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CONFORMED COPY
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-22154
MANUGISTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
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)
(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
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 10,773,778 shares of common
stock, $.002 par value per share, as of January 2, 1997.
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MANUGISTICS GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets - 3
November 30, 1996 and February 29, 1996
Condensed Consolidated Statements of Income - 4
Three and Nine months ended November 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows - 5
Nine months ended November 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements 6
- November 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
PART II OTHER INFORMATION
Item 2. Changes in Securities 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
November 30, February 29,
1996 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,483 $ 4,921
Marketable securities 13,593 18,558
Accounts receivable (net of allowance for returns and uncollectible 24,247 19,281
accounts - November 30, 1996, $1,615; February 29, 1996, $711)
Inventory 349 549
Deferred tax asset 1,991 809
Other current assets 846 805
------------ ------------
Total current assets 46,509 44,923
PROPERTY AND EQUIPMENT - NET 9,227 6,046
NONCURRENT ASSETS:
Capitalized software costs - net 8,974 6,084
Intangibles - net 2,399 2,927
Other noncurrent assets 455 451
------------ ------------
TOTAL $ 67,564 $ 60,431
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,153 $ 3,282
Other accrued expenses 5,501 4,911
Deferred revenue 8,376 6,652
Current portion of long-term debt 194 155
Income taxes payable 1,186 722
------------ ------------
Total current liabilities 17,410 15,722
LONG-TERM DEBT 254 182
DEFERRED INCOME TAXES 2,234 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, 11,148,507 at November 30, 1996; 10,846,502 at
February 29, 1996; shares outstanding, 10,772,252 at November 30,
1996; 10,456,247 at February 29, 1996 22 22
Additional paid-in capital 36,421 33,131
Retained earnings 11,444 10,628
Translation adjustment 496 (95)
Treasury stock - 376,255 shares at November 30, 1996 and 390,255 shares at
February 29, 1996, at cost (717) (744)
------------ ------------
Total stockholders' equity 47,666 42,942
------------ ------------
TOTAL $ 67,564 $ 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)
<TABLE>
<CAPTION>
Three months ended Nine months ended
November 30, November 30,
----------------------- -------------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Software products $12,281 $ 7,236 $31,390 $19,395
Consulting, maintenance
and other services 11,407 8,298 31,674 23,742
------- ------- ------- -------
Total revenues 23,688 15,534 63,064 43,137
------- ------- ------- -------
OPERATING EXPENSES:
Cost of software sold 1,053 709 3,290 2,088
Cost of consulting, maintenance
and other services 4,915 3,763 13,578 10,521
Sales and marketing 8,237 5,186 21,657 15,173
Product development 4,432 2,848 11,985 7,377
General and administrative 2,161 1,561 5,913 4,211
Purchased research and development - - 3,697 -
------- ------- ------- -------
Total operating expenses 20,798 14,067 60,120 39,370
------- ------- ------- -------
INCOME FROM OPERATIONS 2,890 1,467 2,944 3,767
OTHER INCOME - NET 277 272 738 894
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 3,167 1,739 3,682 4,661
PROVISION FOR INCOME TAXES 1,220 678 2,866 1,792
------- ------- ------- -------
NET INCOME $ 1,947 $ 1,061 $ 816 $ 2,869
======= ======= ======= =======
EARNINGS PER SHARE $ 0.17 $ 0.10 $ 0.07 $ 0.27
======= ======= ======= =======
WEIGHTED AVERAGE COMMON
SHARES AND EQUIVALENT SHARES
OUTSTANDING 11,590 10,910 11,288 10,796
======= ======= ======= =======
</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)
<TABLE>
<CAPTION>
Nine months ended November 30,
------------------------------
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 816 $ 2,869
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,750 3,093
Write off of purchased research and development 3,697 -
Deferred income taxes 67 351
Other 28 66
Changes in assets and liabilities:
Accounts receivable (4,829) (1,994)
Inventory 200 (29)
Other current assets (38) (357)
Other noncurrent assets 6 12
Accounts payable and accrued expenses (1,298) (825)
Income taxes payable 1,559 885
Deferred revenue 1,623 (141)
------- -------
Net cash provided by operating activities 7,581 3,930
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Avyx, Inc. (3,582) -
Purchase of assets-division of Marketing Systems GmbH - (1,068)
Proceeds from sale of assets - 100
Purchase of property and equipment (4,744) (3,285)
Capitalization of computer software development costs (4,813) (3,113)
Purchase of software licenses (879) (97)
Sale of marketable securities 7,425 2,486
Purchase of marketable securities (2,460) (530)
------- -------
Net cash used in investing activities (9,053) (5,507)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease obligations (247) (142)
Proceeds from stock options and stock purchases 1,767 630
------- -------
Net cash provided by financing activities 1,520 488
------- -------
EFFECTS OF EXCHANGE RATES ON CASH BALANCES 514 (95)
------- -------
NET INCREASE (DECREASE) IN CASH 562 (1,184)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,921 4,599
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,483 $ 3,415
======= =======
</TABLE>
See accompanying notes to the financial statements.
5
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MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 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 allocated among the identifiable tangible assets
and liabilities based on their respective fair market values. In
addition, the purchase price was also 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 of purchase price over these estimated
fair values of the net assets acquired was accounted for as goodwill.
The 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, amounts were allocated to
existing software products and goodwill. Such amounts will be
amortized on a straight-line basis over five years. The allocation
was finalized during the quarter ended November 30, 1996 and no
significant adjustments were made.
Consolidated pro forma revenues, income, and earnings per share would
not have been materially different from the reported amounts for the
nine months ended November 30, 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
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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 Information of Noncash Investing and Financing Activities
During the nine months ended November 30, 1996, the Company received
an income tax benefit of $1,071,000 relating to the exercise of stock
options. The benefit was recorded as an increase to additional
paid-in capital.
4. Line of Credit
In September 1996, the Company renewed an unsecured committed one year
revolving credit facility with a commercial bank in the amount of $10
million. The Company may make borrowings under the facility for
short-term working capital purposes or for acquisitions.
Acquisition-related borrowings are limited to $7.5 million per
acquisition.
5. Subsequent Event
After the end of the fiscal quarter, the Company commenced actively
conducting negotiations and due diligence in connection with the
potential acquisition of certain assets of an information services
company and related multi-year royalty and revenue guarantee
agreements for other products. Any such transaction is subject to the
satisfactory completion of due diligence and the negotiation of a
definitive purchase agreement.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, markets and supports supply chain management
software products and services. 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 to synchronize distribution, manufacturing and transportation of
supplies and products, 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 supply chain 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 products and services represented approximately 96% and 92% of total
revenues during the quarters ended November 30, 1996 and 1995, respectively.
RESULTS OF OPERATIONS
REVENUES:
Software products. The Company's software products license revenues
increased primarily because the Company was successful in stimulating increased
demand and in closing licensing transactions for supply chain management
software products, and because of increased market acceptance of such products.
These factors more than offset the decrease in 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 November 30, 1996, software products revenues
increased to 52% 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.
<TABLE>
<CAPTION>
Software products revenues Three months ended Nine months ended
----------------------------- ----------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 Change 1995 1996 Change 1995
-------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Supply chain management $11,436 81% $ 6,316 $29,166 81% $16,070
Percentage of total revenues 48.3% 40.7% 46.2% 37.3%
Personal systems $ 845 -8% $ 920 $ 2,224 -33% $ 3,325
Percentage of total revenues 3.6% 5.9% 3.5% 7.7%
------- ------- ------- -------
Total software products revenues $12,281 70% $ 7,236 $31,390 62% $19,395
Percentage of total revenues 51.8% 46.6% 49.8% 45.0%
</TABLE>
Supply chain management. Software products license revenues increased
81% in both the quarter and nine months ended November 30, 1996 from the
quarter and nine months ended November 30, 1995 because of increases in the
number of licenses and the average license fee per transaction. These increases
resulted because some of the Company's sales productivity
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initiatives generated results, the Company's international operations produced
higher revenues and its alliances with complementary software companies and
consulting firms led to additional revenues. In addition, revenues increased
because of increased market acceptance of the Company's products, which
resulted from the recognition by prospects and clients that they could rapidly
realize significant benefits from effective supply chain management. These
companies licensed the Company's software to help them obtain these benefits.
Personal systems. Software products license revenues decreased in the
quarter and nine months ended November 30, 1996 from the quarter and nine
months ended November 30, 1995 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.
<TABLE>
<CAPTION>
Consulting, maintenance and Three months ended Nine months ended
other services ---------------------------- -----------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 Change 1995 1996 Change 1995
------- ------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Supply chain management $11,221 39% $ 8,049 $31,050 36% $22,797
Percentage of total revenues 47.4% 51.8% 49.2% 52.8%
Personal systems $ 186 -25% $ 249 $ 624 -34% $ 945
Percentage of total revenues 0.8% 1.6% 1.0% 2.2%
------- ------- ------- -------
Total consulting, maintenance
and other services $11,407 37% $ 8,298 $31,674 33% $23,742
Percentage of total revenues 48.2% 53.4% 50.2% 55.0%
</TABLE>
Supply chain management. Revenues from consulting and other services
increased in conjunction with increases in the number and average size of
licenses of software products by new and existing clients, which generally
involve implementation and other consulting services, and the purchase of
additional consulting services by established clients.
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. In the past three fiscal years,
approximately 90% to 95% of customers that have maintenance contracts have
renewed these contracts.
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.
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OPERATING EXPENSES:
In the fourth quarter of fiscal 1997 and in fiscal 1998, the Company
plans to continue to incur sales and marketing expenditures at levels that it
believes are necessary to maintain or improve its share of the market for
supply chain management software, and the Company plans to continue 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, even though the Company's total revenues have varied in
the past and are likely to continue to vary.
<TABLE>
<CAPTION>
Three months ended Nine months ended
----------------------------- --------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 Change 1995 1996 Change 1995
------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Cost of software sold $ 1,053 49% $ 709 $ 3,290 58% $ 2,088
Percentage of total revenues 4.4% 4.6% 5.2% 4.8%
Cost of consulting, maintenance,
and other services $ 4,915 31% $ 3,763 $13,578 29% $10,521
Percentage of total revenues 20.7% 24.2% 21.5% 24.4%
Sales and marketing $ 8,237 59% $ 5,186 $21,657 43% $15,173
Percentage of total revenues 34.8% 33.4% 34.3% 35.2%
Product development $ 4,432 56% $ 2,848 $11,985 62% $ 7,377
Percentage of total revenues 18.7% 18.3% 19.0% 17.1%
General and administrative $ 2,161 38% $ 1,561 $ 5,913 40% $ 4,211
Percentage of total revenues 9.1% 10.0% 9.4% 9.8%
Purchased research and development $ - N/M $ - $ 3,697 N/M $ -
Percentage of total revenues 0.0% 0.0% 5.9% 0.0%
------- ------- ------- -------
Total operating expenses $20,798 48% $14,067 $60,120 53% $39,370
Percentage of total revenues 87.8% 90.6% 95.3% 91.3%
</TABLE>
N/M - not meaningful
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.
<TABLE>
<CAPTION>
Three months ended Nine months emded
------------------------------ -------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
Cost of Software Sold 1996 Change 1995 1996 Change 1995
------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Amortization of capitalized software $ 868 50% $ 578 $ 2,652 70% $ 1,560
Percentage of software products revenues 7.1% 8.0% 8.4% 8.0%
Costs of goods and other $ 185 41% $ 131 $ 638 21% $ 528
Percentage of software products revenues 1.5% 1.8% 2.0% 2.7%
------- ------- ------- -------
Cost of software sold $ 1,053 49% $ 709 $ 3,290 58% $ 2,088
Percentage of software products revenues 8.6% 9.8% 10.5% 10.8%
</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."
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The cost of software sold decreased as a percentage of software
products revenues in the quarter ended November 30, 1996 from the quarter ended
November 30, 1995 largely because software products revenues increased more
rapidly than the cost of software sold. In the nine months ended November 30,
1996, the cost of software sold also decreased as a percentage of software
products revenues from the nine months ended November 30, 1995 but to a lesser
extent because during the quarters ended May 31, 1996 and August 31, 1996, the
Company wrote off certain assets. These assets included 1) capitalized costs
relating to the development of the Finite Capacity Scheduling product following
the acquisition of Avyx, Inc. and its manufacturing scheduling software
technology, and 2) obsolete and slow-moving inventory. The amounts of these
write-offs caused a greater rate of increase in the cost of software sold for
the nine month period ended November 30, 1996 than for the quarter ended
November 30, 1996.
Cost of consulting, maintenance and other services. The cost of
consulting, maintenance and other services increased in the quarter ended
November 30, 1996 from the quarter ended November 30, 1995 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.
As a percentage of consulting, maintenance and other services
revenues, the cost of consulting, maintenance and other services decreased in
the quarter and nine month period ended November 30, 1996 as compared to the
quarter and nine month period ended November 30, 1995 largely because of
increased utilization of the Company's consulting employees. In addition, a
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 and nine month period ended November 30, 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 increased in the quarter ended November 30, 1996 as
compared to the quarter ended November 30, 1995 principally because marketing
expenses increased at a more rapid rate than total revenues. For the nine
months ended November 30, 1996, sales and marketing expenses decreased as a
percentage of total revenues as compared to the nine months ended November 30,
1995 mainly because of increases in sales productivity.
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Product development. The Company records product development expenses
net of capitalized software development costs.
<TABLE>
<CAPTION>
Three months ended Nine months emded
------------------------------ -------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
Product development expenses 1996 Change 1995 1996 Change 1995
------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Gross product development costs $ 6,152 51% $ 4,077 $16,798 60% $10,490
Percentage of total revenues 26.0% 26.2% 26.6% 24.3%
Less: Capitalized product development costs $ 1,720 40% $ 1,229 $ 4,813 55% $ 3,113
Percentage of gross prod. dev. costs 28.0% 30.1% 28.7% 29.7%
------- ------- ------- -------
Product development expenses $ 4,432 56% $ 2,848 $11,985 62% $ 7,377
Percentage of total revenues 18.7% 18.3% 19.0% 17.1%
</TABLE>
Product development expenses for the quarter and nine month period
ended November 30, 1996 increased primarily because the Company employed
significantly more developers of supply chain management software. The Company
hired these developers to develop new software products and new versions of
existing products, and to incorporate new technologies into the Company's
product offerings. As a percentage of total revenues, product development
expenses increased in the quarter and nine month period ended November 30, 1996
as compared to the quarter and nine month period ended November 30, 1995,
largely because the Company increased its product development spending at a
slightly greater rate than total revenues increased.
General and administrative. General and administrative expenses
increased in the quarter and nine month period ended November 30, 1996 from the
quarter and nine month period ended November 30, 1995 primarily because of
expenses associated with supporting an organization with more employees and a
greater geographic scope. As a percentage of total revenues, general and
administrative expenses decreased because the Company was able to use its
existing base of administrative resources to support a larger organizational
structure.
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 $3.7 million ($.35 per share) in connection with the write- off of purchased
in-process research and development costs. This one-time charge affected the
Company's operating performance for the nine months ended November 30, 1996.
See Note 2 of Notes to Consolidated Financial Statements.
Other income.
<TABLE>
<CAPTION>
Three months ended Nine months emded
------------------------------ -------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 Change 1995 1996 Change 1995
------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Other income $ 277 2% $ 272 $ 738 -17% $ 894
Percentage of total revenues 1.2% 1.8% 1.2% 2.1%
</TABLE>
Other income increased slightly in the quarter ended November 30, 1996
from the quarter ended November 30, 1995 because the total amount of income and
small gains from marketable securities and other sources increased. Other
income decreased in the nine months ended
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November 30, 1996 from the nine months ended November 30, 1995 because interest
income decreased as a result of a decrease in the amount of the Company's short
term investments. The balance of marketable securities declined following cash
payments in connection with the acquisition of Avyx, Inc. and the expansion of
the Company's international operations.
Provision for income taxes.
<TABLE>
<CAPTION>
Three months ended Nine months ended
-------------------------------- --------------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 Change 1995 1996 Change 1995
-------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Income taxes $ 1,220 80% $ 678 $ 2,866 60% $ 1,792
Percentage of income before taxes 38.5% 39.0% 77.8% 38.4%
Percentage of total revenues 5.2% 4.4% 4.5% 4.2%
</TABLE>
The effective tax rate represented by the Company's provision for
income taxes in the quarter ended November 30, 1996 was approximately 38.5%.
The effective tax rate for the nine months ended November 30, 1996 was 77.8%,
largely because the expenses associated with the Company's write off of
purchased research and development costs during the quarter ended May 31, 1996
were not deductible for tax purposes. 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 39%, excluding one-time charges taken in
connection with acquisitions or other transactions. This estimate is based on
current tax law and is thus subject to change.
Net income and earnings per share.
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------------ ------------------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1996 Change 1995 1996 Change 1995
------- ------ -------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 1,947 84% $ 1,061 $ 816 -72% $ 2,869
Percentage of total revenues 8.2% 6.8% 1.3% 6.7%
Earnings per share $ 0.17 70% $ 0.10 $ 0.07 -74% $ 0.27
Weighted average common shares
and equivalent shares outstanding 11,590 6% 10,910 11,288 5% 10,796
</TABLE>
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
As of
-----------------------------------
November 30, February 29,
1996 1996
------------ ------------
<S> <C> <C>
Working capital $ 29,099 $ 29,201
Cash, cash equivalents
and marketable securities $ 19,076 $ 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 November 30, 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. and the
expansion of the Company's international operations. See Note 2 of Notes to
Consolidated Financial Statements.
The Company has an unsecured committed revolving credit facility with
a commercial bank. Under the terms of the facility, the Company may request
advances in the aggregate amount of up to $10 million. The Company may make
borrowings under the facility for short- term working capital purposes or for
acquisitions. (Acquisition-related borrowings are limited to $7.5 million per
acquisition.) The facility contains certain financial covenants that the
Company believes are typical for a facility of this nature and amount. This
facility succeeds a similar facility that the Company maintained with two
commercial banks, one of which is the lender under the current facility, and
will expire in September 1997, unless renewed.
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.
The Company is actively conducting negotiations and due diligence in
connection with the potential acquisition of certain software products and other
assets from an information services company and related marketing and reseller
agreements. The transaction under consideration would require an initial cash
payment and a guarantee of certain royalties and revenues over a period of
approximately three years. The financial impact of the transaction being
considered has not yet been determined.
The Company's investments in product development are discussed
generally under "Results of Operations -- Product Development."
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 the next 12 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
the Company may need additional funds at an earlier time.
14
<PAGE> 15
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.
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 adverse changes in
domestic or international business and economic conditions, 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 business or 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
software products license revenues in any period.
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.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(b) During the quarter ended November 30, 1996, the Company
entered into a revolving credit facility with a commerical bank. This facility
succeeds a similar, previous agreement. During the term of this facility, the
Company is subject to a covenant not to declare or pay dividends to holders of
Common Stock. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(c) Set forth below is certain information regarding a sale of
equity securities by the Company during the quarter ended November 30, 1996,
which securities were not registered under the Securities Act of 1933, as
amended (the "Securities Act"):
In September 1996, the Company issued 14,000 shares of Common Stock
(the "Shares") from treasury to Marketing Systems GmbH, a closely held German
company, in connection with the Company's acquisition of certain assets of a
division of Marketing Systems in 1994. As previously reported, the Company and
Marketing Systems entered into a new agreement in November 1995 which, among
other things, modified the initial acquisition cost and required the Company to
make an additional cash payment to Marketing Systems and also to issue a
total of 56,000 unregistered shares of Common Stock to Marketing Systems in
four equal quarterly installments. See Note 4 of Notes to Consolidated
Financial Statements in the Company's Annual Report on Form 10-K for the year
ended February 29, 1996. The shares were valued at $238,000 under the November
1995 agreement and constituted the last quarterly installment of shares to be
issued to Marketing Systems thereunder.
15
<PAGE> 16
The issuance of the Shares to Marketing Systems pursuant to the
November 1995 agreement was made in reliance upon the exemption provided by
Section 4(2) of the Securities Act, as a transaction not involving a public
offering of securities. No underwriting discounts or commissions or similar
remuneration were paid in connection with the issuance of the Shares to
Marketing Systems.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.21 Financing Agreement effective as of September 30,
1996 between the Company and NationsBank, N.A.
10.22 Revolving Promissory Note dated as of September 30, 1996
11 Statements Regarding Computation of Per Share Earnings
16
<PAGE> 17
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: January 14, 1997 By: /s/ William M. Gibson
--------------------------------
William M. Gibson
President, Chief Executive Officer and
Chairman of the Board of Directors
Date: January 14, 1997 By:/s/ Peter Q. Repetti
-----------------------------------
Peter Q. Repetti
Vice President, Finance and Administration,
and Chief Financial Officer
(Principal Financial Officer and Chief
Accounting Officer)
17
<PAGE> 1
EXHIBIT 10.21
FINANCING AGREEMENT
<PAGE> 2
FINANCING AGREEMENT
THIS FINANCING AGREEMENT (this "Agreement") is made effective as of
the 30th day of September, 1996, by and among (a) MANUGISTICS GROUP, INC., a
corporation organized under the laws of the State of Delaware (the "Company"),
MANUGISTICS, INC., a corporation organized under the laws of the State of
Delaware, THE ROVER TECHNOLOGY COMPANY, a corporation organized under the laws
of the State of Delaware, MANUGISTICS FRANCE S.A., a corporation organized
under the laws of France, MANUGISTICS, INC. FOREIGN SALES CORPORATION, a
corporation organized under the laws of the United States Virgin Islands,
MANUGISTICS U.K. LTD., a limited liability company incorporated under the laws
of England, and doing business under the name Manugistics Europe Ltd.,
MANUGISTICS CANADA LTD., a corporation organized under the laws of the Province
of Ontario, Canada, MANUGISTICS (DEUTSCHLAND) GMBH, a limited liability company
organized under the laws of the Federal Republic of Germany, MANUGISTICS
EUROPEAN HOLDING COMPANY B.V., a limited liability company organized under the
laws of The Netherlands, MANUGISTICS COLORADO, INC., a corporation organized
under the laws of the State of Delaware (all of such companies, together with
the Company, collectively called the "Borrowers" and each individually a
"Borrower"); and (b) NATIONSBANK, N.A., a national banking association, with
offices located at 6610 Rockledge Drive, Bethesda, Maryland 20852 (the
"Lender").
RECITALS
A. The Borrowers have applied to the Lender for a revolving credit
facility in the maximum principal amount of TEN MILLION DOLLARS ($10,000,000)
to be used by the Borrowers to (i) finance working capital requirements; and
(ii) to finance Purchases consistent with the Borrowers' present line of
business and made in compliance with Section 5.2.1 of this Agreement.
B. The Lender is willing to make the credit facilities available to
the Borrowers upon the terms and subject to the terms, conditions and
understandings set forth in this Agreement.
ARTICLE 1
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement,
the terms defined in the Preamble and Recitals to this Agreement shall have the
respective meanings specified therein, and the following terms shall have the
following meanings:
<PAGE> 3
"Affiliate" means, with respect to any Person, any other Person,
directly or indirectly controlling, directly or indirectly controlled by, or
under direct or indirect common control with such Person.
"Agreement" means this Financing Agreement and all amendments,
modifications and supplements hereto which may from time to time become
effective in accordance with the provisions of Section 7.1.
"Assets" means, at any date or for any period of determination, all
assets that should, in accordance with GAAP consistently applied, be classified
as assets on a consolidated balance sheet of the Company and its Subsidiaries.
"Assignee" means any Person to which the Lender assigns all or any
portion of its interests under and in connection with this Agreement or any
Commitment or any Loan, together with any and all successors and assigns of
such Person; and "Assignees" means all Persons to which the Lender assigns all
or any portion of its interests under and in connection with this Agreement or
any Commitment and/or any Loan, together with any and all successors and
assigns of such Person, all in accordance with the terms of Section 7.9.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended
from time to time.
"Base Prime Rate" means the floating and fluctuating per annum prime
rate of interest of the Lender, as established and declared by the Lender at
any time or from time to time. The Base Prime Rate does not necessarily
represent the lowest rate of interest charged by the Lender to borrowers.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the State of Maryland are authorized or
required to close.
"Capital Expenditures" means an expenditure for Fixed or Capital
Assets, as set forth opposite the caption "Purchase of Property and Equipment"
(or any like caption) on a consolidated statement of cash flow of the Company
and its Subsidiaries, as calculated in accordance with GAAP.
"Cash Equivalents" means (a) securities with maturities of one (1)
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit with maturities of one (1) year or less from the date of acquisition
of, or money market accounts maintained with, the Lender, any Affiliate of the
Lender, or any other domestic commercial bank having capital and surplus in
excess of One Hundred Million Dollars ($100,000,000.00) or such other domestic
financial institutions or domestic brokerage houses to the extent disclosed to,
and approved by, the Lender, (c) securities of any state of the United States
of America or any political subdivision hereof having a maturity
2
<PAGE> 4
of one (1) year or less from the date of acquisition and rated by Standard &
Poor's Corporation and Moody's Investment Service, Inc. in their highest
rating category, (d) commercial paper of a domestic issuer rated at least
either A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors
Service, Inc. with maturities of six (6) months or less from the date of
acquisition, and (e) other investments made by the Borrowers in accordance with
the Company's Investment Policy.
"Cash Flow" means as to the Company and its Subsidiaries, at any date
or for any period of determination thereof, the sum of (a) the net income (or
loss) after deduction of all expenses including, without limitation, interest
expenses, Taxes and depreciation and amortization expenses on such date or for
such period as set forth opposite the caption "Net Income (Loss)" (or any like
caption) on a consolidated income statement of the Company and its Subsidiaries
prepared in accordance with GAAP, plus (b) the aggregate amount of
depreciation, amortization and interest expense deducted in determining such
net income, all calculated in accordance with GAAP, plus or minus (c) the
change in deferred income taxes as set forth opposite the caption "Deferred
Income Taxes" (or any like caption) on a consolidated statement of cash flow of
the Company and its Subsidiaries, as calculated in accordance with GAAP, minus
(d) the capitalized computer software development costs, as set forth opposite
the caption "Capitalization of Computer Software Development Cost" (or any like
caption) on a consolidated statement of cash flow of the Company and its
Subsidiaries, as calculated in accordance with GAAP, plus (e) any write offs of
purchased research and development costs up to a maximum amount of $7,500,000,
as set forth on the cash flow portion of the Company's financial statements,
plus (f) accrued restructuring/acquisition charges, minus payment of
restructuring/acquisition charges as set forth in the cash flow portion of the
Company's cash flow statement. For the purpose of this definition,
"capitalized costs" associated with the purchase of software rights or licenses
is not considered in the calculation contained herein, provided that such
purchases are in accordance with Section 5.2.1 hereof.
"Closing Date" means the Business Day, in any event not later than
October _, 1996, on which the Lender shall be satisfied that the conditions
precedent set forth in Section 4.1 have been fulfilled.
"Commitment" means with the Revolving Credit Commitment, and
"Commitments" means collectively the Revolving Credit Commitments of the
Lender.
"Committed Amount" means with respect to the Lender, the Lender's
Revolving Loan Committed Amount, and "Committed Amounts" means collectively the
Revolving Loan Committed Amount of the Lender.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Borrowers or any
Subsidiary of any of the Borrowers, within the meaning of Section 414(b) or (c)
of the Internal Revenue Code.
3
<PAGE> 5
"Confidential Information" shall have the meaning set forth in Section
7.18 of this Agreement.
"Default" has the meaning described in Article 6.
"Documents" means all documents of title, whether now existing or
hereafter acquired or created, and all proceeds (cash and non-cash) of the
foregoing.
"Enforcement Costs" means all reasonable expenses, charges, costs and
fees whatsoever (including, without limitation, reasonable attorneys' fees and
expenses) of any nature whatsoever paid or incurred by or on behalf of the
Lender in connection with (a) any or all of the Obligations, this Agreement,
the Note, and/or any of the other Financing Documents, (b) the creation,
perfection, collection, maintenance, preservation, defense, protection,
realization upon, disposition, sale or enforcement of all or any part of this
Agreement or any of the other Financing Documents, including, without
limitation, those costs and expenses more specifically enumerated in Section
7.7, and (c) the monitoring, administration, processing and/or servicing of any
or all of the Obligations and/or the Financing Documents.
"Equity" means at any time of determination, as to the Company and its
Subsidiaries, the total of all stockholder's equity, as determined on a
consolidated basis in accordance with GAAP consistently applied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means an event which, with the giving of notice or
lapse of time, or both, could or would constitute a Default under the
provisions of this Agreement.
"Fees" means the Revolving Credit Unused Line Fee.
"Financing Documents" means at any time collectively this Agreement,
the Note, and any other instrument, agreement or document previously,
simultaneously or hereafter executed and delivered by the Borrowers and/or any
other Person, singly or jointly with another Person or Persons, evidencing,
securing, guaranteeing or in connection with any of the Obligations and/or in
connection with this Agreement, any Note, any of the Credit Facilities, and/or
any of the Obligations.
"Fixed or Capital Assets" of a Person means, at any date or for any
period of determination, all capitalized expenditures for property and
equipment on such date or during such period.
"Fixed Charge Coverage Ratio" means for any period of determination
thereof, the ratio of (a) Cash Flow to (b) Fixed Charges.
4
<PAGE> 6
"Fixed Charges" means for any period of determination, the scheduled
or required payments (including, without limitation, principal and interest) on
all Indebtedness for Borrowed Money of the Borrowers, plus dividends declared
or paid by any of the Borrowers, other than dividends paid by a Borrower
exclusively to one or more of the Borrowers.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time, consistently applied.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" means (a) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976, as amended from time to
time, and regulations promulgated thereunder; (b) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended from time to time, and regulations promulgated
thereunder; and (c) any substance the presence of which on any property now or
hereafter owned, operated, controlled or acquired by any of the Borrowers or
their Subsidiaries is prohibited by any Law similar to those set forth in this
definition.
"Hazardous Materials Contamination" means the contamination (whether
presently existing or occurring after the date of this Agreement) by Hazardous
Materials of any property owned, operated, controlled or acquired by any of the
Borrowers or their Subsidiaries or for which the Borrowers have responsibility,
including, without limitation, improvements, facilities, soil, ground water,
air or other elements on, or of, any property now or hereafter owned, operated,
controlled or acquired by any such Borrower or any of its Subsidiaries, and any
other contamination by Hazardous Materials for which any of the Borrowers or
their Subsidiaries are, or are claimed by any Governmental Authority in writing
to be, responsible.
"Indebtedness" of a Person means, at any date or for any period of
determination thereof, the total liabilities of such Person at such time or
during such period, as determined in accordance with GAAP consistently applied.
"Indebtedness for Borrowed Money" of a Person means, at any date or
for any period of determination, the sum at such time or during such period of
(a) indebtedness of such Person for borrowed money (including principal and
interest) or for the deferred purchase price of property or services, (b) any
obligations of such Person with respect to letters of credit, banker's or other
acceptances or similar obligations issued or created for the account of such
Person, (c) Lease Obligations of such Person which have been or should be, in
accordance with GAAP, capitalized on the books of such Person, (d) all
liabilities secured by any Lien on any property owned by such Person, to the
extent attached to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof, and (e) any
obligation of such Person or a Commonly Controlled Entity to a Multiemployer
Plan; but excluding trade and other
5
<PAGE> 7
accounts payable in the ordinary course of business in accordance with
customary trade terms and which are not overdue (as determined in accordance
with customary trade practices) or which are being disputed in good faith by
such Person and for which adequate reserves are being provided on the books of
such Person in accordance with GAAP.
"Instruments" means all instruments, notes, notes receivable, drafts,
acceptances, and similar instruments and documents, both now owned and
hereafter created or acquired.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any and all Regulations issued and proposed to
be issued thereunder.
"Investment Policy" means the Company's investment guidelines as set
forth in EXHIBIT "F" attached hereto, as the same may amended from time to time
and approved by the Company's board of directors.
"Law" or "Laws" means any and all ordinances, statutes, rules,
guidelines, regulations, orders, injunctions, writs, or decrees of any
Governmental Authority or political subdivision or agency thereof, or any court
or similar entity established by any thereof.
"Lease Obligations" of a Person means, on any date or for any period
of determination, the rental commitments of such Person on such date or for
such period under leases for real and/or personal property (net of rent from
subleases thereof, but including Taxes, insurance, maintenance and similar
expenses which the lessee is obligated to pay under the terms of said leases,
except to the extent that such Taxes, insurance, maintenance and similar
expenses are payable by sublessees), including rental commitments under leases
that should be capitalized in accordance with GAAP consistently applied.
"Liabilities" means, at any time of determination thereof, all
liabilities that should, in accordance with GAAP consistently applied, be
classified as liabilities on a consolidated balance sheet of the Company and
its Subsidiaries.
"Liens" means any mortgage, deed of trust, deed to secure debt, grant,
pledge, security interest, assignment, encumbrance, judgment, lien or charge of
any kind, whether perfected or unperfected, avoidable or unavoidable,
including, without limitation, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction, excluding the precautionary filing of any financing statement by
any lessor in a true lease transaction, by any bailor in a true bailment
transaction or by any consignor in a true consignment transaction under the
Uniform Commercial Code of any jurisdiction or the agreement to give any
financing statement by any lessee in a true lease transaction, by any bailee in
a true bailment transaction or by any consignee in a true consignment
transaction.
"Loan" means a Revolving Loan and "Loans" mean all Revolving Loans.
6
<PAGE> 8
"Loan Notice" has the meaning described in Section 2.1.3.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Note" means the Revolving Credit Note and any other promissory notes
which may from time to time evidence all or any portion of the Obligations.
"Obligations" means all present and future debts, obligations,
liabilities, covenants, representations and warranties, whether now existing or
contemplated or hereafter arising, of the Borrowers to the Lender under,
arising pursuant to, in connection with and/or on account of the provisions of
this Agreement, the Note, and/or any of the other Financing Documents, any of
the Loans, and any of the Credit Facilities including, without limitation, the
principal of, and interest on, the Note, Fees, late charges, Enforcement Costs;
and any and all renewals, extensions and rearrangements of any such debts,
obligations and liabilities.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means: (a) Liens for Taxes which are not delinquent
or if delinquent, with respect to which the Lender has determined in the
exercise of its reasonable discretion that (i) such Taxes are being diligently
contested in good faith and by appropriate proceedings by the applicable
Borrower and (ii) such Borrower has the financial ability to pay, with all
penalties and interest, at all times without materially and adversely affecting
such Borrower, and (iii) such Taxes are not, and will not be with appropriate
filing, the giving of notice and/or the passage of time, entitled to priority
over any Lien of the Lender created hereunder; (b) deposits or pledges to
secure obligations under workers' compensation, social security or similar
laws, under unemployment insurance in the ordinary course of business or under
leases; (c) judgment Liens to the extent the entry of such judgment does not
constitute a Default or an Event of Default under the terms of this Agreement;
and (d) such other Liens, if any, as are set forth on EXHIBIT "D" attached
hereto and made a part hereof and any renewals, refinancings or replacements of
such Liens.
"Person" means and includes an individual, a corporation, a
partnership, a joint venture, a trust, a limited liability company, an
unincorporated association, a government or political subdivision or agency
thereof or any other organization or entity.
"Plan" means any pension plan which is covered by Title IV of ERISA
and with respect to which any of the Borrowers or a Commonly Controlled Entity
is an "employer" as defined in Section 3 of ERISA.
"Post-Default Rate" means the Base Prime Rate in effect from time to
time, plus two percent (2%) per annum.
7
<PAGE> 9
"Purchase Cap" has the meaning set forth in Section 5.2.1.
"Purchases" has the meaning set forth in Section 5.2.1.
"Receivable" means any one of any Borrower's now owned and hereafter
acquired billed and unbilled accounts, chattel paper, general intangibles and
instruments, and "Receivables" means all of the Borrowers' now or hereafter
owned, acquired or created billed and unbilled accounts, chattel paper, general
intangibles and instruments, and all cash and non-cash proceeds and products
thereof.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"Responsible Officer" means the chief executive officer or president
of any of the Borrowers for all matters other than financial matters, and, with
respect to financial matters, the chief financial officer, treasurer or
comptroller of any of the Borrowers.
"Revolving Credit Commitment" means the agreement of the Lender
relating to the making of Revolving Loans subject to and in accordance with the
provisions of this Agreement; "Revolving Credit Commitments" means collectively
the Revolving Credit Commitment of the Lender.
"Revolving Credit Commitment Period" means the period of time from the
Closing Date to the Business Day preceding the Revolving Credit Termination
Date.
"Revolving Credit Committed Amount" has the meaning described in
Section 2.1.1.
"Revolving Credit Expiration Date" means September 30, 1997.
"Revolving Credit Facility" means the facility established by the
Lender pursuant to Section 2.1.1.
"Revolving Credit Note" and "Revolving Credit Notes" have the meanings
described in Section 2.1.4.
"Revolving Credit Termination Date" means the earlier of (a) the
Revolving Credit Expiration Date, (b) the date on which the Revolving Credit
Commitments are terminated pursuant to Section 6.2.1 or (c) the date on which
the Borrowers have delivered to the Lender a request to terminate the Revolving
Credit Commitments and have paid in full all of the Obligations.
"Revolving Credit Unused Line Fee" has the meanings described in
Section 2.1.6.
8
<PAGE> 10
"Revolving Loan" and "Revolving Loans" have the meanings described in
Section 2.1.1.
"Revolving Loan Account" has the meaning described in Section 2.1.5.
"Senior Management" means the chief financial officer, the chief
operating officer, the president and the treasurer of each Borrower.
"Subordinated Indebtedness" means all Indebtedness for Borrowed Money
incurred at any time by any of the Borrowers, the repayment of which is
subordinated to the Obligations by a written agreement in form and substance
satisfactory to the Lender in its reasonable discretion.
"Subordinated Liabilities" has the meaning described in Section
5.1.15.
"Subsidiary" means any corporation the majority of the voting shares
of which at the time are owned directly by any of the Borrowers and/or by one
or more Subsidiaries of any of the Borrowers.
"Taxes" means all taxes and assessments whether general or special,
ordinary or extraordinary, or foreseen or unforeseen, of every character
(including all penalties or interest thereon), which at any time may be
assessed, levied, confirmed or imposed by any Governmental Authority on the
Borrowers or any of their properties or assets or any part thereof or in
respect of any of their franchises, businesses, operations, income or profits.
"Wholly Owned Subsidiary" means any corporation all the shares of
stock of all classes of which (other than directors' or foreign residents'
qualifying shares) at the time are owned directly or indirectly by the Company
or another Borrower or by one or more Wholly Owned Subsidiaries of the Company
or another Borrower.
SECTION 1.2 Accounting Terms and Other Definitional Provisions. Unless
otherwise defined herein, as used in this Agreement and in any certificate,
report, schedule or other document made or delivered pursuant to this
Agreement, accounting terms not otherwise defined herein, and accounting terms
only partly defined in this Agreement, to the extent not defined, shall have
the respective meanings given to them under GAAP consistently applied. Unless
otherwise defined in this Agreement, all terms used in this Agreement which are
defined by the Maryland Uniform Commercial Code shall have the same meanings as
assigned to them by the Maryland Uniform Commercial Code unless and to the
extent varied by this Agreement. As used in this Agreement, the singular number
shall include the plural, the plural the singular and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may
require. Reference to any one or more of the Financing Documents shall mean the
same as the foregoing may from time to time be amended, restated, substituted,
extended, renewed, supplemented or otherwise modified.
9
<PAGE> 11
ARTICLE 2
THE CREDIT FACILITIES
SECTION 2.1 The Revolving Credit Facility.
2.1.1 Revolving Credit Facility. Subject to and upon the provisions of
this Agreement, the Lender hereby establishes a revolving credit facility (the
"Revolving Credit Facility") in favor of the Borrowers in the maximum principal
amount of $10,000,000. Each of the loans or other advances made by the Lender
under the Revolving Credit Facility is sometimes referred to in this Agreement
as a "Revolving Loan", and all such loans made by the Lender collectively are
sometimes referred to in this Agreement as the "Revolving Loans".
During the Revolving Credit Commitment Period, the Lender agrees to
make Revolving Loans requested by any Borrower from time to time in accordance
with the provisions of this Agreement; provided that after giving effect to any
Borrower's request the aggregate principal amount of all Revolving Loans would
not exceed an amount equal to $10,000,000 (the "Total Revolving Credit
Committed Amount").
2.1.2 Use of Proceeds of the Revolving Loans. The proceeds of each
Revolving Loan shall be used by the Borrowers for their own, ordinary course
and working capital purposes or for the purpose of financing Purchases
consistent with the Borrowers' principal line of business and made in
compliance with Section 5.2.1 hereof.
2.1.3 Procedure for Making Revolving Loans; Lender Protection Loans.
The Borrowers may borrow under the Revolving Credit Commitments on any Business
Day. Revolving Loans shall be advanced by deposit to the Company's demand
deposit account with the Lender or shall be otherwise applied as directed by
the Borrowers in writing. No later than 12:00 noon, Washington, D.C., time on
the date of the requested borrowing, the Company shall give the Lender oral or
written notice (a "Loan Notice") of the amount and, if requested by the Lender,
the purpose of the requested borrowing. Any oral Loan Notice shall be confirmed
in writing by the Company within three (3) Business Days after the making of
the requested Revolving Loan. Each request for a Revolving Loan shall be in a
minimum principal amount of One Hundred Thousand Dollars ($100,000) and in an
integral multiple of Fifty Thousand Dollars ($50,000).
In addition, the Borrowers hereby irrevocably authorizes the Lender at
any time and from time to time, without further request from or notice to the
Borrowers, to make Revolving Loans which the Lender, in its reasonable
discretion, deems necessary or appropriate to protect the Lender's interests
under this Agreement, including, without limitation, Revolving Loans made to
cover debit balances in the Revolving Loan Account, principal of, and/or
interest on, any Loans or any other Obligations, any Fees, and/or any
Enforcement Costs, prior to, on, or after the termination of other advances
under this Agreement, and/or the suspension and/or termination of the Revolving
Credit Facility, regardless of whether the aggregate amount of the Revolving
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Loans may exceed the Total Revolving Credit Committed Amount or the Revolving
Credit Committed Amount of the Lender after giving effect to any such Revolving
Loans which the Lender elects to make under this Section 2.1.3.
2.1.4 Revolving Credit Note. The obligation of the Borrowers to pay
the Revolving Loans made by the Lender, with interest, shall be evidenced by a
promissory note (as from time to time extended, amended, restated, supplemented
or modified, the "Revolving Credit Note") substantially in the form of EXHIBIT
"A" attached hereto and made a part hereof, with appropriate insertions. The
Revolving Credit Note shall be dated as of the Closing Date, shall be payable
to the order of the Lender at the times provided in the Revolving Credit Note,
and shall be in the principal amount of the Lender's Revolving Credit Committed
Amount. The Borrowers acknowledge and agree that, if the Revolving Loans
outstanding from time to time exceed the face amount of the Revolving Credit
Note, the excess shall bear interest at the Post-Default Rate and shall be
payable, with accrued interest, ON DEMAND. The Revolving Credit Note shall not
operate as a novation of any of the Obligations or nullify, discharge, or
release any such Obligations or the continuing contractual relationship of the
Borrowers and the Lender under the provisions of this Agreement.
2.1.5 Revolving Loan Account. The Lender will establish and maintain a
loan account on its books (the "Revolving Loan Account") to which the Lender
will (a) debit (i) the principal amount of each Revolving Loan made by the
Lender as of the date funded by the Lender, (ii) the amount of any interest
accrued on the Revolving Loans as and when due, and (iii) any other amounts due
and payable by each Borrower to the Lender from time to time under the
provisions of this Agreement in connection with the Revolving Loans, including,
without limitation, Enforcement Costs, Fees, late charges, and service,
collection and audit fees, all as and when due and payable, and (b) credit all
payments made by or on behalf of each Borrower to the Lender on account of the
Revolving Loans as of the date made. All credit entries to the Revolving Loan
Account are conditional and shall be readjusted as of the date made if final
and indefeasible payment is not received by the Lender in cash or solvent
credits. The Borrowers shall pay to the order of the Lender, on the Revolving
Credit Termination Date, an amount equal to the excess, if any, of all debit
entries over all credit entries recorded in the Revolving Loan Account under
the provisions of this Agreement. Absent manifest error, any and all periodic
or other statements or reconciliations relating to the Revolving Loan Account,
and the information contained in those statements or reconciliations, shall be
presumed conclusively to be correct and shall constitute an account stated
between the Lender and each of the Borrowers unless the Lender receives
specific written objection thereto from any Borrower and/or the Lender within
sixty (60) Business Days after such statement or reconciliation shall have been
sent by the Lender.
2.1.6 Revolving Credit Unused Line Fee. The Borrowers shall pay to the
Lender, a revolving credit facility fee (the "Revolving Credit Unused Line
Fee") in an amount equal at all times to one quarter of one percent (1/4%) per
annum on the average daily unused and undisbursed portion of the Total
Revolving Credit Committed Amount in effect from time to time accruing for the
period from and including the Closing Date. The accrued and unpaid portion of
the Revolving Credit Unused Line Fee shall be paid by the Borrowers to the
Lender on
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the last day of each fiscal quarter, commencing on the last day of the current
fiscal quarter, and on the Revolving Credit Termination Date and shall be
calculated based on each immediately preceding quarter.
SECTION 2.2 [INTENTIONALLY OMITTED]
SECTION 2.3 General Financing Provisions.
2.3.1 Requests for Advances, Etc. (a) Each of the Borrowers hereby
represents and warrants to the Lender that each such Borrower will derive
benefits, either directly or indirectly, from the proceeds of each Loan, both
in its individual capacity and as a member of the integrated group to which the
Borrowers belong, because the successful operation of the integrated group
referred to in this Agreement as "the Borrowers" is dependent upon the
continued successful performance of the functions of the integrated group as a
whole.
(b) The Borrowers, in the discretion of their respective
managements, are to agree among themselves as to the allocation of the benefits
of the proceeds of the Loans and the purposes for which such benefits and
proceeds will be used, provided that no allocation, purpose or use shall be in
violation of this Agreement. For administrative convenience, each Borrower is
hereby irrevocably appointed by each and every other Borrower as agent for each
and every other Borrower for the purpose of requesting Loans, receiving the
benefits of the proceeds of such Loans, and disbursing the proceeds of such
Loans among the Borrowers. By reason thereof, each Borrower is hereby
irrevocably appointed by each and every other Borrower with power and authority
through its duly authorized officer or officers (i) to endorse any check (if
any) for the proceeds of any Loan for and on behalf of each and every Borrower
and in the name of each and every Borrower, and (ii) to instruct the Lender to
credit the proceeds of any Loan directly to a banking account of one or more of
the Borrowers which shall evidence the making of such Loan and shall constitute
the acknowledgment by each and every Borrower of the receipt of the proceeds of
such Loan. The Lender may require from time to time such certificates, reports
and other items as the Lender may deem necessary to evidence the allocation of
the proceeds of the Loans among the Borrowers. In particular, the Lender may
require from time to time that any advances of the proceeds of the Loans by one
or more of the Borrowers be evidenced by one or more promissory notes or other
written instruments or agreements between one or more of the Borrowers to
evidence intercompany Receivables between one or more of the Borrowers. All
actions taken by each Borrower in connection with the Loans and the Financing
Documents shall be conclusively presumed to be the joint and several actions of
the Borrowers even though any one Borrower may act from time to time in its
name alone. This appointment is coupled with an interest and is irrevocable
without the prior written consent of the Lender.
Without implying any limitation on the joint and several
nature of the Obligations, the Lender agrees that, notwithstanding any other
provision of this Agreement, the Borrowers may create inter-company
indebtedness between and/or among the Borrowers with respect to the allocation
of the benefits and proceeds of the advances under this Agreement. The
Borrowers agree among themselves, and the Lender consents to that agreement,
that each and
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every Borrower shall have rights of contribution from all of the other
Borrowers to the extent each such Borrower incurs Obligations in excess of the
proceeds of the Loans received by, or allocated to purposes for the direct
benefit of, each such Borrower. All such indebtedness and rights shall be, and
are hereby agreed by the Borrowers to be, subordinate in priority and payment
to the indefeasible payment in full of the Obligations, and, unless the Lender
agrees in writing otherwise, shall not be exercised or repaid in whole or in
part until all of the Obligations have been satisfied, provided, however, that
prior to the occurrence of a payment Default, the Borrowers shall be permitted
to make payments on account of any such inter-company indebtedness from time to
time in accordance with the terms thereof. Each and every Borrower hereby
waives all rights of counterclaim, recoupment and offset between or among
themselves arising on account of that indebtedness. Unless required by the
Laws of the United States or the country where such indebtedness is created,
each and every Borrower agrees not to evidence that indebtedness or rights by
note or other instrument, and shall not secure that indebtedness with any
mortgage, security agreement or otherwise.
(d) The Lender is hereby irrevocably authorized by the
Borrowers to make Loans to the Borrowers, all pursuant to the provisions of
this Agreement upon the written, oral or telephone request of any one of the
Persons who is from time to time a Responsible Officer of the Borrowers under
the provisions of the most recent certificate of corporate resolutions of the
Borrowers on file with the Lender or as otherwise designated in writing by the
Borrowers. Except for gross negligence or willful misconduct, the Lender
assumes no responsibility or liability for any errors, mistakes, and/or
discrepancies in the oral, telephonic, written or other transmissions of any
instructions, orders, requests and confirmations between the Lender and the
Borrowers in connection with any of the Credit Facilities, any Loan, or any
other transaction in connection with the provisions of this Agreement.
2.3.2 [Intentionally Omitted]
2.3.3 Computation of Interest and Fees. All applicable Fees and
interest shall be calculated on the basis of a year of 360 days for the actual
number of days elapsed. Any change in the interest rate on any of the
Obligations resulting from a change in the Base Prime Rate shall become
effective as of the opening of business on the day on which such change in the
Base Prime Rate is announced.
2.3.4 Payments. All payments of the Obligations, including, without
limitation, principal, interest and Fees, shall be paid by the Borrowers
without setoff, recoupment or counterclaim to the Lender at the Lender's office
specified in Section 7.3 hereof in immediately available funds not later than
12:00 noon, Washington, D.C. time on the due date of such payment.
Alternatively, at its sole discretion, the Lender may charge any deposit
account of the Borrowers at the Lender, with all or any part of any amount due
hereunder to the extent that the Borrowers have not otherwise tendered payment
to the Lender; and Lender agrees to give the Borrowers prompt subsequent notice
of any such actions. Except as otherwise specifically provided for in this
Agreement, all payments shall be applied first to any accrued and unpaid Fees,
second to any and all accrued and unpaid late charges and Enforcement Costs,
third to any and all accrued and
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unpaid interest on the Obligations, and then to principal, all in such order
and manner as shall be provided in Section 6.2.2.
2.3.5 Setoff. During the continuance of any Default, the Lender is
hereby authorized by the Borrowers at any time and from time to time, without
notice to the Borrowers, to setoff, appropriate and apply any or all monies,
securities, and other property of the Borrowers and the proceeds thereof, now
or hereafter held or received by or in transit to, the Lender from or for the
Borrowers, and also upon any and all deposit accounts (general or special) and
credits of the Borrowers, if any, with the Lender at any time existing,
excluding any deposit accounts held by the Borrowers in their capacity as
trustee for Persons who are not Affiliates of the Borrowers or held by any of
the Borrowers on behalf of any retirement or benefit plan of any of the
Borrowers against all Obligations then outstanding, all in such order and
manner as shall be provided in Section 6.2.2.
2.3.6 Payments. (a) All payments of the Obligations, including,
without limitation, principal, interest and Fees, shall be paid by the
Borrowers without setoff or counterclaim to the Lender (except as otherwise
provided herein) at the Lender's office specified in Section 7.3 hereof in
immediately available funds not later than 12:00 noon, Washington, D.C. time on
the due date of such payment. All payments received by the Lender after such
time shall be deemed to have been received by the Lender, for purposes of
computing interest and Fees, as of the next Business Day. The Lender may send
the Borrowers statements of all amounts due hereunder for interest, principal
and Fees, etc., which statements shall be considered correct and conclusively
binding on the Borrowers absent manifest error unless the Borrowers notify the
Lender to the contrary within sixty (60) Business Days of the date sent by the
Lender.
(b) Subject to the terms of this Agreement, the Lender may
charge any deposit account of the Borrowers for the benefit of the Lender, with
all or any part of any amount due hereunder; the Lender agrees to give the
Borrowers prompt subsequent notice of any such charge.
2.3.7 Reserves. If (a) any change in any law or regulation or in the
interpretation thereof by any court or other Governmental Authority charged
with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against Loans
made by the Lender, or (ii) impose on the Lender any other condition regarding
this Agreement or (b) the Lender shall have determined that compliance by the
Lender or any corporation controlling the Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
central bank or Governmental Authority, and the result or effect of any event
referred to in clauses (a) or (b) above shall be to (x) reduce the rate of
return on the Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which the Lender or such
corporation would have achieved but for such adoption, change or compliance
(taking into consideration the Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by the Lender in its
reasonable discretion to be material or (y) increase the cost to the Lender of
making the Loans, then, upon demand by the Lender, the Borrowers shall
immediately pay to the Lender, from time
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to time as specified by the Lender, additional amounts which shall be
sufficient to compensate the Lender for such reduction in rate of return or for
such increased cost, together with interest on each such amount from the date
demanded until payment in full thereof at a rate per annum equal to the then
current rate of interest on the Revolving Loans. A certificate as to such loss
or increased cost incurred by the Lender, submitted by the Lender to the
Borrowers, shall be conclusive, absent manifest error, as to the amount thereof
unless the Borrowers notify the Lender to the contrary within sixty (60)
Business Days of the date sent by the Lender.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 General Representations and Warranties. Each of the
Borrowers represents and warrants to the Lender and shall be deemed to
represent and warrant at the time of each request for a Loan under the terms of
this Agreement and again at the time of the making of any Loan, as follows:
3.1.1 Subsidiaries. The only Subsidiaries of such Borrower are as
indicated and described on the Disclosure List attached hereto as EXHIBIT "B"
and made a part hereof. Each of the Subsidiaries is a Wholly Owned Subsidiary
except as shown on the Disclosure List, which correctly indicates the nature
and amount of such Borrower's ownership interests therein.
3.1.2 Good Standing. Each of the Borrowers and their respective
Subsidiaries are if organized in the United States of America, corporations,
each are duly organized and existing, in good standing (to the extent such term
is appropriate in the jurisdiction in which the applicable Borrower or
Subsidiary is organized or doing business), under the laws of the jurisdiction
of its incorporation or formation, as the case may be, and each has the power
to own its property and to carry on its business as now being conducted and is
duly qualified to do business and is in good standing (to the extent such term
is appropriate in the jurisdiction in which the applicable Borrower or
Subsidiary is organized or doing business), in each jurisdiction in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except for
those jurisdictions where failure to be so qualified would not have a
materially adverse effect on the business of the applicable Borrower or
Subsidiary.
3.1.3 Authority. Each of the Borrowers has full power and authority to
enter into this Agreement, to make the borrowings hereunder, to execute and
deliver the Note and the other Financing Documents to which it is a party, and
to incur the Obligations and perform the other obligations provided for herein,
in the Note, and in the other Financing Documents to which they are parties,
all of which have been duly authorized by all proper and necessary action. No
consent or approval of any shareholders of, or the Lender to, any Borrower and
no consent, approval, filing or registration with or notice to any Governmental
Authority on the part of any Borrower is required as a condition to the
validity of this Agreement, the Note or any of the other
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current Financing Documents or the performance by each Borrower of its
obligations hereunder or thereunder.
3.1.4 Binding Agreements. This Agreement constitutes, and the Note and
each of the other Financing Documents, when issued and delivered pursuant
hereto, will constitute, the valid and legally binding obligations of each of
the Borrowers enforceable against each of the Borrowers in accordance with
their respective terms.
3.1.5 Litigation. Except as otherwise disclosed to the Lender on
EXHIBIT "C" attached hereto and made a part hereof, there are no proceedings or
investigations pending or, so far as is actually known by the officers of each
of the Borrowers, threatened in writing before any court or arbitrator or
before or by any Governmental Authority which, in any one case or in the
aggregate, if determined adversely to the interests of such Borrower or any of
its Subsidiaries, would have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, present or
prospective, of such Borrower or such Borrower and its Subsidiaries taken as a
whole.
3.1.6 No Conflicts. There is no statute, regulation, rule, order or
judgment, no charter, by-law or preference stock provision of any Borrower, and
no provision of any mortgage, indenture, contract or other agreement binding on
any Borrower or affecting its properties, which would prohibit, or cause a
default under or in any way prevent the execution, delivery, or carrying out of
the terms of this Agreement or of the Note or of the other Financing Documents
to which such Borrower is a party.
3.1.7 Financial Position. The audited consolidated financial
statements of the Company and its Subsidiaries dated February 29, 1996
heretofore delivered to the Lender, are complete and correct and fairly present
the consolidated financial position of the Company and its Subsidiaries and the
consolidated results of their operations and changes in the consolidated
stockholders' equity as of such dates and for the period referred to and have
been prepared in accordance with GAAP applied on a consistent basis throughout
the period involved. The unaudited consolidated balance sheet of the Company
and its Subsidiaries, as of May 31, 1996, together with statements of profit
and loss and of stockholders' equity for the period then ended heretofore
delivered to the Lender, represent a fair presentation of the consolidated
financial position of the Company and its Subsidiaries and the consolidated
results of their operations and changes in the consolidated stockholders'
equity as of such dates and for the period referred to and have been prepared
in accordance with GAAP applied on a consistent basis throughout the period
involved. There are no liabilities (of the type required to be reflected on
balance sheets prepared in accordance with GAAP), direct or indirect, fixed or
contingent, of the Company and its Subsidiaries taken as a whole, as of the
dates of such statements which are not reflected therein or in the notes
thereto. There has been no material adverse change in the financial condition
or operations of the Company and its Subsidiaries taken as a whole, since the
date of such balance sheet (and to the Company's actual knowledge after
reasonable inquiry, no such material adverse change is likely to occur), and
neither the Company nor any of its Subsidiaries has guaranteed the obligations
of, or made any investment in or loans to, any Person (other than a Subsidiary)
except as disclosed
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in such balance sheet, the endorsement of Instruments in the ordinary course of
its business and Manugistics Inc.'s guaranty of Manugistics (Deutschland)
GmbH's overdraft facility.
3.1.8 No Default. Neither any of the Borrowers nor any of their
respective Subsidiaries is in default beyond any applicable grace period under
or with respect to any obligation under any agreement to which such Borrower or
any of their Subsidiaries is a party in any respect which could be materially
adverse to the business, operations, property or financial condition of such
Borrower, or which could materially adversely affect the ability of such
Borrower to perform its obligations under this Agreement, the Note, or the
other Financing Documents, to which such Borrower is a party. No Default has
occurred and is continuing.
3.1.9 Title to Properties. The Borrowers have good and marketable
title to their properties and assets, and the properties and assets reflected
in the balance sheets described in Section 3.1.7 above. Such properties and
assets are subject to no Lien of any kind, except for Permitted Liens, and the
Borrowers have legal, enforceable and uncontested rights to use freely such
property and assets. Any and all obligations to pay royalties or other charges
with respect to such properties and assets are properly reflected on the
financial statements described in Section 3.1.7 above.
3.1.10 Taxes. Except for sales and use taxes which are in dispute in
various jurisdictions and which will not have a material adverse effect on the
operation of any of the Borrowers, each of the Borrowers and their respective
Subsidiaries have each filed, or have obtained effective extensions for the
filing of, all Federal, state and other tax returns which are required to be
filed, and have paid all Taxes shown as due on said returns and all
assessments, fees and other amounts due, except to the extent that such Taxes
are being contested in good faith and in an appropriate manner. All Tax
liabilities of each of the Borrowers were as of the date of the balance sheets
referred to in Section 3.1.7 above, and are now, adequately provided for on the
books of the Borrowers. Except for sales and use taxes which are in dispute in
various jurisdictions and which will not have a material adverse effect on the
operation of any of the Borrowers, no Tax liability has been asserted by the
Internal Revenue Service or any state or local Governmental Authority against
the Borrowers for Taxes in excess of those already paid.
3.1.11 Regulations U and X and Use of Loans. Neither any of the
Borrowers nor any of their respective Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System). No part
of the proceeds of the Loans will be used to purchase or carry any margin stock
or to extend credit to others for such purpose if as a result there would be a
violation of Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System or any other comparable or similar Law of any other
Governmental Authority.
3.1.12 Investment Company Act. Neither any of the Borrowers nor any of
their respective Subsidiaries is an investment company within the meaning of
the Investment Company Act of 1940, as amended, nor are they, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of said Act.
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3.1.13 ERISA. The Company and its Subsidiaries taken as a whole have
not incurred any accumulated funding deficiency within the meaning of ERISA
which is material or any material liability to the PBGC in connection with any
employee benefit plan (as defined in Section 3 of ERISA) established or
maintained by any Borrower or any Subsidiary.
3.1.14 Compliance with Laws. Neither any of the Borrowers nor any of
their respective Subsidiaries is in violation of any applicable Laws of any
Governmental Authority (including, without limitation, any Laws relating to
employment practices or to environmental, occupational and health standards and
controls) or order of any court or arbitrator, the violation of which,
considered in the aggregate, could materially adversely affect the business,
operations or properties of the Company and its Subsidiaries, taken as a whole.
3.1.15 Patents, Trademarks, Etc. Each of the Borrowers and their
respective Subsidiaries own, possess, or have the right to use all necessary
patents, patent rights, licenses, trademarks, trademark rights, trade names,
trade name rights, copyrights, customer lists, service marks, and franchises to
conduct their business as now conducted, without known conflict with any
patent, patent right, license, trademark, trademark right, trade name, trade
name right, copyright, service mark or franchise right of any other Person.
3.1.16 Full Disclosure. Neither the financial statements referred to
in Section 3.1.7 nor any of the Financing Documents, nor any certificate or
statement furnished in writing by the Borrowers in connection with the
Financing Documents, contains any untrue statement of a material fact or, when
such financial statements, Financing Documents, statements, reports and
certificates are taken in their entirety, omits to state a material fact
necessary to make the statements contained therein or herein not misleading as
of the date hereof. There is no fact actually known to the officers of any of
the Borrowers which has not been disclosed to the Lender in writing prior to
the date of this Agreement with respect to the transactions contemplated by the
Financing Documents which materially and adversely affects or in the future
could, in the reasonable opinion of the Borrowers, materially adversely affect
the condition, financial or otherwise, results of operations, business, or
assets of the Company and its Subsidiaries, taken as a whole. In addition,
the Company and its Subsidiaries have filed all forms, reports and documents
(collectively, the "SEC Reports") with the Securities and Exchange Commission
("SEC") required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder, all of which complied in all material
respects with all applicable requirements of the Securities Exchange Act of
1934 (the "Exchange Act"). None of the SEC Reports which are subject to
Section 10(b) of the Exchange Act, including, without limitation, any financial
statements or schedules included therein, at the time filed contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.1.17 Subordinated Indebtedness. Except for the Loans, the
Indebtedness described in Section 5.2.3, or as otherwise disclosed to the
Lender in writing on EXHIBIT "E" attached hereto and made a part hereof and as
otherwise expressly permitted by the Lender in writing, any and all
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Indebtedness for Borrowed Money of each of the Borrowers has been fully and
completely subordinated to the payment and performance of the Obligations by
written agreement in form and substance satisfactory to the Lender, provided,
however, that prior to the occurrence of any Default, the Borrowers may make
payments on such Indebtedness from time to time in accordance with the terms
thereof. The Lender has received photocopies of all promissory notes
evidencing such Subordinated Indebtedness for Borrowed Money, together with any
and all other agreements, documents, or instruments securing, evidencing,
guarantying or otherwise executed and delivered in connection therewith. The
Borrowers have furnished photocopies of any and all subordination agreements
pertaining to the Subordinated Indebtedness to the Lender on or before the
Closing Date.
3.1.18 Presence of Hazardous Materials or Hazardous Materials
Contamination. To the best of the Borrowers' knowledge and belief, except as
set forth below, no Hazardous Materials are located on any real property
located in the United States, owned, leased, operated or otherwise controlled
by any of the Borrowers or any of their Subsidiaries or for which any such
Borrower or any Subsidiary is responsible. To the best of each Borrower's
knowledge and belief during the period of their occupancy, no property owned,
leased, operated or otherwise controlled by such Borrower or any of its
Subsidiaries has ever been used as a manufacturing, storage (other than storage
of Hazardous Materials on such property in accordance with applicable Laws in
the ordinary course (including, without limitation, Laws relating to
quantity)), or dump site for Hazardous Materials nor is any such property
affected by Hazardous Materials Contamination.
SECTION 3.2 Survival; Updates of Representations and Warranties. All
representations and warranties contained in or made under or in connection with
this Agreement and the other Financing Documents shall survive the Closing Date
and any Loan made hereunder. The Lender acknowledges and agrees that any and
all representations and warranties contained in, or made under, or in
connection with, this Agreement may be amended, changed or otherwise modified
by the Borrowers, with the consent of the Lender, at any time and from time to
time after the Closing Date so as to accurately reflect the matters represented
and warranted therein; provided, that such amendments, changes and/or
modifications are disclosed in writing to, and approved by, the Lender and
provided further that as it relates to any particular statements or financial
information the representation and warranty pertaining to balance sheets,
financial statements and other financial condition information or data and
subsidiaries shall refer to the latest balance sheets, financial statements,
financial condition information and data and corporate information furnished to
the Lender pursuant to the provisions of this Agreement. The Lender shall have
no obligation to waive any Event of Default or Default due to any present or
future inaccuracy of such representation or warranty or to agree to any
amendment, change or modification of any such representation or warranty.
ARTICLE 4
CONDITIONS PRECEDENT
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SECTION 4.1 Conditions to the Initial Loan. The making of the initial
Loan is subject to the fulfillment of the following conditions precedent in a
manner satisfactory to the Lender on or before the Closing Date (all documents
and certificates (other than the Note) being delivered in sufficient copies to
enable delivery to the Lender):
4.1.1 Good Standing, Etc. To the extent available from the applicable
jurisdictions, the Lender shall have received a certificate of good standing
for each of the Borrowers which are domestic corporations certified by the
Secretary of State, or other appropriate Governmental Authority, of the state
of incorporation for each of such Borrowers. To the extent available from the
applicable jurisdictions, the Lender shall have received a Certificate of
Qualification to do business for each of the Borrowers who are domestic
corporations certified by the Secretary of State or other Governmental
Authority of each state in which each of such Borrowers conducts business.
4.1.2 Corporate Proceedings of the Borrowers. The Lender shall have
received a copy, certified as of the Closing Date by the Secretary or an
Assistant Secretary of the Borrowers, of the resolutions of their respective
Board of Directors authorizing (a) the execution, delivery and performance of
the Financing Documents to which the Borrowers are a party, and (b) the
borrowings by the Borrowers hereunder.
4.1.3 Note. The Lender shall have received the Revolving Credit Note,
conforming to the requirements hereof and executed by a Responsible Officer of
the Borrowers and attested by a duly authorized representative of the
Borrowers.
4.1.4 Financing Documents. The Borrowers shall have executed and
delivered the Financing Documents to be executed by them, all in form and
substance satisfactory to the Lender.
4.1.5 Other Documents, Etc. The Lender shall have received such other
certificates, opinions, documents and instruments confirmatory of or otherwise
relating to the transactions contemplated hereby as may have been reasonably
requested by the Lender.
4.1.6 Payment of Fees. The Lender shall have received payment for the
account of the appropriate parties of any Fees due on or before the Closing
Date including all attorney's fees of the Lender.
4.1.7 Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement and the other
Financing Documents shall be reasonably satisfactory in form and substance to
the Lender and its counsel.
4.1.8 Other Financing Documents. In addition to the Financing
Documents to be delivered by the Borrowers, the Lender shall have received the
Financing Documents duly executed and delivered by Persons other than the
Borrowers.
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SECTION 4.2 Conditions to all Loans. The making of all Loans is
subject to the fulfillment of the following conditions precedent in a manner
satisfactory to the Lender:
4.2.1 Compliance. Each of the Borrowers shall have complied and shall
then be in compliance with all terms, covenants, conditions and provisions of
this Agreement and the other Financing Documents which are binding upon them.
4.2.2 Default. There shall exist no Event of Default or Default
hereunder.
4.2.3 Representations and Warranties. The representations and
warranties of each of the Borrowers contained among the provisions of this
Agreement shall be true and with the same effect as though such representations
and warranties had been made at the time of the making of each of the Loans,
except that the representation and warranty pertaining to balance sheets,
financial statements and other financial condition information or data and
subsidiaries shall refer to the latest balance sheets, financial statements,
financial condition information and data and corporate information furnished to
the Lender pursuant to the provisions of this Agreement.
4.2.4 Adverse Change. No adverse change shall have occurred in the
financial condition of the Borrowers which would, in the good faith judgment of
the Lender, materially impair the ability of the Borrowers to pay or perform
any of the Obligations.
4.2.5 Legal Matters. All legal documents incident to the Loan shall
be reasonably satisfactory to counsel for the Lender.
ARTICLE 5
COVENANTS OF THE BORROWERS
SECTION 5.1 General Affirmative Covenants. So long as any of the
Obligations (or Commitments therefor) shall be outstanding hereunder, each of
the Borrowers covenants and agrees with the Lender as follows:
5.1.1 Financial Statements. The Company will furnish to the Lender:
(a) Quarterly Reports. As soon as available, but in no event
more than fifty (50) days after the close of each of the Company's fiscal
quarters, a quarterly aging of accounts receivable and as soon as available,
but in no event more than fifty (50) days after the close of each of the
Company's first three (3) fiscal quarters a copy of the quarterly consolidated
financial statements on Form 10-Q, as filed with the U.S. Securities and
Exchange Commission, relating to the Company and its Subsidiaries, prepared in
accordance with GAAP and certified by a Responsible Officer, which financial
statements shall include a consolidated balance sheet and consolidated
statement of income, expense and cash flow of the Company and its Subsidiaries
for such fiscal quarter;
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(b) Covenant Compliance. As soon as available, but in no
event more than fifty (50) days after the close of each of the Company's first
three (3) fiscal quarters, (i) a letter or opinion of the Responsible Officer
who certified the quarterly financial statement relating to the Company and its
Subsidiaries, stating whether anything in such Responsible Officer's
examination has revealed the occurrence of a Default or an Event of Default
hereunder, and, if so, stating the facts with respect thereto and (ii) a
detailed computation of each financial covenant in this Agreement which is
applicable for the period reported certified by the Responsible Officer of the
Company;
(c) Annual Statements. As soon as available, but in no event
more than one hundred (100) days after the close of each of the Company's
fiscal years, (i) a copy of the annual consolidated financial statement on Form
10-K, as filed with the U.S. Securities and Exchange Commission, relating to
the Company and its Subsidiaries, prepared in accordance with GAAP and examined
and certified by independent certified public accountants reasonably
satisfactory to the Lender, which financial statement shall include a
consolidated balance sheet as of the end of such fiscal year and consolidated
statements of income, expense and cash flow of the Company and its Subsidiaries
for such fiscal year, (ii) a certificate by a Responsible Officer that as of
such date no Default or Event of Default has occurred, and (iii) a detailed
computation of each financial covenant in this Agreement which is applicable
for the period reported certified by the Responsible Officer of the Company. In
addition, the Company will furnish as soon as available, but in no event more
than one hundred fifty (150) days after the close of each of the Company's
fiscal years a consolidated cash flow projection report certified by a
Responsible Officer in a format acceptable to the Lender;
(d) Management Letters. As soon as available, but in no
event more than one hundred and eighty (180) days after the close of each of
the Company's fiscal years, a management letter in the form prepared by the
independent certified public accountants, if any such letter is received;
(e) Receivables Aging. At the time of any advance under
the Revolving Loan, a detailed aging schedule of all Receivables by account
debtor, in such detail, and accompanied by such supporting information, as the
Lender may from time to time reasonably require; and
(f) Additional Reports. Promptly upon demand such other
information as the Lender may reasonably request.
5.1.2 Reports to SEC and to Stockholders. The Company will furnish to
the Lender, promptly upon the filing or making thereof, at least one (1) copy
of all financial statements, reports, notices and proxy statements sent by the
Company to its stockholders, and of all regular and other reports publicly
filed by the Borrowers with any securities exchange or with the SEC.
5.1.3 Record keeping, Rights of Inspection, Field Examination, Etc.
(a) Each of the Borrowers shall, and shall cause each of their Subsidiaries
to, maintain (i) a standard system of
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accounting in accordance with GAAP, and (ii) proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to their properties, business and activities.
(b) Each of the Borrowers shall, and shall cause each of
their Subsidiaries to, permit authorized representatives of the Lender to visit
and inspect such Borrower's properties and the properties of its Subsidiaries,
at any time with reasonable notice, to review, audit, check and inspect such
Borrower's books of record and account and to make abstracts and photocopies
thereof, and to discuss the affairs, finances and accounts of such Borrower and
its Subsidiaries, with such Borrower's officers, directors, employees and other
representatives and the officers, directors, employees and other
representatives of such Borrower's Subsidiaries and their accountants, all at
such times during normal business hours and other reasonable times and as often
as the Lender may reasonably request.
(c) Any and all reasonable costs and expenses incurred by, or
on behalf of, the Lender in connection with the conduct of any of the foregoing
shall be part of the Enforcement Costs and shall be payable to the Lender upon
demand. The Borrowers acknowledge and agree that such expenses may include,
but shall not be limited to, any and all out-of-pocket costs and expenses of
the Lender's employees and agents in, and when, traveling to the Borrowers'
facilities.
(d) Subject to the provisions of Section 7.18 of this
Agreement, each of the Borrowers hereby irrevocably authorizes all accountants
and auditors employed by such Borrowers at any time during the term of this
Agreement to exhibit and deliver to the Lender copies of any of such Borrower's
financial statements, trial balances, management letters, or other accounting
records of any sort in the accountant's or auditor's possession, and to
disclose to the Lender any information it may have concerning such Borrower's
financial status and business operations. Further, each of the Borrowers
hereby authorizes all Governmental Authorities to furnish to the Lender copies
of reports or examinations relating to such Borrower, whether made by such
Borrower or otherwise.
5.1.4 Conduct of Business and Maintenance of Existence, Compliance
with Laws, Etc. Except as otherwise provided in this Agreement, each of the
Borrowers will, and will cause each of their respective Subsidiaries to, (a)
not later than thirty (30) days from the date of discovery by management of a
fact constituting an Event of Default, do or cause to be done all things
necessary to preserve and to keep in full force and effect their corporate
existence and material rights and franchises, trade names, patents, trademarks
and permits which are necessary for the continuance of their business and (b)
continue to engage substantially only in the business of developing, marketing
and supporting computer software and related services, and not later than
thirty (30) days from the date of discovery by management of a fact
constituting an Event of Default, comply with all applicable Laws and observe
the valid requirements of Governmental Authorities, the noncompliance with or
the nonobservance of which would materially interfere with the performance of
their obligations hereunder or the proper conduct of their business.
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5.1.5 Preservation of Properties. Each of the Borrowers will, and will
cause each of their respective Subsidiaries to, at all times (a) maintain,
preserve, protect and keep their properties, whether owned or leased, in good
operating condition, working order and repair (ordinary wear and tear and
replacement of personalty in the normal course of business excepted), and from
time to time will make all proper repairs, maintenance, replacements, additions
and improvements thereto needed to maintain such properties in good operating
condition, working order and repair, and (b) comply with the provisions of all
material leases to which they are a party or under which they occupy property
so as to prevent any loss or forfeiture thereof or thereunder.
5.1.6 Insurance. Each of the Borrowers will, and will cause each of
their respective Subsidiaries to, at all times maintain with insurance
companies A-rated by A.M. Best or any other major rating company acceptable to
the Lender and the Borrowers, such insurance as is required by applicable Laws
and such other insurance, in such amounts, of such types and against such
risks, hazards, liabilities, casualties and contingencies as are usually
insured against in the same geographic areas by business entities engaged in
the same or similar business. Without limiting the generality of the foregoing,
each of the Borrowers will, and will cause each of their respective
Subsidiaries to, keep adequately insured all of their property against loss or
damage resulting from fire or other risks insured against by extended coverage
and maintain public liability insurance against claims for personal injury,
death or property damage occurring upon, in or about any properties occupied or
controlled by them, or arising in any manner out of the businesses carried on
by them, all in such amounts not less than the Lender shall reasonably
determine from time to time. Each of the Borrowers shall deliver to the Lender
on the Closing Date (and thereafter promptly after a material change in the
insurance coverage) a certificate of a Responsible Officer of such Borrower
containing a detailed list of the insurance then in effect and stating the
names of the insurance companies, the types, the amounts and rates of the
insurance, dates of the expiration thereof and the properties and risks covered
thereby. Within thirty (30) days after request by the Lender and notice in
writing from the Lender, each of the Borrowers will obtain such additional
insurance as the Lender may reasonably request.
5.1.7 Taxes. Except for sales and use taxes which are in dispute in
various jurisdictions and which will not have a material adverse effect on the
operation of any of the Borrowers and, except to the extent that the validity
or amount thereof is being contested in good faith and by appropriate
proceedings, each of the Borrowers will, and will cause each of their
respective Subsidiaries to, pay and discharge (a) all Taxes in an amount in
excess of One Hundred Thousand Dollars ($100,000) prior to the date when any
interest or penalty would accrue for the nonpayment thereof and (b) all Taxes
in an amount equal to or less than One Hundred Thousand Dollars ($100,000) not
later than thirty (30) days after the date when any interest or penalty would
accrue for the nonpayment thereof. Each of the Borrowers shall furnish to the
Lender at such times as the Lender may require proof satisfactory to the Lender
of the making of payments or deposits required by applicable laws with respect
to amounts withheld by each of the Borrowers from wages and salaries of
employees and amounts contributed by each of the Borrowers on account of
Federal and other income or wage taxes and amounts due under the Federal
Insurance Contributions Act, as amended.
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5.1.8 ERISA. Each of the Borrowers organized under the laws of a state
of the United States of America will comply, and cause each of their respective
Subsidiaries and Affiliates to comply, with the funding requirements of ERISA
with respect to employee pension benefit plans for its respective employees.
The Borrowers will not permit with respect to any employee benefit plan or
plans covered by Title IV of ERISA (a) any prohibited transaction or
transactions under ERISA or the Internal Revenue Code, which results, or may
result, in any material liability of the Borrowers and their Subsidiaries and
Affiliates, or (b) any reportable event under ERISA if, upon termination of the
plan or plans with respect to which one or more such reportable events shall
have occurred, there is or would be any material liability of the Borrowers and
their Subsidiaries and Affiliates to the PBGC. Upon any Lender's request, the
Company will deliver to the Lender a copy of the most recent actuarial report,
financial statements and annual report completed with respect to any "defined
benefit plan", as defined in ERISA.
5.1.9 Litigation. Each of the Borrowers will promptly notify the
Lender of any litigation instituted or threatened in writing against such
Borrower or any of its Subsidiaries and of the entry of any judgment or Lien
against any of the assets or properties of any of the Borrowers or their
respective Subsidiaries where the claims against such Borrower or Subsidiary
exceed Five Hundred Thousand Dollars ($500,000) individually or in the
aggregate and are not covered by insurance.
5.1.10 Notification of Events of Default and Adverse Developments.
Each of the Borrowers will promptly notify the Lender upon obtaining knowledge
of the occurrence of:
(a) any Event of Default;
(b) any Default;
(c) any event, development or circumstance whereby the most
recent financial statements furnished hereunder fail in any material respect to
present fairly, in accordance with GAAP, the financial condition and
operational results of the Company and its Subsidiaries as a whole;
(d) any judicial, administrative or arbitral proceeding
pending against such Borrower or any of its Subsidiaries and any judicial or
administrative proceeding known by such Borrower to be threatened against it or
any of its Subsidiaries which, if adversely decided, could materially adversely
affect the financial condition or operations (present or prospective) of the
Company and its Subsidiaries as a whole;
(e) any other development in the business or affairs of the
Company and its Subsidiaries as a whole which may be materially adverse; and
in each case describing in detail satisfactory to the Lender the nature thereof
and action such Borrower proposes to take with respect thereto.
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5.1.11 Hazardous Materials; Contamination. Each of the Borrowers
organized under the laws of a state of the United States of America agrees to
(a) give notice to the Lender promptly upon such Borrower's acquiring knowledge
of the presence of any Hazardous Materials on any property owned, leased,
operated or controlled by such Borrower or for which such Borrower is
responsible [(provided that such notice shall not be required for Hazardous
Materials placed or stored on such property in accordance with applicable Laws
in the ordinary course (including, without limitation, Laws governing the
quantity of Hazardous Materials which may be stored)] or of any Hazardous
Materials Contamination with a full description thereof; (b) promptly comply
with any Laws requiring the removal, treatment or disposal of Hazardous
Materials or Hazardous Materials Contamination and provide the Lender with
satisfactory evidence of such compliance; provide the Lender within thirty
(30) days after a demand by the Lender with a bond, letter of credit or similar
financial assurance evidencing to the Lender's satisfaction that the necessary
funds are available to pay the cost of removing, treating, and disposing of
such Hazardous Materials or Hazardous Materials Contamination and discharging
any Lien which may be established as a result thereof on any property owned,
leased, operated or controlled by such Borrower or for which such Borrower is
responsible (d) defend, indemnify and hold harmless the Lender and its agents,
employees, trustees, successors and assigns from any and all claims which may
now or in the future (whether before or after the termination of this
Agreement) be asserted as a result of the presence of any Hazardous Materials
on any property owned or controlled by such Borrower, or for which such
Borrower is responsible, for any Hazardous Materials Contamination. Each of
the Borrowers acknowledges and agrees that this indemnification shall survive
the termination of this Agreement
5.1.12 Disclosure of Significant Transactions. Each of the Borrowers
shall deliver to the Lender, a written report describing in detail each
transaction involving such Borrower's purchase, sale, lease, or other
acquisition or disposition of an interest in Fixed or Capital Assets which
exceeds One Million Dollars ($1,000,000), such reports to be delivered to the
Lender within ten (10) days of the occurrence of each such transaction.
5.1.13 Unrestricted Cash. The Borrowers shall maintain at all times
a ratio of unrestricted cash and investment grade marketable securities valued
at the lower of cost or market value, as determined in accordance with GAAP, to
borrowings under the Credit Facilities of not less than 1.20 to 1.00, on a
consolidated basis.
5.1.14 Fixed Charge Coverage Ratio. The Borrowers shall maintain at
all times on a consolidated basis a Fixed Charge Coverage Ratio of not less
than 2.00 to 1.00, as measured on a rolling four (4) quarter basis, using the
immediately preceding four (4) quarterly periods.
5.1.15 Subordination. Subject to the terms and conditions of this
Section, the payments of any and all past, present and future indebtedness,
liabilities and obligations of each of the Borrowers to each other of every
kind, nature and description (collectively, the "Subordinated Liabilities") is
hereby subordinated and postponed by each of the Borrowers to the payment of
the Obligations, provided, however, notwithstanding anything set forth in this
Agreement to the contrary, prior to the occurrence of a Default, the Borrowers
shall be permitted to make payments
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on account of any of the Subordinated Liabilities from time to time in
accordance with the terms thereof. The definition of Subordinated Liabilities
shall not include the payment of indebtedness, liabilities and obligations by
Manugistics U.K. Ltd. to any other Borrower, provided that Manugistics U.K.
Ltd. shall not make any such payment without the prior written consent of the
Lender, except for the payment of royalties to another Borrower arising from
Manugistics U.K. Ltd.'s grant of licenses to customers of software owned by
such Borrower. Each of the Borrowers agrees that the Obligations shall have
priority in payment, right and remedy over the Subordinated Liabilities.
Following the occurrence and during the continuance of a Default and without
the prior written consent of the Lender, none of the Borrowers shall ask,
demand, receive, accept, sue for, setoff, collect or enforce the Subordinated
Liabilities or any part thereof or any collateral and security therefor. Each
of the Borrowers represents and warrants to the Lender that the Subordinated
Liabilities are unsecured and each of the Borrowers agrees not to receive or
accept any collateral or security for the Subordinated Liabilities without the
prior written permission of the Lender. Without the prior written consent of
the Lender, none of the Borrowers shall assign, transfer, hypothecate or
dispose of the Subordinated Liabilities while this Agreement is in effect,
except by means of assignment to another Borrower, cancellation or forgiveness.
In the event of any distribution, division or application, partial or complete,
voluntary or involuntary, by operation of law or otherwise, of all or any part
of the assets of any or all of the Borrowers or the proceeds thereof to
creditors of any or all of the Borrowers or to any indebtedness, liabilities
and obligations of any or all of the Borrowers, by reason of the liquidation,
dissolution or other winding up of any or all of the Borrowers or the business
of the Borrowers, or in the event of any sale, receivership, insolvency or
bankruptcy proceeding, or assignment for the benefit of creditors, or any
proceeding by or against any or all of the Borrowers for any relief under the
Bankruptcy Code or insolvency law or other laws relating to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions or
extensions, then and in any such event any payment or distribution of any kind
or character, either in cash, securities or other property, which shall be
payable or deliverable upon or with respect to all or any part of the
Subordinated Liabilities shall be paid or delivered directly to the Lender for
application to the Obligations (whether due or not due and in such order and
manner as provided in Section 6.2.2) until the Obligations shall have been
fully paid and satisfied. Each of the Borrowers hereby irrevocably authorizes
and empowers the Lender upon the occurrence and during the continuance of a
Default to demand, sue for, collect and receive every such payment or
distribution and give acquittance therefor and to file claims and take such
other proceedings in the Lender's own name or in the name of the Borrowers or
otherwise, for the benefit of itself and the Lender, as the Lender may deem
necessary or advisable to carry out the provisions of this Section. Each of the
Borrowers hereby agrees to execute and deliver to the Lender, such powers of
attorney, assignments, endorsements or other instruments as may be required by
the Lender for the benefit of itself and the Lender to enforce any and all
claims upon or with respect to the Subordinated Liabilities, and to collect and
receive any and all payments or distributions which may be payable or
deliverable at any time upon or with respect to the Subordinated Liabilities.
Should any payment or distribution not permitted by the provisions of
this Section or security or proceeds thereof be received by any of the
Borrowers upon or with respect to all or any part of the Subordinated
Liabilities prior to the full payment and satisfaction of the
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Obligations, such Borrower will deliver the same to the Lender in precisely the
form received (except for the endorsement or assignment of any or all of the
Borrowers where necessary), for application to the Obligations (whether due or
not due and in such order and manner as provided in Section 6.2.2), and, until
so delivered, the same shall be held in trust by such Borrower as property of
the Lender. In the event of the failure of the Borrowers to make any such
endorsement or assignment, the Lender, or any of its officers or employees on
behalf of the Lender, is hereby irrevocably authorized to make the same.
So as to secure the performance by the Borrowers of the provisions of
this Section and the payment of the Obligations, each of the Borrowers assigns,
pledges, and grants to the Lender, a security interest in the Subordinated
Liabilities, all proceeds thereof and all and any security and collateral
therefor, provided, however, that the Lender shall not exercise any rights
under the security interest granted pursuant to this Section prior to the
occurrence of a Default. Upon the request of the Lender, after the occurrence
of a Default, the Borrowers (or any of them) shall endorse, assign and deliver
to the Lender in a manner acceptable to the Lender all such collateral and
security and all notes, instruments and agreements evidencing, securing,
guarantying or made in connection with the Subordinated Liabilities. In the
event of the failure of the Borrowers to make any such endorsement, assignment
or delivery, the Lender, or any of its officers or employees on behalf of the
Lender, is hereby irrevocable authorized to make the same.
SECTION 5.2 Negative Covenants. So long as any of the Obligations (or
Commitments therefor) shall be outstanding hereunder, each of the Borrowers
covenants and agrees with the Lender that, without the prior written consent of
the Lenders:
5.2.1 Merger, Acquisition, Sale of Assets or Joint Ventures;
Subsidiaries. None of the Borrowers or any of their respective Subsidiaries
will directly or indirectly (a) enter into any merger or consolidation or
amalgamation, windup or dissolve itself (or suffer any liquidation or
dissolution) or (b) acquire all or substantially all of the assets or business
of any Person or enter into any joint venture (for purposes of this Agreement,
a "Purchase"), except that any of the Borrowers may make a Purchase, provided,
(i) the total cash consideration agreed to be paid by all of the Borrowers for
any Purchase consummated does not exceed Seven Million Five Hundred Thousand
Dollars ($7,500,000) per Purchase (the "Purchase Cap"), excluding any payments
that are contingent upon future performance or revenues, regardless of whether
the entire amount of such consideration is actually paid at the time of such
Purchase, (ii) such Purchases do not result in the occurrence of an Event of
Default, after giving effect to such Purchases, and (iii) such Purchases are
consistent with the Borrowers' principal line of business of the development,
marketing, sale and support of computer software, and (iv) the Company and its
Subsidiaries are the surviving entities, or (c) convey, sell, lease, license,
assign, transfer or otherwise dispose of its assets, properties or business, or
permit any Subsidiary so to do, except that, prior to a Default, any of the
Borrowers may sell (i) accounts receivables for licenses or leases of software
(excluding services and maintenance) in an amount not to exceed fifteen percent
(15%) of total accounts receivables on an annual basis based on an average of
the prior four (4) fiscal quarters, and (ii) goods or license intellectual
property in the ordinary course of
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business, personal property subject to ordinary wear and tear may be disposed
of in the normal course of business and except that, upon prior written notice
to the Lender, a Wholly Owned Subsidiary may be (a) merged or consolidated with
one or more other Wholly Owned Subsidiaries or into any of the Borrowers or (b)
dissolved or liquidated. None of the Borrowers shall create or otherwise
acquire any Subsidiary, except for those Subsidiaries in existence as of the
date hereof and previously disclosed in writing to the Lender, any Wholly Owned
Subsidiary now or hereafter created and disclosed to the Lender in writing, and
any Wholly Owned Subsidiary which is the subject of or created specifically to
effect a Purchase. The Company shall cause any Subsidiaries now or hereafter
existing to execute and deliver all documents reasonably deemed necessary by
the Lender to evidence such Subsidiary's assumption of the Obligations and
joinder in the Financing Agreements, jointly and severally, with the Borrowers.
5.2.2 Purchase or Redemption of Securities, Dividend Restrictions.
None of the Borrowers will:
(a) purchase, redeem or otherwise acquire any shares of its capital
stock or warrants now or hereafter outstanding, except in connection with a
Purchase, in which case the value of such shares (as determined by the Lender
in its reasonable discretion) shall be included in the calculation of the
Purchase Cap;
(b) declare or pay any dividends on (other than stock dividends) any
shares of any class of capital stock of such Borrower, unless such dividends
are paid exclusively to one or more of the Borrowers;
(c) apply any of its property or assets to the purchase, redemption or
other retirement of any shares of any class of capital stock of such Borrower,
except as permitted in (a) above;
(d) set apart any sum for the payment of any dividends on, or, for the
purchase, redemption, or other retirement of any shares of any class of capital
stock of such Borrower, except as permitted in (a) above;
(e) make any distribution by reduction of capital or otherwise in
respect of, any shares of any class of capital stock of such Borrower, or any
warrants;
(f) permit any Subsidiary to purchase or acquire any shares of any
class of capital stock of, or warrants issued by, such Borrower, except as
permitted in (a) above,
(g) make any distribution to stockholders or set aside any funds for
any such purpose, unless such dividends are paid exclusively to one or more of
the Borrowers; and
(h) prepay, purchase or redeem any Indebtedness for Borrowed Money
other than the Obligations, except for the prepayment of intercompany loans by
means of assignment to another Borrower, or by cancellation or forgiveness of
such Indebtedness.
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The Borrowers' rights to repurchase capital stock or warrants shall be
conditioned on such repurchase not resulting in the occurrence of an Event of
Default, after giving effect to such repurchase.
5.2.3 Indebtedness. None of the Borrowers will create, incur, assume
or suffer to exist any Indebtedness for Borrowed Money, or permit any
Subsidiary so to do, except:
(a) the Obligations;
(b) current accounts payable arising in the ordinary course
of business of such Borrower and its Subsidiaries;
(c) Indebtedness of such Borrower or any of its Subsidiaries
secured by Permitted Liens;
(d) Subordinated Indebtedness;
(e) Subordinated Liabilities;
(f) Capitalized lease obligations;
(g) Indebtedness for Borrowed Money of such Borrower and its
Subsidiaries existing on the date hereof and reflected on the financial
statements furnished pursuant to Section 3.1.7 and any renewals, refinancings
or replacements thereof; and
(h) Indebtedness of any Borrower or Subsidiaries incurred
after the date of this Agreement, provided that (i) the aggregate principal
amount of all such Indebtedness of the Borrowers and their Subsidiaries taken
as a whole does not exceed One Million Five Hundred Thousand Dollars
($1,500,000), (ii) such Indebtedness is unsecured and (iii) such Indebtedness
has a maturity of not less than one hundred eighty (180) days beyond the
maturity of the Loans.
5.2.4 Investments; Loans and Other Transactions. Except as otherwise
provided herein, none of the Borrowers will, nor will it permit any of their
Subsidiaries to, (a) make, assume, acquire or continue to hold any investment
in any real property (unless used in connection with its business and treated
as a Fixed or Capital Asset of such Borrower or the Subsidiary) or in any
Person, whether by stock purchase, capital contribution, acquisition of
indebtedness of such Person or otherwise (including, without limitation,
investments in any joint venture or partnership), or (b) guaranty or otherwise
become contingently liable for the Indebtedness or obligations of any Person,
or make any loans or advances, or otherwise extend credit to any Person,
except:
(a) advances to employees of the Borrowers or of any
Subsidiary for travel or other business expenses in the ordinary course of
business not exceeding One Hundred and Fifty
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Thousand Dollars ($150,000) per employee for all Borrowers and Subsidiaries and
Three Hundred Thousand Dollars ($300,000) in the aggregate for all Borrowers
and Subsidiaries;
(b) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(c) the investments of the Borrowers or the Subsidiaries in
Cash Equivalents;
(d) trade credit extended to customers in the ordinary course
of business and inter-company indebtedness between the Borrowers and
Subsidiaries;
(e) guaranties by any of the Borrowers or Subsidiaries of
obligations of any of the other Borrowers or any Subsidiaries thereof; and
(f) marketable securities which are (a) traded or listed on a
public exchange, (b) are readily liquid, (c) if applicable, carry an investment
grade of A (or its equivalent) or better, and (d) conform with the Company's
Investment Policy.
5.2.5 Stock of Subsidiaries. None of the Borrowers will sell or
otherwise dispose of any shares of capital stock of any of their respective
Subsidiaries (except in connection with a merger or consolidation of a Wholly
Owned Subsidiary into one of the Borrowers or with another Wholly Owned
Subsidiary or with the dissolution of any Subsidiary) or permit any Subsidiary
to issue any additional shares of its capital stock except (a) pro-rata to its
stockholders or (b) directors or foreign residents' shares.
5.2.6 Subordinated Indebtedness. None of the Borrowers will make, nor
will it permit any of its Subsidiaries to make:
(a) at any time any payment of principal of, or interest on,
any of the Subordinated Indebtedness, if an Event of Default then exists
hereunder or would result from such payment;
(b) at any time, any payment of the principal or interest due
on the Subordinated Indebtedness as a result of acceleration thereunder or a
mandatory prepayment thereunder;
(c) at any time, any amendment or modification of or
supplement to the documents evidencing or securing the Subordinated
Indebtedness; and
(d) at any time, payment of principal or interest on the
Subordinated Indebtedness other than when due (without giving effect to any
acceleration of maturity or mandatory prepayment), except by means of
assignment to a Borrower or cancellation or forgiveness of intercompany
Indebtedness.
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5.2.7 Liens. None of the Borrowers will create, incur, assume or
suffer to exist any Lien upon any of its properties or assets, whether now
owned or hereafter acquired, or permit any of its Subsidiaries so to do, except
for Permitted Liens.
5.2.8 Other Businesses. None of the Borrowers nor any of their
Subsidiaries will engage directly or indirectly in any business other than as
described in Section 5.1.4 hereof.
5.2.9 Prohibition on Hazardous Materials. None of the Borrowers nor
any of their Subsidiaries shall place, manufacture or store or permit to be
placed, manufactured or stored any Hazardous Materials on any property owned,
leased, operated or controlled by such Borrower or for which such Borrower is
responsible other than Hazardous Materials placed or stored on such property in
accordance with applicable Laws in the ordinary course (including, without
limitation, Laws governing the quantity of Hazardous Materials).
5.2.10 Fiscal Year Changes. None of the Borrowers will change the
period of measurement for any of its Fiscal Years.
5.2.11 Change in Management. None of the Borrowers will change its
Senior Management without the Lender's prior written consent.
ARTICLE 6
DEFAULT AND RIGHTS AND REMEDIES
SECTION 6.1 Default. The occurrence of any one or more of the
following events shall constitute a default ("Default") under the provisions of
this Agreement:
6.1.1 Payment of Obligations. The failure of the Borrowers to pay any
of the Obligations as and when due and payable in accordance with the
provisions of this Agreement, the Note and/or any of the other Financing
Documents.
6.1.2 Perform Provisions of this Agreement. The failure of the
Borrowers to perform, observe or comply with any of the provisions of this
Agreement.
6.1.3 Representations and Warranties. If any representation and
warranty contained herein or in any statement or representation made in any
officer's certificate or in any other information at any time given by or on
behalf of any of the Borrowers or furnished in connection with this Agreement
or any of the other Financing Documents shall prove to be false or incorrect in
any material respect on the date as of which made.
6.1.4 Default under Other Financing Documents. The occurrence of a
default under the provisions of the Note or any of the other Financing
Documents which is not cured within applicable cure periods, if any.
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6.1.5 Liquidation, Termination, Dissolution, Change in Management,
Etc. Except as specifically permitted hereunder, if any of the Borrowers shall
liquidate, dissolve or terminate its existence or any change occurs in the
control of any of the Borrowers without the prior written consent of the
Lender.
6.1.6 Default under Other Indebtedness. If any of the Borrowers or any
Subsidiary: (a) defaults in any payment of any Indebtedness for Borrowed Money
(other than Indebtedness for Borrowed Money owed to a Wholly Owned Subsidiary)
in excess of One Hundred Thousand Dollars ($100,000) beyond the period of
grace, if any, provided in the instrument or agreement under which the
Indebtedness for Borrowed Money was created, including, without limitation, any
of the Subordinated Indebtedness, or
(b) defaults in the observance or performance of any other
material agreement or condition relating to any Indebtedness in excess of One
Hundred Thousand Dollars ($100,000) or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur the
effect of which default or other event is to cause or to permit the holder or
holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice and the
failure to cure within any applicable cure period, if required, the
Indebtedness to become due prior to its stated maturity.
6.1.7 Inability to Pay Debts, Etc. If any of the Borrowers or any
Subsidiary shall admit in writing its inability generally to pay its debts as
they mature or shall make any assignment for the benefit of any of its
creditors.
6.1.8 Bankruptcy. If proceedings in bankruptcy, or for reorganization
of any of the Borrowers or any Subsidiary, or for the readjustment of any of
their respective debts, under the Bankruptcy Code, as amended, or any part
thereof, or under any other applicable Laws, whether state or federal, for the
relief of debtors, now or hereafter existing, shall be commenced against or by
any of the Borrowers or a Subsidiary and, except with respect to any such
proceedings instituted by any of the Borrowers or a Subsidiary, shall not be
discharged within sixty (60) days of their commencement.
6.1.9 Receiver, Etc. A receiver or trustee shall be appointed for any
of the Borrowers or any Subsidiary or for any substantial part of their
respective assets, or any proceedings shall be instituted for the dissolution
or the full or partial liquidation of any of the Borrowers or any Subsidiary
and, except with respect to any such appointments requested or instituted by
any of the Borrowers or any Subsidiary, such receiver or trustee shall not be
discharged within sixty (60) days of his appointment, and, except with respect
to any such proceedings instituted by any of the Borrowers or a Subsidiary,
such proceedings shall not be discharged within sixty (60) days of their
commencement.
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6.1.10 Financial Condition. The occurrence of any change in the
financial condition of the Company and its Subsidiaries taken as a whole which
in the good faith judgment of the Lender is materially adverse.
SECTION 6.2 Rights and Remedies, Etc.
6.2.1 General Rights and Remedies. Upon the occurrence of a Default
specified in Sections 6.1.8 and 6.1.9 above, the Commitments shall immediately
and automatically terminate and the unpaid principal amount of the Note (with
accrued interest thereon) and all other Obligations then outstanding, shall
immediately become due and payable without further action of any kind and
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrowers. If any other Default shall occur
hereunder, then in each and every such case, the Lender, may at any time
thereafter while such Default is continuing do any one or more of the
following:
(a) terminate any or all of the Commitments;
(b) declare without notice to the Borrowers the unpaid
principal amount of all or the Note (with accrued interest thereon) and all
other Obligations to be immediately due and payable, whereupon the same shall
forthwith become due and payable, without presentment, demand, protest or
notice of any kind, all of which the Borrowers hereby expressly waive; or
(c) exercise any rights and remedies available to the Lender
under this Agreement, the Note, the other Financing Documents and applicable
Laws.
6.2.2 Enforcement Costs and Proceeds. The Borrowers agree to pay to
the Lender all Enforcement Costs paid or incurred by the Lender in exercising
any rights and remedies available under the provisions of this Agreement, the
Note, the other Financing Documents and applicable Laws. All Enforcement Costs,
together with interest thereon from the date incurred or advanced until paid in
full at a per annum rate of interest equal at all times to the Post-Default
Rate, shall be paid by the Borrowers to the Lender whenever demanded by the
Lender after notice by the Lender.
Any proceeds of the collection of the Obligations will be applied by
the Lender first to the payment of any and all unpaid Enforcement Costs, and
any balance of such proceeds (if any) will be applied by the Lender to the
payment of the remaining Obligations (whether then due or not), at such time or
times and in such order and manner of application as the Lender may from time
to time in their sole discretion determine.
6.2.3 Performance by Lender and the Lender. If the Borrowers shall
fail to pay the Obligations or otherwise fail to perform, observe or comply
with any of the conditions, covenants, terms, stipulations or agreements
contained in this Agreement, or any of the other Financing Documents, the
Lender without notice to or demand upon any of the Borrowers and without
waiving or releasing any of the Obligations or any Default, may (but shall be
under no
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obligation to) at any time thereafter and during the continuance of an Event of
Default, make such payment or perform such act for the account and at the
expense of the Borrowers, and may enter upon the premises of any of the
Borrowers for that purpose and take all such action thereon as the Lender may
consider necessary or appropriate for such purpose. The Borrowers hereby
jointly and severally appoint the Lender or the Lender's designee as their
attorney-in-fact for the purposes of effecting, during the continuance of a
Default, any or all of the provisions of this subsection, in the Lender's name
or in the name of the Borrowers, such appointment being coupled with an
interest and being irrevocable. All acts of said attorney are hereby ratified
and approved and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake, except those
caused by his own gross negligence or willful misconduct. All sums so paid or
advanced by the Lender and all costs and expenses incurred in connection
therewith are part of the Enforcement Costs, together with interest thereon
from the date of payment, advance or incurring until paid in full at the
Post-Default Rate, shall be paid by the Borrowers to the Lender on demand and
shall constitute and become a part of the Obligations.
6.2.4 Offset. Upon the occurrence of a Default (and in addition to all
of its rights, powers and remedies under this Agreement), the Lender is
authorized to offset and apply to all or any part of the Obligations all
moneys, credits and other property of any nature whatsoever of the Borrowers
now or at any time hereafter in the possession of, in transit to or from, under
the control or custody of, or on deposit with, the Lender.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Course of Dealing; Amendment. No course of dealing between
the Borrowers and the Lender shall be effective to amend, modify or change any
provision of this Agreement or the other Financing Documents. The Lender shall
have the right at all times to enforce the provisions of this Agreement and the
other Financing Documents in strict accordance with the terms hereof and
thereof, notwithstanding any conduct or custom on the part of the Lender in
refraining from so doing at any time or times. The failure or delay of the
Lender at any time or times to enforce the rights under such provisions,
strictly in accordance with the same, shall not be construed as having created
a custom in any way or manner contrary to specific provisions of this Agreement
or as having in any way or manner modified or waived the same. Subject to the
provisions of Section 7.10, this Agreement and the other Financing Documents
may not be amended, modified, or changed in any respect except by an agreement
in writing signed by the Lender and the Borrowers.
SECTION 7.2 Waiver, Cumulative Remedies. The Lender may, at any time
and from time to time, execute and deliver to the Borrowers a written
instrument waiving, on such terms and conditions as the Lender may specify in
such written instrument, any of the requirements of this Agreement or of the
other Financing Documents or any Default or Event of Default and its
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consequences, provided, that any such waiver shall be for such period and
subject to such conditions as shall be specified in any such instrument. In the
case of any such waiver, the Borrowers, the Lender shall be restored to their
former positions prior to such Default or Event of Default and shall have the
same rights as they had hereunder. No such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereto and shall be effective only in the specific instance and for the
specific purpose for which given. The rights, powers and remedies provided in
this Agreement, the Note, and in the other Financing Documents are cumulative,
may be exercised concurrently or separately, may be exercised from time to time
and in such order as the Lender shall determine, subject to the provisions of
this Agreement, and are in addition to, and not exclusive of, rights, powers
and remedies provided by applicable Laws. Without limiting the generality of
the foregoing, the Lender shall:
(a) proceed against any of the Borrowers with or without
proceeding against any other Person which may be liable for all or any part of
the Obligations;
(b) proceed against any of the Borrowers with or without
proceeding under any of the other Financing Documents;
(c) without reducing or impairing the obligation of any of the
Borrowers and without notice, release or compromise with any guarantor or other
Person liable for all or any part of the Obligations under the Financing
Documents or otherwise; or
(d) without reducing or impairing the obligations of any of
the Borrowers and without notice thereof: (i) approve the making of Revolving
Loans under this Agreement, (ii) waive any provision of this Agreement or the
other Financing Documents, (iii) exercise or fail to exercise rights of set-off
or other rights, or (iv) accept partial payments or extend from time to time
the maturity of all or any part of the Obligations.
SECTION 7.3 Notices. All notices, requests and demands to or upon the
parties to this Agreement shall be deemed to have been given or made when
delivered by hand, or three (3) Business Days after the date when deposited in
the mail, postage prepaid by registered or certified mail, return receipt
requested, or when sent by overnight courier, on the Business Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows or to such other address as may be hereafter designated in
writing by one party to the other:
Borrowers: c/o Manugistics Group, Inc.
2115 East Jefferson Street
Rockville, Maryland 20852
Attn: Peter Q. Repetti
Chief Financial Officer
Lender: NationsBank, N.A.
6610 Rockledge Drive
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Bethesda, Maryland 20817
Attn: Barbara Deily
Vice President
With a copy to:
Ober, Kaler, Grimes and Shriver
1401 H Street, N.W.
Suite 500
Washington, D.C. 20005
Attn: Richard M. Pollak, Esq.
Except in cases where it is expressly herein provided that such notice, request
or demand is not effective until received by the party to whom it is addressed.
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include
a street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
SECTION 7.4 Management and Administration by Lender. The Borrowers
further agree to pay on demand all reasonable costs and expenses, (including
reasonable counsel fees and expenses) of the Lender, in connection with all the
waivers, consents and amendments of this Agreement and the other Financing
Documents requested by the Borrowers. All of the advances, expenditures, costs
and expenses described in this subsection shall bear interest payable on demand
by the Borrowers from the date paid or incurred until paid in full at the
Post-Default Rate.
SECTION 7.5 Consent to Jurisdiction, Etc. (a) Each of the Borrowers
irrevocably submits to the jurisdiction of any state or federal court sitting
in the State of Maryland over any suit, action or proceeding arising out of or
relating to this Agreement, the Note or any of the other Financing Documents.
Each of the Borrowers irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon each
of the Borrowers and may be enforced in any court to the jurisdiction of which
any of the Borrowers are subject, by a suit upon such judgment, provided that
service of process is effected upon each of the Borrowers in one of the manners
specified in this Section or as otherwise permitted by applicable Laws.
(b) Each of the Borrowers hereby irrevocably designates and
appoints Peter Q. Repetti, c/o Manugistics, Inc., 2115 East Jefferson Street,
Rockville, Maryland 20852, as such Borrower's authorized agent to receive on
such Borrower's behalf service of any and all process that may be served in any
suit, action or proceeding of the nature referred to in this Section in
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any state or federal court sitting in the State of Maryland. If such an agent
shall cease so to act, each of the Borrowers shall irrevocably designate and
appoint without delay another such agent in the State of Maryland satisfactory
to the agent and shall promptly deliver to the agent evidence in writing of
such other agent's acceptance of such appointment and its agreement that such
appointment shall be irrevocable.
Each of the Borrowers hereby consents to process being served
in any suit, action or proceeding of the nature referred to in this Section by
(i) the mailing of a copy thereof by registered or certified mail, postage
prepaid, return receipt requested, to such Borrower at such Borrower's address
designated in or pursuant to Section 7.3 hereof, and (ii) serving a copy
thereof upon the agent designated and appointed by such Borrower as such
Borrower's agent for service of process by or pursuant to this Section. Each of
the Borrowers irrevocably agrees that such service (i) shall be deemed in every
respect effective service of process upon such Borrower in any such suit,
action or proceeding, and (ii) shall, to the fullest extent permitted by law,
be taken and held to be valid personal service upon such Borrower. Nothing in
this Section shall affect the right of the Lender to serve process in any
manner otherwise permitted by law or limit the right of the Lender otherwise to
bring proceedings against the Borrowers in the courts of any jurisdiction or
jurisdictions.
SECTION 7.6 WAIVER OF TRIAL BY JURY. EACH OF THE BORROWERS, AND THE
LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO WHICH THE BORROWERS AND THE LENDER MAY BE PARTIES, ARISING OUT OF
OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, OR (B) ANY OF THE FINANCING
DOCUMENTS. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS
AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST
PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY EACH OF
THE BORROWERS, THE LENDER AND EACH OF THE BORROWERS AND THE LENDER HEREBY
REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY
INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR
NULLIFY ITS EFFECT. EACH OF THE BORROWERS AND THE LENDER FURTHER REPRESENT THAT
THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING
OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL,
AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
SECTION 7.7 Costs and Expenses. Each of the Borrowers agrees:
(a) To pay upon demand therefor, all reasonable costs and
expenses of the Lender in connection with the preparation, execution and
delivery of this Agreement and the other Financing Documents and all
amendments, modifications, restatements, substitutions, extensions
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and renewals thereof, including the reasonable fees and out-of-pocket expenses
of counsel for the Lender (supported by detailed invoices indicating all time
and expense entries);
(b) To pay upon demand any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution and
delivery of this Agreement, the Note, the other Financing Documents; and
(c) To save the Lender harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission
to pay any taxes or fees referred to in this Section, provided that such delay
is not the direct result of the gross negligence or wilful misconduct of the
Lender.
All costs, expenses, taxes and fees described in this Section shall be part of
the Enforcement Costs and shall bear interest, payable by the Borrowers on
demand, from the date due until paid in full at the Post-Default Rate.
SECTION 7.8 Severability. In case one or more provisions contained in
this Agreement or in the other Financing Documents shall be invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions contained herein and in the other
Financing Documents shall remain effective and binding on the parties thereto
and shall not be affected or impaired thereby.
SECTION 7.9 Assignment, Etc. The Lender may, without notice to, or
consent of, the Borrowers, sell, assign or transfer all or any part of the
Obligations, and each such Person or Persons to which the obligations are
transferred shall have the right to enforce the provisions of this Agreement,
the Note and any of the other Financing Documents as fully as the Lender,
provided that the Lender shall continue to have the unimpaired right to enforce
the provisions of this Agreement, the Note and any of the other Financing
Documents as to so much of the Obligations that the Lender has not sold,
assigned or transferred and to the extent such Lender would be entitled to do
so under the provisions of this Agreement. The Lender may, without notice to or
consent of the Borrowers, sell participation in all or any part of the
Obligations. Subject to the provisions of Section 7.18 hereof, in connection
with the foregoing, the Lender shall have the right to divulge to any such
actual or potential purchaser, assignee, transferee or participant all
information, reports, financial statements and documents obtained in connection
with this Agreement, the Note and any of the other Financing Documents or
otherwise.
SECTION 7.10 Survival. All representations, warranties and covenants
contained among the provisions of this Agreement shall survive the execution
and delivery of this Agreement, the Note and all other Financing Documents,
until this Agreement, as amended, may be terminated.
SECTION 7.11 Binding Effect. This Agreement, the Note and all other
Financing Documents shall be binding upon and inure to the benefit of the
Borrowers, the Lender and its successors and assigns, except that the Borrowers
shall not have the right to assign its or their rights hereunder or any
interest herein without the prior written consent of the Lender.
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SECTION 7.12 Applicable Law. As a material inducement to the Lender to
enter into this Agreement, the Borrowers acknowledge and agree that the
Financing Documents, including this Agreement, shall be governed by the Laws of
the State of Maryland, as if each of the Financing Documents and this Agreement
had each been executed, delivered, administered and performed solely within the
State of Maryland, even though for the convenience and at the request of the
Borrowers, one or more of the Financing Documents may be executed elsewhere and
even though day-to-day administration of the Loans may be conducted by one of
the Lender's offices not in the State of Maryland. The Lender acknowledges,
however, that remedies under certain of the Financing Documents which relate to
property outside the State of Maryland may be subject to the laws of the State
in which the property is located.
SECTION 7.13 Duplicate Originals and Counter Parts. This Agreement may
be executed in any number of duplicate originals or counterparts, each of such
duplicate originals or counterparts shall be deemed to be an original and all
taken together shall constitute but one and the same instrument.
SECTION 7.14 Exhibits and Schedules. Any exhibits and schedules
attached to this Agreement are an integral part hereof and are hereby
incorporated herein and included in the term "this Agreement".
SECTION 7.15 Headings. Article, Section and subsection headings in
this Agreement are included herein for convenience of reference only, shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
SECTION 7.16 No Agents. Nothing herein contained shall be construed to
constitute any of the Borrowers as the agent of the Lender for any purpose
whatsoever or to permit any of the Borrowers to pledge any of the Lender's
credit. The Lender shall not, by anything herein or in any of the Financing
Documents or otherwise, assume any of the Borrowers' obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof.
SECTION 7.17 Right of Contribution. The Borrowers and the Lender agree
that on and after the Closing Date, each Borrower (an "Entitled Borrower")
shall be entitled to contribution from each other Borrower to the extent, if
any, that (a) an Entitled Borrower incurs any Obligations in excess of such
Entitled Borrowers Net Valuation (as hereinafter defined) or (b) the
Obligations incurred by such Entitled Borrower would leave such Entitled
Borrower with an unreasonably small amount of capital to enable the Entitled
Borrower to operate the business in which it is engaged, and/or the Obligations
incurred by such Entitled Borrower prevent such Entitled Borrower from paying
its debts as such debts mature; provided, however, that such right of
contribution shall be subordinated to the payment of the Obligations and may
not be exercised by any Borrower until all of the Obligations have been paid in
full. Nothing in this Section shall be deemed to in any manner impair the joint
and several liability of each Borrower for any and all of the Obligations. The
provisions of this Section shall be in addition to and shall in no
40
<PAGE> 42
manner limit any other rights of contribution available to any Borrower. The
term "Net Valuation" as used in this Section means the amount by which (1) an
Entitled Borrower's property at a fair valuation exceeds (2) such Entitled
Borrower's debts.
SECTION 7.18 Confidential Information. The Lender will endeavor
in good faith to maintain the confidentiality of any non-public information
relating to the Borrowers (the "Confidential Information") and, except as
provided below, will exercise the same degree of care that the Lender exercises
with respect to their own proprietary information to prevent the unauthorized
disclosure of the confidential information to third parties. Confidential
information shall not include information that either: (a) is in the public
domain or in the knowledge or possession of the Lender when disclosed to the
Lender, or becomes part of the public domain after disclosure to the Lender
through no fault of the Lender; or (b) is disclosed to the Lender by a third
party, provided the Lender does not have actual knowledge that such third party
is prohibited from disclosing such information. The terms of this Section
shall not apply to disclosure of Confidential Information by the Lender that
is, in the good faith opinion of the Lenders, compelled by laws regulations,
rules, order or legal process or proceedings or is disclosed to: (i) a
prospective assignee of the Lender's interest hereunder (as permitted by
Section 7.9 hereof) who has signed a confidentiality agreement containing terms
substantially similar to those contained herein; (ii) legal counsel, examiners,
accountants, auditors and directors of the Lender and examiners, auditors and
investigators having regulatory authority over the Lender; or (iii) any party
in connection with the exercise of remedies by the Lender after default in the
performance of the Borrowers' obligations to the Lender.
[INTENTIONALLY LEFT BLANK]
41
<PAGE> 43
IN WITNESS WHEREOF, each of the parties hereto have executed and
delivered this Agreement under their respective seals as of the day and year
first written above.
THE BORROWERS:
WITNESS OR ATTEST: MANUGISTICS GROUP, INC.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: President, CEO, Chairman
WITNESS OR ATTEST: MANUGISTICS, INC.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: President, CEO, Chairman
WITNESS OR ATTEST: THE ROVER TECHNOLOGY COMPANY
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: Chairman, CEO
WITNESS OR ATTEST: MANUGISTICS FRANCE S.A.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: Director
WITNESS OR ATTEST: MANUGISTICS, INC. FOREIGN SALES
CORPORATION
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: President, Director
<PAGE> 44
WITNESS OR ATTEST: MANUGISTICS U.K. LTD
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: President, Director
WITNESS OR ATTEST: MANUGISTICS CANADA LTD
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: President, Director
WITNESS OR ATTEST: MANUGISTICS (DEUTSCHLAND) GmbH
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: Managing Director
WITNESS OR ATTEST: MANUGISTICS EUROPEAN HOLDING
COMPANY B.V.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: Managing Director
WITNESS OR ATTEST: MANUGISTICS COLORADO, INC.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON
- -------------------------- -----------------------
Name: William M. Gibson
Title: President, Director
<PAGE> 45
THE LENDER:
NATIONSBANK, N.A.
/s/ SEAN BUTSON By: /s/ BARBARA DEILY
- -------------------------- -----------------------
Barbara Deily
Vice President
<PAGE> 1
EXHIBIT 10.22
REVOLVING PROMISSORY NOTE
<PAGE> 2
REVOLVING PROMISSORY NOTE
$10,000,000 Bethesda, Maryland
September 30, 1996
FOR VALUE RECEIVED, MANUGISTICS GROUP, INC., a corporation organized
under the laws of the State of Delaware, MANUGISTICS, INC., a corporation
organized under the laws of the State of Delaware, THE ROVER TECHNOLOGY
COMPANY, a corporation organized under the laws of the State of Delaware,
MANUGISTICS FRANCE S.A., a corporation organized under the laws of France,
MANUGISTICS, INC. FOREIGN SALES CORPORATION, a corporation organized under the
laws of the United States Virgin Islands, MANUGISTICS U.K. LTD., a limited
liability company incorporated under the laws of England and doing business
under the name Manugistics Europe Ltd., MANUGISTICS CANADA LTD., a corporation
organized under the laws of the Province of Ontario, Canada, MANUGISTICS
(DEUTSCHLAND) GMBH, a limited liability company organized under the laws of the
Federal Republic of Germany, MANUGISTICS EUROPEAN HOLDING COMPANY B.V. a
limited liability company organized under the laws of The Netherlands,
MANUGISTICS COLORADO, INC., a corporation organized under the laws of the State
of Delaware (collectively, the "Borrowers" and each a "Borrower"), jointly and
severally, promise to pay to the order of NATIONSBANK, N.A., a national banking
association (the "Lender"), the principal sum of TEN MILLION DOLLARS
($10,000,000) (the "Principal Sum"), or so much thereof as has been or may be
advanced or readvanced to or for the account of the Borrowers pursuant to the
terms and conditions of the Financing Agreement (as hereinafter defined),
together with interest thereon at the rate or rates hereinafter provided, in
accordance with the following:
1. INTEREST. Commencing as of the date hereof and continuing
until repayment in full of all sums due hereunder, the unpaid Principal Sum
shall bear interest at the fluctuating prime rate of interest established and
declared by the Lender from time to time (the "Prime Rate"); provided,
however, upon election made by any of the Borrowers in writing delivered to the
Lender not less than five (5) Business Days prior to the effective date of such
election (an "Interest Rate Election"), interest on the outstanding Principal
Sum shall accrue at a fixed rate equal to the London Interbank Offered Rate for
three (3) or six (6) month U.S. Dollar deposits as quoted by the Lender as of
11:00 A.M. (Washington, D.C. time), which rate shall be adjusted for any
Federal Reserve Board reserve requirements imposed upon the Lender from time to
time ("LIBOR"), plus one hundred fifty (150) basis points (the "LIBOR Rate").
The length of the interest rate period shall be selected by the Borrowers in
the Interest Rate Election.
In respect to any Interest Rate Election hereunder and any
transactions contemplated hereby, each of the Borrowers authorizes the Lender
to accept, rely upon, act upon and comply with, any verbal or written
instructions, requests, confirmations and orders of a Responsible Officer on
behalf of the Borrowers. Each of the Borrowers acknowledges that the
transmission between the Borrowers and the Lender of any such instructions,
requests, confirmations and orders involves the possibility of errors,
omissions, mistakes and discrepancies and agrees to adopt such internal
measures and operational procedures to protect its interests. By reason
<PAGE> 3
thereof, each of the Borrowers hereby assumes all risk of loss and
responsibility for, releases and discharges the Lender from any and all
responsibility or liability for, and agree to indemnify, reimburse on demand
and hold the Lender harmless from, any and all claims, actions, damages,
losses, liability and expenses by reason of, arising out of or in any way
connected with or related to, (i) the Lender's acceptance, reliance and actions
upon, compliance with or observation of any such instructions, requests,
confirmations or orders, and (ii) any such errors, omissions, mistakes and
discrepancies, except those caused by the Lender's gross negligence or willful
misconduct.
The Prime Rate does not necessarily represent the lowest rate of
interest charged by or the Lender to borrowers. On all sums accruing interest
at the Prime Rate, the rate of interest charged under this Note shall change
immediately and contemporaneously with any change in the Prime Rate. All
interest payable under the terms of this Note shall be calculated on the basis
of a 360-day year and the actual number of days elapsed. No Interest Rate
Election may be made for a period which would extend beyond the maturity of
this Note. If no Interest Rate Election is made within five (5) days prior to
the end of the then current interest period, the Principal Sum shall bear
interest at the Prime Rate from and after such interest period or until another
Interest Rate Election is made in accordance with the terms hereof.
If, due to either: (i) the introduction of or any change (including,
without limitation, any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation or (ii) the
compliance by the Lender with any guideline or request from any central bank or
other governmental authority (whether or not having the force of law), there
shall be any increase in the cost to the Lender of agreeing to make or making,
funding or maintaining advances of all or a portion of the Principal Sum, then
the Borrowers shall from time to time, upon demand by the Lender, pay to the
Lender additional amounts to indemnify the Lender against any such increased
costs. In the absence of manifest error, a certificate as to the amount of
such increased costs submitted to the Borrowers by the Lender shall be
conclusive. It shall be deemed, for purposes of computing any increased costs
pursuant to this Section, that (i) the making and maintaining of advances of
the Principal Sum which accrue interest at the LIBOR Rate have been made by the
Lender from its offices in London, England and (ii) the funding of each advance
of the Principal Sum by the Lender which accrues interest at the LIBOR Rate has
been made through the London Interbank Market. Such additional cost shall be
payable hereunder at the time and in the manner that interest is payable
hereunder for such costs incurred since the last interest payment.
The Borrowers shall also pay to the Lender at the time and in the
manner that interest is payable hereunder for each advance which accrues
interest at the LIBOR Rate, the cost since the last interest payment date, as
determined in good faith by the Lender, of complying, in connection with such
advance during such interest period, with any reserve, special deposit or
similar requirement (including but not limited to reserve requirements under
Federal Reserve Regulation D) imposed or deemed applicable against any assets
held by or deposits or accounts in or with or credit extended by the Lender, or
the office of the Lender in London, England, by any United States governmental
authority charged with the administration of such requirements.
2
<PAGE> 4
Each notification as to the amount of such cost, delivered to the Borrowers by
the Lender shall be conclusive as to the amount of such cost. It shall be
deemed for purposes of computing cost pursuant to the above provision that the
making and maintaining of each advance which accrues interest at the LIBOR Rate
has been made by the Lender through its offices in London, England.
The Borrowers shall also pay to the Lender during the time that the
Lender shall be required to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency liabilities (as defined in
Regulation D of the Board of Governors of the Federal Reserve System as in
effect from time to time), additional interest on the unpaid principal amount
of each advance subject to the LIBOR Rate from the date of such advance until
such principal amount is paid in full, payable on the last day of each interest
period for such advance, at an interest rate per annum equal at all times
during such interest period for such advance to the excess of (i) the rate
obtained by dividing the LIBOR Rate for such interest period by a percentage
equal to 100% minus the reserve percentage applicable during such interest
period under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or if more than one such percentage is so
applicable, minus the daily average for such percentages for those days in such
interest period during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including, without limitation, any
marginal reserve requirement) for the Lender in respect of liabilities or
assets consisting of or including Eurocurrency liabilities over (ii) the LIBOR
Rate for such interest period.
2. PAYMENTS AND MATURITY. The unpaid Principal Sum, together
with interest thereon at the rate or rates provided above, shall be payable as
follows:
(a) Interest only on the unpaid Principal Sum shall be
due and payable monthly, commencing October 1, 1996, and on the first day of
each month thereafter to maturity; and
(b) Unless sooner paid, the unpaid Principal Sum,
together with interest accrued and unpaid thereon, shall be due and payable in
full on September 30, 1997.
The fact that the balance hereunder may be reduced to zero from time
to time pursuant to the Financing Agreement will not affect the continuing
validity of this Note or the Financing Agreement, and the balance may be
increased to the Principal Sum after any such reduction to zero.
3. PREPAYMENT. This Note may be voluntarily prepaid at any time
without premium or penalty, provided that the Borrowers shall jointly and
severally reimburse the Lender, for any Funding Losses occasioned by the
prepayment of the Principal Sum bearing interest at the LIBOR Rate. For
purposes hereof, "Funding Losses" shall mean the Lender's "make whole" cost of
re-employing funds (i.e. yield maintenance) and their costs of reversing or
covering any interest rate hedging or swap agreements (but excluding any
administrative fees, penalties or personnel costs), incurred or expected to be
incurred by the Lender in connection with (a) any
3
<PAGE> 5
prepayment whether voluntary or involuntary of all or any portion of the
Principal Sum and (b) the conversion (for any reason whatsoever, whether
voluntary or involuntary) of a LIBOR Rate advance to an interest rate based on
the Prime Rate on a date other than the last day of the applicable interest
period of such LIBOR Rate.
4. DEFAULT INTEREST. Upon the occurrence of a Default (as
hereinafter defined), the unpaid Principal Sum shall bear interest thereafter
at the Post-Default Rate (as defined in the Financing Agreement) until such
Default is cured.
5. LATE CHARGES. If the Borrowers shall fail to make any payment
under the terms of this Note within fifteen (15) days after the date such
payment is due, the Borrowers jointly and severally shall pay to the Lender on
demand a late charge equal to five percent (5%) of such payment.
6. APPLICATION AND PLACE OF PAYMENTS. All payments made on
account of this Note shall be applied first to the payment of any late charge
then due hereunder, second to the payment of any Enforcement Costs (as defined
in the Financing Agreement), third to the payment of accrued and unpaid
interest then due hereunder, and the remainder, if any, shall be applied to the
unpaid Principal Sum. All payments on account of this Note shall be paid in
lawful money of the United States of America in immediately available funds
during regular business hours of a Business Day for the account of the Lender
at the Lender's office described in Section 7.3 of the Financing Agreement, or
at such other times and places as the Lender may at any time and from time to
time designate in writing to the Borrowers.
7. FINANCING AGREEMENT AND OTHER FINANCING DOCUMENTS. This Note
is the "Note" described in a certain Financing Agreement of even date herewith
by and among the Borrowers and the Lender (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the
"Financing Agreement"). The indebtedness evidenced by this Note is included
within the meaning of the term "Obligations" as defined in the Financing
Agreement. The term "Financing Documents" as used in this Note shall mean
collectively this Note, the Financing Agreement and any other instrument,
agreement, or document previously, simultaneously, or hereafter executed and
delivered by the Borrowers and/or any other person, singularly or jointly with
any other person, evidencing, securing, guaranteeing, or in connection with the
Principal Sum, this Note and/or the Financing Agreement. All defined terms
used in this Note and not defined herein shall have the meanings set forth in
the Financing Agreement.
8. DEFAULTS. The occurrence of any one or more of the following
events shall constitute an event of default (individually, a "Default" and
collectively, the "Defaults") under the terms of this Note:
(a) The failure of any of the Borrowers to pay to the
Lender when due any and all amounts payable by the Borrowers to the Lender
under the terms of this Note; or
4
<PAGE> 6
(b) The occurrence of a Default (as defined therein)
under the terms and conditions of any of the other Financing Documents.
9. REMEDIES. Upon the occurrence of a Default, at the option of
the Lender, all amounts payable by any or all of the Borrowers to the Lender
under the terms of this Note shall immediately become due and payable jointly
and severally by the Borrowers to the Lender without notice to any or all of
the Borrowers or any other person, and the Lender shall have all of the rights,
powers, and remedies available under the terms of this Note, any of the other
Financing Documents and all applicable laws. Each of the Borrowers and all
endorsers, guarantors, and other parties who may now or in the future be
primarily or secondarily liable for the payment of the indebtedness evidenced
by this Note hereby severally waive presentment, protest and demand, notice of
protest, notice of demand and of dishonor and non-payment of this Note and
expressly agree that this Note or any payment hereunder may be extended or
postponed from time to time without in any way affecting the liability of any
or all of the Borrowers, endorsers or guarantors, and each of the Borrowers
hereby waive all suretyship defenses and defenses in the nature thereof which
may arise out of any and all extensions or postponements of the time of payment
or any other indulgence, and/or to the addition or release of any other party
or person primarily or secondarily liable.
Until such time as the Lender is not committed to extend further
credit to the Borrowers and all Obligations of the Borrowers to the Lender have
been indefeasibly paid in full in cash, and subject to and not in limitation of
the provisions set forth in the next following paragraph below, no Borrower
shall have any right of subrogation (whether contractual, arising under the
Bankruptcy Code or otherwise), reimbursement or contribution from any Borrower
or any guarantor, nor any right of recourse to its security for any of the
debts and obligations of any Borrower which are the subject of this Note.
Except as otherwise expressly permitted by the Financing Agreement, any and all
present and future debts and obligations of any Borrower to any other Borrower
are hereby subordinated to the full payment and performance of all present and
future debts and obligations to the Lender under this Note and the Financing
Agreement and the Financing Documents, provided, however, notwithstanding
anything set forth in this Note to the contrary, prior to the occurrence of a
payment Default, the Borrowers shall be permitted to make payments on account
of any of such present and future debts and obligations from time to time in
accordance with the terms thereof. The definition of the payments of debts and
obligations by Manugistics U.K. Ltd to any other Borrower shall not be so
subordinated, provided that Manugistics U.K. Ltd. shall not make any payment of
such debts or obligations without the prior written consent of the Lender,
except for the payment of royalties to another Borrower arising from
Manugistics U.K. Ltd.'s grant of licenses to customers of software owned by
such Borrower.
Each Borrower further agrees that, if any payment made by any Borrower
or any other person is applied to this Note and is at any time annulled, set
aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of any property
hereafter securing this Note is required to be returned by the Lender to
5
<PAGE> 7
any Borrower, its estate, trustee, receiver or any other party, including,
without limitation, such Borrower, under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, such Borrower's liability hereunder (and any lien, security interest
or other collateral securing such liability) shall be and remain in full force
and effect, as fully as if such payment had never been made, or, if prior
thereto any such lien, security interest or other collateral hereafter securing
such Borrower's liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender, this Note (and such lien, security
interest or other collateral) shall be reinstated in full force and effect, and
such prior cancellation or surrender shall not diminish, release, discharge,
impair or otherwise affect the obligations of such Borrower in respect of the
amount of such payment (or any lien, security interest or other collateral
securing such obligation).
The JOINT AND SEVERAL obligations of each Borrower under this Note
shall be absolute, irrevocable and unconditional and shall remain in full force
and effect until the outstanding principal of and interest on this Note and all
other Obligations or amounts due hereunder and under the Financing Agreement
and the Financing Documents shall have been indefeasibly paid in full in cash
in accordance with the terms thereof and this Note shall have been canceled.
10. EXPENSES. The Borrowers, jointly and severally, promise to
pay to the Lender on demand all reasonable costs and expenses incurred by the
Lender in connection with the collection and enforcement of this Note,
including, without limitation, reasonable attorneys' fees and expenses and all
court costs.
11. NOTICES. Any notice, request, or demand to or upon the
Borrowers, the Lender shall be deemed to have been properly given or made when
delivered in accordance with Section 7.3 of the Financing Agreement.
12. MISCELLANEOUS. Each right, power, and remedy of the Lender as
provided for in this Note or any of the other Financing Documents, or now or
hereafter existing under any applicable law or otherwise shall be cumulative
and concurrent and shall be in addition to every other right, power, or remedy
provided for in this Note or any of the other Financing Documents or now or
hereafter existing under any applicable law, and the exercise or beginning of
the exercise by the Lender of any one or more of such rights, powers, or
remedies shall not preclude the simultaneous or later exercise by the Lender of
any or all such other rights, powers, or remedies. No failure or delay by the
Lender to insist upon the strict performance of any term, condition, covenant,
or agreement of this Note or any of the other Financing Documents, or to
exercise any right, power, or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant, or agreement or of
any such breach, or preclude the Lender from exercising any such right, power,
or remedy at a later time or times. By accepting payment after the due date of
any amount payable under the terms of this Note, the Lender shall not be
deemed to waive the right either to require prompt payment when due of all
other amounts payable under the terms of this Note or to declare a Default for
the failure to effect such prompt
6
<PAGE> 8
payment of any such other amount. No course of dealing or conduct shall be
effective to amend, modify, waive, release, or change any provisions of this
Note.
13. PARTIAL INVALIDITY. In the event any provision of this Note
(or any part of any provision) is held by a court of competent jurisdiction to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provision (or
remaining part of the affected provision) of this Note; but this Note shall be
construed as if such invalid, illegal, or unenforceable provision (or part
thereof) had not been contained in this Note, but only to the extent it is
invalid, illegal, or unenforceable.
14. CAPTIONS. The captions herein set forth are for convenience
only and shall not be deemed to define, limit, or describe the scope or intent
of this Note.
15. APPLICABLE LAW. EACH OF THE BORROWERS ACKNOWLEDGES AND AGREES
THAT THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MARYLAND, EVEN
THOUGH FOR THE CONVENIENCE AND AT THE REQUEST OF THE BORROWERS, THIS NOTE MAY
BE EXECUTED ELSEWHERE.
16. CONSENT TO JURISDICTION. Each of the Borrowers irrevocably
submits to the jurisdiction of any state or federal court sitting in the State
of Maryland over any suit, action, or proceeding arising out of or relating to
this Note. Each of the Borrowers irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of venue of any such suit, action, or proceeding brought in any such court and
any claim that any such suit, action, or proceeding brought in any such court
has been brought in an inconvenient forum. Final judgment in any such suit,
action, or proceeding brought in any such court shall be conclusive and binding
upon the Borrowers and may be enforced in any court in which the Borrowers are
subject to jurisdiction by a suit upon such judgment provided that service of
process is effected upon the Borrowers as provided in this Note or as otherwise
permitted by applicable law.
17. SERVICE OF PROCESS. Each of the Borrowers hereby irrevocably
designates and appoints Peter Q. Repetti, c/o Manugistics, Inc., 2115 East
Jefferson Street, Rockville, Maryland 20852, as its authorized agent to receive
on its behalf service of any and all process that may be served in any suit,
action, or proceeding instituted in connection with this Note in any state or
federal court sitting in the State of Maryland. If such agent shall cease so
to act, the Borrowers shall irrevocably designate and appoint without delay
another such agent in the State of Maryland satisfactory to the Lender and
shall promptly deliver to the Lender evidence in writing of such agent's
acceptance of such appointment and its agreement that such appointment shall be
irrevocable.
Each of the Borrowers hereby consents to process being served in any
suit, action, or proceeding instituted in connection with this Note by (i) the
mailing of a copy thereof by certified mail, postage prepaid, return receipt
requested, to the Borrowers and (ii) serving a copy
7
<PAGE> 9
thereof upon the agent hereinabove designated and appointed by the Borrowers as
the Borrowers' agent for service of process. The Borrowers irrevocably agree
that such service shall be deemed in every respect effective service of process
upon the Borrowers in any such suit, action or proceeding, and shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon the Borrowers. Nothing in this Section shall affect the right of the
Lender to serve process in any manner otherwise permitted by law or limit the
right of the Lender otherwise to bring proceedings against the Borrowers in the
courts of any jurisdiction or jurisdictions.
18. WAIVER OF TRIAL BY JURY. EACH OF THE BORROWERS HEREBY WAIVES
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE BORROWERS, OR ANY OF
THEM, THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A)
THIS NOTE OR (B) THE FINANCING DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT
THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL
PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO
ARE NOT PARTIES TO THIS NOTE.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE
BORROWERS, AND THE BORROWERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT
OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY
JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE BORROWERS FURTHER
REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN
THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN
FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH
COUNSEL.
19. Interest Rate Not to Exceed Applicable Laws. The interest
rate or rates required by this Note, the Financing Agreement or any of the
other Financing Documents shall not exceed the maximum rate permissible under
applicable laws, and any amounts paid in excess of such rate or rates shall be
applied to reduce the unpaid balance of the Principal Sum or shall be refunded
to the Borrowers at the option of the Lender.
20. Joint and Several Liability. The Borrowers each shall be
jointly and severally liable of the payment of the Obligations as and when due
and payable in accordance with the provisions of this Note, the Financing
Agreement and the other Financing Documents. The Term "Borrowers" when used in
this Note shall include all of the Borrowers, individually and jointly, and the
Lender may (without notice to or consent of any or all of the Borrowers and
with or without consideration) release, compromise, settle with, proceed
against any or all of the Borrowers without affecting, impairing, lessening or
releasing the obligations of any of the other Borrowers hereunder.
8
<PAGE> 10
IN WITNESS WHEREOF, the Borrowers have caused this Note to be executed
under seal by their duly authorized officers as of the date first written
above.
WITNESS OR ATTEST: MANUGISTICS GROUP, INC.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: President, CEO, Chairman
-----------------------
WITNESS OR ATTEST: MANUGISTICS, INC.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: President, CEO, Chairman
-----------------------
WITNESS OR ATTEST: THE ROVER TECHNOLOGY COMPANY
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: Chairman, CEO
-----------------------
WITNESS OR ATTEST: MANUGISTICS FRANCE S.A.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: Director
-----------------------
WITNESS OR ATTEST: MANUGISTICS, INC. FOREIGN SALES
CORPORATION
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: President, Director
-----------------------
9
<PAGE> 11
WITNESS OR ATTEST: MANUGISTICS U.K. LTD.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: President, Director
-----------------------
WITNESS OR ATTEST: MANUGISTICS CANADA LTD.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: President, Director
-----------------------
WITNESS OR ATTEST: MANUGISTICS (DEUTSCHLAND) GmbH
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: Managing Director
-----------------------
WITNESS OR ATTEST: MANUGISTICS EUROPEAN HOLDING COMPANY
B.V.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: Managing Director
-----------------------
WITNESS OR ATTEST: MANUGISTICS COLORADO, INC.
/s/ DANIEL A. PLISKIN By: /s/ WILLIAM M. GIBSON (SEAL)
- ------------------------------ --------------------------
Name: William M. Gibson
------------------------
Title: President, Director
-----------------------
10
<PAGE> 1
Exhibit 11
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
STATEMENTS REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
--------------------------------------------------
1996 1995 1996 1995
--------- -------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Weighted Average Number of Shares of Common Stock
Outstanding 10,738 10,350 10,611 10,259
Net Effect of Dilutive Stock Options Based on Treasury
Stock Method 852 560 677 537
--------- -------- ------- --------
Weighted Average Shares Outstanding 11,590 10,910 11,288 10,796
========= ======== ======= ========
Net Income $ 1,947 $ 1,061 $ 816 $ 2,869
========= ======== ======= ========
Primary-diluted Earnings Per Share $ 0.17 $ 0.10 $ 0.07 $ 0.27
========= ======== ======= ========
Fully-diluted Earnings Per Share $ 0.17 $ 0.10 $ 0.07 $ 0.27
========= ======== ======= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT FOR THE PERIOD ENDED NOVEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> NOV-30-1996
<CASH> 5,483
<SECURITIES> 13,593
<RECEIVABLES> 25,862
<ALLOWANCES> 1,615
<INVENTORY> 349
<CURRENT-ASSETS> 46,509
<PP&E> 16,610
<DEPRECIATION> 7,383
<TOTAL-ASSETS> 67,564
<CURRENT-LIABILITIES> 17,410
<BONDS> 254
0
0
<COMMON> 22
<OTHER-SE> 47,644
<TOTAL-LIABILITY-AND-EQUITY> 67,564
<SALES> 31,390
<TOTAL-REVENUES> 63,064
<CGS> 3,290
<TOTAL-COSTS> 35,235
<OTHER-EXPENSES> 21,595
<LOSS-PROVISION> 1,207
<INTEREST-EXPENSE> 738
<INCOME-PRETAX> 3,682
<INCOME-TAX> 2,866
<INCOME-CONTINUING> 816
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 816
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
