (1,854) 1,425
PROVISION FOR INCOME TAXES 724 545
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NET (LOSS) INCOME $ (2,578) $ 880
============ ============
(LOSS) EARNINGS PER SHARE $ (0.25) $ 0.08
============ ============
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENT SHARES OUTSTANDING 10,490 10,662
============ ============
</TABLE>
See accompanying notes to the financial statements.
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MANUGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
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Three months ended May 31,
-----------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (2,578) $ 880
Adjustments to reconcile net (loss) income to net cash provided
(used) by operating activities:
Depreciation and amortization 1,964 950
Write off of purchased research and development 3,697 -
Deferred income taxes 268 (5)
Other 11 8
Changes in assets and liabilities:
Accounts receivable (324) (230)
Inventory 240 54
Other current assets (68) (228)
Other noncurrent assets (9) 18
Accounts payable and accrued expenses (2,572) (137)
Income taxes payable (376) 336
Deferred revenue 241 256
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Net cash provided by operating activities 494 1,902
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Avyx, Inc. (3,582) -
Purchase of property and equipment-net (1,278) (796)
Capitalization of computer software development costs (1,504) (916)
Purchase of software licenses (583) (15)
Purchase of marketable securities - (193)
Sale of marketable securities 5,264 -
------------ ------------
Net cash used in investing activities (1,683) (1,920)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations (49) (28)
Proceeds from stock options 130 60
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Net cash provided by financing activities 81 32
------------ ------------
EFFECTS OF EXCHANGE RATES ON CASH BALANCES 106 26
------------ ------------
NET (DECREASE) INCREASE IN CASH (1,002) 40
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,921 4,599
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,919 $ 4,639
============ ============
</TABLE>
See accompanying notes to the financial statements.
5
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MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MAY 31, 1996
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
reporting and in accordance with the instructions to the Quarterly
Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and notes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
only of normal, recurring adjustments) which are necessary for a fair
presentation of the unaudited results for the interim periods
presented have been included. The results of operations for the
periods presented herein are not necessarily indicative of the results
of operations for the entire fiscal year, which ends on February 28,
1997.
These consolidated financial statements should be read in conjunction
with the financial statements and notes thereto for the fiscal year
ended February 29, 1996, included in the Company's Annual Report on
Form 10-K for that year.
2. Acquisition of Avyx, Inc.
On May 24, 1996, the Company acquired by merger Avyx, Inc., a custom
developer and services provider of manufacturing scheduling software,
based in Colorado. The total purchase price was $3,799,000, primarily
comprised of cash, assumed liabilities, and acquisition costs.
The acquisition was accounted for as a purchase. Accordingly, the
purchase price was preliminarily allocated among the identifiable
tangible assets and liabilities based on their respective fair market
values. In addition, the purchase price was also preliminarily
allocated to certain intangible assets, such as existing software
products which had reached technological feasibility, and in-process
software development efforts which had not reached technological
feasibility ("purchased research and development"). The excess in
purchase price over these estimated fair values of the net assets
acquired was accounted for as goodwill.
The preliminary allocation resulted in $3,697,000 of the transaction
value being allocated to purchased research and development costs.
The amount was charged to operations in the quarter ended May
31, 1996. Along with the purchased research and development, nominal
amounts were allocated to existing software products and goodwill.
Such amounts will be amortized on a straight-line basis over five
years.
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Consolidated pro forma revenues, income, and earnings per share would
not have been materially different from the reported amounts for the
quarters ended May 31, 1996 and 1995, excluding the one-time charge
for purchased research and development costs. Such pro forma amounts
are not necessarily indicative of what the actual consolidated results
of operations might have been if the acquisition had been effective at
the beginning of fiscal 1996.
In addition, the Company entered into a three-year non-compete
agreement with two of the principals of Avyx, Inc. who did not become
employees of the Company, in exchange for an option to purchase 30,000
shares of the Company's common stock. The agreement was valued at
$217,000, which represents the estimated fair value of the stock
options issued, and will be amortized over the life of the agreement.
3. Supplemental Cash Flow Information
Cash paid for interest amounted to approximately $12,000 and $8,000
for the quarters ended May 31, 1996 and 1995, respectively. Cash paid
for income taxes amounted to approximately $820,000 and $214,000 for
the quarters ended May 31, 1996 and 1995, respectively.
Supplemental information of noncash investing and financing activities
is as follows:
During the quarter ended May 31, 1996, $345,000 relating to a leased
asset and obligation was capitalized.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, markets and supports a set of operational
planning and decision-making software products and services for supply chain
management. Supply chain management refers to managing the complex interactions
involved in the flows of products across the supply chain -- from raw materials
procurement, through the manufacturing and distribution processes, to delivery
as finished goods to customers. The Company's supply chain management software
assists managers in forecasting product demand and in planning for the
synchronization of distribution, manufacturing and transportation of products
and related logistics, not only across an entire enterprise, but also among an
enterprise and its suppliers and customers. The Company believes it is the only
provider of integrated operational planning and decision-making software
products that address the four key areas of supply chain management: demand
planning, supply planning, manufacturing scheduling and transportation
planning. Additionally, the Company markets and supports the STATGRAPHICS
personal systems product, which provides statistical tools for quality
management in manufacturing companies. Revenues from supply chain management
software, services and maintenance represented approximately 95% and 90% of
total revenues during the quarters ended May 31, 1996 and 1995, respectively.
RESULTS OF OPERATIONS
REVENUES:
Software products. The Company's software products license revenues
increased primarily because of increased demand for, and increased market
acceptance of, supply chain management software products, which more than
offset decreased revenues from the personal systems software product. Although
the percentage of total revenues represented by software products revenues has
varied in the past and is likely to continue to vary, for the quarter ended May
31, 1996, software products license revenues increased to 47% of total
revenues. This increase resulted principally from the fact that software
products revenues increased at a greater rate than consulting, maintenance and
other services revenues. In fiscal 1997, the Company plans to utilize
third-party consultants to provide some implementation services and, as a
result, anticipates that services revenues for periods of fiscal 1997 are
likely to increase less rapidly than in comparable periods in fiscal 1996. See
"Forward Looking Statements."
<TABLE>
<CAPTION>
Software products revenues Three months ended
------------------------------
May 31, May 31,
1996 Change 1995
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Supply chain management $ 8,060 63% $ 4,942
Percentage of total revenues 43.7% 36.7%
Personal systems $ 672 -32% $ 987
Percentage of total revenues 3.7% 7.3%
----------- ----------
Total software products revenues $ 8,732 47% $ 5,929
Percentage of total revenues 47.4% 44.0%
</TABLE>
Supply chain management. Software products license revenues increased
63% primarily because of increases in the number of licenses and an increase in
the average license fee per transaction. The increase in the number of licenses
resulted from increased market acceptance of
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the Company's products and from an increase in the Company's sales and
marketing efforts, which was made possible largely by the addition of sales and
marketing employees. Acceptance of these products increased, the Company
believes, because more companies recognized that they could rapidly realize
significant benefits from effective supply chain management, and these
companies selected the Company's software to help them obtain these benefits.
The Company's European operations and new distribution channels made
important contributions to total software products license revenues for the
quarter. More than 35% of software products revenues were derived from licenses
by the Company's subsidiaries outside North America. In addition, the Company
generated revenues through its alliances with consulting firms and
complementary software companies.
Personal systems. Software products license revenues decreased
primarily because customers and prospective customers selected competing
products and because the Company sold the assets of its APL*PLUS business for
UNIX and personal computer systems effective October 1, 1995. Following this
disposition, the number of employees involved with personal systems products
has decreased and the Company is only continuing to market one personal systems
product, STATGRAPHICS. Management of the Company believes that demand for
STATGRAPHICS will continue to decrease.
Consulting, maintenance and other services. Revenues from consulting,
maintenance and other services increased principally as a result of increased
demand for supply chain management consulting and maintenance services from a
growing base of customers that have licensed the Company's supply chain
management software.
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<CAPTION>
Consulting, maintenance and other services Three months ended
-----------------------------
May 31, May 31,
1996 Change 1995
---------- ------ ---------
<S> <C> <C> <C>
Supply chain management $ 9,482 32% $ 7,168
Percentage of total revenues 51.4% 53.2%
Personal systems $ 227 -39% $ 370
Percentage of total revenues 1.2% 2.7%
---------- ---------
Total consulting, maintenance
and other services $ 9,709 29% $ 7,538
Percentage of total revenues 52.6% 56.0%
</TABLE>
Supply chain management. Revenues from consulting and other services
increased in conjunction with the licensing of software products by new and
existing clients and the purchase of additional services by established
clients. In fiscal 1997, the Company plans to utilize third-party consultants
to provide some implementation services and, as a result, anticipates that
services revenues for periods of fiscal 1997 are likely to increase less
rapidly than in comparable periods in fiscal 1996. See "Forward Looking
Statements."
Maintenance revenues have increased following the increase in the
installed base of customers that have licensed the Company's software products
and entered into maintenance contracts. Maintenance revenues tend to track
software products sold in prior periods. Approximately 90% to 95% of customers
that have maintenance contracts have historically renewed these contracts each
year.
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Personal systems. Consulting, maintenance and other services revenues
decreased primarily because of a decline in maintenance revenues, which
decreased largely because the Company, consistent with its decision to focus on
its supply chain management business and in response to decreased demand for
personal systems products, disposed of the assets of its APL*PLUS business for
UNIX and personal computer systems in October 1995.
OPERATING EXPENSES:
Operating expenses
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<CAPTION>
Three months ended
-----------------------------
May 31, May 31,
1996 Change 1995
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Cost of software sold $ 1,344 106% $ 652
Percentage of total revenues 7.3% 4.9%
Cost of consulting, maintenance,
and other services $ 4,042 22% $ 3,300
Percentage of total revenues 21.9% 24.5%
Sales and marketing $ 6,134 25% $ 4,891
Percentage of total revenues 33.3% 36.3%
Product development $ 3,557 62% $ 2,198
Percentage of total revenues 19.3% 16.3%
General and administrative $ 1,737 30% $ 1,335
Percentage of total revenues 9.4% 9.9%
In-process research and development $ 3,697 N/M $ -
Percentage of total revenues 20.0% 0.0%
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Total operating expenses $ 20,511 66% $12,376
Percentage of total revenues 111.2% 91.9%
</TABLE>
Cost of software sold. Cost of software sold includes 1) amortization
of capitalized software development costs and 2) cost of goods and other. The
Company amortizes capitalized software development costs over a product's
estimated economic life, generally two years or less, commencing when a product
is available for general commercial release.
Cost of software sold
<TABLE>
<CAPTION>
Three months ended
------------------------------
May 31, May 31,
1996 Change 1995
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Amortization of capitalized software $ 1,002 116% $ 464
Percentage of software products revenues 11.5% 7.8%
Cost of goods and other $ 342 82% $ 188
Percentage of software products revenues 3.9% 3.2%
---------- ----------
Cost of software sold $ 1,344 106% $ 652
Percentage of software products revenues 15.4% 11.0%
</TABLE>
The cost of software sold increased primarily because amortization
increased following the general commercial release of additional supply chain
management software products for which costs had previously been capitalized.
The amount of capitalized software development costs has increased in recent
periods as the Company has increased its gross product development expenditures
for supply chain management software. See "Results of Operations -- Product
Development." Also, although the Company's existing Finite Capacity Scheduling
software
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continues to provide benefits to clients, the Company wrote off the substantial
majority of its capitalized costs relating to the development of that product
following the May 1996 acquisition of Avyx, Inc. and its manufacturing
scheduling software technology. The Company plans to use the technology
acquired from Avyx, Inc. in the development of its new manufacturing scheduling
product. See "Results of Operations -- Purchased research and development."
Cost of goods expenses and other increased largely because of a write-off
of approximately $230,000 of obsolete and slow-moving inventory.
The cost of software sold increased as a percentage of software
products revenues principally because the Company took some one-time write-offs
during the quarter, and the amounts of these write-offs caused the cost of
software sold to increase at a greater rate than software products revenues.
Cost of consulting, maintenance and other services. The cost of
consulting, maintenance and other services increased primarily because the
Company added personnel to provide the consulting services that generated the
corresponding increase in supply chain management revenues from consulting,
maintenance and other services. Specifically, in order to meet demand for the
Company's services in Europe, the Company has increased the number of services
employees in its offices there. The Company has also increased the number of
services employees in the U.S.
In fiscal 1997, the Company plans to utilize third-party consultants
to provide some implementation services and, as a result, anticipates that
services revenues for periods of fiscal 1997 are likely to increase less
rapidly than in comparable periods in fiscal 1996. Correspondingly, the Company
anticipates that the cost of consulting services, which is the major component
of the cost of consulting, maintenance and other services, will increase less
rapidly than in comparable periods in fiscal 1996. See "Forward Looking
Statements."
As a percentage of consulting, maintenance and other services
revenues, the cost of consulting, maintenance and other services decreased
because of increased utilization of the Company's consulting employees and
increased training productivity. In addition, a significant portion of the
increase in the corresponding revenues was generated by maintenance and product
support, which can be provided more efficiently by serving a larger client
base. Furthermore, the Company's support function has benefited from the higher
level of quality of the Company's products resulting from its ISO
9001-certified design and development processes.
Sales and marketing. Sales and marketing expenses increased in the
quarter ended May 31, 1996 because the Company increased its sales and
marketing resources in the U.S. and Europe and increased its marketing expenses
in connection with expanded product offerings. The Company also incurred
increased commission expenses as a result of greater software products license
revenues. As a percentage of total revenues, sales and marketing expenses
decreased because the current size and activities of the Company's marketing
group have been sufficient to generate increased revenues.
Product development. The Company records product development expenses
net of capitalized software development costs.
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Product development expenses
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<CAPTION>
Three months ended
-------------------------------
May 31, May 31,
1996 Change 1995
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<S> <C> <C> <C>
Gross product development costs $ 5,061 62% $ 3,114
Percentage of total revenues 27.4% 23.1%
Less: Capitalized product development costs $ 1,504 64% $ 916
Percentage of gross product development costs 29.7% 29.4%
----------- ----------
Product development expenses $ 3,557 62% $ 2,198
Percentage of total revenues 19.3% 16.3%
</TABLE>
Gross product development costs increased because the Company employed
significantly more developers of supply chain management software. The Company
hired these employees to develop new software products and to enhance versions
of existing products. In addition, these developers are modifying the Company's
software to be integrated with, or to inter-operate with, the complementary
products of certain Enterprise Resource Planning ("ERP"), or transaction
system, vendors, such as Oracle Corporation and SAP AG.
The Company is continuing to make product development expenditures
that it believes are necessary to preserve and strengthen the Company's
competitive position in the market for supply chain management software.
Capitalized product development costs increased primarily because of
the increase in the number and magnitude of the Company's supply chain
management product development projects. As a percentage of gross product
development costs, capitalized product development costs remained approximately
the same because the capitalized amount increased at approximately the same
rate as gross product development costs.
Because the costs associated with the greater number of additional
development personnel more than offset the increase in capitalized product
development costs, net product development expenses increased in the quarter
ended May 31, 1996 from the quarter ended May 31, 1995.
General and administrative. General and administrative expenses
increased in the quarter ended May 31, 1996 primarily because the Company hired
additional employees necessary to support the Company's growth, including its
international expansion.
Purchased research and development. During the quarter ended May 31,
1996, the Company acquired by merger all of the outstanding capital stock of
Avyx, Inc., a custom developer and services provider of manufacturing
scheduling systems. The Company incurred a non-recurring charge to operations
of $3.7 million in connection with the write-off of purchased research and
development costs. The amount of this charge caused the Company to have an
operating loss of approximately $2.1 million for the quarter ended May
31, 1996. See Note 2 of Notes to Consolidated Financial Statements.
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Other income (expense).
<TABLE>
<CAPTION>
Three months ended
----------------------------
May 31, May 31,
1996 Change 1995
--------- ------ --------
<S> <C> <C> <C>
Other income (expense) $ 216 -35% $ 334
Percentage of total revenues 1.2% 2.5%
</TABLE>
Other income (expense) includes interest income, interest expense,
foreign currency exchange gains or losses, and other gains or losses. Other
income decreased in the quarter ended May 31, 1996 from the quarter ended May
31, 1995 because there was a one-time, non-recurring gain from the Company's
disposal of a personal systems consulting services business in the quarter
ended May 31, 1995 and because interest income has decreased as a result of a
decrease in the amount of the Company's short term investments. The balance of
short term securities has declined following cash payments in connection with
acquisitions in recent periods, including the acquisition of Avyx, Inc., and
the expansion of the Company's international operations.
Provision for income taxes.
<TABLE>
<CAPTION>
Three months ended
------------------------------
May 31, May 31,
1996 Change 1995
----------- ------ --------
<S> <C> <C> <C>
Income taxes $ 724 33% $ 545
Percentage of income before taxes -39.1% 38.2%
Percentage of total revenues 3.9% 4.0%
</TABLE>
The effective tax rate represented by the Company's provision for
income taxes in the quarter ended May 31, 1996 would have been approximately
39%, disregarding a pre-tax loss, largely because the expenses associated with
the Company's write-off of purchased research and development costs were not
deductible for tax purposes. Also, a relatively greater proportion of revenues
during the quarter ended May 31, 1996 was derived from the Company's
international subsidiaries, which are located in jurisdictions where marginal
tax rates tend to be slightly higher than in the U.S. Management of the Company
believes that, in fiscal 1997, the effective tax rate of the Company on a
consolidated basis is likely to be approximately 40%, excluding one-time
charges in connection with acquisitions or other transactions. This estimate is
based on current tax law and is subject to change.
Net income (loss) and earnings per share.
<TABLE>
<CAPTION>
Three months ended
------------------------------
May 31, May 31,
1996 Change 1995
---------- ------ ----------
<S> <C> <C> <C>
Net (loss) income $ (2,578) NM $ 880
Percentage of total revenues -14.0% 6.5%
(Loss) earnings per share ($0.25) NM $ 0.08
Weighted average common shares
and equivalent shares outstanding 10,490 10,662
</TABLE>
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LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
As of
------------------------------------------
May 31, February 29,
1996 1996
--------------- ---------------
<S> <C> <C>
Working capital $ 25,933 $ 29,201
Cash, cash equivalents
and marketable securities $ 17,213 $ 23,479
</TABLE>
The Company has historically financed its growth primarily through
funds generated from operations and through proceeds from offerings of capital
stock. The decrease in working capital at May 31, 1996 from February 29, 1996
resulted principally from the Company's use of cash flows from operations and
available cash balances and marketable securities to make cash payments in May
1996 in connection with the Company's acquisition of Avyx, Inc. See Note 2 of
Notes to Consolidated Financial Statements.
In April 1995, the Company obtained a one-year unsecured committed
revolving credit facility from two commercial banks. Under the terms of the
facility, the Company may request advances in the aggregate amount of up to $10
million. The facility includes a standby letter of credit facility.
Acquisition-related borrowings are limited to $5 million per acquisition. The
credit facility was extended in March 1996, and will expire on July 31, 1996,
unless it is renewed. The Company and the banks are currently discussing the
renewal of this facility and the Company anticipates that the facility will be
renewed. At May 31, 1996, $9 million was available for borrowing, after the
Company established a $1 million standby letter of credit facility to support a
working capital overdraft facility for one of its international subsidiaries.
No draws have been made upon this standby letter of credit.
The Company investigates potential candidates for acquisition, joint
venture opportunities or other relationships on an ongoing basis. Depending on
certain factors, including the amount, nature, method and timing of the
consideration to be paid, any such acquisitions may result in a decrease in
working capital.
In May 1996, the Company acquired by merger all of the outstanding
capital stock of Avyx, Inc. Under the merger agreement, the Company agreed to
pay approximately $2,160,000, to repay certain indebtedness of Avyx of
approximately $700,000 and to assume other short-term and long-term liabilities
and obligations of approximately $900,000. The Company also entered into a
consulting agreement with two former principals of Avyx who did not become
employees of the Company under which the Company is obligated to pay these
individuals an aggregate amount of up to $250,000 for their services over three
years.
The Company's investments in product development are discussed
generally under "Results of Operations -- Product Development." In particular,
the Company has begun to develop a new product, Advanced Manufacturing
Scheduling, that incorporates Avyx's technology. The Company believes that it
can integrate and develop this acquired technology and deliver the initial
commercial release of Advanced Manufacturing Scheduling during the third
quarter of the current fiscal year, with a subsequent release planned as part
of the next full version of Manugistics' product suite in the first part of
the 1997 calendar year. Following these releases, the Company plans to continue
to devote resources to the ongoing development and enhancement of these
products. See "Forward Looking Statements."
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The Company believes that existing cash balances, marketable
securities, funds generated from operations and amounts available under the
revolving credit facility will be sufficient to meet its anticipated liquidity
and working capital requirements for at least the next 12 to 18 months. If the
Company decides to expand its operations more rapidly, to broaden or enhance
its products more rapidly, to acquire businesses or technologies or to make
other significant expenditures to respond to market opportunities or
competitive pressures, then it may need access to additional funds at an
earlier time.
INFLATION
The Company believes that inflation has not had a material effect on
its results of operations.
FORWARD LOOKING STATEMENTS
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section contains forward looking statements that are
subject to a number of risks and uncertainties. There are several important
factors that could cause actual results to differ materially from those
anticipated by the statements made above. Descriptions of these factors, which
accompany the related statements, follow:
The Company believes that the market for supply chain management
software is expanding rapidly. If market demand for the Company's products does
not continue to grow rapidly, because of such factors as business conditions or
the general economy, the timely availability and acceptance of the Company's
products, technological change or the effect of competitive products and
pricing, software license revenue growth could be adversely affected.
Revenues for any period depend on the volume, timing and size of
license agreements. The Company typically ships software products shortly
after license agreements are signed, and therefore, does not maintain any
material contract backlog. The timing of license agreements is difficult to
forecast because software sales cycles are affected by the size of transactions
and other external factors such as general economic conditions. A small
variation in the timing of software licensing transactions, particularly at or
near the end of any quarter or year, can cause significant variations in the
proportion of total revenues represented by software products.
The timing of releases of the Company's software products can be
affected by client needs, marketplace demands, technological advances, and
competitors' activities. Development plans frequently change, and it is
difficult to predict with accuracy the release dates for products in
development. In particular, the release of manufacturing scheduling products
depends in part on the Company's ability to integrate and develop certain
acquired technology as planned.
In fiscal 1997, the Company plans to utilize third-party consultants
to provide some implementation services and, as a result, anticipates that
services revenues for periods of fiscal 1997 are likely to increase less
rapidly than in comparable periods in fiscal 1996. Correspondingly, the Company
anticipates that the cost of consulting services will increase less rapidly
than in comparable periods of fiscal 1996. There can be no assurance, however,
that third-party consultants will provide the level and quality of service
required to meet the needs of the
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Company's customers, or that there will be a sufficient number of trained
individuals employed by these third-party consultants to provide these services
to clients. The Company's strategy is to utilize third-party consultants for
implementing its products as well as for generating leads and assisting in the
sales process. If the Company receives fewer new leads and little sales
assistance from these firms, then the Company might not utilize these
consultants and might instead provide services itself, which might change the
Company's expectations regarding the rate of growth of services revenues, as
well as the corresponding rate of increase in the cost of consulting services.
16
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C>
(a) Exhibits
10.18 Agreement and Plan of Merger dated May 24, 1996 between Avyx, Inc.,
Manugistics Acquisition, Inc., and the Company
10.19 Consulting Agreement dated May 24, 1996 between The Kendall Group, Inc.
and the Company
10.20 Confidentiality, Non-Competition and Non-Solicitation Agreement dated May
24, 1996 between the Company and John K. Willoughby and Jo Anne
Gardner
11 Statements Regarding Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
</TABLE>
No reports on Form 8-K were filed by the Company during the first
quarter ended May 31, 1996. On June 10, 1996, the Company filed a Current
Report on Form 8-K following its issuance of a press release announcing that
the Company had completed its acquisition by merger of all of the issued and
outstanding common stock of Avyx, Inc., a closely held Colorado company.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Manugistics Group, Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MANUGISTICS GROUP, INC.
(Registrant)
Date: July 15, 1996 By:/s/ William M. Gibson
--------------------------------------
William M. Gibson
President, Chief Executive Officer and
Chairman of the Board of Directors
Date: July 15, 1996 By:/s/ Peter Q. Repetti
------------------------------------------
Peter Q. Repetti
Vice President, Finance and Administration,
and Chief Financial Officer
(Principal Financial Officer and Chief
Accounting Officer)
18
<PAGE> 1
EXHIBIT 10.18
AGREEMENT AND
PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of May 24, 1996 by and among AVYX,
INC., a Colorado Corporation ("Avyx"), MANUGISTICS ACQUISITION, INC., a
Delaware Corporation ("Acquisition"), and MANUGISTICS, INC., a Delaware
Corporation ("Manugistics") and joined in by the principal shareholders of
Avyx, SCOTT EQUITIES, LTD., a Colorado limited partnership ("Scott"), JOHN K.
WILLOUGHBY ("Willoughby"), JO ANNE GARDNER ("Gardner"), JAMES E. PACOTTI, JR.
("Mr. Pacotti") and PATSY A. PACOTTI ("Mrs. Pacotti") (each of Scott,
Willoughby, Gardner, Mr. Pacotti and Mrs. Pacotti being referred to
collectively as the "Principal Shareholders").
BACKGROUND
A. Avyx is engaged in the business of providing advanced
manufacturing scheduling products.
B. Acquisition is a wholly-owned subsidiary of Manugistics, and
Acquisition was formed to merge with and into Avyx so that as a result of the
merger Avyx would become a wholly-owned subsidiary of Manugistics.
C. The Boards of Directors of each of Avyx, Acquisition and
Manugistics, and Manugistics as the sole shareholder of Acquisition, have all
determined, on April 29, 1996 for Avyx and on April 30, 1996 for Acquisition
and Manugistics, that the merger of Acquisition with and into Avyx (hereinafter
referred to as the "Merger") in accordance with the provisions of Colorado
Business Corporation Act (the "CBCA") and Delaware General Corporation Law (the
"DGCL") and subject to the terms and conditions of this Agreement and Plan of
Merger (this "Agreement") is in the best
<PAGE> 2
interests of each of Avyx, Acquisition and Manugistics and the shareholders of
each of Avyx, Acquisition and Manugistics, and approved the Merger on and as of
the dates set forth above.
D. On May 24, 1996, certain Avyx shareholders, who together hold
not less than one hundred percent (100%) of the issued and outstanding common
stock of Avyx, entered into a Shareholders Agreement (the "Shareholders
Agreement") with Acquisition and Manugistics (in the form of Exhibit A annexed
hereto) and each executed a Shareholder's Unanimous Written Consent (in the
form of Exhibit B annexed hereto) pursuant to which the Avyx shareholders
executed consents in writing in favor of the Merger.
E. The Secretary of Acquisition hereby certifies that this
Agreement has been adopted pursuant to Section 251(f) of the DGCL, as
applicable pursuant to Section 252(e) of the DGCL, and as of the date of the
Certificate of Merger (as hereinafter defined), the outstanding shares of
Acquisition are such as to render such Sections applicable.
F. The Secretary of Avyx hereby certifies that this Agreement has
been adopted pursuant to Article 111 of the CBCA and as of the date of the
Articles of Merger (as hereinafter defined), the outstanding shares of Avyx are
such as to render such Section applicable.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties, agreements and promises contained herein and
intending to be legally bound hereby, each of Avyx, Acquisition and Manugistics
agree as follows:
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AGREEMENT
1. The Merger
1.1 General.
(a) Subject to the terms and conditions of this Agreement
and in accordance with the CBCA and the DGCL, Acquisition will be merged with
and into Avyx on the Effective Date (as defined in Section 1.1(b) hereof), and
the separate corporate existence of Acquisition shall cease and Avyx shall be
the surviving corporation (the "Surviving Company," and any company into which
the Surviving Company may hereafter merge also being referred to as the
"Surviving Company") continuing its corporate existence under the laws of the
State of Colorado.
(b) The Merger shall become effective at 12:01 P.M. E.D.T.
on May 28, 1996 (the "Effective Date"), which date shall be specified in the
Certificate and Articles of Merger (described below) as the effective date of
the Merger. Prior to the Effective Date the parties shall cause to be filed a
Certificate of Merger (substantially in the form of Exhibit C annexed hereto)
with the Secretary of State of the State of Delaware in accordance with the
provisions of the DGCL (the "Certificate of Merger") and Articles of Merger (in
the form of Exhibit D annexed hereto) with the Secretary of State of the State
of Colorado in accordance with the provisions of the CBCA (the "Articles of
Merger"). The date and time when the Merger shall become effective is herein
referred to as the "Effective Date."
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(c) On the Effective Date, the Merger shall have the legal
effect provided in Section 259 of the DGCL and Section 7-111-106 of the CBCA.
1.2 Conversion of Stock. On the Effective Date:
(a) Each share of common stock, no par value per share of
Avyx (the "Effective Date Avyx Common Stock") then issued and outstanding
(other than shares, if any, as to which the holders shall perfect dissenters'
rights) shall, by virtue of the Merger and without any action on the part of
Avyx or any of Avyx's shareholders (except as set forth in Section 3.3 hereof),
be converted into and represent the right to receive in cash a price per share
(the "Share Price") equal to the Purchase Price (as defined in Section 2 below,
taking account of reductions, if any, pursuant to the Balance Sheet Adjustment
provisions of Section 2.7(a) below), divided by the total number of issued and
outstanding shares of Effective Date Avyx Common Stock as of the Effective
Date. The amount of cash actually received by the Avyx shareholders with
respect to each share of Effective Date Avyx Common Stock will be less than the
Share Price by reason of (i) reductions for certain costs of the transaction,
including those described in Section 2.2(a) below, and (ii) any payments of
claims out of the Escrow Fund in accordance with Section 2.7(b) below and
related provisions of this Agreement.
(b) Each share of common stock, $.01 par value per share
of Acquisition (the "Acquisition Common Stock") then issued and outstanding
shall, by virtue of the Merger and without
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any action on the part of the holder thereof, become one fully paid and
nonassessable share of common stock, no par value per share, of the Surviving
Company (the "Surviving Company Common Stock").
1.3 No Further Rights of Transfer. On and after the Effective
Date, each Avyx shareholder holding a certificate or certificates theretofore
evidencing shares of Effective Date Avyx Common Stock (the "Certificates")
shall cease to have any rights as a shareholder of Avyx, except for the right
to surrender such Certificates in exchange for payment of the Share Price, as
adjusted pursuant to Section 1.2(a), payable to such holder, or the right to
perfect such shareholder's right to receive payment for dissenting shares, and
no transfer of shares of Effective Date Avyx Common Stock shall be made on the
stock transfer books of the Surviving Company.
1.4 Articles of Incorporation. The Articles of Incorporation
of Avyx, as in effect immediately prior to the Effective Date, shall be the
Articles of Incorporation of the Surviving Company until thereafter amended as
provided therein and by law.
1.5 By-Laws. The By-Laws of Avyx, as in effect immediately
prior to the Effective Date, shall be the By-Laws of the Surviving Company
until thereafter amended as provided therein and by law.
1.6 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Acquisition, 2115 East Jefferson Street,
Rockville, Maryland 20852, on May 24, 1996
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<PAGE> 6
(the "Closing Date"), but in no event later than the automatic termination date
provided in Section 18.2 hereof. At the time of Closing, the Closing
certificates, opinions of counsel and other documents to be delivered pursuant
to this Agreement will be exchanged.
2. Purchase Price
2.1 Payment of Purchase Price. The purchase price shall be Two
Million One Hundred Sixty Thousand Dollars ($2,160,000.00) (the "Purchase
Price"), payable as follows:
(a) One Million Six Hundred and Sixty Thousand Dollars
($1,660,000.00) (the "Closing Funds), shall be payable at the Closing in lawful
money of the United States of America in immediately available funds by wire
transfer to a bank account designated by the Paying Agent (as defined in
Section 2.2 hereof) on the Closing Date;
(b) Three Hundred Thousand Dollars ($300,000.00) (the
"Escrow Funds"), shall be payable at the Closing in lawful money of the United
States of America in immediately available funds by wire transfer to a bank
account designated by the escrow agent as named in the Escrow Agreement in the
form of Exhibit E annexed hereto (the "Escrow Agreement"); and
(c) Two Hundred Thousand Dollars ($200,000.00) (the
"Balance Sheet Adjustment Funds"), less the Balance Sheet Adjustment (as
defined in Section 2.7(a) hereof) (the Balance Sheet Adjustment Funds less the
Balance Sheet Adjustment being the "Adjustment Payment"), shall be payable on
or before ten (10) days
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<PAGE> 7
after the Adjustment Date (as defined in Section 2.7(a) hereof). The
Adjustment Payment shall bear interest at the rate of five (5%) percent from
the Closing through the date of payment.
2.1A Within two (2) business days of the Closing, the Surviving
Company shall satisfy the following outstanding obligations: (a) a note ("Note
1") in the outstanding principal amount of Five Hundred Thousand Dollars
($500,000.00), plus accrued interest as of the Closing, to Scott; (b) a note
("Note 2") in the outstanding principal amount of $135,846.00, plus accrued
interest as of the Closing, to Scott; (c) a note ("Note 3")in the outstanding
principal amount of $34,860.26, plus accrued interest as of the Closing, to Mr.
Pacotti; and (d) a note ("Note 4") in the outstanding principal amount of Ten
Thousand Dollars ($10,000.00), plus accrued points and interest as of the
Closing, to Willoughby. Concurrently with receipt of payment, Scott shall
deliver such UCC-3 and other releases and take all other action requested by
the Surviving Company to terminate any and all security interests of Scott in
the assets of Avyx, the Surviving Company and the Subsidiaries securing Note 1
and Note 2 and any other obligations from Avyx and the Subsidiaries to Scott;
Pacotti shall deliver such UCC-3 and other releases and take all other action
requested by the Surviving Company to terminate any and all security interests
of Pacotti in the assets of Avyx, the Surviving Company and the Subsidiaries
securing Note 3 and any other obligations from Avyx and the Subsidiaries to
Pacotti; and Willoughby shall deliver such UCC-3 and other releases and take
all other action requested by the
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<PAGE> 8
Surviving Company to terminate any and all security interests of Willoughby in
the assets of Avyx, the Surviving Company and the Subsidiaries securing Note 4
and any other obligations from Avyx and the Subsidiaries to Willoughby.
2.2 Deposit With Paying Agent; Deposit With Escrow Agent. Avyx
shall appoint Willoughby as the paying agent (the "Paying Agent"), who upon
unanimous agreement of the Principal Shareholders may be one of the Avyx
shareholders, for the purpose of disbursing the Closing Funds and the
Adjustment Payment to the Avyx shareholders.
(a) At the Closing, immediately prior to the Effective
Date, Acquisition shall deposit the Closing Funds with the Paying Agent, as
agent for the Avyx shareholders, as provided in and subject to Section 2.1
hereof. Immediately upon such deposit, none of Manugistics, Acquisition or the
Surviving Company shall have any further liability to the Avyx shareholders
with respect to the Closing Funds. The Paying Agent shall disburse the Closing
Funds as follows:
(i) The Paying Agent shall pay to The Corum Group,
Ltd. ("Corum") the sum of $139,677.84, which amount, together with the amounts
(if any) paid to Corum pursuant to the Paying Agent Agreement out of any
Adjustment Payment or Escrow Funds actually paid to the Paying Agent under the
terms hereof, shall be in full satisfaction of any claim which Corum may have
for a brokerage fee or other commission in respect of the execution of
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<PAGE> 9
this Agreement or the consummation of the transactions contemplated hereby;
(ii) The Paying Agent shall pay retention bonuses to
the employees listed on Schedule 2.2(a)(ii) annexed hereto in the amounts
indicated thereon;
(iii) The Paying Agent shall pay to the law firm of
Blanc Williams Johnston & Kronstadt and the law firm of Andrew N. Bernstein,
P.C., counsel to Avyx in connection with this Agreement, the sum of $60,000.00
and $13,575.00, respectively; and
(iv) The balance of the Closing Funds remaining after
the disbursements set forth in subsections (i), (ii) and (iii) above shall be
disbursed to the Avyx shareholders pro rata.
(b) At the Closing, immediately prior to the Effective
Date, Acquisition shall deposit the Escrow Funds with the Escrow Agent, as
provided in and subject to Section 2.1 hereof. Immediately upon such deposit,
none of Manugistics, Acquisition or the Surviving Company shall have any
further liability to the Avyx shareholders with respect to the Escrow Funds,
except for obligations, if any, of Manugistics, Acquisition or the Surviving
Company pursuant to the Escrow Agreement.
(c) On the Adjustment Date, Manugistics shall deposit the
Adjustment Payment with the Paying Agent, as agent for the Avyx shareholders,
as provided in and subject to Section 2.1 hereof. Immediately upon such
deposit, none of Manugistics, Acquisition or the Surviving Company shall have
any further
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<PAGE> 10
liability to the Avyx shareholders with respect to the Adjustment Payment.
2.3 Investment of Funds. The Closing Funds and the Adjustment
Payment deposited with the Paying Agent shall be held in an interest-bearing
checking account at a national bank or a bank having capital and surplus of at
least $50,000,000. All interest earned or accrued on such account shall be
distributed by the Paying Agent to the Avyx shareholders, and the Surviving
Company shall not have any rights thereto or interest therein and none of
Manugistics, Acquisition or the Surviving Company shall have any liability with
respect thereto. The Escrow Funds shall be held by the Escrow Agent pursuant
to the terms of the Escrow Agreement and all principal and interest earned or
accrued on such Escrow Funds shall be distributed by the Escrow Agent in
accordance with the terms of the Escrow Agreement.
2.4 Surrender of Certificates and Disbursement. Upon the
surrender of Certificates to the Paying Agent and Paying Agent's surrender of
such certificates to Acquisition, the holder of such Certificates shall be
entitled to receive in exchange therefor the Share Price payable with respect
to each share of Effective Date Avyx Common Stock represented thereby less the
sum of such shareholder's pro rata share of the following: (i) the Escrow Funds
held by the Escrow Agent; (ii) the Balance Sheet Adjustment Funds; and (iii)
the amount which the Paying Agent will disburse from the Closing Funds pursuant
to Sections 2.2(a)(i), (ii), and (iii) hereof (the "Share Price Adjustments").
(The Share
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Price less the Share Price Adjustments being the "Closing Share Price") Upon
such surrender, the Paying Agent will promptly pay the Closing Share Price
payable to such holder, less such holder's share, as determined in any
agreement between the Paying Agent and the Avyx shareholders (the "Paying Agent
Agreement"), of all fees and expenses incurred by or for the benefit of the
Avyx shareholders in connection with the transactions contemplated by this
Agreement and such other amounts as may be provided in the Paying Agent
Agreement.
2.5 Transferred Certificates. If the Closing Share Price is to
be delivered to a person other than the person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Closing Share Price to such person that the Certificates so
surrendered shall be properly endorsed or accompanied by appropriate stock
transfer powers and any other required documents and otherwise in proper form
for transfer, that such transfer otherwise be proper and that the person
requesting such transfer pay to the Paying Agent any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of the
Paying Agent that such taxes have been paid or are not required to be paid.
2.6 Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the delivery to the
Paying Agent of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, which the Paying Agent shall
furnish to Acquisition, the
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Paying Agent will pay the Closing Share Price to such person; provided,
however, that as a condition to such payment the Paying Agent may in his
discretion require the owner of such lost or destroyed Certificate to give the
Paying Agent a bond in such sum as he may reasonably direct as indemnity
against any claim that may be made with respect to the Certificate alleged to
have been lost, stolen or destroyed.
2.7 Post-Closing Adjustments and Claims.
(a) Adjustment Payment. Financial statements as of April
30, 1996 (the "April 30 Financial Statements") prepared at the expense of Avyx
by Heidi M. O'Neil were delivered to Manugistics, Avyx, the Paying Agent and
each of the Principal Shareholders on May 20, 1996. The April 30 Financial
Statements were prepared in accordance with GAAP (except as set forth in
Schedule 2.7) and included the balance sheet, income statement, statement of
cash flows, and statement of retained earnings, with detailed schedules
supporting the composition of each of the balances for each line item of assets
and liabilities, and reflected sufficient information for Manugistics to
determine the nature, amount and contact person (including name, address, and
telephone number) associated with each asset and liability reflected in the
detailed schedules, and were otherwise prepared in accordance with Schedule 2.7
annexed hereto and the provisions of this Section 2.7(a). Any necessary
disclosures to the April 30 Financial Statements, required under GAAP, to
adequately and reasonably convey to the reader an understanding of Avyx's
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financial condition since its last annual audited financial statements were
also provided. Manugistics shall have (60) days after its receipt of the April
30 Financial Statements to review and either approve or disapprove such April
30 Financial Statements. If Manugistics does not deliver written notice of
disapproval to the Paying Agent within such sixty (60) day period, stating with
specificity Manugistics' reasons for disapproval and its proposed value of the
Adjustment Payment, Manugistics shall be conclusively deemed to have approved
such April 30 Financial Statements. For purposes of this Agreement, the
"Adjustment Date" shall mean (i) if Manugistics either approves or is deemed to
approve the April 30 Financial Statements, the date upon which the aforesaid
sixty (60) day period expires, or (ii) if Manugistics disapproves the April 30
Financial Statements, the date of the final decision of the Accounting Firm (as
defined below). Immediately following notice of disapproval of the April 30
Financial Statements, Manugistics and the Principal Shareholders shall commence
negotiations regarding the correct amount of the Adjustment Payment. If
agreement is not reached within ten (10) days following the notice of
disapproval, and if the negotiation period is not otherwise extended by mutual
agreement of the parties, then Manugistics shall select a "Big 6" accounting
firm other than [Deloitte] (the "Accounting Firm") to review the April 30
Financial Statements and determine the value for the Adjustment Payment
consistent with GAAP, and who shall be instructed to make its determination
within sixty (60) days of selection. The party
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whose estimate of the Adjustment Payment is farthest from the amount determined
by the Accounting Firm to be correct shall be responsible for the costs and
expenses of the Accounting Firm and the reasonable expenses of the other party
in connection with the dispute. All parties to this Agreement hereby expressly
agree that the decision of the Accounting Firm shall be final and binding.
Notwithstanding anything contained herein to the contrary, Manugistics shall
not be required to accept any April 30 Financial Statements unless such
statements are accompanied by a certification from the Principal Shareholders
substantially in the form of Exhibit F annexed hereto and containing
representations and warranties with respect to such April 30 Financial
Statements identical to those contained in Sections 4.6(b), 4.27, 4.28 and 4.29
hereof. The April 30 Financial Statements will not contain or reflect any
incremental increases in the value of intangible assets (as reasonably defined
under GAAP) from the unaudited balance sheet as of January 31, 1996 delivered
to Acquisition and Manugistics. If the net asset value (total assets less the
sum of all liabilities, including, but not limited to, reserves for contingent
liabilities) as set forth on the April 30 Financial Statements (the "April 30
Net Asset Value") is less than Eighteen Thousand Dollars ($18,000.00) (the
"Minimum Net Asset Value"), the difference between the Minimum Net Asset Value
and the April 30 Net Asset Value (the "Balance Sheet Adjustment") shall be
deducted from the Balance Sheet Adjustment Funds and retained by Manugistics;
provided, however, that if the Balance Sheet Adjustment is less
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than Twenty-Five Thousand Dollars ($25,000.00) (the "Balance Sheet Adjustment
Trigger"), then no deduction shall be made. If the Balance Sheet Adjustment is
equal to or greater than the Balance Sheet Adjustment Trigger, then the entire
Balance Sheet Adjustment shall be deducted without reference to any Balance
Sheet Adjustment Trigger. The Balance Sheet Adjustment shall also cause a
corresponding reduction to the Purchase Price as set forth in Section 2.1
hereof. If the amount of the Balance Sheet Adjustment exceeds the amount of
the Balance Sheet Adjustment Funds, then Manugistics shall be permitted to
claim the difference from the Escrow Funds. Under no circumstances will
Manugistics or Acquisition be obligated to make payments to the Avyx
shareholders for any variance in the April 30 Net Asset Value. For purposes of
setting the Minimum Net Asset Value, it is agreed that the April 30 Financial
Statements shall reflect a $200,000 liability to Maidenform, Inc.
("Maidenform") with respect to the claims being released pursuant to Section
9.18 hereof.
(b) Escrow Funds. The Escrow Funds shall be held pursuant
to the terms of the Escrow Agreement as security for any claims for
indemnification brought by Manugistics, Acquisition or the Surviving Company
for the nonfulfillment of any representation, warranty, covenant or agreement
on the part of Avyx, the Principal Shareholders, and the Avyx shareholders
contained in this Agreement and in the Shareholders Agreement. Notwithstanding
anything contained herein to the contrary, it is
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understood and acknowledged that such rights of indemnification are not limited
to the Escrow Funds.
(c) Accounts Receivable Collections. Avyx and the
Principal Shareholders covenant and agree that the accounts receivable set
forth on Schedule 4.27 annexed hereto are collectible within the later to occur
of (i) ninety (90) days of the invoice date, and (ii) thirty (30) days of
Closing. In the event that any account receivable on Schedule 4.27 is not
collected within the later to occur of (i) ninety (90) days of the invoice
date, and (ii) thirty (30) days from Closing (a "Stale Receivable"), upon
notice to the Escrow Agent by Manugistics, the Surviving Company shall, subject
to the terms, conditions and procedures of the Escrow Agreement, receive an
immediate payment from the Escrow Funds in an amount equal to the value of the
account as set forth on Schedule 4.27. After receipt of payment from the
Escrow Funds for a Stale Receivable, the Surviving Company shall immediately
assign such Stale Receivable to the Paying Agent, acting as agent for the Avyx
shareholders, who shall attempt to collect such Stale Receivable; provided,
however, that Avyx and the Principal Shareholders represent and agree that the
Paying Agent shall use reasonable and professional efforts to collect upon such
Stale Receivable without damaging the customer relations of Manugistics or the
Surviving Company.
(d) Settlement of Account for Factoring Agreement. Avyx
and the Principal Shareholders covenant and agree that the amount owed to Trust
Company Bank as a settlement of
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account following the termination pursuant to Section 9.14 hereof of the
Factoring Agreement between Avyx and Trust Company Bank (presently known as
SunTrust Bank, Atlanta) dated July 18, 1995 (the "Factoring Agreement") between
Avyx and Trust Company Bank shall not exceed $205,529.48. With respect to any
liability to Trust Company Bank pursuant to the Factoring Agreement in excess
of $205,529.48 (such excess amount being referred to herein as the "Excess
Liability"), (i) if the Adjustment Payment has not yet been paid to the Paying
Agent, the Excess Liability shall retained by Manugistics and deducted from the
Balance Sheet Adjustment Funds, or (ii) if the Adjustment Payment has been paid
to the Paying Agent, upon notice to the Escrow Agent by the Surviving Company,
the Surviving Company shall receive an immediate payment from the Escrow Funds
in an amount equal to the Excess Liability, subject to the terms, conditions
and procedures of the Escrow Agreement. Any Excess Liability which is paid to
the Surviving Company from the Adjustment Payment or the Escrow Funds shall not
be paid again pursuant to Section 11 of this Agreement; provided, however, that
nothing contained in this Section 2.7(d) shall limit or otherwise restrict the
ability of Manugistics, Acquisition or the Surviving Company to exercise any
and all rights of indemnification with respect to obligations, or any part of
any obligation, for which the Adjustment Payment or the Escrow Funds are
insufficient or unavailable because already disbursed.
(e) Notwithstanding anything in this Agreement to the
contrary, any losses, payments, expenses, damages or
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liabilities of Manugistics, Acquisition or the Surviving Company resulting
from or attributable to the failure of the Surviving Company and Manugistics to
support and continue the development of Advanced Scheduled Environment ("ASE")
which does not otherwise constitute a breach of a representation, warranty, or
covenant pursuant to this Agreement shall be the sole burden of the Surviving
Company, and the amount thereof shall not be (i) recoverable by Manugistics,
Acquisition or the Surviving Company from the Escrow Funds or the Balance Sheet
Adjustment Funds, or (ii) subject to indemnification hereunder from any of the
Avyx shareholders. Nothing stated herein shall give rise to any affirmative
obligation on the part of Manugistics, Acquisition or the Surviving Company to
support and continue the development of ASE.
2.8 Assignment of University of Maryland Contract. The
Surviving Company shall assign or otherwise assist in the transfer of all of
its rights and obligations under that certain subcontract between Avyx and the
University of Maryland identified as Agreement No. Z623801 (the "University of
Maryland Contract") to The Kendall Group, Inc., a Colorado corporation owned
one hundred percent by Willoughby and Gardner. Willoughby and Gardner warrant
and agree that The Kendall Group shall accept such assignment or transfer. The
Surviving Company, Acquisition, and Manugistics hereby consent to such
assignment or transfer and agree to take any and all necessary or appropriate
further actions after the date of Closing to facilitate such assignment or
transfer.
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3. Approval by Stockholders, Amendment, Termination
3.1 Approval by Stockholders. This Agreement has been approved
by all necessary action on the part of the shareholders of Avyx pursuant to the
Shareholders Agreement and the Shareholder's Unanimous Written Consents and by
the shareholder of Acquisition. Avyx, Acquisition, and Manugistics each agree
to execute and deliver such further documents and instruments and to do such
other acts and things as may be required to complete all requisite corporate
action in connection with the transactions contemplated by this Agreement.
3.2 Amendment. This Agreement may be amended by the parties
hereto following the approval hereof by the Shareholders of Avyx.
3.3 Termination. This Agreement may be terminated,
notwithstanding the approval by the Shareholders of Avyx and/or Acquisition, as
provided in Section 18 hereof.
4. Representations and Warranties of Avyx and the Principal
Shareholders. Avyx and the Principal Shareholders, jointly and severally,
represent and warrant to Acquisition and Manugistics as follows:
4.1 Organization. Avyx is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority and all
necessary licenses and permits to carry on its business as it has been and is
now being conducted and to own or lease and to operate the properties used in
connection
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therewith, except where the failure to have such licenses and permits,
individually or in the aggregate, would not have a material adverse effect on
its financial condition, business, assets or operations in excess of $5,000.00
(a "Material Adverse Effect"). Avyx is duly qualified or licensed and in good
standing to do business in the jurisdictions set forth on Schedule 4.1 hereto,
which constitutes each jurisdiction where the conduct of its business or the
ownership, leasing or operation of its properties requires such qualification
or licensing, except where the failure to be so duly qualified or licensed and
in good standing, individually or in the aggregate, would not have a Material
Adverse Effect.
4.2 Capitalization; Options and Other Rights.
(a) The total authorized capital stock of Avyx consists
of:
(i) Six Million Five Hundred Thousand (6,500,000)
shares of common stock, no par value, of which, at the date hereof, One Million
Two Hundred Twenty Three Thousand Eight Hundred Thirty-Eight (1,223,838) shares
are issued and outstanding (the "Avyx Common Stock") and are held by those
shareholders listed on Schedule 4.2 hereto in such amounts as are set forth on
such schedule, One Hundred Forty Thousand One Hundred and Two (140,102) shares
of common stock are reserved for issuance upon exercise of options (prior to
the cancellation of options contemplated hereunder), no shares are held as
treasury shares by Avyx, and the
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remaining Five Million One Hundred Thirty Six Thousand and Sixty (5,136,060)
shares are not otherwise issued and outstanding; and
(ii) One Million (1,000,000) shares of preferred
stock, $.10 par value, of which at the date hereof, none are issued and
outstanding (the "Avyx Preferred Shares") and are held by those shareholders
listed on Schedule 4.2 hereof in such amounts as are set forth on such
schedule, no shares of preferred stock are reserved for issuance upon exercise
of options, none are held as treasury shares by Avyx, and One Million
(1,000,000) shares are not issued and outstanding.
Except as set forth on Schedule 4.2 hereof, all of the Avyx Common
Stock and Avyx Preferred Shares have been duly and validly authorized and
issued and are fully paid and nonassessable; none have been issued in violation
of the preemptive rights of any shareholder of Avyx; all were issued in
compliance with all applicable Federal and state securities laws and
regulations, and are owned free and clear of any liens.
(b) Except as set forth in Schedule 4.2, there are no
existing agreements, subscriptions, options, warrants, calls, commitments,
trusts (voting or otherwise), or rights of any kind whatsoever granting to any
person or entity any interest in or the right to purchase or otherwise acquire
from Avyx at any time, or upon the happening of any stated event, any
securities of Avyx, whether or not presently issued or outstanding, nor are
there any outstanding securities of Avyx or any other entity which are
convertible into or exchangeable for shares or other securities of
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Avyx, nor are there any agreements, subscriptions, options, warrants, calls,
commitments or rights of any kind whatsoever granting to any person or entity
any interest in or the right to purchase or otherwise acquire from Avyx or any
other entity any securities so convertible or exchangeable, nor are there any
proxies, agreements or understandings with respect to the voting of the shares
of Avyx other than those set forth in the Shareholders Agreement. The number
of issued and outstanding shares of Avyx Common Stock and Avyx Preferred Stock
will be the same on the Effective Date as the date hereof.
4.3 Authorization: Freedom to Contract.
(a) The execution and delivery by Avyx and Scott of this
Agreement, and the performance by each of them of their obligations hereunder,
has been duly authorized by all necessary corporate (directors and
shareholders) actions.
(b) The execution and delivery of this Agreement by Avyx
and Scott does not, and the performance by Avyx and Scott of their obligations
hereunder will not, (i) violate or conflict with any provision of the
Certificates or Articles of Incorporation or By-Laws of Avyx and Scott, or any
amendments thereto or restatements thereof, (ii) violate any of the terms,
conditions or provisions of any law, rule, regulation, order, writ, injunction,
judgment or decree of any court, governmental authority, or regulatory agency,
or (iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination,
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cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, agreement, license, franchise, permit, guaranty, joint
venture agreement, or other agreement, instrument or obligation, oral or
written, to which Avyx or Scott is a party (whether as an original party or as
an assignee or successor) or by which any of its properties is bound, except
for violations, breaches or defaults which, individually or in the aggregate,
will not have a Material Adverse Effect. No governmental authorization,
approval, order, license, franchise, consent or permit (collectively,
"Permits"), and no registration, declaration or filing with any court,
governmental department, commission, authority, board, bureau, agency or other
instrumentality (collectively, "Filings"), is required in connection with the
execution, delivery and performance of this Agreement by Avyx and Scott and the
consummation of the transactions contemplated hereby, except the filing of the
Certificate of Merger and Articles of Merger.
4.4 Subsidiaries and Affiliates.
(a) Annexed hereto as Schedule 4.4 is a correct and
complete list setting forth (i) the name and jurisdiction of incorporation of
each corporation (individually, a "Subsidiary," and collectively, the
"Subsidiaries") of which Avyx owns, directly or indirectly, capital stock,
other than securities constituting not more than five percent (5%) of an
issuer's issued and outstanding voting capital stock and carried as marketable
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securities on Avyx's balance sheet in accordance with generally accepted
accounting principles ("Marketable Securities"), (ii) the total number of
shares of each class of capital stock of each Subsidiary authorized, the number
of such shares outstanding and the number of such shares owned by Avyx or any
of the Subsidiaries (indicating the name of the owner), and (iii) a complete
list of the directors and officers of Avyx and each Subsidiary. All of the
issued and outstanding shares of each Subsidiary have been duly and validly
authorized and issued and are fully paid, nonassessable and free of preemptive
rights. No shares of any Subsidiary have been issued in violation of the
preemptive rights of any shareholder of such Subsidiary. The shares of each
Subsidiary were issued in compliance with all applicable Federal, state and
foreign securities laws and regulations, and are owned as set forth in Schedule
4.4, free and clear of any and all liens, security interests, charges, claims,
pledges or other encumbrances ("Liens").
(b) There are no existing agreements, subscriptions,
options, warrants, calls, commitments, trusts (voting or otherwise), or rights
of any kind whatsoever granting to any person or entity any interest in the
right to purchase or otherwise acquire from Avyx or any Subsidiary, at any
time, or upon the happening of any stated event, any shares of any Subsidiary,
whether or not presently issued or outstanding, nor are there any outstanding
securities of any Subsidiary or any other entity which are convertible into or
exchangeable for shares or other securities
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of any Subsidiary, nor are there any agreements, subscriptions, options,
warrants, calls, commitments, trusts (voting or otherwise), or rights of any
kind whatsoever granting to any person or entity any interest in the right to
purchase or otherwise acquire any Subsidiary or any other entity any securities
so convertible or exchangeable, nor are there any proxies, agreements or
understandings with respect to voting of the capital stock of any Subsidiary.
Except for Avyx's ownership of the Subsidiaries as disclosed on Schedule 4.4
and as may be otherwise described in such schedule, and except for Marketable
Securities, Avyx does not, directly or indirectly, have any ownership or other
interest in, or control of, any person, corporation, partnership, joint
venture, business association or other entity, nor is Avyx controlled by or
under common control with, any person, corporation, partnership, joint venture,
business association or other entity, other than the shareholders of Avyx set
forth on Schedule 4.2 annexed hereto.
4.5 Charter and Organizational Documents. Avyx has previously
furnished to Manugistics or Acquisition true and complete copies of its
Certificates or Articles of Incorporation and By-Laws.
4.6 Financial Statements.
(a) Except as set forth in Schedule 4.6, Avyx has
previously furnished to Manugistics or Acquisition true and complete copies of
the following financial statements with respect to Avyx and the Subsidiaries
(the "Financial Statements"):
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(i) audited consolidated balance sheets, statements
of operations, stockholders' equity, and cash flows for each of the years ended
May 31, 1993, 1994, and 1995; and
(ii) an unaudited balance sheet, statement of
operations, and statement of cash flows for the period ended April 30, 1996,
and all other items included in the April 30 Financial Statements as described
in Section 2.7(a) hereof.
(b) Except as set forth on Schedule 4.6, the Financial
Statements were prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that of preceding accounting
periods. The Financial Statements were prepared on the basis of the books and
records of Avyx and its Subsidiaries, and fully and fairly present the
financial position of Avyx and the Subsidiaries as of the dates thereof and the
results of operations and changes in financial position of Avyx and the
Subsidiaries for each of the periods then ended.
(c) At the Effective Date, there will be no restrictions
on the availability of cash in banks and on hand of Avyx and the Subsidiaries
except clearance of checks in the ordinary course of business.
(d) The accounts and other receivables as set forth on the
Financial Statements, or arising since the date thereof, have or shall have
arisen in the ordinary course of the business of Avyx and the Subsidiaries.
(e) Except as set forth on Schedule 4.6, the Financial
Statements and the notes thereto correctly and completely
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set forth all liabilities of Avyx and the Subsidiaries required to be reflected
under generally accepted accounting principles as of the date thereof (i)
pursuant to all Plans (as that term is defined in Section 4.22, including all
unfunded past service costs, (ii) pursuant to all bonus, incentive,
compensation, insurance, deferred compensation, severance and other fringe
benefit plans, contracts, agreements, arrangements and programs of any type,
coverage or form, including, without limitation, any employee welfare benefit
program as defined in Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and (iii) for vacation pay.
4.7 Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 4.7, the Financial Statements, or in the notes to the Financial
Statements, Avyx and the Subsidiaries do not have any known liabilities
(whether absolute, accrued or contingent), which would be required (under
generally accepted accounting principles consistently applied) to be set forth
on a balance sheet or in the notes thereto, except (i) liabilities which are
accrued or reserved against in the Financial Statements and in the notes
thereto, and (ii) normally occurring liabilities incurred after the date of the
Financial Statements in the ordinary course of business and consistent with
past practice.
4.8 Title to Properties. Avyx and the Subsidiaries have good
and marketable title to all properties and assets reflected on the Financial
Statements or acquired after the date thereof (except for properties and assets
sold or otherwise
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disposed of in the ordinary course of business since the date of the Financial
Statements) in fee simple absolute with respect to real property (except for
leasehold interests or licenses, in which event the entity directly holding
such leasehold interest or license has a valid leasehold interest or license),
subject only to (i) statutory liens arising or incurred in the ordinary course
of business with respect to which the underlying obligations are not
delinquent, (ii) with respect to personal property, the rights of suppliers or
customers of Avyx with respect to contracts entered into by Avyx in the
ordinary course of business, (iii) liens reflected on the Financial Statements
or notes thereto, (iv) liens set forth in Schedule 4.8 hereto, and (v) those
dispositions of properties and assets not in the ordinary course of business
since April 30, 1996 which are set forth on Schedule 4.8 hereto.
4.9 Real Property. Schedule 4.9 lists all land, buildings and
structures owned beneficially or of record by Avyx and the Subsidiaries. Also
included on Schedule 4.9 are lists of all deeds, mortgages, surveys and title
insurance policies relating to such real property in the possession of Avyx.
Avyx has heretofore delivered to Manugistics or Acquisition copies of all
written documents, instruments, deeds, mortgages, surveys, rights of-way,
easements, permits and other documents or agreements relating to such real
property listed on Schedule 4.9.
4.10 Machinery and Equipment. Schedule 4.10 lists each item of
machinery and equipment owned by Avyx as of April 30, 1996.
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4.11 Inventory. Schedule 4.11 contains a description of all
classes of inventory owned by Avyx and the Subsidiaries as of April 30, 1996.
4.12 Leases. Schedule 4.12 lists all outstanding leases or
licenses pursuant to which Avyx or the Subsidiaries have (i) obtained the right
to use or occupy any real or personal property under arrangements where the
remaining obligation is more than $5,000, or (ii) granted to any other party
the right to use any real or personal property described on Schedule 4.9,
Schedule 4.10 or Schedule 4.12 hereto. Avyx has heretofore delivered to
Manugistics or Acquisition copies of all the written leases and licenses
described on Schedule 4.12, together with all amendments thereto. Schedule
4.12 also sets forth the name, address, telephone number and contact person for
each lease obligation and the due date for lease payments.
4.13 Copyrights and Trademarks. Schedule 4.13 annexed hereto is
a complete and correct list, together with a brief description (including, if
applicable, date of application, filing or registration, as the case may be,
and the registration or application number), of each patent, invention,
material trade secret, copyright, trade name, trademark, brand name, service
mark or design, or representation or expression of any thereof or registration
or application therefor pertaining to the assets and the business of Avyx and
the Subsidiaries ("Trade Rights"), whether or not registered in the name of, or
applied for by, Avyx or the Subsidiaries, and in each case a brief description
of the nature of
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such rights and interests. Avyx and the Subsidiaries are a licensor or a
licensee in respect of the Trade Rights listed on Schedule 4.13 annexed hereto,
paying or receiving royalty payments to or from third parties as indicated on
Schedule 4.13. Except as set forth on Schedule 4.13 annexed hereto, Avyx and
the Subsidiaries own, or have the exclusive right to use, each of the Trade
Rights necessary to conduct, or be used in, the business of Avyx and the
Subsidiaries as now operated and there are no conflicts with, or infringements
of, the rights of others in respect thereof or any unauthorized use or
misappropriation of any thereof. Avyx has heretofore delivered to Manugistics
or Acquisition true, correct and complete copies of all documents described on
Schedule 4.13. In addition, to the knowledge of Avyx, the Subsidiaries, and
the Principal Shareholders, there are no claims or prior technologies or
patents which would interfere with the Surviving Company obtaining a patent for
the manufacturing scheduling process with improved modeling, scheduling and
editing capabilities for solving finite capacity planning, which is a component
to ASE. Notwithstanding anything contained herein to the contrary, Avyx and
the Principal Shareholders are not representing or warranting that the
manufacturing scheduling process with improved modeling, scheduling and editing
capabilities for solving finite capacity planning, which is a component to ASE
is in fact patentable.
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4.14 Contracts. Except as otherwise indicated thereon, Schedule
4.14 lists each and every document not otherwise listed on any other Schedule,
for the following:
(i) written contract or commitment to which Avyx or
any Subsidiary is a party which creates an obligation on the part of Avyx in
excess of $5,000;
(ii) written debt instrument, including, without
limitation, any loan agreements, promissory notes, security agreements or other
evidences of indebtedness, where Avyx or any Subsidiary is a lender or borrower
(Schedule 4.14 also sets forth the name, address, telephone number, and contact
person with respect to each such obligation, the date payments are due, and any
accrued and unpaid interest as of the date indicated);
(iii) written contract or commitment restricting Avyx
or any Subsidiary from engaging in any line of business;
(iv) written contract or agreement to which Avyx or
any Subsidiary is a party (whether as an original party or an assignee or
successor) for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person or entity;
(v) written contract or commitment to which Avyx or
any Subsidiary is a party (whether as an original party or an assignee or
successor) for any charitable contribution;
(vi) written loan agreement, security agreement, note,
debenture, or other contract or commitment (except
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for this Agreement) limiting or restraining Avyx or any Subsidiary from
declaring, setting aside, authorizing or making payment of any dividend or any
distribution, whether in cash or property;
(vii) written joint venture or partnership agreement
to which Avyx or any Subsidiary is a party (whether as an original party or as
an assignee or successor);
(viii) written agreement or agreements to which Avyx
or any Subsidiary is a party (whether as an original party or as an assignee or
successor) with respect to any assignment, discounting or reduction of any
receivables, other than normal trade discounts, of Avyx or any Subsidiary;
(ix) written distributorship, sales agency, sales
representative, brokerage marketing agreement, including without limitation,
agreements with insurance companies;
(x) existing agreements, options, commitments or
rights with, to or in any third party to acquire any assets or properties,
real, personal or mixed, or any interest therein, of Avyx or any Subsidiary,
having a value in excess of $5,000; and
(xi) a list of all clients of Avyx for the past three
years and all Subsidiaries.
Avyx has heretofore delivered to Manugistics or Acquisition true,
correct and complete copies of all documents described in Schedule 4.14. In
making such representation and warranty, Avyx has relied on the receipt by
Acquisition of the documents attached hereto as Schedule 4.14A, it being
understood
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and acknowledged that neither Manugistics nor Acquisition is making any
representations or warranties that any of such documents represent all of the
documents described in Schedule 4.14 nor that any such documents constitute
true and correct copies of any of the documents so described. To the knowledge
of Avyx, there are no oral contracts or commitments of the types described in
this Section 4.14 which create an obligation on the part of Avyx or any
Subsidiaries in excess of $5,000. There are no contracts or commitments
between Avyx or any Subsidiaries, on the one hand, and any person which
controls, is controlled by or is under common control with Avyx, on the other,
except as listed on Schedule 4.14 or agreements referred to in this Agreement.
4.15 Absence of Default. Except as set forth in Schedule 4.15
annexed hereto: (a) neither Avyx nor any Subsidiaries has received notice that
it has not complied with and performed all of its obligations required to be
performed under all material contracts, agreements and leases to which it is a
party (whether as an original party or as an assignee or successor) as of the
date hereof, or that it is in default in any material respect under any
contract, agreement, lease, undertaking, commitment or other obligation; and
(b) Avyx and the Subsidiaries have no knowledge that any party has failed to
comply in any material respect with or perform all of its obligations required
to be performed under any material contract, agreement or lease to which Avyx
or any Subsidiary is a party (whether as an original party or as an assignee or
successor) as of the date hereof.
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4.16 Insurance. Schedule 4.16 contains a description of all
policies or binders of insurance insuring Avyx and any Subsidiary (including
without limitation any errors and omissions insurance) or any directors and
officers thereof or any of its properties or assets (specifying the insurer,
the amount of the coverage, the type of insurance, the risks insured, the
expiration date, the policy number, the premium and any agent or broker).
Schedule 4.16 also contains a description of all outstanding performance bonds
in excess of $5,000 (for any single bond) which have been delivered to any
person in connection with the business and operations of Avyx and the
Subsidiaries.
4.17 Distributions, Satisfactions, Obligations. Since April 30,
1996, neither Avyx nor any Subsidiaries has, except as and to the extent
reflected or otherwise disclosed on Schedule 4.16 or any other schedule annexed
hereto:
(i) issued or redeemed any stock, bonds or other
corporate securities;
(ii) incurred any obligations or liabilities for
money borrowed; or
(iii) operated its business in any way other than in
the ordinary course, consistent with past practice.
4.18 Capital Expenditures. Schedule 4.18 sets forth the current
capital budget for Avyx and the Subsidiaries.
4.19 Litigation.
(a) Except as set forth in Schedule 4.19 annexed hereto,
as of the date hereof: (i) there are no actions,
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suits, arbitrations, legal or administrative proceedings or investigations
pending or claims asserted under any of the insurance policies described in
Section 4.16 hereof against Avyx or any Subsidiary of which Avyx, any
Subsidiary, or any of the Principal Shareholders has knowledge; and (ii)
neither Avyx nor any of the Subsidiaries nor the assets, properties or business
of any of them is subject to any judgment, order, writ, injunction or decree of
any court, governmental agency or arbitration tribunal.
(b) Except as set forth in Schedule 4.19, Avyx is not a
party to any suit, action, arbitration or legal, administrative, governmental
or other proceeding or investigation pending or, to the knowledge of Avyx or
any of the Principal Shareholders, threatened which might have a material
adverse effect or restrict the ability of Avyx to consummate the transactions
contemplated by this Agreement or to perform its obligations thereunder.
(c) There is no judgment, order, injunction or decree of
any court, governmental authority or regulatory agency to which Avyx is subject
which might have a material adverse effect or restrict the ability of Avyx to
consummate the transactions contemplated by this Agreement or to perform its
obligations thereunder.
4.20 Compliance with Law. Except as set forth in Schedule 4.20
annexed hereto, neither Avyx nor any Subsidiaries have received written notice
that:
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(a) Avyx or any Subsidiaries has not complied with, or is
in violation of, any law, ordinance or governmental rule or regulation to which
it or its business is subject; or
(b) Avyx, any Subsidiary, or any employee thereof, has
failed to obtain any material license, permit, certificate or other
governmental authorization or inspection necessary to the ownership or use of
its assets and properties or to the conduct of its business.
4.21 Tax Matters.
(a) Except as set forth in Schedule 4.21, Avyx and each of
the Subsidiaries has filed or will file all required Federal, foreign, state,
county, local, and other tax returns and reports including without limitation
income tax, estimated tax, excise tax, sales and use tax, transfer tax, gross
receipts tax, capital stock tax, franchise tax, employment, unemployment and
payroll-related tax, and real or personal property tax returns and reports,
whether or not measured in whole or in part by net income, within the
prescribed period or any extension thereof for all periods through the
Effective Date, except where the prescribed period (and any extension thereof)
will not have expired by the Effective Date. Avyx and the Subsidiaries have
paid, and with respect to the 1995 and current tax years will pay or will
reserve and make appropriate provision in its Financial Statements for, all
taxes shown to be due on such returns (or to be shown on returns due after
Closing) and reports due or to become due pursuant to any written assessment,
deficiency notice, 30-day letter or similar
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written notice actually received by Avyx for any period prior to the Effective
Date, including interest and penalties with respect thereto, except as set
forth on Schedule 4.21. There are no tax liens upon any property of Avyx or
any of the Subsidiaries except for liens for current taxes not yet due. Except
as set forth in Schedule 4.21, all amounts required to be withheld by Avyx and
the Subsidiaries from its workers for income taxes, social security and other
payroll taxes have been collected and withheld, and either paid to the
respective governmental agencies, set aside in accounts for such purpose, or
accrued, reserved against and entered upon the books and records of the
employer. For the purpose of this Agreement, unless otherwise expressly
provided, the term "tax" shall include all Federal, foreign, state and local
taxes or assessments, including any interest or penalties applicable thereto.
(b) The Federal income tax returns of Avyx and the
Subsidiaries have either been audited by the Internal Revenue Service (the
"IRS") or the period during which any assessments may be made has expired
without waiver or extension, for all periods to and including the year ended
May 31, 1992. Except as set forth on Schedule 4.21 hereto, all Federal income
tax deficiencies asserted in writing as a result of such examinations have been
paid or finally settled. Further, no written notice has been received by Avyx
proposing the assessment of any Federal income tax liability against Avyx with
respect to the periods which have not been audited by the IRS. There has been
no waiver or extension of any
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applicable statute of limitations for the assessment or collection of any
taxes. Except as set forth in Schedule 4.21, none of the state or local income
or franchise tax returns of Avyx or the Subsidiaries has been audited by any
governmental agency within the past five (5) years.
(c) Except as set forth on Schedule 4.21, neither Avyx nor
any of the Subsidiaries is a party to any pending examination or action by any
governmental authority for assessment or collection of taxes, or party to any
dispute or threatened dispute, and no such claim for assessment or collection
of taxes has been made upon Avyx or any of the Subsidiaries.
(d) Neither Avyx nor any of the Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired, filed a
consent to the application of Section 341(f)(2) of the Internal Revenue Code of
1986, as amended (the "Code").
(e) Except as set forth on Schedule 4.21, Avyx and the
Subsidiaries (i) have made all payments of estimated taxes required to be made;
(ii) have not taken any action that could have the effect of deferring any
liability for taxes from any taxable period ending on or before the Closing to
any taxable period ending thereafter; (iii) have no excess loss account with
respect to any Subsidiary (within the meaning of Treas. Reg. Section
1.1502-19); (iv) will make no payment which will be or may be characterized as
an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code; and (v) have net operating loss carryovers available as reflected on its
returns, which carryovers are not restricted
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and will not be restricted as of the Closing by Sections 382, 383 or 384 of the
Code, except to the extent affected by this Agreement and the transactions
evidenced hereby.
(f) During the past ten (10) years, except as set forth on
Schedule 4.21, neither Avyx nor any of the Subsidiaries has agreed or has been
requested in writing by IRS to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method.
(g) None of the Subsidiaries which are incorporated under
the laws of a foreign country have been subject to tax as: a "foreign personal
holding company" within the meaning of Section 552 of the Code; a "foreign
investment company" within the meaning of Section 1246 of the Code; or a
"passive foreign investment company" within the meaning of Section 1296 of the
Code.
(h) Set forth on Schedule 4.21 is a correct and complete
list of:
(i) all Federal, foreign, state and local income and
franchise tax returns and reports filed individually or on a consolidated basis
by Avyx and the Subsidiaries within the past five years, which returns are
true, correct and complete; and
(ii) all currently effective agreements, consents,
elections and waivers filed or made with Federal, foreign, state or local
taxing authorities relating to Avyx and the Subsidiaries, including any tax
sharing agreement between Avyx and the Subsidiaries.
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(i) All methods of accounting utilized by Avyx and the
Subsidiaries together with the book/tax adjustments made by them in preparing
their tax returns comply with the Code and associated regulations, and Avyx and
the Subsidiaries have made all proper elections which support the methods of
accounting utilized.
Avyx has made available to Acquisition and Manugistics all Federal,
foreign, state and local tax returns referred to on Schedule 4.21
4.22 Employee Benefit Plans
(a) Schedule 4.22 lists all employee benefit (including
multiemployer) plans, funds or programs (within the meaning of the Code or
ERISA), whether or not they are or are intended to be (i) covered or qualified
under the Code, ERISA or any other applicable law, (ii) funded or unfunded, or
(iii) generally available to all employees of Avyx, which are maintained and/or
contributed to by Avyx ("Plan"). For purposes of this Section 4.22, references
to Avyx shall include any corporation which is a member of a controlled group
of corporations (as defined in section 414(b) of the Code) which includes Avyx;
any trade or business (whether or not incorporated) which is under common
control (as defined in section 414(c) of the Code) with Avyx; any organization
(whether or not incorporated) which is a member of an affiliated service group
(as defined in section 414(m) of the Code) which includes Avyx; and any other
entity required to be aggregated with Avyx pursuant to regulations under
section 414(o) of the Code.
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(b) Avyx has delivered to Manugistics or Acquisition (i)
copies of all Plan documents and other instruments relating to all Plans
sponsored solely by Avyx or any Subsidiary ("Company Plans"), (ii) copies of
the most recent financial statements with respect to such Plans, (iii) true and
complete copies of all annual reports for such Plans prepared within the past
three (3) years, and (iv) all filings with respect to such Plans submitted to
and any correspondence received by Avyx or any Subsidiary from any government
agency within the past 2 years with respect to such filings.
(c) Each Plan which is intended to be qualified under
section 401(a) and exempt from tax under section 501(a) of the Code has been
determined by the IRS to be so qualified and such determination remains in
effect and has not been revoked. Neither Avyx nor any Subsidiary has taken or
omitted to take any action since the date of any such determination which would
adversely affect such qualification or exemption, or result in the imposition
of excise taxes or tax on unrelated business income under the Code or ERISA.
(d) Except in the case of multiemployer plans, (i) no
reportable event (as defined in section 4043 of ERISA or the regulations
thereunder) for which the reporting requirements have not been fully waived, or
accumulated funding deficiency (as defined in section 302 of ERISA) whether or
not waived, or liability to the Pension Benefit Guaranty Corporation ("PBGC")
under section 4062 of ERISA, nor any prohibited transaction (as
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defined in section 406 of ERISA or section 4975 of the Code), has occurred
and/or exists with respect to any Plan; and (ii) each of the Plans and
provisions thereof, the trusts created thereby, and the operation of the Plans
is currently in compliance with and conform to applicable provisions of the
Code (including but not limited to section 412), ERISA, other statutes,
including, but not limited to the Consolidated Omnibus Budget Reconciliation
Act of 1985, and governmental rules and regulations.
(e) There is no action, audit, suit or claim pending or,
threatened in writing relating to any Plan, fiduciary of any such Plan or
assets of any such Plan, before any court, tribunal or government agency.
(f) Avyx has delivered to Manugistics or Acquisition the
most recent Plan audit reports, actuarial reports and annual reports for the
Plans.
(g) Neither Avyx nor any Subsidiary has, with respect to
any multiemployer plan, suffered or caused a complete withdrawal or partial
withdrawal (as such terms are respectively defined in sections 4203 and 4205 of
ERISA), except as set forth in Schedule 4.22.
(h) With respect to any Plan that is an employee welfare
benefit plan within the meaning of Section 3(1) of ERISA (a "Welfare Plan"),
neither Avyx nor any Subsidiary has any knowledge or received written notice
that (i) any such Welfare Plan the contributions to which are claimed as a
deduction under any provision of the Code is not currently in compliance with
all
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applicable requirements pertaining to such deduction, (ii) with respect to any
welfare benefit fund within the meaning of section 419 of the Code that
comprises part of a Welfare Plan, there is no disqualified benefit within the
meaning of section 4976(b) of the Code that would subject Avyx to a tax under
section 4976(a) of the Code, or (iii) with respect to any group health plan,
there is no failure to meet the requirements of Section 4980(B)(f) of the Code
that would subject Avyx to the tax under Section 4980(B)(b), or with respect to
years beginning before January 1, 1989, any such Plan that was a group health
plan within the meaning of section 162(i)(3) of the Code as of that date did
not meet all of the then requirements of section 162(k) of the Code.
(i) Avyx and the Subsidiaries have complied with all
reporting and disclosure requirements under any applicable statutes and
governmental rules and regulations with respect to all Plans and assets of
Plans.
4.23 Employees
(a) Annexed hereto as Schedule 4.23 and Schedule
2.2(a)(ii) is a list of the names, titles and current annual salary rates of
and bonuses paid or payable to all present non-union officers and employees and
union employees, if any, of Avyx and the Subsidiaries ("Employees").
(b) Except as set forth in Schedule 4.14, Schedule 4.22,
Schedule 4.23, or Schedule 4.24, neither Avyx nor any of the Subsidiaries has
any employment agreement with, maintains any Plans or has any obligations for
any employee
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benefits or bonuses with respect to, any Employees. Neither Avyx nor any of
the Subsidiaries has received a written notice of default with respect to any
such agreements.
(c) Except as set forth on Schedule 4.23, neither Avyx nor
any of the Subsidiaries has any existing obligations for bonuses or deferred
compensation to Employees.
4.24 Labor Agreements. Annexed hereto as Schedule 4.24 is a
list of all labor and collective bargaining agreements to which Avyx and any
Subsidiary is a party or by which it is bound. Avyx has made available to
Acquisition copies of all such agreements, contracts and plans. Neither Avyx
nor any Subsidiary has received a written notice of default with regard to any
of such agreements.
4.25 Environmental Laws.
(a) Avyx and the Subsidiaries have obtained all permits,
licenses and other authorizations which are required with respect to the
operation of its business under Federal, state, and local laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
industrial toxic or
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hazardous substances or wastes (the "Environmental Laws"), except any permits,
licenses and other authorizations the absence of which would not, individually
or in the aggregate, have a material adverse effect on its business or
operations.
(b) Neither Avyx nor any of its Subsidiaries has received
written notice that it is not in compliance with any other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder.
(c) Other than the items listed in Schedule 4.25, there is
no civil, criminal or administrative action, suit, demand, claim, hearing
notice or demand letter pending against Avyx of which it has received written
notice, relating in any way to the Environmental Laws or any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder.
4.26 Bank Accounts, Letters of Credit and Powers of Attorney.
Schedule 4.26 lists (a) all bank accounts, lock boxes and safe deposit boxes
relating to the business and operations of Avyx and the Subsidiaries (Schedule
4.26 also sets forth, opposite the identification of each such account or box
by its account or box number, the name, address, telephone number, and contact
person for the Bank or other institution where such account or box is located,
the account balance or description of the box contents,
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and the name of each authorized signatory thereto), (b) all outstanding letters
of credit issued by financial institutions for the account of Avyx and the
Subsidiaries (setting forth, in each case, the name, address, telephone number,
and contact person for each financial institution issuing such letter of
credit, the maximum amount available under such letter, the terms (including
the expiration date) of such letter of credit and the party or parties in whose
favor such letter of credit was issued), and (c) the name, address, and
telephone number of each person who has a power of attorney to act on behalf of
Avyx and the Subsidiaries. Avyx has heretofore delivered to Manugistics or
Acquisition true, correct and complete copies of each letter of credit and each
power of attorney described on Schedule 4.26.
4.27 Accounts and Notes Receivable. Annexed hereto as Schedule
4.27 is a true and correct list, as of April 30, 1996, setting forth, by
customer or obligor (Schedule 4.27 also sets forth, opposite the name of each
customer or obligor, the address, telephone number, and contact person for such
customer or obligor), an aging of the accounts and notes receivable of Avyx and
the Subsidiaries in categories of less than 30 days due, 30 to 59 days due, 60
to 89 days due and 90 days or greater due. Written agreements exist to support
the right to payment for all receivables on Schedule 4.27 and reserves are
adequate to support the net realizable value of these receivables as set forth
on the Financial Statements. Schedule 4.27 also includes a true and
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correct list of all factored accounts receivable under the Factoring Agreement.
4.28 Accounts Payable, Outstanding Obligations, and Liabilities.
Annexed hereto as Schedule 4.28 is a true and correct list, as of April 30,
1996, of all of the accounts payable, outstanding obligations and other
liabilities of Avyx and the Subsidiaries, setting forth, by vendor or payee
(Schedule 4.28 also sets forth, opposite the name of each vendor or payee, the
address, telephone number, and contact person for such vendor), an aging of the
accounts payable, outstanding obligations and other liabilities of Avyx and the
Subsidiaries in categories of less than 30 days due, 30 to 59 days due, 60 to
89 days due and 90 days or greater due.
4.29 Customers, Suppliers, Licensees and Consulting Agreements.
Schedule 4.29 annexed hereto is a complete and correct list of the names,
addresses, telephone numbers, and contacts of (a) all customers of Avyx and the
Subsidiaries during the last three years, (b) the ten (10) largest suppliers of
Avyx and the Subsidiaries during the current fiscal year, (c) all licensees of
Avyx and the Subsidiaries during the last three years, and (d) all persons for
whom Avyx and the Subsidiaries have performed consulting services during the
last three years. Schedule 4.29 includes the total sales to, purchases by, or
fees paid by each customer, licensee or party to a consulting arrangement, the
total purchases by Avyx and the Subsidiaries from each supplier, and the
salesperson assigned to each such customer, licensee, party to a
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consulting arrangement, and supplier. Except as set forth on Schedule 4.29, no
supplier, customer, licensee, or party to a consulting arrangement with Avyx or
the Subsidiaries during the last three years has advised Avyx or the
Subsidiaries, formally or informally, that it intends to terminate, discontinue
or substantially modify or reduce its business with Avyx or the Subsidiaries
(i) by reason of the transactions contemplated by this Agreement or (ii)
otherwise. Except as set forth on Schedule 4.29, neither Avyx nor the
Subsidiaries have any obligation or made any undertaking to perform work for
customers, licensees, or parties to consulting arrangements other than on a
billable basis.
4.30 Knowledge of and Notices to Avyx. Wherever any
representation or warranty of Avyx or the Principal Shareholders in this
Agreement is qualified by reference to "knowledge," it shall mean that none of
the officers of Avyx listed on Schedule 4.30 hereof or the Principal
Shareholders has actual knowledge of the matters referred to in such
representation or warranty after making due inquiry. Wherever any
representation or warranty of Avyx in this Agreement is qualified by reference
to the receipt of written notice or written claims, it shall mean that none of
such officers has knowledge that such written notice or written claims have
actually been received.
5. Representations and Warranties of Acquisition and Manugistics.
5.1 Organization. Each of Acquisition and Manugistics is a
corporation duly organized, validly existing and
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in good standing under the laws of its jurisdiction of incorporation.
5.2 Authorization: Freedom to Contract.
(a) The execution and delivery by Acquisition and
Manugistics of this Agreement, and the performance by each of them of its
respective obligations hereunder, has been duly authorized by all necessary
corporate actions.
(b) The execution and delivery of this Agreement by
Acquisition and Manugistics does not, and the performance by each of
Acquisition and Manugistics of its respective obligations hereunder will not,
(i) violate or conflict with any provision of its Certificates or Articles of
Incorporation or By-Laws thereof, or any amendments thereto or restatements
thereof, or (ii) violate any of the terms, conditions or provisions of any law,
rule, regulation, order, writ, injunction, judgment or decree of any court,
governmental authority, or regulatory agency, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, indenture, debenture, security agreement, trust agreement, lien,
mortgage, lease, agreement, license, franchise, permit, guaranty, joint venture
agreement, or other agreement, instrument or obligation, oral or written, to
which Acquisition or Manugistics is a party (whether as an original party or as
an assignee or successor) or by which any of their properties is bound. No
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Permits and no Filings are required in connection with the execution, delivery
and performance of this Agreement by Acquisition and Manugistics and the
consummation of the transactions contemplated hereby, except (i) the filing by
Acquisition of the Certificate of Merger and the Articles of Merger, and (ii)
any filings required to be made with the Securities and Exchange Commission.
5.3 Litigation.
(a) Acquisition and Manugistics are not parties to any
suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or, to the knowledge of either of them,
threatened which might have a material adverse effect or restrict their ability
to consummate the transactions contemplated by this Agreement or to perform
their obligations thereunder.
(b) There is no judgment, order, injunction or decree of
any court, governmental authority or regulatory agency to which Acquisition or
Manugistics is subject which might have a material adverse effect on or
restrict their ability to consummate the transactions contemplated by this
Agreement or to perform their obligations thereunder.
6. Due Diligence of Acquisition and Manugistics.
6.1 Access. From and after the date hereof until the Closing,
Avyx shall afford and, with respect to clause (ii) below, shall use its best
efforts to cause its independent certified public accountants to afford, (i) to
the officers,
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independent certified public accountants, counsel and other representatives of
Acquisition and Manugistics, free and full access at all reasonable times to
the properties, books and records (including tax returns filed and those in
preparation) of Avyx and the right to consult with the officers, employees,
accountants, counsel and other representatives of Avyx in order that
Acquisition and Manugistics may have full opportunity to make such
investigations as they shall reasonably desire to make of the operations,
properties, business, financial condition and prospects of Avyx; (ii) to the
independent certified public accountants of Acquisition and Manugistics, free
and full access at all reasonable times to the work papers and other records of
the accountants relating to Avyx, and (iii) to Acquisition and Manugistics and
their representatives, such additional financial and operating data and other
information as to the properties, operations, business, financial condition and
prospects of Avyx as Acquisition and Manugistics shall from time to time
reasonably require.
6.2 Confidentiality. From and after the date hereof until the
Closing, Acquisition and Manugistics agree that all data and information
furnished by Avyx to Acquisition and Manugistics in connection with their due
diligence shall be maintained on a confidential basis and shall not be
disclosed to any third parties not employed by Acquisition and Manugistics,
other than their attorneys, accountants and financial advisors; provided,
however, that nothing in this Section 6.2 shall be construed to prevent
Acquisition or Manugistics from contacting the customers of Avyx set forth on
Schedule 6.2 annexed hereto.
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7. Conduct Pending Closing.
7.1 Conduct of Business Pending Closing. From the date hereof
until the Closing Date, Avyx will, and will cause each of its Subsidiaries to:
(a) maintain its existence in good standing;
(b) use all reasonable commercial efforts to maintain the
general character of its business and properties and conduct its business in
the ordinary and usual manner consistent with past practices, except as
expressly permitted by this Agreement and except as set forth on Schedule 7.2
hereto;
(c) use all reasonable commercial efforts to maintain
business and accounting records consistent with past practices; and
(d) use all reasonable commercial efforts to preserve its
business intact, to keep available to Avyx and the Subsidiaries the services of
the present officers and employees, and to preserve the goodwill of the
customers and others having business relations with Avyx and the Subsidiaries.
7.2 Prohibited Actions Pending Closing. Unless otherwise
provided for herein or approved by the other in writing, from the date hereof
until the Closing Date, Avyx shall not, and will cause each of the Subsidiaries
not to:
(i) amend or otherwise change its Certificate or
Articles of Incorporation or By-Laws;
(ii) issue or sell or authorize for issuance or sale,
or grant any options or make other agreements
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with respect to, any share of its capital stock or any other of its securities;
(iii) authorize or incur any additional debt for money
borrowed;
(iv) mortgage, pledge or subject to lien or other
encumbrance any of its properties or agree to do so except for (A) liens for
taxes, assessments, or similar charges, incurred in the ordinary course of
business that are not yet due and payable, (B) pledges or deposits made in the
ordinary course of business, (C) liens of mechanics, materialmen, warehousemen,
carriers, or other like liens securing obligations incurred in the ordinary
course of business that are not yet due and payable, or (D) similar liens and
encumbrances which are incurred in the ordinary course of business and which do
not in the aggregate materially detract from the value of such properties or
materially impair the use thereof in the operation of its business;
(v) increase or agree to increase the compensation of
any of its officers, directors or employees;
(vi) establish or adopt any Plan; modify, amend,
restate, terminate or revise any Plan, or take any action to deplete any asset
of any Plan, except as required by law;
(vii) make any tax election or change any accounting
methods which election or method would have an effect upon taxes after Closing;
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(viii) assume, guarantee or otherwise become
responsible for the obligations of any other party or agree to so do;
(ix) enter into or agree to enter into any contract,
if any such contract shall obligate Avyx or any Subsidiary to make payments, or
enter into or agree to enter into any employment agreement or collective
bargaining agreement, except (A) as set forth on Schedule 7.2, or (B) except
with the prior written consent of Acquisition and Manugistics;
(x) except as otherwise expressly provided herein,
pay any fees of attorneys, accountants, consultants, finders or investment
bankers or other expenses in connection with the transactions contemplated by
this Agreement;
(xi) license, sell or assign any rights or interests
in any of the trademarks, trade names, service marks, patents, or copyrights
listed on Schedule 4.13 or with respect to the manufacturing scheduling process
which is a component to ASE;
(xii) incur any additional account payable
obligations not set forth on Schedule 4.28 annexed hereto between the date of
this Agreement and Closing except with the express written consent of
Acquisition and Manugistics; or
(xiii) fail to pay in its ordinary course of business
any obligations that become due between the date of this Agreement and Closing.
7.3 Dividends and Distributions. From the date hereof until the
Closing Date, neither Avyx nor any Subsidiary
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shall declare, set aside, make and pay its shareholders any kind of dividends
or distributions in respect of its capital stock.
8. Conditions Precedent to Obligations of Avyx. All obligations of
Avyx under this Agreement are subject to the fulfillment or satisfaction, prior
to or at the Closing, of each of the following conditions precedent (any of
which may be waived in writing in whole or in part by Avyx).
8.1 Representations and Warranties True as of Closing Date. The
representations and warranties of Acquisition and Manugistics contained in
Section 5 of this Agreement shall be true on and as of the date hereof and
shall be true on and as of the Closing Date with the same effect as though such
representations and warranties were made on and as of the Closing Date, except
for changes permitted by this Agreement.
8.2 Compliance with this Agreement. Acquisition and Manugistics
shall have performed and complied with all agreements and conditions contained
in this Agreement that are required to be performed or complied with by them
prior to or at the Closing.
8.3 Company Certificate. Avyx shall have received a certificate
from each of Acquisition and Manugistics dated the Closing Date and signed by
the President of Acquisition and Manugistics, respectively, certifying that the
conditions specified in Sections 8.1 and 8.2 have been fulfilled.
8.4 Opinion of Counsel. Avyx shall have received the written
opinion dated the Closing Date of Dilworth, Paxson,
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Kalish & Kauffman LLP, counsel to Acquisition and Manugistics, substantially in
the form of Exhibit G hereto.
8.5 No Litigation. No litigation, suit, action or proceeding
shall have been instituted by any party which (i) seeks to restrain or prohibit
the transactions contemplated by this Agreement, (ii) challenges the legality
or validity of the transactions contemplated by this Agreement, or (iii) seeks
damages from Avyx as a result of the transactions contemplated by this
Agreement.
8.6 Certificates. Avyx shall have been furnished with
certificates dated the Closing Date and signed by the Secretary or an Assistant
Secretary of Acquisition and Manugistics setting forth (i) the names,
signatures and positions of the officers of Acquisition and Manugistics who
have executed this Agreement or any other document executed as a Closing
document hereunder, and (ii) a copy of the resolutions adopted by the boards of
directors of Acquisition and Manugistics authorizing the execution, delivery
and performance of this Agreement.
9. Conditions Precedent to Obligations of Acquisition and
Manugistics. All obligations of Acquisition and Manugistics under this
Agreement are subject to the fulfillment or satisfaction, prior to or at the
Closing, of each of the following conditions precedent (any of which may be
waived in writing in whole or in part by Acquisition and Manugistics).
9.1 Representations and Warranties True as of Closing Date. The
representations and warranties of Avyx and the
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Principal Shareholders contained in Section 4 of this Agreement shall be true
on and as of the date hereof and shall be true on and as of the Closing Date
with the same effect as though such representations and warranties were made on
and as of the Closing Date, except for changes permitted by this Agreement or
changes in the ordinary course of business.
9.2 Compliance with this Agreement.
(a) Avyx shall have performed and complied and shall have
caused all of its Subsidiaries to perform and comply with all agreements and
conditions contained in this Agreement that are required to be performed or
complied with by Avyx or its Subsidiaries prior to or at the Closing.
(b) The Principal Shareholders shall have performed and
complied with all agreements and conditions contained in this Agreement that
are required to be performed or complied with by the Principal Shareholders
prior to or at the Closing.
9.3 Company Certificate. Acquisition and Manugistics shall have
received a certificate dated the Closing Date and signed by the Chief Executive
Officer of Avyx certifying that the conditions specified in Sections 9.1 and
9.2 have been fulfilled.
9.4 Opinion of Counsel. Acquisition and Manugistics shall have
received the written opinions dated as of the Closing Date of Blanc Williams
Johnston & Kronstadt and of Andrew N. Bernstein, P.C., counsel to Avyx,
substantially in the form of Exhibit H annexed hereto.
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9.5 No Litigation. No litigation, suit, action or proceeding
shall have been instituted by any party which (i) seeks to restrain or prohibit
the transactions contemplated by this Agreement, (ii) challenges the legality
or validity of the transactions contemplated by this Agreement, or (iii) seeks
damages from Acquisition or Manugistics as a result of the transactions
contemplated by this Agreement.
9.6 Certificates. Acquisition and Manugistics shall have been
furnished with certificates dated the Closing Date and signed by the Secretary
of Avyx setting forth (i) the names, signatures and positions of the officers
of Avyx who have executed this Agreement or any other document executed as a
Closing document hereunder, (ii) a copy of the resolutions adopted by the board
of directors Avyx authorizing the execution, delivery and performance of this
Agreement and all documents referred to herein, and (iii) the consent by all of
the Avyx shareholders to the execution, delivery and performance of this
Agreement and all documents referred to herein.
9.7 Resignations. Avyx shall have delivered to Acquisition the
written resignation of each director and each officer of Avyx and the
Subsidiaries and the written resignations of all trustees of all Plans as shall
be requested by Acquisition.
9.8 Termination of Authority. Avyx shall have cancelled the
authority of all persons permitted to (A) draw on Avyx's bank accounts, (B)
charge on the Avyx's credit cards, (C) have access to the Avyx's safe deposit
boxes, and (D) exercise a
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power of attorney to act on behalf of Avyx, all effective as of the Closing.
9.9 Employees
(a) The employees of Avyx set forth on Schedule 9.9
annexed hereto will remain as employees of the Surviving Company at Closing.
These employees of the Surviving Company will be covered by the employment
practices, policies, and procedures of Manugistics and will be eligible for
benefits similar to those made available to current employees of Manugistics
who hold similar positions.
(b) Avyx shall deliver to Acquisition and Manugistics
releases and waivers from John Willoughby and Jo Anne Gardner regarding any
claims relating to their employment with Avyx, including, but not limited to,
claims for deferred compensation.
9.10 Intentionally Deleted.
9.11 Shareholders Agreement, Escrow Agreement. Avyx shall have
delivered to Acquisition and Manugistics fully-executed originals of each of
the Shareholders Agreement and the Escrow Agreement, with counterpart
executions being acceptable. The terms of the Escrow Agreement, including,
without limitation, those pertaining to the rights, if any, of the Avyx
shareholders to receive payment from the Escrow Funds, shall have been agreed
to by all of the Avyx shareholders pursuant to the Shareholders Agreement and
the Shareholder's Unanimous Written Consents.
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9.12 Existing Options. Each existing agreement, subscription,
option, warrant, call, commitment, trust (voting or otherwise), or right of any
kind whatsoever granting to any person or entity any interest in the right to
purchase or otherwise acquire from Avyx or any Subsidiary (an "Existing
Option"), at any time, or upon the happening of any stated event, any shares of
Avyx or any Subsidiary shall have been terminated, and Avyx shall deliver a
written waiver and relinquishment of all rights against Manugistics, Avyx, the
Surviving Company and their Subsidiaries from the holder of such Existing
Option. The consideration, if any, for such waiver and relinquishment of
rights shall not be the obligation of Avyx, the Surviving Company, Acquisition
or Manugistics. No Existing Option shall have been exercised, or an attempt at
exercise made, between the date hereof and the Closing.
9.13 Severance Obligations. The employment agreements with the
persons listed on Schedule 9.13 annexed hereto shall have been terminated, and
Avyx shall deliver a written confirmation from each of the persons listed on
Schedule 9.13 of their waiver and relinquishment of all rights against Avyx,
the Subsidiaries, the Surviving Company, Acquisition, and Manugistics.
9.14 Termination of Agreements. The agreements with the
entities listed on Schedule 9.14 annexed hereto shall have been terminated, and
Avyx shall deliver a written confirmation from each of the entities listed on
Schedule 9.14 of their waiver and relinquishment of all rights against Avyx,
the Subsidiaries, the Surviving Company, Acquisition, and Manugistics.
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9.15 Payments from Closing Funds. The Paying Agent shall
disburse the Closing Funds to the persons and in the amounts as set forth in
Section 2.2(a)(i) through (iv) hereof.
9.16 Liquidation of Subsidiaries. Information Sciences, Inc.
("ISI"), and any other subsidiaries set forth on Schedule 4.4 shall be
dissolved or liquidated in such a manner as to constitute a qualifying
liquidation pursuant to the terms of Section 332 of the Code.
9.17 Intentionally Omitted.
9.18 Release from Maidenform. Avyx shall deliver a written
release from Maidenform (the "Release") of all claims against Avyx, the
Subsidiaries, the Surviving Company, Acquisition, and Manugistics, including,
but not limited to, claims relating to a license for Maidenform to use the FAST
Scheduling Tool software, in the form of Exhibit I annexed hereto.
9.19 Consent to Transfer of Ownership. Avyx shall deliver a
written consent to the transfer of ownership contemplated by this Agreement
from the parties to the agreements set forth on Schedule 9.19 annexed hereto.
9.20 Consent of Shareholders. Avyx shall deliver the executed
Shareholder's Unanimous Written Consents from one hundred percent (100%) of the
Avyx shareholders on or before the date of the Closing.
9.21 Board Approval. The boards of directors of each of
Manugistics and Acquisition shall approve the Agreement and Plan of Merger and
transactions contemplated thereby.
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10. Cooperation and Post Closing Obligations.
10.1 Further Assurances. From and after the Closing, all of the
parties to this Agreement agree to execute and deliver such further documents
and instruments and to do such other acts and things as the other, as the case
may be, may reasonably request in order to effectuate the transactions
contemplated by this Agreement. In the event any party shall be involved in
litigation, threatened litigation or government inquiries with respect to a
matter involving any of them, the other parties shall also make available to
such first party, at reasonable times and subject to the reasonable
requirements of its or his own business, such of its or his personnel as may
have information relevant to the matters provided such first party shall
reimburse the providing party for its or his reasonable costs for employee time
incurred in connection therewith if more than one business day is required.
Following the Closing, the parties will cooperate with each other in connection
with tax audits and in the defense of any legal proceedings, consistent with
the other provisions for defense of claims provided in Section 11, to the
extent such cooperation does not cause unreasonable expense, unless such
expense is borne by the requesting party.
10.2 Furnishing Notice. From the date of this Agreement through
and including the Closing Date, each of the parties to this Agreement agree to
furnish to all other parties to this Agreement, copies of any notices,
documents, requests, court papers, or other materials received from any
governmental agency or
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any other third party with respect to the transactions contemplated by this
Agreement, except where it is obvious from such notice, document, request,
court paper or other material that the other parties were already furnished
with a copy thereof.
11. Indemnification.
11.1 General. The Surviving Company shall indemnify each of the
shareholders of Avyx and hold each of them harmless at all times from and after
the Closing Date against and in respect of:
(a) Any and all damages, losses, liabilities, obligations,
claims, encumbrances, deficiencies, costs and expenses, including, without
limitation, reasonable attorneys' fees and other costs and expenses incident
to, any action, investigation, claim or proceeding (all hereinafter referred to
as "Losses") suffered, sustained, incurred or required to be paid by any of the
shareholders of Avyx by reason of any breach or failure of observance or
performance of any representation, warranty, covenant, agreement or commitment
made by Manugistics or the Surviving Company in this Agreement or in the
Shareholders Agreement or relating thereto or as a result of any such
representation, warranty, covenant, agreement or commitment being untrue or
incorrect in any respect.
(b) Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, losses, damages, liabilities and
reasonable legal and other expenses incident to the foregoing.
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The foregoing indemnity rights shall be in addition to any other
rights and remedies which the shareholders of Avyx may have under this
Agreement or the Shareholders Agreement or as a matter of law or equity.
11.2 Indemnification by the Principal Shareholders. The
Principal Shareholders shall jointly and severally indemnify each of the
Surviving Company and Manugistics and hold each of them harmless at all times
from and after the Closing Date against and in respect of:
(a) Any and all damages, losses, liabilities, obligations,
claims, encumbrances, deficiencies, costs and expenses, including, without
limitation, reasonable attorneys' fees and other costs and expenses incident
to, any action, investigation, claim or proceeding (all hereinafter referred to
as "Losses") suffered, sustained, incurred or required to be paid by
Manugistics or the Surviving Company by reason of any of the following:
(i) Any breach or failure of observance or
performance of any representation, warranty, covenant, agreement or commitment
made by Avyx and/or the Principal Shareholders in this Agreement or in the
Shareholders Agreement or as a result of any such representation, warranty,
covenant, agreement or commitment being untrue or incorrect in any respect;
(ii) Any liability of Avyx or the Surviving Company,
whether known or unknown, that (A) is not disclosed on any Schedule or
reflected in the Financial Statements
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(whether or not it is required hereunder to be so disclosed), (B) arises out of
the operations of Avyx at any time prior to the Closing, except to the extent
that such liability constitutes an ordinary course of business expense incurred
in the normal and customary operations of Avyx conducted in a manner consistent
with commercially reasonable practice; provided, however, that to the extent of
any conflict between this Section 11.2(a)(ii)(B) and Section 2.7(a) hereof, the
provisions of Section 2.7(a) shall govern, and (C) arises out of any act,
failure to act, omission or conduct by Avyx and/or the Principal Shareholders
at any time prior to the date of Closing; provided, further, that nothing
contained in this Section 11.2(a)(ii) shall be interpreted or construed to
limit any claim that Manugistics or the Surviving Company may have pursuant to
Section 11.2(a)(i) hereof;
(iii) Any of the following claims arising at any time
prior to the date of Closing against Avyx but which are asserted against
Manugistics or the Surviving Company following the date of Closing: (A) Any
claims by Corum; (B) Any claims by SunTrust Bank, Atlanta, formerly known as
Trust Company Bank, in excess of $205,529.48; (C) Any claims by Maidenform for
amounts in excess of the sum of $200,000.00 paid in consideration for the
Release; (D) Any claims by Softworks, Inc. in excess of $27,380.75; (E) Any
claims by Burlington Industries, CTA Incorporated, Golden Software Brokers,
Internet Software Brokers, or Western Colorado Med Net, Inc.; (F) Any claims
by holders of Existing Options relating to such Existing Options and any claims
by [Mager] or
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[Stodghill] relating to stock options granted by Avyx; (G) Any claims by
Productivity Partners, Inc. not relating to transactions consummated after the
date of Closing; and (H) Any claims by Scott, Willoughby, or Mr. Pacotti for
loans to Avyx other than, or in excess of, Notes 1 through 4 set forth in
Section 2.1A hereof; provided, further, that nothing contained in this Section
11.2(a)(iii) shall be interpreted or construed to limit any claims that
Manugistics or the Surviving Company may have pursuant to Section 11.2(a)(i)
and (ii) hereof;
(iv) Any claims or litigation arising from any breach
by Paying Agent under this Agreement, the Shareholders Agreement and the Escrow
Agreement or by the Avyx Attorney-in-Fact (as defined in the Shareholders
Agreement) under the Shareholders Agreement;
(v) Any and all damages, losses, liabilities and
costs and expenses resulting from the exercise by any of the Avyx shareholders
of his right to an appraisal of his Avyx shares in accordance with the CBCA;
(vi) Any and all damages, losses, liabilities and
costs and expenses resulting from the attempted exercise by any of the Avyx
shareholders of any rights under any redemption or similar agreements; and
(vii) Any and all liabilities of Manugistics or the
Surviving Company with respect to claims for fees and expenses properly
allocable to the Avyx Shareholders in connection with the preparation of this
Agreement, the Shareholders
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Agreement, the Escrow Agreement and the consummation of the transactions
contemplated thereby other than costs of Manugistics due diligence, costs of
Manugistics personnel, and fees and costs of counsel, accountants and other
advisors of Manugistics in connection with the foregoing agreements and
transactions.
(b) Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, losses, damages, liabilities and
reasonable legal and other expenses incident to the foregoing.
The foregoing indemnity rights shall be in addition to any other
rights and remedies which the Surviving Company, Acquisition or Manugistics may
have under this Agreement, the Escrow Agreement or the Shareholders Agreement
or as a matter of law or equity.
11.3 Period of Indemnity. The aforesaid indemnities shall
remain in full force and effect as follows:
(a) with respect to claims relating to any actions
commenced by third parties, for a period equal to the applicable statute of
limitation for such third-party actions;
(b) with respect to claims relating to breaches of
representations, warranties, covenants or agreements, for a period equal to two
(2) years from the Closing, except for claims relating to breaches of
representations, warranties, covenants or agreements contained in Section 4.21,
in which event the period of indemnity shall be the applicable statute of
limitations period.
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Provided, however, that if prior to the expiration of such period any
claim for indemnification has been asserted but not fully determined, or any
audit or other proceeding with respect to any tax matter has been initiated,
such period will be extended as to such claim, audit or other proceeding for an
additional six-month period; further provided, however, that if legal action
has been commenced to enforce such indemnification prior to the expiration of
such additional six-month period, such period will be extended as to such
claim, audit or other proceeding until it is finally determined or concluded,
but if such legal action has not been commenced prior to the expiration of such
additional six-month period, all rights to indemnification with respect to such
claim, audit or other proceeding shall thereupon terminate.
11.4 Notice to the Indemnitor. Within a reasonable period after
the assertion of any claim by a third-party or occurrence of any event which
may give rise to a claim for indemnification from an indemnitor (the
"Indemnitor") under this Section 11, an indemnified party (the "Indemnified
Party") shall notify the Indemnitor in writing of such claim and, advise the
Indemnitor whether the Indemnified Party intends to contest same, but the
failure to give or delay in giving such notice shall not affect the obligations
of the Indemnitor hereunder except to the extent the Indemnitor actually has
been prejudiced thereby.
11.5 Rights of Parties to Settle or Defend. If the Indemnified
Party determines not to contest such claim, the Indemnitor shall have the
right, at its own expense, to contest and
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defend against such claim. If the Indemnified Party determines to contest such
claim, the Indemnitor shall have the right to be represented, at its own
expense by its own counsel and accountants, their participation to be subject
to the reasonable direction of the Indemnified Party. In either case, the
Indemnified Party shall make available to the Indemnitor and its attorneys and
accountants, at all reasonable times during normal business hours, all books,
records, and other documents in its possession relating to such claim. The
party contesting any such claim shall be furnished all reasonable assistance in
connection therewith by the other party. If the Indemnitor fails to undertake
the defense of or, settle or pay any such third-party claim within ten (10)
days after the Indemnified Party has given written notice to the Indemnitor
advising that the Indemnified Party does not intend to contest such claim, or
if the Indemnitor, after having received such notification from the Indemnified
Party, fails forthwith to defend,- settle or pay such claim, then the
Indemnified Party may take any and all necessary action to dispose of such
claim including, without limitation, the settlement or full payment thereof
upon such terms as it shall deem appropriate, in its sole discretion, subject
to the following with respect to any proposed settlement thereof.
11.6 Settlement Proposals. In the event the Indemnified Party
desires to settle any such third-party claim (whether or not contested by the
Indemnitor), the Indemnified Party shall advise the Indemnitor of the amount it
proposes to pay in
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settlement thereof (the "Proposed Settlement"). If such Proposed Settlement is
unsatisfactory to the Indemnitor, it shall have the right, at its expense, to
contest such claim by giving written notice of such election to the Indemnified
Party within ten (10) days after the Indemnitor has been advised of the
Proposed Settlement. If the Indemnitor does not deliver such written notice
within ten (10) days after the Indemnitor has been advised of the Proposed
Settlement, the Indemnified Party may offer the Proposed Settlement to the
third party making such claim. If the Proposed Settlement is not accepted by
the party making such claim, any new Proposed Settlement figure which the
Indemnified Party may wish to present to the party making such claim shall
first be presented to the Indemnitor who shall have the right, subject to the
conditions hereinabove set forth in this Section, to contest such claim. In
all such events, the Indemnitor shall indemnify the Indemnified Party and hold
it harmless against and from any and all costs of defense, payment or
settlement, including reasonable attorneys' fees incurred in connection
therewith.
11.7 Reimbursement.
(a) In General. At the time that the Indemnified Party
shall suffer a loss because of a breach of any warranty, representation,
covenant or agreement by the Indemnitor or at the time the amount of any
liability on the part of the Indemnitor under this Section is determined (which
in the case of payments to third persons shall be the earlier of (i) the date
of such payments or (ii) the date that a court of competent
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jurisdiction shall enter a final judgment, order or decree (after exhaustion of
appeal rights establishing such liability), the Indemnitor shall forthwith,
upon notice from the Indemnified Party, pay to the Indemnified Party, the
amount of the indemnity claim; provided, however, that unless the Indemnitor
expressly denies in writing its indemnity obligation hereunder, the Indemnitor
shall pay the reasonable attorneys' fees and other litigation expenses from
time to time incurred by the Indemnified Party promptly upon the submission of
invoices therefor by the Indemnified Party. If such amount and/or attorneys'
fees and other litigation expenses are not paid forthwith, then, regardless of
any denial of any indemnity obligation, the Indemnified Party may, at its
option, take legal action against the Indemnitor for reimbursement in the
amount of its indemnity claim and/or attorneys' fees and other litigation
expenses. For purposes hereof the indemnity claim shall include the amounts so
paid (or determined to be owing) by the Indemnified Party together with costs
and reasonable attorneys' fees and interest on the foregoing items at the rate
of eight and one-half percent (8.5%) per annum from the date the obligation is
due from the Indemnified Party to the Indemnitor, as hereinabove provided,
until the indemnity claim shall be paid.
(b) Escrow Fund; Balance Sheet Adjustment Funds. Without
in any manner limiting the generality of Section 11.7(a) above, if the
Indemnified Party is Manugistics or Acquisition or the Surviving Company, then
the Indemnified Party may first obtain payment from (i) the Escrow Fund which
has been
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created as security for any claims for indemnification brought by Manugistics
or Acquisition or the Surviving Company for the nonfulfillment of any covenant,
representation, warranty or agreement on the part of Avyx or the Principal
Shareholders contained in this Agreement, and all of the Avyx shareholders in
the Shareholders Agreement, or (ii) the Balance Sheet Adjustment Funds. To the
extent not paid from either of these sources either because all such funds have
been exhausted or already disbursed, Manugistics or Acquisition or the
Surviving Company may pursue such recompense from the Principal Shareholders
personally if such claim arises pursuant to this Agreement and from each
relevant Avyx shareholder if such claim arises pursuant to the Shareholders
Agreement. Manugistics shall have no right to seek payment from the Escrow
Funds for any claim or reason other than a valid claim for indemnification or
payment under this Agreement or the Shareholders Agreement. In the event that
any payment obtained from the Escrow Funds by Manugistics is challenged by any
party hereto, the losing party shall reimburse the prevailing party for all of
the prevailing party's costs and expenses (including reasonable attorneys' fees
and costs) incurred or paid in connection with such dispute. The terms and
conditions of the Escrow Agreement shall govern any claims brought by
Manugistics or Acquisition or the Surviving Company for payment from the Escrow
Funds and the terms and conditions of Sections 2.1 and 2.7 of this Agreement
shall govern any claims brought by Manugistics or Acquisition or the Surviving
Company for payment from the Balance
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Sheet Adjustment Funds. A claim for indemnification which has been paid from
the Escrow Funds or the Balance Sheet Adjustment Funds shall not also be
recoverable from the Principal Shareholders pursuant to Section 11 of this
Agreement.
11.8 Dissenting Shareholders. Without in any way limiting the
generality of the foregoing Section 11.2 of this Agreement, the Principal
Shareholders shall indemnify each of the Surviving Company, Acquisition and
Manugistics and hold each of them harmless at all times from and after the
Closing Date against and in respect of any claims brought by the dissenting
shareholders.
11.9 Limitation of Liability.
(a) It is understood and acknowledged that each of the
Surviving Company, Acquisition and Manugistics may demand payment of the entire
amount of the Balance Sheet Adjustment Funds and the Escrow Funds to the extent
that the conditions precedent to payment therefrom are met regardless of
whether or not such claims arise from the breach of a representation or
warranty of any particular Principal Shareholder, and nothing in this Section
11.9 shall limit the ability of Manugistics, the Surviving Company and
Acquisition to so demand and receive payment from the Escrow Funds or the
Balance Sheet Adjustment Funds.
(b) It is further acknowledged and agreed that the
Surviving Company, Acquisition, or Manugistics may also make claims under or
with respect to this Agreement (including, without limitation, Section 11.7(b)
hereof) and/or other agreements and
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documents referenced herein, against one or more individual Principal
Shareholders for the payment of amounts in addition to or separate from any
amounts recovered by such claiming parties from the Escrow Funds or the Balance
Sheet Adjustment Funds as provided in Section 11.9(a) above. Any such separate
or additional amounts claimed by Manugistics, Acquisition or the Surviving
Company (i.e. any amounts claimed that are not described in Section 11.9(a)
above, but specifically excluding any amounts sought pursuant to Section 11.10
hereof from Willoughby and/or Gardner) shall be referred to for all purposes of
this Agreement as "Additional Amounts."
(c) Subject to the provisions of Section 11.9(a) above,
but otherwise notwithstanding anything contained herein to the contrary, the
total liability of each Principal Shareholder for the payment of Additional
Amounts to Manugistics, Acquisition and the Surviving Company in the aggregate,
by reason of any breach of this Agreement or otherwise, shall be limited to,
and shall not exceed, an amount equal to the sums actually paid to such
Principal Shareholder (not including Escrow Funds and Balance Sheet Adjustment
Funds that were attributable to, but not actually paid to, such Principal
Shareholder) pursuant to this Agreement.
11.10 Indemnification for University of Maryland Contract.
Willoughby and Gardner shall jointly and severally indemnify each of the
Surviving Company, Acquisition and Manugistics and hold each of them harmless
at all times from and after the Closing Date from any and all actions, suits,
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proceedings, claims, demands, assessments, judgments, costs, losses, damages,
liabilities and reasonable legal and other expenses incident to the assignment
by Avyx to The Kendall Group, Inc. of the University of Maryland Contract
and/or the performance thereof by Willoughby and Gardner. The limitations as
set forth in Section 11.9(c) above with respect to claims for Additional
Amounts do not apply to the obligations of Willoughby and Gardner pursuant to
this Section 11.10.
12. Survival of Representations and Warranties. Claims against any
of the parties or the Avyx shareholders relating to breaches of
representations, warranties, covenants or agreements, shall survive for a
period equal to two (2) years from the Closing, except for breaches of
representations, warranties, covenants or agreements relating to tax matters,
which shall survive for a period equal to the applicable statute of limitation
for such claim, and in either case, notwithstanding any investigation conducted
before or after the Closing or the decision of any party to complete the
Closing; provided, however, that if prior to the expiration of such period any
claim for breach of any such representation, warranty, covenant or agreement
has been asserted but not fully determined, such period will be extended as to
such claim for an additional six-month period; further provided, however, that
if legal action has been commenced to enforce such claim prior to the
expiration of such additional six-month period, such period will be extended as
to such claim until it is finally determined or concluded, but if such legal
action has not been
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commenced prior to the expiration of such additional six-month period, all
rights to enforce such claim shall thereupon terminate. All representations,
warranties, covenants and agreements made by Manugistics and Acquisition in
this Agreement, and any and all claims and causes of action based thereon,
shall survive for a period equal to two (2) years from the Closing.
13. Brokers' and Finders' Fees.
13.1 Each of Avyx, Acquisition and Manugistics represent and
warrant to each other party hereto that all negotiations relative to this
Agreement have been carried on by it directly without the intervention of any
person or entity who or which may be entitled to a brokerage fee or other
commission in respect of the execution of this Agreement or the consummation of
the transactions contemplated hereby, except for Corum, who shall be paid out
of the Closing Funds as provided in Section 2.2(a)(i) hereof.
14. Additional Covenants.
14.1 Expenses. Except as provided herein and in the
Shareholders Agreement, each party hereto shall pay its own expenses incidental
to the preparation of this Agreement, the carrying out of the provisions of
this Agreement and the consummation of the transactions contemplated hereby.
Acquisition, Manugistics and the Surviving Company shall not be liable for (a)
any fees of attorneys, accountants, consultants, finders or investment bankers
or other expenses incurred by or on behalf of Avyx or any of its Subsidiaries
or shareholders in connection with
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the transactions contemplated by this Agreement, or (b) any amounts incurred or
paid with respect to satisfying Sections 9.12, 9.13 or 9.14 of this Agreement.
14.2 Press Releases; Confidentiality. Except as required by a
judicial, regulatory or governmental authority with competent jurisdiction,
including, but not limited to, obligations of the parent company of Manugistics
to make public disclosures under Federal and state securities laws, and except
as required by the rules of the National Association of Securities Dealers
("NASD") applicable to the parent company of Manugistics, no party hereto shall
issue any press release nor otherwise make public any information with respect
to this Agreement or the transactions contemplated thereby, prior to the
Closing Date, without the consent of the other parties to this Agreement. The
parties agree that all discussions, negotiations, and transactions contemplated
hereby and all information exchanged pursuant hereto and in connection with due
diligence, shall be kept strictly confidential, except as otherwise provided in
this Section 14.2. Each Principal Shareholder covenants and agrees that, at
all time following execution of this Agreement, it shall not use for its own
benefit or divulge to any other person, firm, or corporation, any confidential
information or trade secrets which Avyx, the Surviving Company, Acquisition or
Manugistics may have imparted to such Principal Shareholder. Notwithstanding
anything contained in Section 14.2 to the contrary, Manugistics shall not in
any press release in any way disparage the reputation or competence of John
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Willoughby or Jo Anne Gardner by name; provided, however, that nothing herein
contained shall prohibit Manugistics from making general references to the
management of Avyx.
14.3 Negotiations With Others. During the period from the date
of this Agreement to the Effective Date, or until this Agreement is terminated,
if it is terminated, none of the Principal Shareholders, Avyx or any of its
Subsidiaries, nor any investment banking firm or financial advisor retained by
Avyx or any Subsidiary shall, directly or indirectly, without the prior written
consent of Acquisition and Manugistics, initiate or solicit any discussions,
negotiations, or agreements with any corporation, partnership, person or other
entity or group (other than Acquisition and Manugistics) concerning any
proposal or offer regarding a sale of disposition of capital stock of Avyx or
any Subsidiary, or a merger, liquidation, consolidation, sale or any
disposition of assets or other similar transaction involving Avyx or any
Subsidiary (hereinafter "Acquisition Proposal"). Avyx will immediately notify
Acquisition and Manugistics if any such contract or request to discuss or
negotiate such Acquisition Proposal or request for information relating to a
possible Acquisition Proposal is received by Avyx or any Subsidiary and will
identify the party from whom such request, contact, proposal or offer is
received as well as the terms of such request, contact, proposal or offer.
15. Contents of Agreement; Parties in Interest; etc. This Agreement
and the agreements referred to herein set forth the entire understanding of the
parties hereto with respect to the
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transactions contemplated hereby. Except as set forth in Sections 4 and 5 of
this Agreement and the Exhibits hereto, there are no representations or
warranties, express or implied, made by any party to this Agreement with
respect to the subject matter of this Agreement. This Agreement shall not be
amended except by a written instrument duly executed by each of the parties
hereto. Any and all previous agreements and understandings between or among
the parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement and the documents referred to herein, except for
the confidentiality provisions of Section 6.2 hereof.
16. Assignment and Binding Effect. This Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties. All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto.
17. Waiver. Any term or provision of this Agreement may be waived
at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
18. Termination.
18.1 Mutual Consent. This Agreement may be terminated (a)
by the mutual agreement of the board of directors of each of Avyx, Acquisition
and Manugistics at any time prior to the Effective Date; and (b) by the Board
of Directors of Acquisition
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and Manugistics if there is a dissent by any of the shareholders of Avyx.
18.2 Automatic Termination. This Agreement shall be terminated
automatically, without any notice or further action by any party, if Closing
shall not have occurred for any reason by May 31, 1996, unless the parties
shall have agreed to an extension of such time period.
Any termination pursuant to this Section 18 shall be without
liability on the part of any party to the other party hereto, except if such
termination has resulted by reason of a breach by such party of any of its
material obligations hereunder.
19. Notices. Any notice, request, demand, waiver, consent,
approval, or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given only if
delivered to the party personally or sent to the party by facsimile or by
registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:
If to Acquisition or Manugistics:
--------------------------------
c/o Manugistics, Inc.
2115 East Jefferson Street
Rockville, MD 20852
Attention: Helen Nastasia, Esquire
General Counsel
with a copy to:
Harriet J. Koren, Esquire
Dilworth, Paxson, Kalish & Kauffman LLP
3200 Mellon Bank Center
1735 Market Street
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Philadelphia, PA 19103
If to Avyx (prior to the Closing):
---------------------------------
Avyx, Inc.
23 Inverness Way East
Suite 100
Englewood, CO 80112
with a copy to:
Gary A. David, Esquire
Blanc Williams Johnston & Kronstadt
1900 Avenue of the Stars
17th Floor
Los Angeles, CA 90067-4403
If to Avyx (after the Closing):
------------------------------
John K. Willoughby, Paying Agent
7740 South Glencoe Way
Littleton, CO 80122
with a copy to:
Gary A. David, Esquire
Blanc Williams Johnston & Kronstadt
1900 Avenue of the Stars
17th Floor
Los Angeles, CA 90067-4403
or to such other address or person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date so delivered, facsimiled or mailed.
20. Governing Law. This Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the State of Delaware
as applied to contracts made and fully performed in such state, except insofar
as the CBCA shall be mandatorily applicable to the Merger and the rights of the
Avyx shareholders in connection therewith.
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21. No Benefit to Others. The representations, warranties,
covenants, agreements and indemnities contained in this Agreement are for the
sole benefit of the parties hereto, and their respective successors and
assigns, and they shall not be construed as conferring, and are not intended to
confer, any rights on any other persons.
22. Section Headings. All section headings are for convenience only
and shall in no way modify or restrict any of the terms or provisions hereof.
23. Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
24. Counterparts. This Agreement and all agreements referred to
herein may be executed in two or more counterparts, each of which shall be
deemed an original, and Avyx, Acquisition, and Manugistics and each of the
Principal Shareholders may become a party hereto by executing a counterpart
hereof. This Agreement and any counterpart so executed shall be deemed to be
one and the same instrument. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
INTENTIONALLY LEFT BLANK
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<PAGE> 83
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement on the date first above written.
Attest: AVYX, INC.
By: /s/ JO ANNE GARDNER By: /s/ JOHN K. WILLOUGHBY
----------------------- ---------------------------
Secretary President
Attest: MANUGISTICS ACQUISITION, INC.
By: /s/ PETER Q. REPETTI By: /s/ WILLIAM M. GIBSON
----------------------- ---------------------------
Secretary President
Attest: MANUGISTICS, INC.
By: /s/ HELEN A. NASTASIA By: /s/ WILLIAM M. GIBSON
----------------------- ---------------------------
Secretary President
PRINCIPAL SHAREHOLDERS:
----------------------
SCOTT EQUITIES, LTD.
By Its General Partner:
[NAME OF GENERAL PARTNER]
By:
Scott Capital Corp., G.P.
Witness/Attest:
/s/ VENIETTA M. KELLY By: /s/ H. REX MARTIN
- - -------------------------- ------------------------------
Title: President
------------------------
Witness: JOHN K. WILLOUGHBY
/s/ JO ANNE GARDNER /s/ JOHN K. WILLOUGHBY
- - -------------------------- ------------------------------
Witness: JO ANNE GARDNER
/s/ JOHN K. WILLOUGHBY /s/ JO ANNE GARDNER
- - -------------------------- ------------------------------
Witness: JAMES E. PACOTTI, JR.
/s/ LYLA J. ROWE /s/ JAMES E. PACOTTI, JR.
- - -------------------------- ------------------------------
Witness: PATSY A. PACOTTI
/s/ LYLA J. ROWE /s/ PATSY A. PACOTTI
- - -------------------------- ------------------------------
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<PAGE> 84
CERTIFICATION BY SECRETARY OF MANUGISTICS ACQUISITION, INC.
The undersigned hereby certifies that the foregoing agreement has been
adopted pursuant to Section 251(f) of the Delaware General Corporation Law and
as of the date of the Certificate of Merger the outstanding shares of
Manugistics Acquisition, Inc., are such as to render such Section applicable.
Witness: /s/ JULIA A. BOWEN /s/ PETER Q. REPETTI
---------------------- ------------------------------
Name: Peter Q. Repetti
-------------------------
Secretary
<PAGE> 85
EXHIBITS AND SCHEDULES
EXHIBITS:
Exhibit A Shareholders Agreement
Exhibit B Shareholder's Unanimous Written Consent
Exhibit C Certificate of Merger
Exhibit D Articles of Merger
Exhibit E Escrow Agreement
Exhibit F Certificate of Principal Shareholders
Exhibit G Opinion of Dilworth, Paxson, Kalish & Kauffman LLP
Exhibit H Opinion of Blanc Williams Johnston & Kronstadt and of Andrew N.
Bernstein, P.C.
Exhibit I Maidenform Release
SCHEDULES:
2.2(a)(ii) Bonuses
2.7 GAAP Exceptions
4.1 Organization
4.2 Shareholders; Existing Agreements Affecting Capitalization
4.4 Subsidiaries and Affiliates
4.6 Financial Statements
4.7 Liabilities
4.8 Liens affecting Real Property
4.9 Real Property
4.10 Machinery and Equipment
4.11 Inventory
4.12 Leases and Licenses
4.13 Copyrights and Trademarks
4.14 Contracts
4.14A Documents Received
4.15 Defaults
4.16 Insurance
4.17 Distributions, Satisfactions, Obligations
4.18 Capital Expenditures
4.19 Litigation
4.20 Legal Compliance
4.21 Tax Matters
4.22 Employee Benefit Plan
4.23 Employees
4.24 Labor Agreements
4.25 Environmental Laws
4.26 Bank Accounts, Letters of Credit and Powers of Attorney
4.27 Accounts and Note Receivable
4.28 Accounts Payable
4.29 Customers and Suppliers
<PAGE> 86
4.30 List of Officers and Employees pertaining to Knowledge and
Receipt of Notice
6.2 Confidentiality
7.2 Permitted Actions Pending Closing
9.9 Employees Remaining at Closing
9.13 Severance Obligations
9.14 Termination of Agreements
9.19 Consent to Transfer of Ownership
Set forth above is a list of exhibits and schedules to Exhibit 10.18 that have
been omitted. Pursuant to Item 601(b)(2) of Regulation S-K, the Company agrees
to furnish supplementally a copy of any omitted schedule to the Securities and
Exchange Commission upon request.
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<PAGE> 1
EXHIBIT 10.19
MANUGISTICS
================================================================================
Manugistics, Inc., 2115 East Jefferson Street, Rockville, Maryland 20852
CONSULTING AGREEMENT
Consultant Name and Address:
John K. Willoughby and Jo Anne Gardner Willoughby
The Kendall Group, Inc.
7740 South Glencoe Way
Littleton, CO 80122
THIS AGREEMENT made by and between The Kendall Group, Inc., a Colorado
corporation ("CONSULTANT") and Manugistics, Inc., a Delaware corporation, with
headquarters located at 2115 East Jefferson Street, Rockville, Maryland 20852
(hereinafter "MANUGISTICS").
WHEREAS, MANUGISTICS wishes to engage the services of CONSULTANT for a limited
period of time in a field in which CONSULTANT is a leading expert, and
CONSULTANT is willing to render such services for MANUGISTICS on an agreed
basis as hereinafter specified.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
1. MANUGISTICS hereby retains CONSULTANT to render advisory services on a
nonexclusive basis at MANUGISTICS' call for the term provided on the
Supplement(s) attached hereto ("SUPPLEMENT"). CONSULTANT understands
and agrees that all consulting work under this AGREEMENT shall be
performed by either John K. Willoughby and Jo Anne Gardner Willoughby,
who are deemed to be key personnel for purposes of this AGREEMENT.
Any change in the key personnel under this AGREEMENT must be
specifically authorized in writing by MANUGISTICS.
2. The services MANUGISTICS may request of CONSULTANT will be as
described on the attached SUPPLEMENT(s), which are incorporated herein
by reference. CONSULTANT will engage in discussions and meetings with
MANUGISTICS personnel when so requested, and will use best efforts to
provide solutions and answers to questions submitted by MANUGISTICS.
CONSULTANT's point of contact at MANUGISTICS with respect to the
specific nature and scope of the services to be provided hereunder and
the days CONSULTANT is to engage in work hereunder is as indicated in
the SUPPLEMENT(s), unless CONSULTANT is informed otherwise by
MANUGISTICS.
3. Subject to the provisions of paragraph 1 hereof, the days when
CONSULTANT is to engage in work hereunder will be designated by
MANUGISTICS, subject to any prior work commitments of CONSULTANT and
where practicable selected on the basis of the mutual convenience of
the parties. CONSULTANT agrees to use its best efforts to accommodate
the work schedule requests of MANUGISTICS within standard working
hours and balancing such scheduling requests with other work
commitments. CONSULTANT will be paid for its services hereunder and
for travel and expenses in accord with the attached SUPPLEMENT(s).
At the close of each month hereunder CONSULTANT may bill MANUGISTICS
for the time worked during such month, and for travel and expenses in
accord with the SUPPLEMENT(s). Such billings will
-1-
<PAGE> 2
be sent to Accounts Payable, Manugistics, Inc., 2115 East Jefferson
Street, Rockville, Maryland 20852, with a copy to CONSULTANT's point
of contact and will be paid within 30 days following receipt.
4. CONSULTANT hereby represents and warrants that no part of the fee paid
by MANUGISTICS will be used directly or indirectly to make payments,
gratuities, or emoluments, or to confer any other benefit, to an
official of any government or any political party.
5. CONSULTANT agrees that any and all ideas, documentation, computer
programs, improvements, developments and inventions conceived of,
developed, or first reduced to practice in the performance of work
hereunder for MANUGISTICS shall become the exclusive property of
MANUGISTICS and that any ideas, information and data received by
MANUGISTICS hereunder and ideas and developments accruing therefrom
shall all be fully disclosed to MANUGISTICS and shall all be the
exclusive property of MANUGISTICS and may be dealt with by MANUGISTICS
as such, all without payment of further consideration than is herein
specified. CONSULTANT further agrees to preserve all such ideas,
developments, agreements, information, improvements and inventions as
confidential during and after the term of this AGREEMENT, and to
execute all papers and documents necessary to vest title to such
ideas, developments, information, data, improvements and inventions in
MANUGISTICS and to enable MANUGISTICS to apply for and, where
possible, obtain copyrights, patents and/or other proprietary rights
on such ideas, developments, information, data, improvements and
inventions in any and all countries and to assign to MANUGISTICS the
entire right, title and interest thereto.
Notwithstanding the above, CONSULTANT shall retain all of its
copyright and other proprietary rights to materials developed by
CONSULTANT exclusively during CONSULTANT's own time and independently
of CONSULTANT's work to be performed under SUPPLEMENT. MANUGISTICS
agrees that CONSULTANT may use such materials in the performance of
his work for MANUGISTICS without surrendering his proprietary rights
to such materials. During and subsequent to the termination of
AGREEMENT or any supplement thereto, CONSULTANT agrees to make such
materials available to MANUGISTICS at the then-current prices for such
materials for the purposes of distributing them to MANUGISTICS
employees or to employees of MANUGISTICS' customers.
6. CONSULTANT will comply with, and do all things necessary to comply
with and, solely with respect to CONSULTANT's work hereunder, for
MANUGISTICS to comply with, United States Government laws and
regulations. CONSULTANT will also comply with and do all things
necessary for MANUGISTICS to comply with provisions of contracts
between agencies of the United States Government or their contractors
and MANUGISTICS which (i) relate either to patent rights or to the
safeguarding of information pertaining to the security of the United
States and (ii) copies of which, or adequate descriptions of which,
have previously been provided in writing by MANUGISTICS to CONSULTANT.
Both parties agree that this entire AGREEMENT and/or its contents may
be disclosed to the United States Government.
7. CONSULTANT shall maintain appropriate time and expense records
pertaining to the services performed under this AGREEMENT. Said
records may be examined and audited by MANUGISTICS and the Government
for three (3) years after final payment hereunder.
8. Each of CONSULTANT and MANUGISTICS shall indemnify the other party for
any claims brought by any third party against such other party as a
result of any personal injury or property damage incurred by such
third party as a result of any action or omission on the part of the
indemnifying party.
9. CONSULTANT warrants that no person or selling agency has been or will
be employed or retained to solicit or secure on behalf of MANUGISTICS
any contract, including but not limited to a United States Government
contract, upon an agreement or understanding for a commission,
percentage, brokerage, or
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<PAGE> 3
contingent fee, excepting bona fide employees or bona fide established
commercial or selling agencies maintained by CONSULTANT for the
purpose of receiving business. For breach or violation of this
warranty, MANUGISTICS shall have the right to annul this AGREEMENT
without liability or in its discretion to deduct from the fee or
consideration, or otherwise recover, the full amount of such
commission, percentage, brokerage or contingent fee.
10. It is contemplated that this AGREEMENT will involve disclosure to
CONSULTANT of MANUGISTICS' and/or MANUGISTICS' customers' proprietary
information and trade secrets, including, but not limited to, customer
lists, proprietary programs and other documents, secret formulae,
programs, devices, compilations of information, and methods of
operation or fabrication and the like. The CONSULTANT agrees to
regard and preserve as confidential and not to disclose or use in any
manner, during and after the term of this AGREEMENT, all such
information and any other confidential information pertaining to
MANUGISTICS or MANUGISTICS' customers' business obtained by CONSULTANT
from whatever source during the term of this AGREEMENT; provided
however, that if disclosure or use of said proprietary information is
required in the performance of CONSULTANT's work hereunder for
MANUGISTICS or MANUGISTICS' customers, MANUGISTICS or MANUGISTICS'
customers may waive the provisions of this paragraph 10 in writing at
CONSULTANT's request.
11. CONSULTANT will not disclose to MANUGISTICS or induce MANUGISTICS to
use any secret process, trade secret, or other confidential knowledge,
information or property belonging to others.
12. CONSULTANT further covenants that there is no agreement between
CONSULTANT and any other person, firm, or corporation which would
cause this AGREEMENT not to have full force and effect.
13. This AGREEMENT shall terminate upon the death or disability of any of
CONSULTANT's key employees which prevents CONSULTANT from efficiently
performing its services. Either MANUGISTICS or CONSULTANT may
terminate this AGREEMENT after a minimum of two thousand (2,000) hours
of consulting services have been performed by providing the other
party with sixty (60) days written notice of such intent to terminate.
Notwithstanding the foregoing, MANUGISTICS may, at its option,
terminate this AGREEMENT at any time, after ten (10) days written
notice and opportunity to cure, if the failure is curable, and
otherwise without prior written notice, if either CONSULTANT fails to
provide services in a manner that conforms with prevailing commercial
standards for comparable services. In the event of termination,
MANUGISTICS' only obligation or liability shall be payment for
services performed or any outstanding expenses incurred up to the date
of termination.
14. CONSULTANT shall not hold itself out as an agent or representative of
MANUGISTICS. CONSULTANT shall render its services hereunder as an
independent contractor, and it shall have no authority to obligate
MANUGISTICS in any manner.
15. This AGREEMENT may not be assigned by either party without the written
consent of the other, except by MANUGISTICS to wholly-owned
subsidiaries and related corporate entities.
16. This AGREEMENT shall be construed and interpreted in accordance with
the laws of the State of Maryland.
17. The parties to this AGREEMENT mutually agree that this AGREEMENT
contains the final and entire agreement between the parties with
respect to the consulting relationship described herein and neither
they nor their agents shall be bound by any terms, conditions,
statements, warranties, or representations, oral or written, relating
to such consulting relationship and not herein contained.
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<PAGE> 4
18. This AGREEMENT shall not be varied in its terms by any oral agreement
or representation or otherwise than by an instrument in writing of
subsequent date executed by both parties hereto. Any purchase order
issued by MANUGISTICS in connection herewith is for administrative
purposes only.
19. CONSULTANT shall complete and return to MANUGISTICS with this
AGREEMENT, Exhibit A hereto entitled "CONSULTANT's FEDERAL INCOME TAX
INFORMATION", which information CONSULTANT hereby certifies is true
and correct. The parties understand that MANUGISTICS will provide this
information to the Internal Revenue Service in accordance with federal
tax law.
Accepted by CONSULTANT: Accepted by MANUGISTICS:
By: /s/ JOHN K. WILLOUGHBY By: /s/ WILLIAM M. GIBSON
--------------------------------- ----------------------------------
Signature Signature
Print Name: John K. Willoughby Print Name: William M. Gibson
------------------------- --------------------------
Title: President Title: President & CEO
------------------------------ -------------------------------
Date: May 24, 1996 Date: May 24, 1996
------------------------------- -------------------------------
Accepted by CONSULTANT's Key Employees:
/s/ JOHN K. WILLOUGHBY
- - -------------------------------------
John K. Willoughby
May 24, 1996
- - -------------------------------------
Date
/s/ JO ANNE GARDNER WILLOUGHBY
- - -------------------------------------
Jo Anne Gardner Willoughby
May 24, 1996
- - -------------------------------------
Date
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<PAGE> 5
EXHIBIT A TO CONSULTING AGREEMENT
CONSULTANT'S FEDERAL INCOME TAX INFORMATION
The Tax Equity and Fiscal Responsibility Act of 1982 significantly increased
the penalties for failure to file form 1099 information returns and to include
the recipient's taxpayer identification number with the return. To comply with
these laws, it is necessary for us to obtain the federal identification number
or social security number of every vendor with whom we do business. Please
provide us with the information in the spaces below. If there is valid
exemption for your organization, please provide a description of that exemption
in the appropriate space.
Nature of Organization: Corporation (x)
Partnership ( )
Individual ( )
Federal Tax-Exempt Organization ( )
State, City or Other Governmental Unit ( )
Other (Explain) ( )
Federal Identification Number Applied For
--------------------------------------
or
Social Security Number
--------------------------------------
Description of Valid Exemption
---------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
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<PAGE> 6
MANUGISTICS
=============================================================================
Manugistics, Inc., 2115 East Jefferson Street, Rockville, Maryland 20852
SUPPLEMENT NO. 1
TO
CONSULTING AGREEMENT
1. This Supplement modifies and amends the Consulting Agreement dated May
23, 1996 between Manugistics, Inc. ("MANUGISTICS") and The Kendall
Group, Inc. ("CONSULTANT"). The term of this Supplement
("SUPPLEMENT") is for a maximum of three (3) years during the term
commencing May 23, 1996 and ending May 23, 1999 .
2. CONSULTANT's point of contact at MANUGISTICS for purposes of
SUPPLEMENT is Mike Sullivan .
3. It is anticipated that CONSULTANT's work will be generally performed
at its office in Colorado, but MANUGISTICS may, through its contact
person designated above, require that CONSULTANT perform services at
MANUGISTICS' office in Rockville, MD to the extent reasonable
necessary to the accomplishment of the objectives of the work to be
performed by CONSULTANT hereunder.
4. CONSULTANT shall be paid at the rate of $125.00 per hour for a minimum
of 2,000 hours, and MANUGISTICS agrees that (i) at least 667 of such
hours shall be performed and paid for in the first year of the term of
the aforesaid CONSULTING AGREEMENT and (ii) at least 1,333 of such
hours shall be performed and paid for, in the aggregate, in the first
two years of the term of such CONSULTING AGREEMENT. In no event shall
CONSULTANT receive a total fee of more than $250,000.00 for services
performed hereunder or be required to work more than 2,000 hereunder,
unless and to the extent mutually agreed in writing by the parties
hereto.
5. MANUGISTICS will reimburse CONSULTANT for CONSULTANT's reasonable
travel expenses to such places as, with MANUGISTICS' prior approval,
CONSULTANT may travel in the performance of services for MANUGISTICS.
MANUGISTICS shall also reimburse CONSULTANT for its reasonable
non-travel expenses incurred with MANUGISITCS' prior approval in the
performance of services hereunder. Notwithstanding the foregoing,
CONSULTANT shall be entitled to reimbursement of expenses of up to
$300 per calendar month (including without limitation travel, parking
and long-distance telephone expenses) reasonably incurred by it in
connection with its performance of services hereunder, with no
necessity of prior approval of such expenses by MANUGISTICS. Approved
travel expenses shall be included on CONSULTANT's monthly bill.
Unless specifically approved in writing in advance by Mike Sullivan,
travel and transit time will not be considered working time for
purposes of this SUPPLEMENT.
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<PAGE> 7
6. The services MANUGISTICS may request of CONSULTANT will be in the
general areas of the business of Avyx, Inc. and software consulting
and, except to the extent that such request is inconsistent with a
pre-existing contractual obligation of CONSULTANT, CONSULTANT shall
use its best efforts to accommodate such request.
Accepted by CONSULTANT: Accepted by MANUGISTICS:
By: /s/ JOHN K. WILLOUGHBY By: /s/ WILLIAM M. GIBSON
-------------------------------- ----------------------------------
Signature Signature
Print Name: John K. Willoughby Print Name: William M. Gibson
------------------------ --------------------------
Title: President Title: President & CEO
----------------------------- -------------------------------
Date: May 24, 1996 Date: May 24, 1996
------------------------------ --------------------------------
Accepted CONSULTANT's Key Employees by:
/s/ JOHN K. WILLOUGHBY
- - --------------------------------------
John K. Willoughby
May 24, 1996
- - --------------------------------------
Date
/s/ JO ANNE GARDNER WILLOUGHBY
- - --------------------------------------
Jo Anne Gardner Willoughby
May 24, 1996
- - --------------------------------------
Date
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<PAGE> 1
EXHIBIT 10.20
CONFIDENTIALITY, NON-COMPETITION AND
NON-SOLICITATION AGREEMENT
AGREEMENT made as of this 24th day of May, 1996 between Manugistics,
Inc., a Delaware Corporation, (hereinafter referred to as the "Company") and
John K. Willoughby and Jo Anne Gardner (hereinafter referred to as the
"Founders").
WHEREAS, the Founders, Company and certain other parties have entered
into a certain Agreement and Plan of Merger of even date herewith (which,
together with the documents and agreements referenced therein, is hereafter
referred to as the "Merger Agreement") providing for, among other things,
purchase of all of the capital stock of Avyx, Inc. (hereinafter referred to as
"Avyx") held by its shareholders; and
WHEREAS, the parties following the merger have entered into a
consulting agreement (hereinafter referred to as the "Consulting Agreement")
with the Company and have been and in consideration of an option to purchase,
in the aggregate, thirty thousand (30,000) shares of the Common Stock of
Manugistics Group, Inc., pursuant to the terms of the Manugistics Group, Inc.
Employee Stock Option Plan, as amended, at an exercise price equal to the
average of the high and low prices for the Common Stock as of the date the
merger transaction is consummated, Founders hereby covenant and agree as
follows:
1. Definitions: As used in this Agreement, the following terms
shall have the following meanings:
A. Avyx means Avyx, Inc. as well as the surviving
company following the merger of Manugistics Acquisition, Inc. and Avyx.
B. Company means Manugistics, Inc., Manugistics Group,
Inc. and all affiliates;
<PAGE> 2
C. Proprietary Information means any trade or business
secrets of Company and/or Avyx and any scientific, technical or business
materials that are treated by Company and/or Avyx as confidential or
proprietary, including but not limited to Manugistics' software modules,
Manugistics' Manufacturing Planning module, Avyx's ASE, Avyx's FAST,
information to which Founders had access relating to the Company's present or
planned business which could include the names and addresses of Company's
and/or Avyx's customers or prospective customers and methods of doing business
and certain other business information with which Company and/or Avyx has
entrusted Founders in the use, application or purpose therefor, as well as
information concerning: techniques, processes and programs relating to
company's customers and Company's and/or Avyx's products and any companies with
which the Company and/or Avyx does business; sales processes and procedures;
costs; Company's and/or Avyx's general business procedures and operations,
financial information, invoices, accounts receivable, billings, reports,
correspondence and payment of billings; sales information/or information
concerning profits; merchandising, sales or marketing strategies and
techniques; expansion plans with respect to marketing, products or otherwise;
methods of servicing customers; methods of pricing or charging for services and
products; business forms developed by or for Company and/or Avyx; with respect
to the Company and/or Avyx, form and content of proposals, reports and
analyses; names of suppliers, personnel or employees; advertising sources and
potential advertising sources; internal reporting methods; bids; contracts;
proposals; scientific and technical data, specifications and other
documentation, whether written, oral or machine-readable; forecasts;
predictions; designs, formulae; software programs, however embodied;
information about or belonging to customers, potential customers or others and
any other information relating to the operation,
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<PAGE> 3
business, customers and sources of supply for all or any of the Company's
and/or Avyx's products. However, Proprietary Information shall not include any
information that (i) is or becomes publicly known without any breach of this
agreement; (ii) a Founder develops from and after the date hereof (and not
working under a Consulting Agreement) without reference to Proprietary
Information; or (iii) a Founder rightfully acquires from a third party without
any obligation on that Founder's part to maintain its confidentiality.
D. Intellectual Property means any writing, drawing,
logo, computer program, manual, trade name, trademark, service mark or other
material of the Company and/or Avyx registered or otherwise protected or
protectable under state, federal or foreign patent, trademark, copyright, or
similar laws.
2. Acknowledgments:
A. Founders recognize and acknowledge that: (1) in the
course of Founders' employment as an officer, director and/or executive
employee of Avyx, Inc., and/or their stock ownership in Avyx, Inc. and/or the
Company, as the case may be, it was necessary for Founders to use or have
access to information relating to Company's and/or Avyx's present or planned
business which includes in whole or in part, but which is not limited to, the
Proprietary Information and Intellectual Property; (2) the use,
misappropriation or disclosure of the Proprietary Information and Intellectual
Property would constitute a breach of trust and cause irreparable injury to
Company; and (3) it is essential to the protection of Company's goodwill and to
the maintenance of Company's competitive position that the Proprietary
Information and Intellectual Property be kept secret and that Founders not
3
<PAGE> 4
disclose the Proprietary Information and Intellectual Property to others or use
the same to Founder's own advantage or the advantage of others.
B. Founders further recognize and understand that to the
extent that they prepared any materials in the course of their employment by
Avyx, including written or graphic materials, any such materials conceived or
written by Founders were done as "work made for hire" as defined and used in
the Copyright Act of 1976, 17 USC Section 1 et seq. In the event of
publication of such materials, Founders understand that since the work was
"work made for hire," Manugistics, Inc., Manugistics Group, Inc. or Surviving
Company as the case may be, will solely retain and own all rights in said
materials, including rights of copyright.
C. Founders represent and warrant that they have
adequate personal financial resources and that their experience and
capabilities are such that the provisions of Section 3 below will not prevent
Founders from earning a livelihood. Founders also acknowledge that it would
cause Company serious and irreparable injury and cost if Founders were to
breach the obligations contained in Section 3.
3. Confidentiality, Noncompetition and Nonsolicitation:
A. Founders agree at all times from and after the date
hereof, to maintain in strict confidence the Proprietary Information and
Intellectual property. Founders understand that by agreeing to maintain the
Proprietary Information and Intellectual Property in strict confidence, they
are agreeing not to disclose the Proprietary Information and Intellectual
Property to any third party at any time and to refrain from utilizing, directly
or indirectly, the Proprietary Information and Intellectual Property at any
time for any purpose whether for Founders' own account or for the account of
any
4
<PAGE> 5
other person or business entity. Founders agree not to make any copies and
simultaneously with his execution hereof, to promptly return to Company any and
all documentary, machine-readable or other elements or evidence of the
Proprietary Information and Intellectual Property and any copies thereof that
may be in Founders' possession or under his control. Notwithstanding the
foregoing, a Founder may disclose Proprietary Information or Intellectual
Property to the extent required to do so by an order of a court of competent
jurisdiction, but only if such Founder first immediately notifies Company of
such order and uses its best efforts to cooperate with Company, at Company's
expense, (i) to lawfully avoid such disclosure and (ii) to protect the
information in question.
B. Founders agree that for a period of thirty-six (36)
months after the date hereof, Founders will not "compete" with Avyx and/or the
Company. As used herein, to "compete" means to be involved in any manner
whether directly or indirectly (any such involvement by Founder or any child or
parent of any Founder to be deemed the involvement of Founders personally), for
his own account or for the account of another, as owner, principal,
stockholder, director, employee, officer, consultant, agent, independent
contractor, partner, jointventurer, creditor or in any other manner, with any
person, business or entity located anywhere in the world that (i) produces,
manufactures, markets, sells or distributes (a) any of the products produced,
manufactured, marketed, sold or distributed by the Avyx and/or the Company as
of the date hereof, or at any time within one year preceding the date hereof or
at any time during the thirty-six (36) month period from and after the date
hereof, including without limitation any of the following: Manugistics'
software products, Manugistics' Manufacturing Planning module, ASE or FAST (b)
any products which the Company planned to produce, manufacture, market, sell or
distribute within three years following the date hereof as outlined or
identified in a
5
<PAGE> 6
business plan or related minutes or memoranda prior to the date hereof, or (ii)
that Founders know or have reason to know employs, solicits, or seeks to
persuade to become employed any employee of Avyx (or any successor division or
entity that consists primarily of the business of Avyx following any
reorganization involving Avyx) in violation of any noncompetition or other
agreement to which Avyx is a party; except that nothing herein shall prohibit
Founders from owning not more than 1% of any class of securities of any
publicly-traded entity. Founders acknowledge that because the Company's
business is highly competitive, price sensitive and capital intensive and
because the Company conducts its business and offers products throughout the
world and the information they may have acquired about the conduct of the
business of Avyx and/or the Company during the course of their employment by
Avyx and/or their stock ownership in Avyx is important to the entire breadth of
Company's business, it is appropriate to define such area broadly as relevant
to the fair protection of Company's goodwill and substantial economic
investment in same. Company acknowledges that it carries on a broad and
diversified business, and thus agrees (I) to provide Founders from time with
written notice of all products produced, marketed, manufactured, sold or
distributed by Company or Avyx ("Company Products"), (ii) that Founders'
obligations under this Section 3B shall apply and extend only to Company
Products with respect to which Founder has received such written notice or
otherwise has actual notice ("Notice"), and (iii) that any actions taken by a
Founder pursuant to a contract entered into, or an obligation incurred, prior
to the date of such Founder's receipt of any such Notice that would otherwise
cause such actions to be prohibited under this Section 3B shall not be deemed
to violate this Section 3B solely by reason of such Founder's receipt of such
Notice.
6
<PAGE> 7
C. Founders agree that for a period of thirty-six (36)
months after the date hereof during the period of Founders' Consulting
Agreement with Avyx, Founders shall not contact, divert or solicit directly or
indirectly any account, customer or supplier with whom Avyx has conducted any
business or for whom Avyx has performed any services or sold any products
during the period of Founders' stock ownership in and/or employment by Avyx,
including, but not limited to, any person or entity who was a potential
account, client or customer of Avyx as a result of contacts, including without
limitation the exchange of proposals, having been made between Avyx and such
person or entity prior to the date of this Agreement, but excluding NASA, as
defined in Section 3G below, it being expressly recognized that Founders are
permitted to work with NASA as described in Section 3G below. As used herein,
"to solicit directly or indirectly" means directly or indirectly, to provide,
offer to provide, or communicate with in any way to induce any interest in
using for the account of Founder or another, as owner, principal, stockholder,
director, employee, officer, consultant, agent, independent contractor,
partner, joint-venturer, creditor or in any other manner, services or products
provided by Avyx.
D. Founders agree that for a period of thirty-six (36)
months after the date hereof, they will neither employ nor solicit or seek to
persuade any employee, consultant or independent contractor of Company to
discontinue his employment or relationship with Company, or to become employed
or engaged in any business directly or indirectly competitive with Company's
business as described in Section 3B hereof.
E. To assist in the enforcement of the provisions set
forth in this Section 3, Founders agree to immediately notify the Company of
any contracts, agreements, policy statements
7
<PAGE> 8
and other similar documents relating to Founders' performance of services or
delivery of goods to or on behalf of any other person, group or entity during
the term of this Agreement if, in the reasonable judgment of Founders, such
document could raise a material issue as to whether Founders' obligations
thereunder could conflict with Founders' obligations under this agreement.
F. Notwithstanding anything contained in this Agreement
to the contrary, Founders, and each of them shall be permitted to: (i) Take any
actions (including the publication of professional articles, reports,
abstracts, and similar writings) permitted or required by the terms of the
Merger Agreement, including without limitation actions by John Willoughby as
"Paying Agent" thereunder and performance of services by Founders (through
their wholly owned corporation, The Kendall Group, Inc.) (A) under the
Consulting Agreements, (B) under the contract dated August 3, 1994 and modified
on March 13, 1995, June 9, 1995, and October 23, 1995, between the University
of Maryland and Information Sciences, Inc., formerly a wholly-owned subsidiary
of Avyx, Inc. (hereinafter referred to as the "University of Maryland
Contract"), and (C) under any substitute, replacement or follow-up contract or
agreement to the University of Maryland Contract between Founders (or their
controlled entity) and NASA, any NASA field agency, any NASA research center,
or any NASA direct support contractor (each and all of which are referred to
hereinafter as "NASA") pertaining to process requirements of mission
operations; (ii) Enter into or participate in, and perform services (including
the publication of professional articles, reports, abstracts or similar
writings) under, any contracts, agreements and projects with NASA relating to
aerospace mission operations, including process definition, operations concepts
and computer systems concepts and requirements; and (iii) Enter into or
participate in, and perform services (including the publication of professional
articles, reports, abstracts,
8
<PAGE> 9
and similar writings) under, any contracts, agreements and projects with any
party, including any commercial company, involving general management
consulting in commercial areas not relating to (A) manufacturing decision
support, (B) manufacturing supply chain management, or (C) any other business
area explicitly described in published business plans or annual reports of the
Company.
4. Remedies. Founders acknowledge that any breach by them
of the obligations set forth in Section 3 A, B, C, D, or E above would
substantially and materially impair and irreparably harm Company's business and
goodwill; that such impairment and harm would be difficult to measure; and,
therefore, total compensation in solely monetary terms would be inadequate.
Consequently, Founders agree that in the event of any breach or any threatened
breach by Founders of any of the provisions of Section 3 A, B, C, D or E above,
Company shall be entitled, in addition to monetary damages or other remedies,
to equitable relief, including injunctive relief. The existence of any claims
or cause of action by Founders against the Company or any rights to offset
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by Company of such covenants. All
covenants and agreements set forth shall be binding on and shall inure to the
benefit of and be enforceable by or for Company's successors, transferees and
assigns. In any action under or arising out of this agreement, the prevailing
party shall be entitled to recover from the non-prevailing party all of the
prevailing party's costs and expenses of such action, including without
limitation reasonable attorneys' fees.
5. Severance. It is the intention of the parties that the
provisions of Section 3 hereof shall be enforceable to the fullest extent
permissible under applicable law, but that the unenforceability (or
modification to conform to such law) of any provision or provisions thereof
shall not render
9
<PAGE> 10
unenforceable, or impair, the remaining provisions. In the event a specific
provision of this Agreement, or any portion thereof, is determined to be
invalid by statute or administrative or judicial decision (provided the time of
appeal of such decision has expired with no appeal having been made), the
parties shall conform their conduct to satisfy the requirements of such statute
or administrative or judicial decision. The remainder of this Agreement shall
not be affected by any such determination and shall continue in full force and
effect as provided herein.
6. Governing Law. This Agreement shall be governed in all
respects, including without limitation, validity, interpretation, effect,
performance and enforcement, by the laws of Delaware (without application of
any principles of conflicts or choice of law that may otherwise be applicable).
Any action arising out of or relating to any of the provisions of this
Agreement may, at the election of Company, be brought and prosecuted only in
the courts of Delaware, and in the event of such election the parties hereto
consent to the jurisdiction and venue of said courts.
7. Modification. This instrument constitutes the entire
Agreement between the parties, and may be changed only by an agreement in
writing signed by the parties.
8. Assignment. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the
successors, transferees and assigns of the Company. This Agreement, being for
the personal services of Founders, shall not be assignable or subject to
anticipation by him.
9. No Conflicting Agreements. The parties agree that this
Agreement supersedes all previous agreements between them relating to the
matters set forth herein; provided that this Agreement shall not supersede, but
instead shall be interpreted in conjunction with, the Consulting
10
<PAGE> 11
Agreements and the Merger Agreement. Founders warrant and represent that their
execution and performance of this Agreement does not and will not violate,
conflict with, or constitute a default under any contract, commitment,
agreement, understanding, arrangement, restriction, or any adjudication or
finding of any kind by any court or agency to which Founders may be a party or
by which Founders may be bound, and that he will save, defend, and hold Company
harmless and indemnify Company for any liability related to a breach of this
warranty and representation, including a costs, expenses, and reasonable
attorneys' fees incurred in defending against such a claim.
10. Consideration; Grant of Options. As consideration for the
promises, covenants, representations and agreements of Founders hereunder,
Company agrees to make the following grants and awards, the grant date of which
shall be the date hereof:
(a) John Willoughby ("Willoughby") shall be granted options under
the Manugistics Group, Inc. Employee Stock Option Plan, as amended (the "Plan")
to purchase fifteen thousand (15,000) shares of Manugistics Group, Inc. common
stock (the "Stock") at an exercise price equal to the fair market price of such
Stock (as determined under the provisions and usual procedures of the Plan) on
the date hereof. Such options shall vest in twenty-five percent (25%)
increments, with the first 25% (i.e., options to purchase three thousand seven
hundred fifty shares of Stock) vesting on the date that is one year after the
date of this Agreement, and the remaining three 25% increments vesting on the
succeeding three annual anniversaries of such first vesting date, respectively,
so that one hundred percent (100%) of such options shall be vested on the date
that is four years after the date hereof.
(b) Jo Anne Gardner ("Gardner") shall be granted options under the
Plan to purchase fifteen thousand (15,000) shares of Stock at an exercise price
equal to the fair market price of
11
<PAGE> 12
such Stock (as determined under the provisions and usual procedures of the
Plan) on the date hereof. Such options shall vest in accordance with the
vesting schedule set forth in paragraph (a) of this Section.
(c) The options to be granted to the Founders as
described above shall be subject to all the rules of the Plan and of any
form(s) of agreement customarily used by Company in implementing grants under
the Plan. Company and Founders agree to execute any and all such documents and
agreements as required or appropriate to accomplish the purposes of this
Section.
(d) If a Founder breaches this Agreement and in the case of a
curable breach fails to cure such breach within ten (10) business days after
receiving written notice thereof from the Company, then all options granted
under this Section 10 to such Founder that are not vested at the time of such
breach shall forthwith terminate and be canceled, and such Founder shall have
no further rights by reason of such canceled non-vested options.
11. Termination. If the Closing has not occurred on or before June 1,
1996, this Agreement, and each and every provision hereof, shall be terminated
and of no force and effect from and after June 1, 1996. If the Closing does
occur on or before June 1, 1996, then except for Sections 2A, 2B and 3A, which
shall continue in accordance with their terms, this Agreement shall be
terminated as to Company and each Founder, and shall have no further force and
effect, upon the earlier of (i) the date thirty-six (36) months after the date
hereof, and (ii) the termination of, or breach by Company or Avyx or Founder
under, such Founders' Consulting Agreement.
Accepted by FOUNDERS:
12
<PAGE> 13
/s/ JOHN K. WILLOUGHBY
- - -----------------------------------------------
John K. Willoughby
/s/ JO ANNE GARDNER
- - -----------------------------------------------
Jo Anne Gardner
Accepted by MANUGISTICS:
/s/ WILLIAM M. GIBSON
- - -----------------------------------------------
Signature
William M. Gibson
- - -----------------------------------------------
Name
President & CEO
- - -----------------------------------------------
Title
Witness: /s/ Julia A. Bowen
13
<PAGE> 1
EXHIBIT 11
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended May 31,
-------------------------------------
1996 1995
----------------- ---------------
(In thousands, except per share data)
<S> <C> <C>
Weighted Average Number of Shares of Common Stock
Oustanding 10,490 10,152
Net Effect of Dilutive Stock Options Based on Treasury
Stock Method - 510
----------------- ---------------
Weighted Average Shares Outstanding 10,490 10,662
================= ===============
Net Income $ 2,578 $ 880
================= ===============
Earnings Per Share $ (0.25) $ 0.08
================= ===============
Fully-diluted Earnings Per Share $ (0.25) $ 0.08
================= ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1996
<CASH> 3,919
<SECURITIES> 13,294
<RECEIVABLES> 21,094
<ALLOWANCES> (1,351)
<INVENTORY> 309
<CURRENT-ASSETS> 40,132
<PP&E> 13,150
<DEPRECIATION> (5,970)
<TOTAL-ASSETS> 57,847
<CURRENT-LIABILITIES> (14,199)
<BONDS> (381)
0
0
<COMMON> (22)
<OTHER-SE> (40,810)
<TOTAL-LIABILITY-AND-EQUITY> (57,847)
<SALES> (8,732)
<TOTAL-REVENUES> (18,441)
<CGS> 1,344
<TOTAL-COSTS> 11,520
<OTHER-EXPENSES> 20,511
<LOSS-PROVISION> 383
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 1,854
<INCOME-TAX> 724
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,578
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
