<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------------------
Date of Report (date of earliest event reported): July 15, 1998
MANUGISTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-22154 52-1469385
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
</TABLE>
<TABLE>
<S> <C>
2115 EAST JEFFERSON STREET
ROCKVILLE, MARYLAND 20852
(Address of principal executive offices) (Zip Code)
</TABLE>
(301) 984-5000
(Registrant's telephone number, including area code)
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<PAGE> 2
ITEM 5. Other Events
(Unaudited) Effective as of June 1, 1998, the Company acquired TYECIN Systems,
Inc. ("TYECIN"), based in Los Altos, California, by merger and accounted for
the transaction as a pooling of interests. In accordance with certain terms in
the Merger Agreement (as defined in Item 7 below), the following 61 day
financial information is being published for the combined periods May and June
1998, which includes 30 days of post-merger combined operations including the
effective date of the Merger. During that period, the combined company recorded
revenues of approximately $36,309,000, a net loss of approximately $3,421,000,
and a basic and diluted loss per share of $0.13.
ITEM 7. Financial Statements and Exhibits
As previously reported by the Company, effective as of June 1, 1998, the
Company, through its direct, wholly-owned subsidiary, TYECIN Acquisition, Inc.
("TYECIN Acquisition"), acquired all of the capital stock of TYECIN (such
transaction being referred to as the "Merger") pursuant to a certain Agreement
and Plan of Merger dated as of June 1, 1998, by and among TYECIN, Manugistics
Group, Inc. ("Manugistics"), TYECIN Acquisition, Randall A. Hughes and Richard
A. Zuanich (the "Merger Agreement"). TYECIN is a provider of advanced planning
and scheduling supply chain management software for the semiconductor industry.
The Company has accounted for the Merger as a pooling of interests.
Set forth below are the following: (i) selected supplemental consolidated
financial data with respect to the Company for each of the five fiscal years in
the period ended February 28, 1998; (ii) the supplemental consolidated balance
sheets of the Company as of February 28, 1998 and 1997, and the related
supplemental consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended February 28, 1998;
and (iii) the related Supplemental Management's Discussion and Analysis of
Financial Condition and Results of Operations. Such supplemental financial
data and financial statements give retroactive effect to the Merger which, as
noted above, has been accounted for as a pooling of interests as described in
Notes 1 and 13 to the supplemental consolidated financial statements.
(Such supplemental financial data and financial statements are not required to
be filed pursuant to Item 2 of Form 8-K).
2
<PAGE> 3
SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
Selected supplemental consolidated financial data with respect to the
Company for each of the five fiscal years in the period ended February 28, 1998,
are set forth below. The selected supplemental consolidated financial data give
retroactive effect to the merger with TYECIN and include the combined operations
of the Company and TYECIN for all periods presented (see Note 13(b) to the
Supplemental Consolidated Financial Statements). This data should be read in
conjunction with the Supplemental Consolidated Financial Statements of the
Company and related Notes thereto for the corresponding periods, which are
contained in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software products................ $107,547 $54,342 $33,111 $26,483 $20,769
Consulting, maintenance and other
services....................... 72,716 45,865 33,865 25,334 18,765
-------- ------- ------- ------- -------
Total revenues.............. 180,263 100,207 66,976 51,817 39,534
Operating expenses:
Cost of software sold............ 11,102 5,011 3,070 3,060 2,992
Cost of consulting, maintenance
and other services............. 33,213 19,618 15,181 12,990 9,518
Sales and marketing.............. 66,228 34,961 22,933 17,491 13,716
Product development.............. 32,794 18,889 12,133 8,127 5,451
General and administrative....... 14,639 9,344 6,664 5,617 4,103
Purchased research and
development(1)................. 47,340 3,697 -- -- --
-------- ------- ------- ------- -------
Total operating expenses.... 205,316 91,520 59,981 47,285 35,780
-------- ------- ------- ------- -------
(Loss) income from operations....... (25,053) 8,687 6,995 4,532 3,754
Other income -- net................. 2,863 1,047 1,144 658 150
-------- ------- ------- ------- -------
(Loss) income before income taxes... (22,190) 9,734 8,139 5,190 3,904
(Benefit) provision for income
taxes............................ (9,025) 5,077 3,064 1,801 1,510
-------- ------- ------- ------- -------
Net (loss) income................... $(13,165) $ 4,657 $ 5,075 $ 3,389 $ 2,394
======== ======= ======= ======= =======
Basic (loss) income per share....... $ (0.56) $ 0.22 $ 0.24 $ 0.17 $ 0.14
======== ======= ======= ======= =======
Shares used in basic share
computation(2)................... 23,484 21,657 20,909 19,982 17,172
======== ======= ======= ======= =======
Diluted (loss) income per share..... $ (0.56) $ 0.20 $ 0.23 $ 0.16 $ 0.13
======== ======= ======= ======= =======
Shares used in diluted share
computation(2)................... 23,484 23,159 21,935 20,880 18,746
======== ======= ======= ======= =======
</TABLE>
- ---------------
(1) During fiscal 1998 and 1997, the Company incurred non-recurring charges to
operations totaling $47.3 million ($28.6 million, net of $18.7 million tax
benefit) and $3.7 million, respectively, in connection with the write-off of
purchased research and development which had not yet reached technological
feasibility and had no alternative future use. The impact of these charges
was to reduce basic and diluted (loss) income per share by $1.22 and $1.09,
respectively, in fiscal 1998, and $.17 and $.16, respectively, in fiscal
1997. Excluding the effect of these non-recurring, non-cash charges, basic
and diluted income per share would have been $.66 and $.59, respectively, in
fiscal 1998, and $.39 and $.36, respectively, in fiscal 1997.
(2) Gives effect to (i) the issuance of 379,747 shares of Series B Convertible
Preferred Stock on June 7, 1993; and (ii) the automatic conversion of all
outstanding shares of Series A and B Convertible Preferred Stock into shares
of common stock during fiscal 1994.
3
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<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
----------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................... $ 95,982 $33,443 $29,012 $30,125 $21,400
Total assets........................ 225,215 86,306 62,497 50,035 35,142
Long-term debt, less current
portion.......................... 235 220 182 337 528
Total stockholders' equity.......... 173,746 54,873 43,846 36,866 25,086
</TABLE>
4
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SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, markets and supports software products for
synchronized supply chain management(TM) and provides related services.
Synchronized supply chain management refers to managing the complex interactions
involved in the flows of products through the supply chain. It involves
forecasting product demand and coordinating the timing of distribution,
manufacturing, procurement and transportation activities to meet this demand,
not only across an entire enterprise, but also among an enterprise and its
suppliers and customers. The Company provides an integrated suite of strategic,
tactical and operational supply chain software planning products, including a
high-level optimizer, that address the four key operational areas of supply
chain management: demand planning, supply planning, manufacturing scheduling and
transportation management. The Company derived approximately 98%, 96% and 92% of
its revenues in fiscal 1998, 1997 and 1996, respectively, from its supply chain
management software and services. Additionally, the Company markets and supports
the STATGRAPHICS personal systems product, which provides statistical tools for
quality management in manufacturing companies.
RESULTS OF OPERATIONS
Revenues:
Software products. The Company's software products license revenues
increased to approximately 60% and 54% of total revenues in fiscal 1998 and
1997, respectively, from 49% in fiscal 1996, primarily because the Company's
increased sales and marketing efforts for supply chain management were
effective, because of increased market acceptance of such products, and because
the Company increased its resources devoted to generating software products
license revenues more rapidly than its resources for producing services
revenues. See "Operating Expenses." Although the percentage of total revenues
represented by software products license revenues has varied in the past and is
likely to continue to vary, the Company anticipates that software products
license revenues are likely to represent 50% to 60% of total revenues for fiscal
1999. See "Certain Forward-Looking Statements."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
--------------------------------------------------
1998 CHANGE 1997 CHANGE 1996
-------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Supply chain management.................. $104,784 104% $51,386 79% $28,687
Percentage of total revenues........... 58.1% 51.3% 42.8%
Personal systems and other............... $ 2,763 -7% $ 2,956 -33% $ 4,424
Percentage of total revenues........... 1.5% 2.9% 6.6%
-------- --- ------- ---- -------
Total software products
revenues..................... $107,547 98% $54,342 64% $33,111
Percentage of total revenues........... 59.7% 54.2% 49.4%
</TABLE>
Supply chain management. Software products license revenues increased in
fiscal 1998 and 1997 because of increases in both the number of licenses and the
average license fee per transaction. This growth resulted from increases in the
Company's sales and marketing resources, increases in the Company's sales
productivity, higher contributions from the Company's international operations
(which grew to 26% and 24% of total software revenues in fiscal 1998 and 1997,
respectively, from 20% in 1996), and expansion into new vertical industries.
Software products license revenues also increased because of increased market
acceptance of the Company's products, including its recently introduced products
and the latest versions of established products. This increased acceptance
resulted in part from the recognition by prospects and customers that they could
rapidly realize significant benefits from effective supply chain management,
which led some companies to license more of the Company's products or to amend
their existing licenses to permit a greater number of users.
5
<PAGE> 6
The Company has historically derived the substantial majority of its
software products license revenues from direct sales. However, the Company has
embarked on a strategy of expanding its product distribution through alliances
with complementary vendors which also led to additional software products
license revenues during fiscal 1998 and 1997. This strategy of developing
alliances is still in its early stages and the number of software license
transactions involving complementary vendors has been relatively small and has
fluctuated. The Company anticipates that software products license revenues
derived from indirect sales by these complementary vendors will continue to
fluctuate. See "Risk Factors" and "Certain Forward-Looking Statements."
Personal systems. Software products license revenues decreased slightly in
fiscal 1998 primarily because the Company decreased the resources dedicated to
STATGRAPHICS and because many prospective customers selected competing products.
As a percentage of total revenues, personal systems software products license
revenues decreased to less than 2%. Software products license revenues decreased
in fiscal 1997 primarily because the Company sold the assets of its APL*PLUS
business in fiscal 1996. The Company believes that demand for STATGRAPHICS will
continue to decrease. See "Certain Forward-Looking Statements."
Consulting, maintenance and other services. Revenues from consulting,
maintenance and other services increased in fiscal 1998 and 1997 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>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------------------------
1998 CHANGE 1997 CHANGE 1996
------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Supply chain management................... $71,979 60% $45,041 38% $32,666
Percentage of total revenues............ 39.9% 44.9% 48.8%
Personal systems and other................ $ 737 -11% $ 824 -31% $ 1,199
Percentage of total revenues............ 0.4% 0.8% 1.8%
------- --- ------- --- -------
Total consulting, maintenance
and other services revenues... $72,716 59% $45,865 35% $33,865
Percentage of total revenues............ 40.3% 45.8% 50.6%
</TABLE>
Supply chain management. Revenues from consulting and other services
increased in fiscal 1998 and 1997 because of: (1) new clients licensing
increased numbers of products and users, which generally leads to implementation
and other consulting services, and (2) established clients licensing additional
products and users, which also generates further demand for consulting services.
Consulting revenues also increased in fiscal 1998 due to additional
contributions from the Company's international operations, including consulting
services provided by employees who joined the Company in June 1997 in connection
with the Company's acquisition of Synchronology Group Limited ("SGL"). See Note
4 of Notes to the Supplemental Consolidated Financial Statements.
Maintenance revenues increased in fiscal 1998 and 1997 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 with maintenance contracts have
renewed these contracts.
Personal systems. Consulting, maintenance and other services revenues
decreased in fiscal 1998 and 1997 because of a decline in maintenance revenues.
This decline followed the erosion of the installed base of STATGRAPHICS users,
which resulted from customers and prospective customers having selected
competing products and from the Company's sale of the assets of its APL*PLUS
business in fiscal 1996.
OPERATING EXPENSES:
General. In fiscal 1999, the Company plans to continue to incur relatively
high levels of both sales and marketing expenditures and product development
expenditures as it pursues its strategies of
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<PAGE> 7
expanding its business into new geographic and vertical markets, expanding its
distribution through alliances, and rapidly developing and delivering new
product features and functions. The percentage of revenues represented by these
items may vary because the Company's total quarterly and annual revenues have
varied in the past and are likely to continue to vary. Also, the percentages of
revenues represented by sales and marketing expenses, product development and
the cost of services can be affected by the total amount of expenses associated
with new employees and by the timing delays between the dates that these
employees begin work and the dates they first become productive after training.
See "Certain Forward-Looking Statements."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
--------------------------------------------------
1998 CHANGE 1997 CHANGE 1996
-------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cost of software sold.................... $ 11,102 122% $ 5,011 63% $ 3,070
Percentage of total revenues........... 6.2% 5.0% 4.6%
Cost of consulting, maintenance and other
services............................... $ 33,213 69% $19,618 29% $15,181
Percentage of total revenues........... 18.4% 19.6% 22.7%
Sales and marketing...................... $ 66,228 89% $34,961 52% $22,933
Percentage of total revenues........... 36.7% 34.9% 34.2%
Product development...................... $ 32,794 74% $18,889 56% $12,133
Percentage of total revenues........... 18.2% 18.8% 18.1%
General and administrative............... $ 14,639 57% $ 9,344 40% $ 6,664
Percentage of total revenues........... 8.1% 9.3% 9.9%
-------- ------- -------
Total operating expenses excluding
purchased research and development..... $157,976 80% $87,823 46% $59,981
Percentage of total revenues........... 87.5% 87.6% 89.6%
-------- ------- -------
Purchased research and development....... $ 47,340 $ 3,697 $ --
Percentage of total revenues........... 26.3% 3.7% --
-------- ------- -------
Total operating expenses................. $205,316 124% $91,520 53% $59,981
Percentage of total revenues........... 113.9% 91.3% 89.6%
</TABLE>
Cost of software sold. Cost of software sold includes: 1) amortization of
capitalized software development costs, and 2) cost of goods and other, which
includes royalty fees associated with third-party software included with
Manugistics software that is licensed to customers. The Company amortizes
internal computer software development costs over the product's estimated
economic life, generally two years, commencing when a product is first available
for general commercial release. The Company amortizes purchased capitalized
software development costs over a product's estimated economic life, generally
two to five years.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------------------
1998 CHANGE 1997 CHANGE 1996
------- ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Amortization of capitalized software................ $ 7,560 113% $3,543 59% $2,228
Percentage of software products license revenues.... 7.0% 6.5% 6.7%
Cost of goods and other............................. $ 3,542 141% $1,468 74% $ 842
Percentage of software products license revenues.... 3.3% 2.7% 2.5%
------- ------ ------
Cost of software sold............................... $11,102 122% $5,011 63% $3,070
Percentage of software products license revenues.... 10.3% 9.2% 9.3%
</TABLE>
The cost of software sold increased in fiscal 1998 and 1997 because
amortization increased following the general commercial release of additional
supply chain management software products for which costs had previously been
capitalized, and because cost of goods and other increased. The amortization of
capitalized software development costs has increased in recent years as the
Company has increased its
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<PAGE> 8
gross product development expenditures for supply chain management software. See
"Product Development." Amortization also increased because the Company wrote off
approximately $1.9 million and $.3 million in fiscal 1998 and 1997,
respectively, of capitalized costs relating to the development of certain prior
versions of its software products which the Company determined exceeded the
future net realizable value as a result of new technologies developed by the
Company or acquired in connection with acquisitions. Cost of goods and other
expenses increased in fiscal 1998 and 1997 primarily because of the increase in
royalty fees as the number of licenses to customers involving third party
software increased.
Cost of consulting, maintenance and other services. The cost of
consulting, maintenance and other services increased in fiscal 1998 and 1997
primarily because the Company added personnel (including SGL employees) to meet
increased demand for its consulting and maintenance services which resulted from
the increased demand for the Company's software products. These additional
employees helped generate 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 increased in fiscal 1998
mainly because of the amount of expenses associated with new employees and
because of the timing delays between the dates that these employees began work
and the dates they first become productive after training. In fiscal 1997, the
cost of consulting, maintenance and other services decreased as a percentage of
consulting, maintenance and other services revenues largely because a portion of
the increase in corresponding revenues was generated by product maintenance and
support, which can be provided more efficiently by serving a larger client base,
and because of improved utilization of the Company's consulting employees.
Sales and marketing. Sales and marketing expenses increased in fiscal 1998
and 1997 primarily because the Company added sales and marketing resources in
North and South America, Europe and the Asia/Pacific region, and incurred higher
commissions as a result of increased software products license revenues. In
addition, the Company incurred costs to establish new offices or build up its
presence in certain foreign markets, and increased its marketing expenses in
connection with these new foreign markets and with its expanded product
offerings. As a percentage of total revenues, sales and marketing expenses
increased in fiscal 1998 principally because these expenses increased at a more
rapid rate than total revenues. As a percentage of total revenues, sales and
marketing expenses decreased in fiscal 1997 because total revenues increased
more rapidly than these expenses. As it pursues its strategy of expanding its
business into new geographic markets, new industries and expanded distribution
channels, the Company is continuing to hire and train additional sales and
marketing employees and to make other sales and marketing expenditures. See
"Certain Forward-Looking Statements."
Product development. The Company records product development expenses net
of capitalized software development costs for products which have reached
technological feasibility.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------------------------
1998 CHANGE 1997 CHANGE 1996
------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Gross product development costs........... $42,182 64% $25,732 51% $17,048
Percentage of total revenues............ 23.4% 25.7% 25.5%
Less: Capitalized prod. dev. costs........ $ 9,388 37% $ 6,843 39% $ 4,915
Percentage of gross prod. dev. costs.... 22.3% 26.6% 28.8%
------- -- ------- -- -------
Product development expenses.............. $32,794 74% $18,889 56% $12,133
Percentage of total revenues............ 18.2% 18.8% 18.1%
</TABLE>
Gross product development costs for fiscal 1998 and 1997 increased
primarily because the Company employed 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. In fiscal 1998 and 1997, as a
percentage of total revenues, gross product development costs decreased largely
because these expenses did not increase as rapidly as total
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<PAGE> 9
revenues. The Company plans to continue to make significant product development
expenditures in fiscal 1999 as it pursues its strategy of rapidly developing and
delivering new products, features, functions and integration to software
products of other vendors. See "Certain Forward-Looking Statements."
General and administrative. General and administrative expenses increased
in fiscal 1998 and 1997 primarily because of increased 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
in fiscal 1998 and 1997 because these expenses did not increase as rapidly as
total revenues, in part because the Company was able to leverage its base of
administrative resources to support a larger organizational structure.
Purchased research and development. During the fourth quarter of fiscal
1998, the Company acquired all of the outstanding capital stock of ProMIRA
Software, Inc. ("ProMIRA"), a provider of supply chain planning software for
manufacturers of complex products in industries such as high technology,
electronics and motor vehicles and parts. In that quarter, the Company recorded
a non-recurring charge to operations totaling $47.3 million ($28.6 million, net
of an income tax benefit of $18.7 million) to write off purchased research and
development which had not yet reached technological feasibility and had no
alternative future use. The impact on basic and diluted income per share for
fiscal 1998 was $1.22 and $1.09, respectively. In addition, during the first
quarter of fiscal 1997, the Company acquired all of the outstanding capital
stock of Avyx, Inc. ("Avyx"), a developer and services provider of custom
manufacturing scheduling software. The Company recorded a non-recurring charge
to operations of $3.7 million ($.17 and $.16 basic and diluted income per share,
respectively) to write off purchased research and development which had not yet
reached technological feasibility and had no alternative future use. See Note 4
of Notes to Supplemental Consolidated Financial Statements.
(LOSS) INCOME FROM OPERATIONS:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------------------------
1998 CHANGE 1997 CHANGE 1996
-------- ------ ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Income from operations excluding purchased
research and development................ $ 22,287 80% $12,384 77% $6,995
Percentage of total revenues............ 12.4% 12.4% 10.4%
Purchased research and development........ $(47,340) $(3,697) $ --
Percentage of total revenues............ N/M N/M
-------- ------- ------
(Loss) income from operations............. $(25,053) N/M $ 8,687 24% $6,995
Percentage of total revenues............ N/M 8.7% 10.4%
</TABLE>
OTHER INCOME -- NET:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
----------------------------------------------
1998 CHANGE 1997 CHANGE 1996
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Other income -- net.......................... $2,863 173% $1,047 -8% $1,144
Percentage of total revenues............... 1.6% 1.0% 1.7%
</TABLE>
Other income-net includes income from short term investments, interest
income and expense, foreign currency exchange gains or losses, and other gains
or losses. Other income increased in fiscal 1998 primarily due to greater
interest income generated from short-term investments following the investment
of the net proceeds of the public offering of common stock completed in August
1997. In future quarters, the investment of these proceeds will continue to
generate income, pending their application to other uses. Other income decreased
slightly in fiscal 1997 over 1996 because of slight changes in the various
components.
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<PAGE> 10
PROVISION FOR INCOME TAXES:
The Company recorded a loss in fiscal 1998 as a result of the write-off of
purchased research and development associated with the acquisition of ProMIRA.
As a result of this non-recurring charge, the Company recorded an income tax
benefit of $18.7 million. In fiscal 1997, the effective tax rate represented by
the Company's provision for income taxes was approximately 52%, primarily
because the expenses associated with the Company's write-off of purchased
research and development from the purchase of Avyx were not deductible for tax
purposes. Excluding the effect of this write-off on taxable income, the
effective tax rate for fiscal 1997 would have been approximately 38%. Management
of the Company believes that, in fiscal 1999, the effective tax rate of the
Company on a consolidated basis is likely to be approximately 39%, excluding
non-recurring charges recorded in connection with acquisitions or other
transactions. This estimate is based on current domestic and foreign tax law and
is thus subject to change. See "Forward Looking Statements" and Note 9 of Notes
to Supplemental Consolidated Financial Statements.
NET (LOSS) INCOME AND (LOSS) INCOME PER SHARE:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FEBRUARY 28 OR 29,
--------------------------------------------------
1998 CHANGE 1997 CHANGE 1996
-------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income excluding purchased research
and development........................ $ 15,488 85% $ 8,354 65% $ 5,075
Percentage of total revenues........... 8.6% 8.3% 7.6%
Less: Purchased research and development,
net of tax benefit in 1998............. $(28,653) $(3,697) $ --
-------- ------- -------
Net (loss) income........................ $(13,165) N/M $ 4,657 -- $ 5,075
Percentage of total revenues........... N/M 4.6% (8)% 7.6%
======== ======= =======
Basic income per share, excluding
purchased research and development..... $ 0.66 69% $ 0.39 63% $ 0.24
Purchased research and development, per
basic share............................ $ (1.22) $ (0.17) $ --
-------- ------- -------
Basic (loss) income per share............ $ (0.56) N/M $ 0.22 --% $ 0.24
======== ======= =======
Shares used in basic share computation... 23,484 21,657 20,909
======== ======= =======
Diluted (loss) income per share.......... $ (0.56) N/M $ 0.20 --% $ 0.23
======== ======= =======
Shares used in diluted share
computation............................ 23,484 23,159 21,935
======== ======= =======
</TABLE>
As previously reported by the Company in its Current Report on Form 8-K
dated June 9, 1998, the Company had a net loss of $8,246,000, or $0.32 per basic
and diluted share for the three months ended May 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
-------------------------------------------------
1998 CHANGE 1997 CHANGE 1996
------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Working capital........................... $95,982 186% $33,443 16% $29,012
Cash, cash equivalents and marketable
securities.............................. $82,137 266% $22,465 -8% $24,441
</TABLE>
The Company has historically financed its growth primarily through funds
generated from operations and through proceeds from offerings of capital stock.
The increase in working capital at February 28, 1998 and 1997 resulted
principally from increases in (1) the Company's cash and marketable securities,
largely as
10
<PAGE> 11
a result of the Company's sale of 1.6 million shares of common stock in August
1997, (2) the Company's cash flows from operations and (3) accounts receivable,
which resulted from the increases in software products and services revenues,
and which more than offset decreases resulting from the Company's payments in
connection with the agreement with IRI in March 1997, the acquisition of SGL in
June 1997 and the acquisition of ProMIRA in February 1998. See Note 4 of Notes
to Supplemental Consolidated Financial Statements.
The Company's operating activities provided cash of $30.1 million, $13.7
million and $10.3 million in fiscal 1998, 1997 and 1996, respectively. Operating
cash flows increased in fiscal 1998 primarily because the increase in operating
income before non-cash expenses (including the write-off of purchased research
and development in connection with the acquisition of ProMIRA in February 1998
and depreciation and amortization) and increases in accounts payable, accrued
liabilities and accrued compensation more than offset increases in accounts
receivable, non-cash expenses and deferred income taxes. Operating cash flows
increased in fiscal 1997 largely because the cash flows resulting from net
income were augmented by increases in non-cash expenses and increases in
deferred revenues, accrued compensation, other accrued liabilities and income
taxes payable, and were not fully offset by increases in accounts receivable.
At February 28, 1998, accounts receivable were $59.6 million, compared to
$38.4 million at February 28, 1997, primarily as a result of increases in the
number and size of software license transactions. Deferred revenue increased
from $14.4 million to $18.5 million, principally because of growth in deferred
maintenance revenue as a result of increased licensing activity. At February 28,
1997, accounts receivable were $38.4 million, compared to $20.0 million at
February 29, 1996, primarily as a result of increases in the number and size of
software license transactions. Deferred revenue increased from $7.1 million to
$14.4 million because of growth in software licensing activity and increases in
related services and maintenance revenue.
Investing activities used cash of $86.2 million, $13.7 million and $9.8
million in fiscal 1998, 1997 and 1996, respectively. In fiscal 1998, investing
activities used cash largely as a result of the purchase of marketable
securities using proceeds from the public offering of common stock completed in
August 1997. In fiscal 1998 and 1997, sales of marketable securities provided
cash, but the amounts provided were more than offset by cash used for purchases
of marketable securities, property and equipment, capitalization of software
development costs and acquisitions. The Company had expenditures for property
and equipment of approximately $16.0 million in fiscal 1998. The Company
anticipates expenditures for property and equipment commensurate with its
anticipated growth fiscal 1999. The Company also used cash to acquire ProMIRA
and SGL, and to enter into an agreement with IRI.
Financing activities provided cash of $67.2 million, $2.4 million and $0.7
million, in fiscal 1998, 1997 and 1996, respectively. In fiscal 1998, cash from
financing activities was derived primarily from the sale of 1.6 million shares
of common stock in an underwritten public offering in August 1997, from
exercises of employee stock options and from the sale of shares pursuant to the
Company's employee stock purchase program. In fiscal 1997, cash from financing
activities was derived primarily from exercises of employee stock options and
from the sale of shares pursuant to the Company's employee stock purchase
program. See Note 6 of Notes to Supplemental Consolidated Financial Statements.
In June 1998, the Company issued approximately 333,000 shares of common
stock in connection with the acquisition of TYECIN. The Company accounted for
the acquisition as a pooling of interests and the Company expects to incur a
non-recurring charge of approximately $3 million in certain expenses related to
this transaction which includes, among other items, severance, legal and
accounting fees. In February 1998, the Company issued 1.55 million shares of
common stock, in connection with the acquisition of ProMIRA. The Company also
paid $5.3 million in cash. The Company accounted for the acquisition as a
purchase transaction and recognized a non-recurring, non-cash charge of $47.3
million to write off purchased research and development. In June 1997, the
Company acquired all of the outstanding stock of SGL for $2.8 million in cash.
The Company accounted for the acquisition as a purchase transaction. In March
1997, the Company entered into agreements with IRI (the "IRI Agreement")
relating to the Company's possible acquisition of certain assets of IRI and the
development of a solution that will
11
<PAGE> 12
incorporate IRI's point-of-sale scanner data into the Company's supply chain
management software. Under the agreements, the Company paid $1.5 million to IRI.
Under the IRI Agreements, the Company agreed to market IRI's point-of-sale
data and received 10-year, exclusive rights among supply chain software vendors
in most geographic markets to incorporate these data. The Company and IRI agreed
to resell certain of each other's products, and the Company might acquire
certain additional assets of IRI (subject to the satisfaction of certain
contingencies).
As part of these agreements, the Company committed that it will generate a
minimum of $16.5 million in revenues for IRI from specified products over
several years, beginning after the occurrence of certain events. This commitment
is subject to the satisfaction of significant contingencies specified in the
agreements. Certain issues have arisen between the Company and IRI relating to
the satisfaction of these contingencies. The Company currently anticipates
satisfactory resolution of these issues and believes that it will be able to
produce a sufficient amount of qualifying revenues to satisfy its commitment.
However, if the Company is unable to generate the minimum annual revenues, to
the extent required under the agreements, it will be obligated to pay to IRI
from its own funds an amount equal to the difference between the qualifying
revenues generated and the required minimum, which could result in a material
decrease in working capital. See "Certain Forward-Looking 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
will expire in September 1998, unless renewed. There were no amounts outstanding
under this facility at February 28, 1998.
The Company is continuing to take steps to ensure its products, internal
systems and infrastructure are Year 2000 compliant. The Company released an
enhancement (as part of its normal product development efforts) to its supply
chain management software products in the quarter ending May 31, 1998 that is
the Company's Year 2000 compliant release. In addition, its efforts have
included testing, replacing and updating these systems. Based upon actual
experience to date, the Company continues to evaluate the estimated costs
associated with these efforts. While final cost estimates are not complete, the
Company presently anticipates that it will be able to manage its total Year 2000
transition without any material adverse effect on its results of operations or
financial condition. The Company has expensed approximately $200,000 of Year
2000 costs through fiscal 1998 and estimates that it will incur $1,000,000 and
$300,000 of additional expenses in fiscal 1999 and 2000, respectively.
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 by the Company, any such acquisitions, transactions or
relationships might result in a decrease in working capital.
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 to 18 months. If the Company decides to
expand its operations more rapidly, to broaden or enhance its products more
rapidly, to acquire businesses or technologies or to make other significant
expenditures to respond to market opportunities or competitive pressures, then
the Company may need additional funds at an earlier time.
As noted above, a number of shareholder class action lawsuits were filed
against the Company and certain of its executive officers and directors in June
1998. (See "Recent Developments -- Shareholder Class Action Lawsuits Filed.")
The ultimate outcome of these lawsuits, as with litigation generally, is
inherently uncertain, and it is possible that one or more of these matters may
be resolved adversely to the Company. The adverse resolution of one or more of
these lawsuits could have a material adverse effect on the Company's business,
operating results, financial condition and cash flows. However, as noted above,
management believes that the lawsuits are without merit and the Company and the
other defendants intend to defend against the lawsuits vigorously.
12
<PAGE> 13
The Company believes that inflation did not have a material effect on its
results of operations in fiscal 1998.
13
<PAGE> 14
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
INDEX TO SUPPLEMENTAL FINANCIAL STATEMENTS
Page
----
REPORT OF INDEPENDENT AUDITORS...................................... 14
REPORT OF INDEPENDENT ACCOUNTANTS................................... 15
SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS:
Supplemental Consolidated Balance Sheets for
Each of the Two Years in the Period Ended
February 28, 1998......................................... 16
Supplemental Consolidated Statements of
Operations for Each of the Three Years in
the Period ended February 28, 1998........................ 17
Supplemental Consolidated Statements of
Stockholders' Equity for Each of the Three
Years in the Period Ended February 28, 1998............... 18
Supplemental Consolidated Statements of Cash
Flows for Each of the Three Years in the
Period Ended February 28, 1998............................ 19
Notes to Supplemental Consolidated Financial
Statements................................................ 20
<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Board of Directors of
Manugistics Group, Inc.:
We have audited the accompanying supplemental consolidated balance sheets
of Manugistics Group, Inc. (the Company) and its subsidiaries as of February 28,
1998 and 1997, and the related supplemental consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended February 28, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audits. We did not audit the
consolidated balance sheets of TYECIN as of December 31, 1997 and 1996, or the
related statements of income, shareholders' equity and cash flows of TYECIN for
the three years in the period ended December 31, 1997, which consolidated
statements reflect total assets of $2,971,400 and $2,059,100 as of December 31,
1997 and 1996, respectively, and total revenues of $4,597,200, $5,077,000, and
$4,653,800 for the three years ended December 31, 1997, respectively. Those
consolidated statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for TYECIN for 1997, 1996 and 1995, is based solely on the report of such other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
The supplemental consolidated financial statements give retroactive effect
to the merger of Manugistics Group, Inc. and TYECIN Systems, Inc., ("TYECIN"),
on June 1, 1998, which has been accounted for as a pooling of interests as
described in Notes 1 and 13 to the supplemental consolidated financial
statements. Generally accepted accounting principles proscribe giving effect to
a consummated business combination accounted for by the pooling of interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation;
however, they will become the historical consolidated financial statements of
Manugistics Group, Inc. after financial statements covering the date of
consummation of the business combination are issued.
In our opinion, based on our audits and the report of the other auditors,
the supplemental consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company and its
subsidiaries at February 28, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended February
28, 1998 in conformity with generally accepted accounting principles applicable
after financial statements are issued for a period which includes the date of
consummation of the business combination.
DELOITTE & TOUCHE LLP
Washington, D.C.
June 19, 1998
14
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of TYECIN Systems, Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of income, of shareholders' equity and of cash flows of TYECIN
Systems, Inc. and its subsidiary (not presented separately herein) present
fairly, in all material respects, their financial position at December 31, 1997
and 1996, and the results of their operation and their cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles. These consolidated financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
San Jose, California
March 6, 1998, except as to Note 11, which is as of June 1, 1998
15
<PAGE> 17
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------
1998 1997
-------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 19,891 $ 8,834
Marketable securities..................................... 62,246 13,631
Accounts receivable (net of allowance for uncollectible
accounts -- 1998, $2,099; 1997, $1,235)................ 59,584 38,428
Deferred tax asset........................................ 1,693 1,117
Other current assets...................................... 3,525 1,241
-------- -------
Total current assets.............................. 146,939 63,251
PROPERTY AND EQUIPMENT -- NET............................... 21,142 10,608
NONCURRENT ASSETS:
Software development costs (net of accumulated
amortization -- 1998, $14,651; 1997, $6,375)........... 22,986 9,932
Intangibles (net of accumulated amortization -- 1998,
$2,971; 1997, $1,943).................................. 14,660 2,130
Deferred tax asset........................................ 17,593 --
Other non-current assets.................................. 1,895 385
-------- -------
TOTAL............................................. $225,215 $86,306
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 8,918 $ 4,316
Accrued compensation...................................... 12,419 6,403
Other accrued liabilities................................. 10,834 3,601
Deferred revenue.......................................... 18,546 14,377
Income taxes payable...................................... 240 1,111
-------- -------
Total current liabilities......................... 50,957 29,808
LONG-TERM LIABILITIES....................................... 512 220
DEFERRED TAXES.............................................. -- 1,405
COMMITMENTS AND CONTINGENCIES (Notes 8 and 13)
STOCKHOLDERS' EQUITY:
Preferred stock........................................... -- --
Common stock -- $.002 par value; 100,000,000 shares
authorized; shares issued, 26,719,681 in 1998;
22,725,065 in 1997; shares outstanding, 25,967,171 in
1998; 21,972,555 in 1997............................... 53 45
Additional paid-in capital................................ 171,075 38,819
Retained earnings......................................... 3,102 16,267
Translation adjustment.................................... 365 459
Unrealized loss on marketable securities.................. (132) --
Treasury stock -- 752,510 shares at cost.................. (717) (717)
-------- -------
Total stockholders' equity........................ 173,746 54,873
-------- -------
TOTAL............................................. $225,215 $86,306
======== =======
</TABLE>
See notes to supplemental consolidated financial statements.
16
<PAGE> 18
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
REVENUES:
Software products........................................ $107,547 $ 54,342 $33,111
Consulting, maintenance and other services............... 72,716 45,865 33,865
-------- -------- -------
Total revenues................................... 180,263 100,207 66,976
-------- -------- -------
OPERATING EXPENSES:
Cost of software sold.................................... 11,102 5,011 3,070
Cost of consulting, maintenance and other services....... 33,213 19,618 15,181
Sales and marketing...................................... 66,228 34,961 22,933
Product development...................................... 32,794 18,889 12,133
General and administrative............................... 14,639 9,344 6,664
Purchased research and development....................... 47,340 3,697 --
-------- -------- -------
Total operating expenses......................... 205,316 91,520 59,981
-------- -------- -------
(LOSS) INCOME FROM OPERATIONS.............................. (25,053) 8,687 6,995
OTHER INCOME -- NET........................................ 2,863 1,047 1,144
-------- -------- -------
(LOSS) INCOME BEFORE INCOME TAXES.......................... (22,190) 9,734 8,139
(BENEFIT) PROVISION FOR INCOME TAXES....................... (9,025) 5,077 3,064
-------- -------- -------
NET (LOSS) INCOME.......................................... $(13,165) $ 4,657 $ 5,075
======== ======== =======
BASIC (LOSS) INCOME PER SHARE.............................. $ (0.56) $ 0.22 $ 0.24
======== ======== =======
SHARES USED IN BASIC SHARE COMPUTATION..................... 23,484 21,657 20,909
======== ======== =======
DILUTED (LOSS) INCOME PER SHARE............................ $ (0.56) $ 0.20 $ 0.23
======== ======== =======
SHARES USED IN DILUTED SHARE COMPUTATION................... 23,484 23,159 21,935
======== ======== =======
</TABLE>
See notes to supplemental consolidated financial statements.
17
<PAGE> 19
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------
PAR PAID-IN RETAINED TRANSLATION TREASURY
SHARES VALUE CAPITAL EARNINGS ADJUSTMENT STOCK OTHER TOTAL
------ ----- -------- -------- ----------- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 1, 1995........... 10,801 $21 $ 30,952 $ 6,535 $145 $(771) $ (12) $ 36,870
Issuance of common stock....... 42 -- 377 -- -- -- -- 377
Exercise of stock options...... 282 1 538 -- -- -- -- 539
Tax benefit of options
exercised................... -- -- 1,056 -- -- -- -- 1,056
Issuance of treasury stock..... -- -- 211 -- -- 27 -- 238
Amortization of deferred
compensation................ -- -- -- -- -- -- 12 12
Translation adjustment......... -- -- -- -- (240) -- -- (240)
Net income..................... -- -- -- 5,075 -- -- -- 5,075
------ --- -------- -------- ---- ----- ----- --------
BALANCE, FEBRUARY 29, 1996....... 11,125 22 33,134 11,610 (95) (744) -- 43,927
Issuance of common stock....... 50 -- 733 -- -- -- -- 733
Exercise of stock options...... 336 1 1,906 -- -- -- -- 1,907
Tax benefit of options
exercised................... -- -- 2,571 -- -- -- -- 2,571
Fair value of options issued... -- -- 217 -- -- -- -- 217
Compensation expense........... -- -- 69 -- -- -- -- 69
Issuance of treasury stock..... -- -- 211 -- -- 27 -- 238
Translation adjustment......... -- -- -- -- 554 -- -- 554
Net income..................... -- -- -- 4,657 -- -- -- 4,657
Two-for-one stock split........ 11,214 22 (22) -- -- -- -- --
------ --- -------- -------- ---- ----- ----- --------
BALANCE, FEBRUARY 28, 1997....... 22,725 45 38,819 16,267 459 (717) -- 54,873
Issuance of common stock, net
of issuance costs of $652... 3,137 6 120,110 -- -- -- -- 120,116
Issuance of stock options in
connection with
acquisition................. -- -- 1,081 -- -- -- -- 1,081
Exercise of stock options...... 858 2 3,334 -- -- -- -- 3,336
Tax benefit of options
exercised................... -- -- 7,731 -- -- -- -- 7,731
Translation adjustment......... -- -- -- -- (94) -- -- (94)
Unrealized loss on marketable
securities.................. -- -- -- -- -- -- (132) (132)
Net loss....................... -- -- -- (13,165) -- -- -- (13,165)
------ --- -------- -------- ---- ----- ----- --------
BALANCE, FEBRUARY 28, 1998....... 26,720 $53 $171,075 $ 3,102 $365 $(717) $(132) $173,746
====== === ======== ======== ==== ===== ===== ========
</TABLE>
See notes to supplemental consolidated financial statements
18
<PAGE> 20
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income......................................... $(13,165) $ 4,657 $ 5,075
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization............................. 16,150 8,110 4,610
Write-off of purchased research and development........... 47,340 3,697 --
Allowances for doubtful accounts.......................... 1,510 2,529 732
Deferred income taxes..................................... (19,574) (479) 485
Tax benefit from stock options exercised.................. 7,731 2,571 1,056
Other..................................................... (13) 108 126
Changes in assets and liabilities (net of the effects of
acquisitions):
Accounts receivable.................................... (20,908) (20,720) (5,091)
Other current assets................................... (2,023) 54 (449)
Other noncurrent assets................................ (503) 94 24
Accounts payable and accrued expenses.................. 5,777 (157) 2,888
Accrued compensation................................... 6,016 4,878 (534)
Deferred revenue....................................... 2,470 7,128 1,052
Income taxes payable................................... (716) 1,198 373
-------- -------- -------
Net cash provided by operating activities............ 30,092 13,668 10,347
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (Note 4)..................................... (9,637) (3,582) (1,068)
Sale of marketable securities............................. 46,865 7,933 5,570
Purchase of marketable securities and long-term
investments............................................ (96,347) (3,006) (3,662)
Purchase of property and equipment........................ (16,011) (7,284) (5,333)
Capitalization of software development costs.............. (10,274) (6,843) (4,915)
Purchase of software licenses............................. (816) (878) (382)
-------- -------- -------
Net cash used in investing activities................ (86,220) (13,660) (9,790)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (payments) under long-term obligations........... 58 (273) (187)
Net proceeds from sale of common stock.................... 63,770 735 378
Proceeds from exercise of stock options................... 3,334 1,907 538
-------- -------- -------
Net cash provided by financing activities............ 67,162 2,369 729
-------- -------- -------
EFFECTS OF EXCHANGE RATES ON CASH BALANCES.................. 23 574 (246)
-------- -------- -------
NET INCREASE IN CASH........................................ 11,057 2,951 1,040
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................ 8,834 5,883 4,843
-------- -------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 19,891 $ 8,834 $ 5,883
======== ======== =======
</TABLE>
See notes to supplemental consolidated financial statements.
19
<PAGE> 21
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED FEBRUARY 28, 1998
Manugistics Group, Inc. (the "Company") develops, markets and supports
software products for synchronized supply chain management(TM) and provides
related services. Synchronized supply chain management refers to managing the
complex interactions involved in the flows of products through the supply chain.
It involves forecasting product demand and coordinating the timing of
distribution, manufacturing, procurement, and transportation activities to meet
this demand, not only across an entire enterprise, but also among an enterprise
and its suppliers and customers. The Company provides an integrated suite of
strategic, tactical and operational supply chain software planning products,
including a high-level optimizer, that address the four key operational areas of
supply chain management: demand planning, supply planning, manufacturing
scheduling and transportation management.
In June, 1998, the Company acquired TYECIN Systems, Inc. ("TYECIN"), a
provider of advanced planning and scheduling supply chain management software
for the semiconductor industry (see Note 13).
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The supplemental consolidated financial statements
have been prepared to give retroactive effect to the acquisition of TYECIN
Systems, Inc. on June 1, 1998, which has been accounted for as a pooling of
interests ("pooling"). Generally accepted accounting principles proscribe giving
effect to a merger or business combination accounted for as a pooling in
financial statements that do not include the date of consummation. Although,
these supplemental consolidated financial statements do not extend through the
date of consummation, they will become the Company's historical consolidated
financial statements after financial statements including the consummation date
are issued.
Principles of Consolidation -- The supplemental consolidated financial
statements include the accounts of Manugistics Group, Inc., its wholly-owned
subsidiaries, and its 60% owned subsidiary TYECIN-INNOTECH, a Japanese
corporation. All significant intercompany transactions and balances have been
eliminated. The Company's fiscal year ends on the last day of February. The
supplemental consolidated financial statements combine the Company's fiscal
years which end in February with TYECIN's fiscal years which end in December.
Use of Estimates -- The preparation of supplemental consolidated financial
statements in conformity with generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the supplemental
consolidated financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results may differ from these
estimates.
Revenue Recognition -- The Company's revenues consist primarily of software
license revenues, consulting service revenues and maintenance revenues. The
Company recognizes revenues in accordance with the provisions of the American
Institute of Certified Public Accountants ("AICPA") Statement of Position
("SOP") 91-1, "Software Revenue Recognition." Software license revenues from
supply chain management products are recognized upon the customer's execution of
a noncancellable license agreement and shipment of the software, provided that
no significant vendor obligations remain outstanding, the license fee is fixed
and amounts are due within one year and collection is considered probable by
management. Software license revenues from the sale of personal systems products
are recognized upon the Company's shipment of the software.
Consulting service revenues are recognized when the services are provided,
generally on a time and materials basis. Consulting service revenues consist
primarily of implementation and training services related to the installation of
the Company's products and do not include significant customization to or
development of the underlying software code. Maintenance revenues are deferred
and recognized ratably over the term of the maintenance contract, typically 12
months.
20
<PAGE> 22
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amounts received in advance of revenue recognition are classified as
deferred revenues.
In October 1997, the AICPA issued SOP 97-2, "Software Revenue Recognition,"
which provides guidance in applying generally accepted accounting principles in
recognizing revenues on software transactions and supercedes SOP 91-1. The
provisions of SOP 97-2 are effective for the Company for transactions entered
into after February 28, 1998. SOP 97-2 requires revenues earned on software
arrangements involving multiple elements to be allocated to each element based
on vendor specific objective evidence of the relative fair values of the
elements. If a vendor does not have evidence of the fair value for all elements
in a multiple-element arrangement, all revenue from the arrangement is deferred
until such evidence exists or until all elements are delivered. In addition, SOP
97-2 requires that the Company have an executed software license agreement, the
license fee be fixed and determinable and collection deemed probable by
management in order to record software license revenue. The Company currently
believes the adoption of SOP 97-2 will not have a material impact on its
consolidated results of operations or financial position; however, because
implementation guidelines for this standard have not yet been issued and a wide
range of potential interpretations are being discussed by the accounting
profession, there can be no assurance that SOP 97-2 will not have a material
impact on the Company's consolidated results of operations or financial
position. In March 1998, the AICPA issued SOP 98-4 which defers the effective
date of a provision of SOP 97-2. This provision currently has no impact to the
Company.
Cash and Cash Equivalents -- The Company considers cash on hand, deposits
in banks, and highly liquid overnight investments as cash and cash equivalents.
Marketable Securities -- The Company has classified its short-term
marketable securities as "available-for-sale." These securities are recorded at
fair value, with gross unrealized gains and losses reported as a component of
stockholders' equity. At February 28, 1998 and 1997, marketable securities
consisted of investments in municipal bonds and other short-term investments
which generally mature in one year or less.
Concentration of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of
investments in marketable securities and accounts receivable. The Company has
policies that limit investments to investment grade securities and that limit
the amount of credit exposure to any one issuer. The Company performs ongoing
credit evaluations of its customers and maintains an allowance for potential
losses, but does not require collateral. The Company's credit risk is also
further mitigated as its customer base is diversified, geographically and by
industry.
Fair Values of Financial Instruments -- The carrying values of cash and
cash equivalents, marketable securities, accounts receivable, and accounts
payable approximate fair value due to the short maturities of such instruments.
The carrying value of long-term debt approximates fair value based on current
rates offered to the Company for debt with similar collateral and guarantees, if
any, and maturities.
Property and Equipment -- Property and equipment is stated at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, ranging from two to ten years. Leasehold
improvements are amortized over the shorter of the lease term or the useful life
of the asset.
Intangibles -- Intangibles include intellectual property, customer lists
and goodwill. Intellectual property and goodwill are amortized on a
straight-line basis and customer lists are amortized using the double declining
balance method. The amortization period for these assets is five years or less,
commencing on the date of acquisition (see Note 4).
Impairment of Long-Lived Assets -- The Company reviews its long-lived
assets, including property and equipment and intangibles, for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the assets may not be fully recoverable. In performing an evaluation of
21
<PAGE> 23
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recoverability, the estimated future undiscounted net cash flows of the assets
are compared to the assets' carrying amount to determine if a write down is
required.
Income Taxes -- The provision for income taxes is based on income
recognized for financial reporting purposes and includes the effects of
temporary differences between such income and income recognized for income tax
purposes. Deferred income taxes reflect the net tax effects of temporary
differences between carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Foreign Currency Translation -- Assets and liabilities denominated in
foreign currencies are translated at the exchange rate on the balance sheet
date. The related revenues and expenses are translated at the prevailing
exchange rate during the reporting period. Translation adjustments related to
this process are charged to stockholders' equity.
Net (Loss) Income Per Share -- As of February 28, 1998, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 requires the presentation of basic income per share and,
for companies with potentially dilutive securities, such as options, diluted
income per share. Basic income per share is computed using the weighted average
number of shares of common stock outstanding. Diluted income per share is
computed using the weighted average number of shares of common stock and, when
dilutive, common equivalent shares from options to purchase common stock using
the treasury stock method. The following table sets forth the computation of
basic and diluted income per share:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
----------------------------------------
1998 1997 1996
---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Weighted average common shares........... 23,484 21,657 20,909
Dilutive potential common shares......... -- 1,502 1,026
-------- ------- -------
Shares used in diluted share
computation............................ 23,484 23,159 21,935
======== ======= =======
Net (loss) income........................ $(13,165) $ 4,657 $ 5,075
======== ======= =======
Basic (loss) income per share............ $ (0.56) $ 0.22 $ 0.24
======== ======= =======
Diluted (loss) income per share.......... $ (0.56) $ 0.20 $ 0.23
======== ======= =======
</TABLE>
The dilutive effect of options for approximately 3.8 million shares has not
been considered in the computation of diluted loss per share in fiscal 1998
because such shares would be anti-dilutive.
Stock-Based Compensation Plans -- The Company accounts for its stock-based
compensation plans in accordance with Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees" and has made the pro
forma disclosures required by SFAS 123, "Accounting for Stock-Based
Compensation" in Note 6.
New Accounting Pronouncements -- In June 1997, SFAS No. 130, "Reporting
Comprehensive Income" was issued and requires that all items which meet the
definition of comprehensive income be reported for the period in which they are
recognized. Comprehensive income includes changes in the balances of items that
are reported directly in a separate component of stockholders' equity on the
consolidated balance sheets, such as foreign currency translation adjustments
and unrealized gains or losses on available-for-sale securities. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997 and the Company
will make the disclosures required by SFAS No. 130 in the first quarter of
fiscal 1999.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued and requires that a public business
enterprise report financial and descriptive information about
22
<PAGE> 24
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
its reportable operating segments. Generally, financial information is required
to be reported on the basis used internally for evaluating segment performance
and resource allocation. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997; however, disclosure is not required in interim
financial statements in the initial year of adoption. Accordingly, the Company
will make the required disclosures for the fiscal year ending February 28, 1999.
The Company is still determining the effect of adopting SFAS No. 131; however,
management does not anticipate that it will have a material impact.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The provisions of SOP
98-1 require that certain costs to develop or obtain internal use software be
capitalized. SOP 98-1 is effective for fiscal years beginning after December
1998 and will be effective for the Company beginning March 1999. The Company is
still determining the effect of adopting SOP 98-1; however, management does not
anticipate that it will have a material impact on the Company's consolidated
results of operations or financial position.
Reclassification of Account Balances -- Certain prior year amounts have
been reclassified for comparability with the current year's financial statement
presentation.
2. FINANCIAL STATEMENT DETAILS
Property and Equipment -- Property and equipment consists of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------
1998 1997
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment and software............................. $ 22,130 $12,698
Office furniture and equipment.............................. 6,585 4,181
Leasehold improvements...................................... 6,877 2,192
-------- -------
Total............................................. 35,592 19,071
Less accumulated depreciation and amortization.............. (14,450) (8,463)
-------- -------
Property and equipment -- net............................... $ 21,142 $10,608
======== =======
</TABLE>
Other Income -- Net -- Other income -- net, consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-----------------------------
1998 1997 1996
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest Income......................................... $2,774 $1,232 $1,251
Interest Expense........................................ (110) (58) (91)
Other................................................... 199 (127) (16)
------ ------ ------
Other income -- Net..................................... $2,863 $1,047 $1,144
====== ====== ======
</TABLE>
Other includes minority interest related to the Company's 60% owned
subsidiary in fiscal 1998.
3. SOFTWARE DEVELOPMENT COSTS
The Company capitalizes costs incurred in the development of its software
products. Software development costs include certain internally developed costs,
software costs purchased from third parties in connection with acquisitions if
the related software product under development has reached technological
feasibility or if there are alternative future uses for the purchased software,
provided the capitalized amounts will be realized over a period not exceeding
five years, and purchased software license costs for products used in the
development of the Company's products. Costs incurred prior to establishing
23
<PAGE> 25
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
technological feasibility are charged to product development expense as
incurred. Software development costs are amortized on a straight line basis over
the estimated economic life of the product, generally two to five years,
commencing with the date the product is first available for general release.
The Company capitalized internally developed software costs of $10,274,000,
$6,843,000, and $4,915,000, and recorded amortization expense of $7,560,000,
$3,543,000, and $2,228,000 for fiscal 1998, 1997, and 1996, respectively. Fiscal
1998 balances reflect $9,940,000 in purchased software development costs
capitalized in connection with the acquisition of ProMIRA Software Inc. (see
Note 4). The Company capitalized approximately $1,116,000, $878,000 and $382,000
and recorded amortization expense of $717,000, $331,000 and $51,000 in fiscal
1998, 1997 and 1996, respectively, relating to purchased software license
product costs.
The amortization expense amounts for fiscal 1998 and 1997 include
write-offs totaling approximately $1,897,000 and $312,000, respectively, of
previously capitalized internal software development costs. These capitalized
costs were deemed to exceed their future net realizable value as a result of new
technologies developed by the Company and acquired in connection with
acquisitions.
4. ACQUISITIONS
Purchases
During fiscal 1998 and 1997, the Company made three acquisitions which have
been accounted for under the purchase method. Accordingly, the purchase prices
were allocated to certain assets and liabilities based on their respective fair
market values. The excess of the purchase price over the estimated fair market
value of the net assets acquired under each transaction was accounted for as
goodwill. Amounts allocated to certain intangibles, including goodwill, are
being amortized on a straight-line basis over five years. The supplemental
consolidated financial statements include the operating results of each
acquisition from the date of the acquisition.
Fiscal 1998 acquisitions
In February 1998, the Company acquired ProMIRA Software, Inc. ("ProMIRA"),
a provider of supply chain planning software for manufacturers of complex
products in industries such as high technology, electronics and motor vehicles
and parts. The total purchase price was approximately $64,500,000, comprised of
cash, 1,550,000 shares of common stock and options to purchase 78,379 shares of
common stock valued at $57.8 million, and acquisition costs. The purchase price
was allocated based on a fair value appraisal obtained from a nationally
recognized independent appraisal firm, and included allocations 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 write-off of purchased research and development resulted in a non-recurring
charge to the Company's operating results, and reduced net income for fiscal
1998 by $28,653,000 ($47,340,000, inclusive of income tax benefits of
$18,687,000), or $1.22 basic and $1.09 diluted income per share.
In June 1997, the Company acquired Synchronology Group Limited, a
closely-held company which provides manufacturing planning and scheduling
consulting services. In March 1997, the Company entered into a definitive
agreement to acquire certain assets of Information Resources, Inc. ("IRI"). The
total purchase prices of these acquisitions were approximately $3,200,000 and
$1,900,000, respectively, and consisted primarily of cash, assumed liabilities,
and acquisition costs.
24
<PAGE> 26
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Had the acquisitions made in fiscal 1998 been completed as of March 1,
1996, unaudited pro forma results would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY
--------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................... $188,893 $103,872
Net loss.................................................... (18,328) (29,025)
Basic and diluted loss per share............................ (0.78) (1.34)
</TABLE>
Such unaudited pro forma amounts are not necessarily indicative of what the
actual consolidated results of operations might have been had the acquisitions
been effective at the beginning of each period presented.
Fiscal 1997 acquisition
In fiscal 1997, the Company acquired Avyx, Inc. ("Avyx"), a custom
developer and services provider of manufacturing scheduling software. The total
purchase price was approximately $3,799,000, primarily comprised of cash,
assumed liabilities and acquisition costs. The purchase price allocation
included allocations to certain intangible assets, such as existing software
products and in-process software development efforts which had not reached
technological feasibility. The Company's write-off of the purchased research and
development resulted in a non-recurring charge to the Company's operating
results, and reduced net income for fiscal 1997 by $3,697,000, or $0.17 basic
and $0.16 diluted income per share. The fiscal 1997 supplemental consolidated
financial statements include the operating results of Avyx from the date of the
acquisition. The results of operations of Avyx prior to the acquisition were not
material to the supplemental consolidated financial statements.
In addition, the Company entered into a three-year non-compete agreement
with two of the principals of Avyx, who did not become employees of the Company,
in exchange for an option to purchase 60,000 shares of the Company's common
stock. The agreement was valued at $217,000, which represented the estimated
fair value of the stock options issued, and is being amortized over the life of
the agreement, which is three years.
5. DEBT AND LONG-TERM LIABILITIES
Long-term obligations consisted of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
--------------
1998 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Notes payable............................................... $ 499 $ 182
Capital lease obligations (see Note 8)...................... 230 229
----- -----
Total............................................. 729 411
Less -- current portion..................................... (494) (191)
----- -----
Subtotal.................................................... 235 220
Other long-term liabilities................................. 277 --
----- -----
Total............................................. $ 512 $ 220
===== =====
</TABLE>
Other long-term liabilities includes minority interest related to the
Company's 60% owned subsidiary in fiscal 1998.
25
<PAGE> 27
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Notes Payable -- The Company has several outstanding notes payable which
accrue interest at rates ranging from 1.93% to 7.0% at February 28, 1998.
Principal repayment requirements for each of the five succeeding years beginning
March 1, 1998 are as follows: $494,000 for 1998, $187,000 for 1999, $32,000 for
2000, $9,000 for 2001 and $7,000 for 2002.
Line of Credit -- 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 an aggregate amount of up to $10,000,000. The Company
may make borrowings under the facility for short-term working capital purposes
or for acquisitions. (Acquisition-related borrowings are limited to $7,500,000
per acquisition). For the interest rate on borrowings, the Company may select
either the prime rate of the lender or either the three-month or six-month
London Interbank Offered Rate (LIBOR) plus one and one-half percent. The
facility contains certain financial covenants that the Company believes are
typical for a facility of this nature and amount, including a covenant not to
pay or declare cash dividends. This facility will expire in September 1998,
unless renewed. There were no outstanding amounts under the credit facility at
February 28, 1998.
6. STOCKHOLDERS' EQUITY
Preferred Stock -- The Company has authorized 4,620,253 shares of $.01 par
value preferred stock. As of February 28, 1998, no preferred shares were
outstanding.
Common Stock -- The Company has authorized 100,000,000 shares of $.002 par
value common stock. No cash dividends on common stock have been declared or paid
in fiscal 1998, 1997, or 1996. On August 18, 1997, the Company completed an
underwritten offering of 1,600,000 newly issued shares of common stock. The
proceeds to the Company were approximately $61,985,000, net of related offering
expenses.
Stock Split -- On May 9, 1997, the Board of Directors of the Company
declared a two-for-one stock split on the Company's common stock, which was paid
in the form of a 100% stock dividend on June 11, 1997 to shareholders of record
as of May 23, 1997. The shares outstanding, weighted average shares, amounts per
share, and all other references to shares of common stock reported have been
restated to give effect to the stock dividend.
Employee Stock Purchase Plan -- In October 1994, the Company adopted an
employee stock purchase plan ("ESPP") that authorizes the Company to sell up to
500,000 shares of common stock to employees through voluntary payroll
withholdings. The stock price to employees is equal to 85% or 95% of the market
price on the lower of either the first or last day of each six-month withholding
period. Payroll deductions may not exceed the lesser of 10% of a participant's
compensation or $25,000 per year. The number of shares purchased under this plan
by employees totaled 69,113 shares, 100,818 shares, and 84,404 shares in fiscal
1998, 1997, and 1996, respectively. The weighted average fair value of shares
purchased in fiscal 1998, 1997, and 1996 was $44.88, $14.09, and $7.13,
respectively.
Stock Options
The Company has an employee stock option plan under which non-qualified
options of up to 6,564,238 shares may be granted to employees to purchase common
stock at prices not less than the fair market value at the time of grant. Under
the plan, prior to 1994, options vested and became exercisable four years from
the date of grant. In 1994, the Company amended the plan such that options
granted after the amendment vest and become exercisable ratably over a four-year
period from the date of grant. The right to exercise the vested options expires
upon the earlier of either ten years (or for options granted prior to 1994,
eleven years) from the date of grant, or within thirty days of termination of
employment. As of February 28, 1998, the Company has granted options on
5,969,260 shares.
26
<PAGE> 28
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1994, the Company adopted the 1994 Outside Directors Non-Qualified Stock
Option Plan, which provides for the grant of stock options of up to 280,000
shares to the Company's non-employee directors. Under this plan, non-qualified
options are granted annually at the fair market value of the Company's common
stock on the date of grant. The number of options granted annually to each
non-employee director is fixed by the plan. Options become fully exercisable on
the first anniversary of the date of grant. Under this plan, options may be
granted over a ten year period through May 23, 2004. As of February 28, 1998,
the Company has granted options on 192,500 shares.
In January 1996, the Company amended its Employee Incentive Stock Option
Plan, whereby the Company may grant options up to 1,805,950 shares to certain
key executive employees. Options are granted at an exercise price equal to or
greater than the fair market value of the stock on the date of grant and expire
ten years from the date of grant. All options granted vest in accordance with
plan terms. As of February 28, 1998, the Company has granted options on
1,650,000 shares.
In 1994, the Company adopted the 1994 Executive Incentive Stock Option
Plan, whereby the Company may grant options to certain key executive officers of
the Company up to 1,750,000 shares. Options are granted at an exercise price
equal to or greater than the fair market value of the stock on the date of grant
and expire ten years from the date of grant. Options will vest ratably over a
four-year period. As of February 28, 1998, the Company has granted options on
145,750 shares.
TYECIN stock option plans. TYECIN's Board of Directors adopted and the
shareholders approved incentive stock option plans for employees and
nonqualified stock option plans for employees and consultants. Under these
plans, options have been granted at prices not less than 85% of the estimated
fair market value of TYECIN's common stock (not less than 100% for incentive
stock options) at the date of grant. The options generally vest over a four year
period. In connection with the acquisition of TYECIN, all options were assumed
by the Company.
A summary of the status of the Company's stock option plans, including
TYECIN's stock option plans, and changes during the fiscal years is presented
below:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ----------------------
OPTIONS TO OPTIONS TO OPTIONS TO
PURCHASE WTD. AVG. PURCHASE WTD. AVG. PURCHASE WTD. AVG.
SHARES EX. PRICE SHARES EX. PRICE SHARES EX. PRICE
---------- --------- ---------- --------- ---------- ---------
(SHARE AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of
Year............................ 3,824 $ 6.78 3,353 $ 4.20 2,876 $2.56
Options Granted at Fair Value..... 1,503 36.64 1,324 11.54 1,185 6.67
Options Granted Greater Than Fair
Value........................... 45 26.47 24 8.01 -- --
Exercised......................... (777) 4.34 (653) 3.00 (555) 1.00
Cancelled......................... (174) 16.85 (224) 5.19 (153) 4.45
----- ----- -----
Outstanding at end of year........ 4,421 $16.77 3,824 $ 6.78 3,353 $4.20
===== ===== =====
Exercisable at end of year........ 1,357 1,119 971
===== ===== =====
</TABLE>
27
<PAGE> 29
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average fair value of options granted in fiscal 1998, 1997,
and 1996 was $16.48, $5.19, and $3.51 per share, respectively. A summary of the
weighted average remaining contractual life and the weighted average exercise
price of options outstanding as of February 28, 1998 is presented below:
<TABLE>
<CAPTION>
NUMBER WEIGHTED AVG. NUMBER WEIGHTED
RANGE OF OUTSTANDING REMAINING WEIGHTED AVG. EXERCISABLE AVG. EXERCISE
EXERCISE PRICES AT 2/28/98 CONTRACTUAL LIFE EXERCISE PRICE AT 2/28/98 PRICE
- --------------- ----------- ---------------- -------------- ----------- -------------
(SHARE AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$ 0.52-$ 4.50 926 5.34 $ 2.84 793 $ 2.60
4.63- 7.56 1,030 7.53 6.53 319 6.74
7.63- 17.53 922 8.44 10.82 211 10.36
17.69- 42.31 1,335 9.19 33.65 34 21.83
42.63- 47.13 208 9.71 44.10 -- --
------------- ----- ---- ------ ----- ------
$ 0.52-$47.13 4,421 7.89 $16.77 1,357 $ 5.37
===== =====
</TABLE>
Stock-Based Compensation
As permitted under SFAS No. 123, the Company continues to account for
stock-based compensation to employees in accordance with APB Opinion No. 25,
under which no compensation expense is recognized, since the exercise price of
options granted is equal to or greater than the fair market value of the
underlying security on the grant date. Pro forma information regarding net
income and income per share is required by SFAS No. 123, which uses the fair
value method. The fair value of the Company's stock-based awards to employees
was estimated as of the date of grant using the Black-Scholes option pricing
model. Limitations on the effectiveness of the Black-Scholes option valuation
model include that it was developed for use in estimating the fair value of
traded options which have no vesting restrictions and are fully transferable and
that the model requires the use of highly subjective assumptions including
expected stock price volatility. Because the Company's stock-based awards to
employees have characteristics significantly different from those of traded
options and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
stock-based awards.
Had compensation cost for these plans been recorded, the Company's net
income and income per share amounts would have been as follows:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
----------------------------------------
1998 1997 1996
---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net (loss) income............................... $(19,250) $2,912 $4,412
Basic (loss) income per share................... $ (0.82) $ 0.13 $ 0.21
Diluted (loss) income per share................. $ (0.82) $ 0.13 $ 0.20
</TABLE>
The increase in the fair value of stock options granted in 1998 resulted
primarily from a significant increase in the price of the Company's common stock
during fiscal 1998 from fiscal 1997. Because the SFAS No. 123 method of
accounting has not been applied to options granted prior to March 1, 1995, the
resulting pro forma compensation cost may not be representative of that to be
expected in future years. Additionally, the fiscal 1998, 1997, and 1996 pro
forma amounts include $435,000, and $279,000, and $173,000, respectively,
related to the purchase discount offered under the employee stock purchase plan.
28
<PAGE> 30
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of options granted was estimated assuming no dividends and
using the following weighted-average assumptions:
<TABLE>
<CAPTION>
OPTIONS ESPP
---------------------------------------------- ----------------------
1998 1997 1996 1998 1997 1996
-------------- -------------- -------------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Risk-free interest rates... 6.20-6.59% 5.44-5.73% 6.68-7.08% 5.65% 5.67% 6.44%
Expected term.............. 2.62-7.69 yrs 1.54-4.51 yrs 1.54-4.77 yrs 6 mos 6 mos 6 mos
Volatility................. 0.6038 0.6358 0.6910 0.6044 0.6562 0.6910
</TABLE>
7. RETIREMENT PLANS
The Company has two defined contribution retirement savings plans (one in
the U.S. and another in the U.K.) under the terms of which the Company matches a
percentage of the employees' qualified contributions. New employees are eligible
to participate in the plans upon completing one month of service. The Company's
contribution to the plans totaled $1,045,000, $535,000 and $337,000 for fiscal
1998, 1997 and 1996, respectively.
The Company is not obligated under any other post-retirement benefit plans.
8. COMMITMENTS AND CONTINGENCIES
Commitments -- The Company leases office space, office equipment, and
automobiles under operating leases and various computer and other equipment
under capital leases. Property acquired through capital leases amounted to
$884,000 and $830,000 at February 28, 1998 and 1997, respectively, and has been
included in computer equipment and software (Note 2). Total accumulated
amortization relating to these leases was $716,000 and $576,000 as of February
28, 1998 and 1997, respectively.
Rent expense for operating leases for fiscal 1998, 1997 and 1996 was
approximately $7,754,000, $4,723,000, and $3,894,000, respectively. The future
minimum lease payments under these capital and operating leases for each of the
succeeding years beginning March 1, 1998 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(IN THOUSANDS)
<S> <C> <C>
1999........................................................ $195 $ 8,025
2000........................................................ 32 6,061
2001........................................................ 9 4,158
2002........................................................ 9 3,415
2003........................................................ 7 840
---- -------
Total minimum lease payments...................... $252 $22,499
==== =======
Less amount representing interest........................... (22)
----
Present value of net minimum lease payments................. $230
====
</TABLE>
The Company has collaborative arrangements with various parties relating to
product development and joint marketing programs. The Company has also entered
into an agreement with a third party under which the Company has guaranteed
certain revenue levels to the third party in the aggregate amount of $16,500,000
over several years. In the event that the activities performed by the Company do
not meet the minimum amounts, the Company may be obligated to pay the
difference. Certain issues have arisen between the Company and the third party
relating to the satisfaction of these contingencies. The Company
29
<PAGE> 31
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
anticipates satisfactory resolution of these issues and believes it will be able
to meet the revenue levels. Accordingly, the Company does not expect to be
obligated to make such payments.
Contingencies -- In the ordinary course of business, the Company may be a
party to legal proceedings and claims. In addition, from time to time, the
Company may have contractual disagreements with certain customers concerning the
Company's products and services. The Company has established accruals related to
such matters that are probable and reasonably estimable. In management's
opinion, any liability that may ultimately result from the resolution of these
matters in excess of amounts provided will not have a material adverse effect on
the results of operations, financial condition or cash flows of the Company. The
Company has been in discussions with a customer to resolve a certain claim under
an agreement. While the Company believes there is no merit to such claim, this
matter is subject to various uncertainties and may be resolved unfavorably to
the Company.
9. INCOME TAXES
Income Tax Provision -- The components of the (benefit) provision for
income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
-------------------------------
1998 1997 1996
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $ 7,522 $3,518 $1,558
State............................................... 2,069 375 400
Foreign............................................. 710 1,063 760
-------- ------ ------
Total current provision..................... 10,301 4,956 2,718
-------- ------ ------
Deferred:
Federal............................................. (18,891) (419) 850
State............................................... 18 521 (46)
Foreign............................................. (453) 19 (458)
-------- ------ ------
Total deferred (benefit) provision.......... (19,326) 121 346
-------- ------ ------
Total (benefit) provision for income
taxes..................................... $ (9,025) $5,077 $3,064
======== ====== ======
</TABLE>
The income tax benefits related to the exercise of stock options reduce
taxes currently payable and are credited to additional paid-in capital. Such
amounts were approximately $7,731,000, $2,571,000, and $1,056,000, for fiscal
1998, 1997, and 1996, respectively.
30
<PAGE> 32
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Income Taxes -- The components of the Company's deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
FEBRUARY 28,
------------------
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Uncollectible receivables and sales returns............... $ 813 $ 499
Rent accruals............................................. 205 207
Operating loss carryforwards:
Domestic............................................... 617 672
Foreign................................................ 2,507 1,353
Software revenue recognition.............................. 41 183
Depreciation and amortization............................. 1,345 697
Accrued commissions....................................... 723 --
Purchased research and development write-off.............. 18,774 --
Other temporary differences............................... 552 237
------- -------
Total deferred tax assets.............................. 25,577 3,848
Less: valuation allowance.............................. (1,786) (734)
------- -------
Total deferred tax assets.............................. 23,791 3,114
Deferred tax liabilities:
Software development costs................................ (4,154) (3,313)
Deferred revenue.......................................... (321) --
Other temporary differences............................... (30) (89)
------- -------
Total deferred tax liabilities......................... (4,505) (3,402)
------- -------
Net deferred tax assets (liabilities).................. $19,286 $ (288)
======= =======
</TABLE>
At February 28, 1998, the Company had $1,340,400 of federal, $879,700 of
state and $8,120,000 of foreign net operating loss carry-forwards ("NOLs")
available to offset future taxable income in those respective taxing
jurisdictions. Federal and state NOLs arose from acquisitions and are subject to
limitations. The federal NOLs expire in the years 2006 and 2011 while the state
NOLs expire during fiscal 1999. Approximately $3,467,100 of the foreign NOLs
expire during the fiscal years 2000 to 2003 while the remaining NOLs are
available in perpetuity. The Company considers the earnings of foreign
subsidiaries to be permanently reinvested outside the United States.
Accordingly, no United States income tax on these earnings has been provided.
31
<PAGE> 33
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective and Statutory Rate Reconciliation -- The difference between the
income tax provision and the amount computed by applying the federal statutory
income tax rate to pretax accounting income is summarized as follows:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
-------------------------
1998 1997 1996
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
(Benefit) provision computed at federal statutory rate... $(7,767) $3,310 $2,767
Increase (reduction) in taxes resulting from:
State and foreign taxes, net of federal benefit........ (1,450) 411 417
Change in valuation allowance.......................... 1,052 291 (31)
Benefit of net operating loss carry forwards and tax
credits............................................. (1,255) -- (55)
Foreign items.......................................... 529 -- --
Purchased research and development write-off........... -- 1,257 --
Tax exempt income...................................... (349) (163) (257)
Other.................................................. 215 (29) 223
------- ------ ------
(Benefit) Provision for income taxes..................... $(9,025) $5,077 $3,064
======= ====== ======
</TABLE>
10. SEGMENT INFORMATION
The Company operates in two industry segments. The Company develops,
markets, and supports software products for synchronized supply chain
management(TM) and provides related services. The Company also markets and
supports the STATGRAPHICS product within its personal systems segment, which
provides statistical tools for quality management in manufacturing companies.
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
-------------------------------
1998 1997 1996
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
INDUSTRY SEGMENTS
Revenues:
Supply chain management.......................... $176,763 $ 96,427 $61,353
Personal systems................................. 3,500 3,780 5,623
-------- -------- -------
$180,263 $100,207 $66,976
======== ======== =======
(Loss) Income from operations:(1)
Supply chain management.......................... 466 15,557 11,489
Personal systems................................. 1,778 1,032 1,184
Corporate........................................ (27,297) (7,902) (5,678)
-------- -------- -------
$(25,053) $ 8,687 $ 6,995
======== ======== =======
Identifiable assets:
Supply chain management.......................... $135,165 $ 60,035 $34,210
Personal systems................................. 848 1,014 1,375
Corporate........................................ 89,202 25,257 26,912
-------- -------- -------
$225,215 $ 86,306 $62,497
======== ======== =======
</TABLE>
32
<PAGE> 34
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
-------------------------------
1998 1997 1996
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital expenditures:
Supply chain management.......................... $ 10,539 $ 6,682 $ 2,963
Personal systems................................. 19 24 172
Corporate........................................ 6,269 1,456 2,580
-------- -------- -------
$ 16,827 $ 8,162 $ 5,715
======== ======== =======
Depreciation and amortization:
Supply chain management.......................... $ 14,275 $ 7,201 $ 3,713
Personal systems................................. 16 24 426
Corporate........................................ 1,859 885 471
-------- -------- -------
$ 16,150 $ 8,110 $ 4,610
======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
-------------------------------
1998 1997 1996
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
GEOGRAPHIC AREAS
Revenues:
Americas......................................... $152,572 $ 87,969 $61,055
Europe........................................... 35,708 18,273 7,625
Asia............................................. 5,890 -- --
Eliminations..................................... (13,907) (6,035) (1,704)
-------- -------- -------
$180,263 $100,207 $66,976
======== ======== =======
(Loss) income from operations:(1)
Americas......................................... $(23,148) $ 8,067 $ 9,982
Europe........................................... 9,595 6,655 (1,283)
Asia............................................. 2,407 -- --
Eliminations..................................... (13,907) (6,035) (1,704)
-------- -------- -------
$(25,053) $ 8,687 $ 6,995
======== ======== =======
Identifiable assets:
Americas......................................... $289,701 $ 88,212 $58,977
Europe........................................... 22,932 12,161 7,421
Asia............................................. 3,195 -- --
Eliminations..................................... (90,613) (14,067) (3,901)
-------- -------- -------
$225,215 $ 86,306 $62,497
======== ======== =======
</TABLE>
- ---------------
(1) (Loss) income from operations includes non-recurring write-offs of purchased
research and development of $47,340,000 and $3,697,000 in fiscal 1998 and
1997, respectively. Such amounts relate to the supply chain management
segment in the Americas.
33
<PAGE> 35
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Domestic and export sales for fiscal 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States..................................... $121,456 $ 71,055 $ 48,484
Europe............................................ 36,322 20,088 9,907
Pacific Rim....................................... 7,247 2,405 1,053
Japan............................................. 6,769 1,726 1,459
Canada............................................ 4,682 3,905 4,056
South America..................................... 3,537 -- --
Other............................................. 250 1,028 2,017
-------- -------- --------
$180,263 $100,207 $ 66,976
======== ======== ========
</TABLE>
No customer accounted for 10% or more of the Company's net sales in fiscal
1998, 1997 or 1996.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest amounted to approximately $110,000, $55,000 and
$78,000 in fiscal 1998, 1997 and 1996, respectively. Cash paid for income taxes
amounted to approximately $3,478,000, $1,489,000, and $1,016,000 in fiscal 1998,
1997 and 1996, respectively.
Supplemental information of non-cash investing and financing activities is
as follows:
During fiscal 1998, 1997 and 1996, the Company received income tax benefits
of $7,731,000, $2,571,000, and $1,056,000, respectively, relating to the
exercise of stock options. The benefits were recorded as an increase to
additional paid-in capital. During fiscal 1997, the fair value of treasury stock
issued was $238,000. Also during fiscal 1997, options valued at $217,000 were
granted under a non-compete agreement and $345,000 relating to a leased asset
and obligation was capitalized. During fiscal 1996, a $294,000 note receivable
was recorded relating to an asset divestiture, a $714,000 liability was recorded
related to the fair value of stock to be issued, and the fair value of treasury
stock issued was $238,000.
34
<PAGE> 36
MANUGISTICS GROUP, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly consolidated financial information for fiscal 1998 and
1997 follows:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1998
Total revenues............................ $35,616 $39,160 $42,159 $ 63,328
Purchased research and development
costs................................... -- -- -- 47,340
Operating income (loss)................... 3,114 4,076 5,114 (37,356)
Net income (loss)......................... 2,126 2,788 3,795 (21,875)
Basic income (loss) per share............. $ 0.10 $ 0.12 $ 0.16 $ (0.89)
Shares used in basic share computation.... 22,086 22,990 24,228 24,633
Dilutive income (loss) per share.......... $ 0.09 $ 0.11 $ 0.14 $ (0.89)
Shares used in diluted share
computation............................. 23,630 25,043 26,941 24,633
1997
Total revenues............................ $19,866 $22,308 $24,918 $ 33,115
Purchased research and development
costs................................... 3,697 -- -- --
Operating (loss) income................... (1,810) 2,157 2,971 5,369
Net (loss) income......................... (2,437) 1,457 1,967 3,670
Basic (loss) income per share............. $ (0.11) $ 0.07 $ 0.09 $ 0.17
Shares used in basic share computation.... 21,312 21,539 21,810 21,966
Diluted (loss) income per share........... $ (0.11) $ 0.06 $ 0.08 $ 0.15
Shares used in diluted share
computation............................. 21,312 22,711 23,514 23,683
</TABLE>
Included in the fourth quarter of fiscal 1998 and the first quarter of
fiscal 1997 are non-recurring charges of $47,340,000 and $3,697,000,
respectively, for write-offs of purchased research and development costs in
connection with acquisitions (see Note 4).
13. SUBSEQUENT EVENTS
(a) On March 26, 1998, the Company entered into a lease agreement with a
commercial real estate developer to lease a new office building that will
commence in fiscal 2001 with a lease term of 15 years.
(b) On June 1, 1998, the Company acquired TYECIN by merger for
approximately 333,000 shares of common stock and assumed options to purchase
shares totaling approximately 25,000 shares. The merger was accounted for as a
pooling of interests. Accordingly, the supplemental consolidated financial
statements give retroactive effect to the merger and include the combined
operations of the Company and TYECIN for all periods presented. The supplemental
consolidated financial statements combine the Company's fiscal years which end
in February with TYECIN's fiscal years which end in December. The effect of
excluding the two months is an increase of approximately $250,000 (unaudited) to
retained earnings.
(c) A number of shareholder class action lawsuits were filed against the
Company and certain of its executive officers and directors in June 1998
alleging certain disclosure violations under the federal securities laws. The
ultimate outcome of these lawsuits, as with litigation generally, is inherently
uncertain and it is possible that one or more of these matters may be resolved
adversely to the Company. The adverse resolution of one or more of these
lawsuits could have a material adverse effect on the Company's business,
operating results, financial condition and cash flows. Management believes that
the lawsuits are without merit and the Company and the other defendants intend
to defend against the lawsuits vigorously.
35
<PAGE> 37
ITEM 7. Exhibits
Exhibit Number
2 Agreement and Plan of Merger dated June 1, 1998, by
and among Manugistics Group, Inc., TYECIN
Acquisition, Inc., TYECIN Systems, Inc. and certain
other persons.
36
<PAGE> 38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
MANUGISTICS GROUP, INC.
Date: July 15, 1998 By: /s/ PETER Q. REPETTI
-----------------------------
Peter Q. Repetti
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer
and Chief Accounting Officer)
37
<PAGE> 39
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
2 Agreement and Plan of Merger dated
June 1, 1998
<PAGE> 1
Exhibit 2
AGREEMENT AND
PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of , 1998
by and among TYECIN SYSTEMS, INC., a California Corporation ("Tyecin"), TYECIN
ACQUISITION, INC., a Delaware Corporation ("Acquisition"), and MANUGISTICS
GROUP, INC., a Delaware Corporation ("Manugistics") and the principal
shareholders of Tyecin, Randall A. Hughes and Richard A. Zuanich (referred to
collectively as the "Principal Shareholders").
BACKGROUND
A. Tyecin is engaged in the business of providing manufacturing
scheduling products to the semiconductor industry.
B. Acquisition is a wholly-owned subsidiary of Manugistics, and
Acquisition was formed to merge with and into Tyecin so that as a result of the
merger Tyecin would become a wholly-owned subsidiary of Manugistics.
C. The Boards of Directors of each of Tyecin, Acquisition and
Manugistics have all determined that the merger of Acquisition with and into
Tyecin (hereinafter referred to as the "Merger") in accordance with the
provisions of the California General Corporation Law (the "CGCL") and Delaware
General Corporation Law (the "DGCL") and subject to the terms and conditions of
this Agreement and Plan of Merger (this "Agreement") is in the best interests of
each of Tyecin, Acquisition and Manugistics and the holders of record of shares
of Tyecin.
D. The parties intend that the Merger constitute a tax-free
reorganization under Section 368(a)(2)(E) of the Internal Revenue Code (the
"Code").
E. Certain Tyecin shareholders (including the Principal
Shareholders) who together hold more than ninety-seven (97%) per cent of the
issued and outstanding common stock of Tyecin and one hundred percent (100%) of
the issued and outstanding preferred stock of Tyecin, have submitted their
shares of Tyecin capital stock to be exchanged in accordance with the terms of
this Agreement (the "Tyecin Shareholders").
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties, agreements and promises contained herein and
intending to be legally bound hereby, each of Tyecin, Acquisition and
Manugistics agree as follows:
<PAGE> 2
AGREEMENT
1. THE MERGER.
1.1 GENERAL.
(a) Subject to the terms and conditions of this Agreement
and in accordance with the CGCL and the DGCL, Acquisition will be merged with
and into Tyecin on the Effective Date (as defined in Section 1.1(b) hereof), and
the separate corporate existence of Acquisition shall cease and Tyecin shall be
the surviving corporation (the "Surviving Company") continuing its corporate
existence under the laws of the State of California.
(b) The Merger shall become effective at a date and time
agreed to by the parties but in no event at a date and time later than five (5)
days after the Closing Date (as defined in Section 1.10 hereof)(the "Effective
Date"), which date shall be specified in the Certificate of Merger and
California Merger Agreement (described below) as the effective date of the
Merger. Prior to the Effective Date the parties shall cause to be filed a
Certificate of Merger (substantially in the form of EXHIBIT A annexed hereto)
with the Secretary of State of the State of Delaware in accordance with the
provisions of the DGCL (the "Certificate of Merger") and the Agreement of Merger
and Officer's Certificate (in the form of EXHIBIT B annexed hereto) with the
Secretary of State of the State of California in accordance with the provisions
of the CGCL (the "California Merger Agreement").
(c) On the Effective Date, the Merger shall have the legal
effect provided in Section 259 of the DGCL and Section 1107 of the CGCL.
1.2 CONVERSION OF STOCK AND OPTIONS. On the Effective Date, by
virtue of the Merger and without any further action on the part of the parties
hereto, and subject to Section 1.4 below (with respect to fractional shares):
(a) All of the issued and outstanding preferred stock, no
par value per share, of Tyecin as of the Effective Date, if any, (the "Tyecin
Preferred Stock") shall be converted into the aggregate number of shares of
common stock of Manugistics (the "Manugistics Common Stock"), equal to the
product of the Conversion Factor (as defined in Section 1.5 below) multiplied by
the number of shares of Tyecin Common Stock into which the Tyecin Preferred
Stock is convertible as of the Effective Date. Innotech (the "Preferred
Shareholder") will be entitled to receive such shares of Manugistics Common
Stock based on the aggregate Tyecin Preferred Stock which it owns as of the
Effective Date and each share of Tyecin Preferred Stock will be canceled as of
the Effective Date.
(b) All of the issued and outstanding common
<PAGE> 3
stock, no par value per share of Tyecin as of the Effective Date (the "Tyecin
Common Stock") shall, subject to Section 1.3 below, be converted into the
aggregate number of shares of Manugistics Common Stock equal to the product of
the Conversion Factor multiplied by the number of outstanding shares of Tyecin
Common Stock as of the Effective Date. Accordingly, each Tyecin Shareholder will
be entitled to receive his/her pro rata share of such Manugistics Common Stock,
based on such Tyecin Shareholder's proportionate interest in the Tyecin Common
Stock as of the Effective Date, and each share of Tyecin Common Stock will be
canceled as of the Effective Date.
(c) Each share of common stock, $.01 par value per share
of Acquisition (the "Acquisition Common Stock") then issued and outstanding
shall become one fully paid and nonassessable share of common stock, no par
value per share, of the Surviving Company (the "Surviving Company Common
Stock").
(d) The existing Tyecin option plans are in the form
attached hereto as EXHIBIT C and EXHIBIT D (the "Option Plans") and the options
(vested and unvested) to purchase Tyecin Common Stock outstanding now and as of
the Effective Date (the "Tyecin Options") are listed on SCHEDULE 1.2(D). The
Tyecin Options shall become options to purchase common stock, $.002 par value,
of Manugistics based upon the Conversion Factor. Pursuant to the Option Plans,
the number of options to purchase Manugistics Common Stock (the "Manugistics
Options") issued to each holder of Tyecin Options (the "Tyecin Optionholders")
shall be equal to the number of Tyecin Options held by each Tyecin Optionholder
as of the Effective Date multiplied by the Conversion Factor and to the extent
such number of shares to be received upon the exercise of such options is not a
whole number, Manugistics may in lieu of issuing a fractional share, pay to such
optionholder the then fair market value of such fractional share. The exercise
price of each Manugistics Option received in exchange for each Tyecin Option
shall be equal to the exercise price of such Tyecin Option divided by the
Conversion Factor, rounded up to the nearest whole cent. Each Tyecin
Optionholder's vesting schedule prior to the Closing Date shall remain the same
after the Closing Date under the applicable Option Plan, and each Tyecin
Optionholder shall receive credit with respect to vesting under the applicable
Option Plan for the period of time from the date of option grant to the Closing
Date.
1.3 DISSENTING SHARES.
(a) Each outstanding share of Tyecin Common Stock held by
a Tyecin Shareholder who has demanded and perfected his right to an appraisal
of his shares in accordance with Section 1301 of the CGCL and who has not
effectively withdrawn or lost his right to such appraisal ("Dissenting Shares")
shall not be converted into or represent a right to receive Manugistics Common
Stock based upon the Conversion Factor pursuant to Section 1.2 hereof, but the
holder thereof shall be entitled only to such
<PAGE> 4
rights as are granted by Chapter 13 of the CGCL. Each holder of Dissenting
Shares who becomes entitled to payment for his Tyecin Common Stock pursuant to
Chapter 13 of the CGCL shall receive payment therefor from the Surviving Company
in accordance with the CGCL.
(b) If any shareholder of Tyecin who demands appraisal of his
shares under Chapter 13 of the CGCL shall effectively withdraw or lose (through
failure to perfect or otherwise) his right to appraisal, each share of Tyecin
Common Stock held by such shareholder of Tyecin shall automatically be converted
into the right to receive that number of shares of Manugistics Common Stock
yielded by multiplying such Tyecin Shareholder's total number of outstanding and
issued shares of Tyecin Common Stock as of the Effective Date by the Conversion
Factor pursuant to Section 1.2 hereof and such shares of Tyecin Common Stock
shall be delivered in accordance with Section 2.1(b) and 2.1(c) below.
(c) Prior to the Closing, Tyecin shall give Manugistics and
Acquisition prompt notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other instruments served pursuant to Chapter 13 of
the CGCL received by Tyecin. From and after the Closing: (i) the Surviving
Company shall give the Paying Agent (as defined in Section 2.2) prompt notice of
any written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to Chapter 13 of the CGCL received by the
Surviving Company; (ii) the Paying Agent shall have the right to participate in
all negotiations and proceedings with respect to demands for appraisal under
Chapter 13 of the CGCL.
1.4 FRACTIONAL SHARES. No fractional shares will be issued in
connection with the Merger. Any Tyecin Shareholder who would otherwise be
entitled to receive five-tenths (.5) or more of a share of Manugistics Common
Stock will instead receive an additional whole share and any Tyecin Shareholder
who would otherwise be entitled to less than five-tenths (.5) of a share of a
Manugistics Common Stock will not receive any consideration for such fractional
interest, or at the option of Manugistics, such Tyecin Shareholder shall receive
cash for such fractional share with each share of Manugistics Common stock to be
valued at $60 per share for such purposes.
1.5 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the meanings indicated below:
(a) "Conversion Factor" means that number equal to (i) 355,000,
less that number equal to (x) the amount of Tyecin Merger Costs which exceeds
$700,000 divided by (y) 60; divided by (ii) the total number of shares of
outstanding Tyecin Common Stock, the total number of Tyecin Options, and the
total number of shares of Tyecin Common Stock into which the Tyecin Preferred
Stock is convertible, all as of the Effective Date, less
<PAGE> 5
the 88,000 Tyecin Options listed on SCHEDULE 4.8 hereto.
(b) "Tyecin Merger Costs" means certain reasonable professional
and broker fees and costs incurred by Tyecin in connection with the Merger as
set forth on SCHEDULE 1.5(B) hereto.
1.6 SHAREHOLDERS - NO FURTHER RIGHTS OF Transfer. On and after the
Effective Date, each Tyecin Shareholder holding a certificate or certificates
theretofore evidencing shares of Tyecin Common Stock or Tyecin Preferred Stock
(the "Certificates") shall cease to have any rights as a shareholder of Tyecin,
except for the right to surrender such Certificates in exchange for Manugistics
Common Stock (as provided in Section 1.2 above), and no transfer of shares of
Tyecin Common Stock or Tyecin Preferred Stock shall be made on the stock
transfer books of the Surviving Company.
1.7 OPTIONHOLDERS - NO FURTHER RIGHTS OF Transfer. On and after the
Effective Date, each Tyecin Optionholder holding a Tyecin Option shall cease to
have any rights as an optionholder of Tyecin, except for his, her or its rights
as a holder of Manugistics Options pursuant to the Option Plans, and no transfer
of Tyecin Options shall be made on the transfer books of the Surviving Company.
1.8 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Tyecin, as in effect immediately prior to the Effective Date, shall be the
Articles of Incorporation of the Surviving Company until thereafter amended as
provided therein and by law.
1.9 BY-LAWS. The By-Laws of Tyecin, as in effect immediately prior to
the Effective Date, shall be the By-Laws of the Surviving Company until
thereafter amended as provided therein and by law.
1.10 CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Manugistics' counsel, Dilworth Paxson LLP, 3200 Mellon
Bank Center, 1735 Market Street, Philadelphia, PA 19103 on _____________, 1998
(the "Closing Date"). At the time of Closing, the Closing certificates, opinions
of counsel and other documents to be delivered pursuant to this Agreement will
be exchanged.
2. PURCHASE PRICE.
2.1 PAYMENT OF PURCHASE PRICE. The purchase price (the "Purchase
Price") shall be payable to each Tyecin Shareholder as follows:
(a) Ninety percent (90%) of the Manugistics
<PAGE> 6
Common Stock as determined in accordance with Section 1.2(a) above, (the
"Preferred Closing Stock") shall be tendered to the Paying Agent (as defined in
Section 2.2 hereof) at the Closing.
(b) Ninety percent (90%) of the Manugistics Common Stock
as determined in accordance with Section 1.2(b) above (the "Common Closing
Stock") shall be tendered to the Paying Agent (as defined in Section 2.2 hereof)
at the Closing.
(c) That amount of Manugistics Common Stock as determined
in accordance with Section 1.2(a) and Section 1.2(b) above, less the aggregate
amount tendered pursuant to Section 2.1(a) and Section 2.1(b) above
(hereinafter, the "Escrow Stock") shall be tendered to the Escrow Agent as named
in the Escrow Agreement in the form of EXHIBIT E annexed hereto (the "Escrow
Agreement").
2.2 DEPOSIT WITH PAYING AGENT; DEPOSIT WITH ESCROW AGENT.
Randall A. Hughes is hereby appointed as the paying agent (the "Paying Agent")
as named in the Paying Agent Agreement in the form of EXHIBIT F annexed hereto
(the "Paying Agent Agreement") for the purpose of disbursing the Preferred
Closing Stock and the Common Closing Stock at Closing to the Tyecin
Shareholders.
(a) Following receipt of a certificate from the Secretary
of State of the state of California and an opinion of counsel from counsel to
Tyecin (in form and substance satisfactory to Manugistics) that the Merger is
effective, and upon satisfaction of all conditions to Closing as set forth in
Section 9 hereof, Acquisition shall tender the Preferred Closing Stock and the
Common Closing Stock to the Paying Agent, as agent for the Tyecin Shareholders,
as provided in and subject to Section 2.4 hereof. Immediately thereafter, none
of Manugistics, Acquisition or the Surviving Company shall have any further
liability to any of the Tyecin Shareholders with respect to the Preferred
Closing Stock and the Common Closing Stock. The Paying Agent shall disburse at
Closing to the persons listed on SCHEDULE 2.2 annexed hereto, that amount of
Manugistics Common Stock set forth on SCHEDULE 2.2 next to each such person's
name;
(b) Following receipt of a certificate from the Secretary
of State of the state of California and an opinion of counsel from counsel to
Tyecin (in form and substance satisfactory to Manugistics) that the Merger is
effective, and upon satisfaction of all conditions to Closing as set forth in
Section 9 hereof, Acquisition shall tender the Escrow Stock to be held with the
Escrow Agent, as provided in the Escrow Agreement. Immediately upon such
deposit, none of Manugistics, Acquisition or the Surviving Company shall have
any further liability to the Tyecin Shareholders or to any other holders of
Tyecin Common Stock with respect to the Escrow Stock.
2.3 CUSTODY OF STOCK. The Manugistics Common Stock issued at
Closing to be held in escrow shall be held by the Escrow
<PAGE> 7
Agent pursuant to the terms of the Escrow Agreement.
2.4 SURRENDER OF CERTIFICATES AND DISBURSEMENT. Upon the
surrender of the Certificates to the Paying Agent by each Tyecin Shareholder
together with a Letter of Transmittal substantially in the form of EXHIBIT G
(the "Letter of Transmittal") and any necessary stock powers, duly executed and,
if required, with signatures notarized or guaranteed, and the Paying Agent's
surrender of such Certificates and documents to Acquisition (including forms W-9
and W-8, as required by Manugistics or Acquisition), and subject to the
provisions of the Paying Agent Agreement and the provisions for fractional
shares as set forth in Section 1.4 hereof, each holder of such Certificates
shall be entitled to receive in exchange therefor a certificate representing
that shareholder's portion of the Common Closing Stock or the Preferred Closing
Stock, as the case may be, issuable pursuant to Section 2.1 above. Upon such
surrender, the Paying Agent will promptly tender the allocable Common Closing
Stock or Preferred Closing Stock, as the case may be, to each such holder.
2.5 TRANSFERRED CERTIFICATES. If the Common Closing Stock or the
Preferred Closing Stock is to be delivered to a person other than the person in
whose name the Certificates surrendered in exchange therefor are registered, it
shall be a condition to the delivery of the Common Closing Stock or the
Preferred Closing Stock, as the case may be, that the Certificates so
surrendered shall be properly endorsed or accompanied by appropriate stock
transfer powers and any other documents required by Manugistics and otherwise in
proper form for transfer, that such transfer otherwise be proper and that the
person requesting such transfer pay to the Paying Agent any transfer or other
taxes payable by reason of the foregoing or establish to the satisfaction of the
Paying Agent that such taxes have been paid or are not required to be paid.
2.6 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the delivery to the
Paying Agent of a notarized affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, the Paying Agent will issue the
allocable Common Closing Stock or Preferred Closing Stock, as the case may be,
to such person; provided, however, that as a condition to such issuance the
Paying Agent may, in its discretion, require the owner of such lost or destroyed
Certificate to give the Paying Agent a bond in such sum as the Paying Agent may
reasonably direct as indemnity against any claim that may be made with respect
to the Certificate alleged to have been lost, stolen or destroyed.
3. APPROVAL; AMENDMENT; TERMINATION.
3.1 APPROVAL. This Agreement is subject to approval by all
necessary action on the part of the Tyecin board of directors and the
shareholders of Tyecin and by the board of
<PAGE> 8
directors of Manugistics and Acquisition. Tyecin, Acquisition, and Manugistics
each agree to execute and deliver such further documents and instruments and to
do such other acts and things as may be required to complete all requisite
corporate action in connection with the transactions contemplated by this
Agreement.
3.2 AMENDMENT. This Agreement may be amended by the parties
hereto notwithstanding the approval hereof by the shareholders of Tyecin and of
Acquisition, except as provided in Section 1104 of the CGCL and Section 251(d)
of the DGCL, as applicable pursuant to Section 252(e) of the DGCL.
3.3 TERMINATION. This Agreement may be terminated,
notwithstanding the approval by the board of directors of Tyecin, the Tyecin
Shareholders and/or the board of directors of Manugistics and Acquisition, as
provided in Section 17 hereof.
4. REPRESENTATIONS AND WARRANTIES OF TYECIN AND THE PRINCIPAL
SHAREHOLDERS. Tyecin and the Principal Shareholders, jointly and severally,
represent and warrant to Acquisition and Manugistics as follows:
4.1 ORGANIZATION; QUALIFICATION. Tyecin is a corporation duly
organized, validly existing and in good standing under the laws of California
and has all requisite corporate power and authority and all necessary licenses
and permits to carry on its business as it has been and is now being conducted
and to own or lease and to operate the properties used in connection therewith.
Tyecin is duly qualified or licensed and in good standing to do business in the
jurisdictions set forth on SCHEDULE 4.1 hereto, which constitutes each
jurisdiction where the conduct of its business or the ownership, leasing or
operation of its properties requires such qualification or licensing. Copies of
the articles of incorporation and bylaws of Tyecin heretofore delivered to
Manugistics are accurate and complete as of the date hereof and as of the
Effective Date.
4.2 CAPITALIZATION; OPTIONS AND OTHER RIGHTS.
(a) The total authorized capital securities of Tyecin
consists of (i) Fifty Million shares of voting common stock, no par value, of
which, as of the date hereof and as of the Effective Date, Eight Million Four
Hundred Forty-Eight Thousand Seven Hundred Eighty-Five (8,448,785) shares are
issued and outstanding, are and will be held by those shareholders listed on
SCHEDULE 2.2 hereto in such amounts as are set forth on such schedule and such
shareholders reside at the address indicated on such schedule, (ii) Five Million
shares of voting preferred stock, no par value, of which as of the date hereof,
One Hundred Fifty Thousand (150,000) are issued and outstanding and are all held
by the Preferred Shareholder, and (iii) Six Hundred Fifty-One Thousand and
Twelve (651,012) options to purchase Tyecin Common Stock are (A) issued and
outstanding, (B) held by those optionholders listed on SCHEDULE 1.2(D) hereof in
such amounts and with the vesting and
<PAGE> 9
exercise dates set forth on such schedule and (C) except as set forth on such
schedule are qualified options (as defined under the Code) and Four Hundred
Thirty-Seven Thousand Four Hundred Ninety-five (437,495) options are reserved
for issuance.
Except as set forth on SCHEDULE 2.2 or SCHEDULE 1.2(D) hereof, all of
the Tyecin Common Stock and Tyecin Preferred Stock have been duly and validly
authorized and issued and are fully paid and nonassessable and all of the Tyecin
Options have been duly and validly authorized and issued, including
authorization of each of the Option Plans by the board of directors of Tyecin
and the shareholders of Tyecin within twelve (12) months after adoption thereof
by Tyecin; none have been issued in violation of the preemptive rights of any
Tyecin Shareholder or Tyecin Optionholder; all were issued in compliance with
all applicable Federal and state securities laws and regulations, and are owned
free and clear of any liens, security interests, charges, claims, pledges and
other encumbrances (the "Liens").
(b) Except as set forth in SCHEDULE 2.2 or SCHEDULE 1.2(D),
there are no existing agreements, subscriptions, options, warrants, calls,
commitments, trusts (voting or otherwise), or rights of any kind whatsoever
granting to any person or entity any interest in or the right to purchase or
otherwise acquire from Tyecin at any time, or upon the happening of any stated
event, any securities of Tyecin, whether or not presently issued or outstanding,
nor are there any outstanding securities of Tyecin or any other entity which are
convertible into or exchangeable for shares or other securities of Tyecin, nor
are there any agreements, subscriptions, options, warrants, calls, commitments
or rights of any kind whatsoever granting to any person or entity any interest
in or the right to purchase or otherwise acquire from Tyecin or any other entity
any securities so convertible or exchangeable, nor are there any proxies,
agreements or understandings with respect to the voting of the shares of Tyecin
securities.
4.3 AUTHORIZATION; FREEDOM TO CONTRACT.
(a) The execution and delivery by Tyecin of this Agreement, the
consummation of the transactions contemplated hereby and the performance by it
of its obligations hereunder, have been duly authorized by all necessary
corporate actions. This Agreement has been approved by a majority of the Tyecin
Shareholders.
(b) The execution and delivery of this Agreement by Tyecin does
not, and the performance by Tyecin of its obligations hereunder will not, (i)
violate or conflict with any provision of the Articles of Incorporation or
By-Laws of Tyecin, or any amendments thereto or restatements thereof, as in
effect on the date hereof, (ii) violate any of the terms, conditions or
provisions of any applicable law, rule, regulation, order, writ, injunction,
judgment or decree of any court, governmental
<PAGE> 10
authority, or regulatory agency, or (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, indenture, debenture,
security agreement, trust agreement, lien, mortgage, lease, agreement, license,
franchise, permit, guaranty, joint venture agreement, or other agreement,
instrument or obligation, oral or written, to which Tyecin is a party (whether
as an original party or as an assignee or successor) or by which any of its
properties is bound. No governmental authorization, approval, order, license,
franchise, consent or permit (collectively, "Permits"), and no registration,
declaration or filing with any court, governmental department, commission,
authority, board, bureau, agency or other instrumentality (collectively,
"Filings"), is required in connection with the execution, delivery and
performance of this Agreement by Tyecin and the consummation of the transactions
contemplated hereby, except (i) the filing of the Certificate of Merger and
California Merger Agreement and (ii) such consents, approvals, orders,
authorizations, registrations and filings as may be required under applicable
California securities laws, as provided on SCHEDULE 4.3.
(c) Tyecin has complied in all respects with the CGCL,
including but not limited to, approval of the Merger, notice to all of the
holders of Tyecin Common Stock and Tyecin Preferred Stock of the approval of the
Merger, and requirements relating to the rights of holders of dissenting shares,
including without limitation, delivery of a statement of the fair market value
of any Dissenting Shares to all of the holders of Tyecin Common Stock and Tyecin
Preferred Stock, which fair market value statement is consistent with the terms
of this Agreement.
4.4 SUBSIDIARIES AND AFFILIATES.
(a) Annexed hereto as SCHEDULE 4.4 is a correct and
complete list setting forth (i) the name and jurisdiction of incorporation of
each corporation (individually, a "Subsidiary," and collectively, the
"Subsidiaries") of which Tyecin owns, directly or indirectly, capital stock,
(ii) the total number of shares of each class of capital stock of each
Subsidiary authorized, the number of such shares outstanding and the number of
such shares owned by Tyecin or any of the Subsidiaries (indicating the name of
the owner), and (iii) a complete list of the directors and officers of Tyecin
and each Subsidiary. All of the issued and outstanding shares of each Subsidiary
have been duly and validly authorized and issued and are fully paid,
nonassessable and free of preemptive rights. No shares of any Subsidiary have
been issued in violation of the preemptive rights of any shareholder of such
Subsidiary. The shares of each Subsidiary were issued in compliance with all
applicable Federal, state and foreign securities laws and regulations, and are
owned as set forth in SCHEDULE 4.4, free and clear of any and all Liens.
<PAGE> 11
(b) There are no existing agreements, subscriptions,
options, warrants, calls, commitments, trusts (voting or otherwise), or rights
of any kind whatsoever granting to any person or entity any interest in the
right to purchase or otherwise acquire from Tyecin or any Subsidiary, at any
time, or upon the happening of any stated event, any shares of any Subsidiary,
whether or not presently issued or outstanding, nor are there any outstanding
securities of any Subsidiary or any other entity which are convertible into or
exchangeable for shares or other securities of any Subsidiary, nor are there any
agreements, subscriptions, options, warrants, calls, commitments, trusts (voting
or otherwise), or rights of any kind whatsoever granting to any person or entity
any interest in the right to purchase or otherwise acquire any Subsidiary or any
other entity any securities so convertible or exchangeable, nor are there any
proxies, agreements or understandings with respect to voting of the capital
stock of any Subsidiary. Except for Tyecin's ownership of the Subsidiaries as
disclosed on SCHEDULE 4.4 and as may be otherwise described in such schedule,
Tyecin does not, directly or indirectly, have any ownership or other interest
in, or control of, any person, corporation, partnership, joint venture, business
association or other entity, nor is Tyecin controlled by or under common control
with, any person, corporation, partnership, joint venture, business association
or other entity, other than the shareholders of Tyecin set forth on SCHEDULE 4.4
annexed hereto.
4.5 CHARTER AND ORGANIZATIONAL DOCUMENTS. Attached hereto as
SCHEDULE 4.5 is a certified copy of the Articles of Incorporation and By-Laws of
Tyecin and each of its Subsidiaries. Tyecin and the Subsidiaries have previously
furnished to Acquisition and Manugistics, true and complete copies of minutes of
all meetings of the board of directors and the shareholders of Tyecin and the
Subsidiaries.
4.6 FINANCIAL STATEMENTS.
(a) Except as set forth in SCHEDULE 4.6, Tyecin has
previously furnished to Manugistics true and complete copies of the following
financial statements with respect to Tyecin and the Subsidiaries (the "Financial
Statements"):
(i) audited consolidated balance sheets, statements
of operations, stockholders' equity, and cash flows for each of the calendar
years ended 1996 and 1995 with detailed schedules for each line item on the
balance sheets; and
(ii) an unaudited consolidated balance sheet,
statement of operations, and statement of cash flows for the calendar year ended
1997 and for the period beginning January 1, 1998 and ended at March 31, 1998.
(b) The Financial Statements were prepared in accordance
with generally accepted accounting principles ("GAAP")
<PAGE> 12
applied on a basis consistent with that of preceding accounting periods. The
Financial Statements were prepared on the basis of the books and records of
Tyecin and its Subsidiaries, and fully and fairly present the financial position
of Tyecin and the Subsidiaries as of the dates thereof and the results of
operations and changes in financial position of Tyecin and the Subsidiaries for
each of the periods then ended.
(c) On the Closing Date and Effective Date, there will be
no restrictions on the availability of cash of Tyecin and the Subsidiaries in
banks and on hand, except clearance of checks in the ordinary course of
business.
(d) The accounts and other receivables as set forth on the
Financial Statements, and arising since the date thereof, have or shall have
arisen in the ordinary course of the business of Tyecin and the Subsidiaries.
(e) The Financial Statements and the notes thereto
correctly and completely set forth all liabilities of Tyecin and the
Subsidiaries required to be reflected under GAAP as of the date thereof (i)
pursuant to all Plans (as that term is defined in Section 4.22), including all
unfunded past service costs, (ii) pursuant to all bonus, incentive,
compensation, insurance, deferred compensation, severance and other fringe
benefit plans, contracts, agreements, arrangements and programs of any type,
coverage or form, including, without limitation, any employee welfare benefit
program as defined in Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and (iii) for vacation pay.
4.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
SCHEDULE 4.7, Tyecin and the Subsidiaries do not have any liabilities (whether
absolute, accrued or contingent), which would be required (under GAAP
consistently applied) to be set forth on a balance sheet or in the notes
thereto, except for liabilities incurred after March 31, 1998 in the ordinary
course of business and consistent with past practice.
4.8 ABSENCE OF CERTAIN CHANGES OF EVENTS. Except as set forth on
SCHEDULE 4.8, since December 31, 1997 there has not been (a) any issuance of any
shares of capital stock, declaration, setting aside or payment of any dividend,
any grant of options, any execution of any agreements with respect to any shares
of capital stock or any other of Tyecin's and the Subsidiaries' securities or
any distribution with respect to shares of Tyecin's capital stock; (b) any
material changes made to any Plan, including any modification, amendment,
revision, restatement or revision or any action to deplete any asset of any
Plan; (c) any material adverse change in Tyecin's or the Subsidiaries' business
or the results of their respective operations; (d) any damage, destruction or
casualty loss, whether covered by insurance or not, adversely affecting Tyecin's
or the Subsidiaries' assets or their respective business; (e) (i) any material
increase in the rate or terms of
<PAGE> 13
compensation payable to or to become payable to Tyecin's or the Subsidiaries'
employees, officers, directors or consultants, or (ii) any material
modifications in employee benefits to Tyecin's or the Subsidiaries' employees;
(f) any creation of or assumption of any mortgage, pledge, or other lien or
encumbrance upon any of the assets of Tyecin or the Subsidiaries; (g) any
incurrence of any additional debt for money borrowed by Tyecin or the
Subsidiaries; (h) any sale, assignment, lease, transfer or other disposition of
any of the assets of Tyecin or the Subsidiaries; (i) any imposition or incurring
of any obligation or liability, fixed or contingent not in the ordinary course
of business of Tyecin or the Subsidiaries; (j) any termination or alteration of
Tyecin's or the Subsidiaries' relationship with any customer that, during any
period in the last two (2) years, accounted for more than 2% of Tyecin's or the
Subsidiaries' respective sales; (k) any material transaction otherwise relating
to Tyecin or the Subsidiaries; (l) any change in the general character of
Tyecin's or the Subsidiaries' business and properties; or (m) any change in any
method of accounting or accounting practice or policy of Tyecin or the
Subsidiaries.
4.9 TITLE TO PROPERTIES. Tyecin and the Subsidiaries have good
and marketable title to all of their respective properties and assets reflected
on the Financial Statements or acquired after the date thereof (except for
properties and assets sold or otherwise disposed of in the ordinary course of
business since the date of the Financial Statements) in fee simple absolute with
respect to real property (except for leasehold interests, in which event the
entity directly holding such interest has a valid leasehold interest), subject
only to (i) statutory liens arising or incurred in the ordinary course of
business with respect to which the underlying obligations are not delinquent,
(ii) with respect to personal property, the rights of suppliers or customers of
Tyecin with respect to contracts entered into by Tyecin in the ordinary course
of business, (iii) liens reflected on the Financial Statements or notes thereto,
(iv) liens set forth in SCHEDULE 4.9 hereto, and (v) those dispositions of
properties and assets not in the ordinary course of business since December 31,
1997, which are set forth on SCHEDULE 4.9 hereto.
4.10 REAL PROPERTY. SCHEDULE 4.10 lists all land, buildings and
structures owned beneficially or of record by Tyecin and the Subsidiaries. Also
included on SCHEDULE 4.10 are lists of all deeds, mortgages, surveys and title
insurance policies relating to such real property in the possession of Tyecin
and the Subsidiaries. Tyecin has heretofore delivered to Manugistics copies of
all written documents, instruments, deeds, mortgages, surveys, rights of-way,
easements, permits and other documents or agreements relating to such real
property listed on SCHEDULE 4.10.
4.11 MACHINERY AND EQUIPMENT. SCHEDULE 4.11 lists each item of
machinery and equipment owned by Tyecin and the Subsidiaries as of the Closing
Date.
<PAGE> 14
4.12 INVENTORY. SCHEDULE 4.12 contains a description of all
classes of inventory owned by Tyecin and the Subsidiaries as of the Closing
Date.
4.13 LEASES. SCHEDULE 4.13 lists all outstanding leases or
licenses pursuant to which Tyecin and the Subsidiaries have (i) obtained the
right to use or occupy any real or personal property, or (ii) granted to any
other party the right to use any real or personal property described on SCHEDULE
4.10, SCHEDULE 4.11 or SCHEDULE 4.13 hereto. Tyecin has heretofore delivered or
made available to Manugistics or Acquisition copies of all the written leases
and licenses described on SCHEDULE 4.13, together with all amendments thereto.
4.14 PATENTS, COPYRIGHTS AND TRADEMARKS. All patents, trademarks,
trade names and service marks which Tyecin and the Subsidiaries own or utilize
and all registrations granted and/or applications pending therefor, if any, are
listed on SCHEDULE 4.14. As of the date of this Agreement, there are no pending
interference, opposition or cancellation actions or proceedings, or written
claims received and unresolved, with respect to any such trademarks, trade
names, service marks, patents or any copyrights; and to the knowledge of Tyecin
and the Subsidiaries, there are no pending actions or proceedings, or written
claims received and unresolved, claiming that the use of any such trademarks,
trade names, service marks, patents and/or copyrights infringes upon or
conflicts with, any trademark, trade name, patent, copyright, or other
proprietary right of any other person. Tyecin and the Subsidiaries have
heretofore delivered to Manugistics true, correct and complete copies of all
documents described on SCHEDULE 4.14. To the knowledge of Tyecin and the
Subsidiaries, there are no claims or prior technologies, patents or other prior
art which would interfere with or prevent the Surviving Company from obtaining a
patent for the manufacturing scheduling process which is a component to the
Software Materials (as defined in Section 4.32 below). To their knowledge,
neither Tyecin nor the Subsidiaries are infringing on any trademark, trade name,
service mark, patent or copyright.
4.15 CONTRACTS. Except as otherwise indicated thereon, SCHEDULE
4.15 lists each and every document not otherwise listed on any other Schedule,
for the following:
(i) written contract or commitment to which Tyecin or
any Subsidiary is a party which creates an obligation on the part of Tyecin or
any Subsidiary in excess of $5,000 in the aggregate;
(ii) written debt instrument, including, without
limitation, any loan agreements, promissory notes, security agreements or other
evidences of indebtedness, where Tyecin or any Subsidiary is a lender or
borrower;
(iii) written contract or commitment
<PAGE> 15
restricting Tyecin or any Subsidiary from engaging in any line of business or in
any geographic area;
(iv) written contract or agreement to which Tyecin or
any Subsidiary is a party (whether as an original party or an assignee or
successor) for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person or entity;
(v) material written contract or commitment to which
Tyecin or any Subsidiary is a party (whether as an original party or an assignee
or successor) for any charitable contribution;
(vi) written loan agreement, security agreement, note,
debenture, or other contract or commitment (except for this Agreement) limiting
or restraining Tyecin or any Subsidiary from declaring, setting aside,
authorizing or making payment of any dividend or any distribution, whether in
cash or property;
(vii) written joint venture or partnership agreement
to which Tyecin or any Subsidiary is a party (whether as an original party or as
an assignee or successor);
(viii) written agreement or agreements to which Tyecin
or any Subsidiary is a party (whether as an original party or as an assignee or
successor) with respect to any assignment, discounting or reduction of any
receivables, other than normal trade discounts, of Tyecin or any Subsidiary;
(ix) written distributorship, sales agency, sales
representative, brokerage marketing agreement, including without limitation,
agreements with insurance companies;
(x) existing agreements, options, commitments or
rights with, to or in any third party to acquire any assets or properties, real,
personal or mixed, or any interest therein, of Tyecin or any Subsidiary; and
(xi) a list of all clients of Tyecin and all
Subsidiaries.
Tyecin and the Subsidiaries have heretofore delivered to Manugistics or
Acquisition true, correct and complete copies of all documents described in
SCHEDULE 4.15. There are no oral contracts or commitments of the types described
in this Section 4.15 which create an obligation on the part of Tyecin or any
Subsidiaries. There are no contracts or commitments between Tyecin or any
Subsidiaries, on the one hand, and any person which controls, is controlled by
or is under common control with Tyecin, on the other, except as listed on
SCHEDULE 4.15 or agreements referred to in this Agreement.
<PAGE> 16
4.16 ABSENCE OF DEFAULT. Except as set forth in SCHEDULE 4.16
annexed hereto: (a) neither Tyecin nor any Subsidiaries has received notice that
it has not complied with and performed all of its obligations required to be
performed under all contracts, agreements and leases to which it is a party
(whether as an original party or as an assignee or successor) as of the date
hereof, or that it is in default in any respect under any contract, agreement,
lease, undertaking, commitment or other obligation; and (b) Tyecin and the
Subsidiaries have no knowledge that any party has failed to comply in any
respect with or perform all of its obligations required to be performed under
any contract, agreement or lease to which Tyecin or any Subsidiary is a party
(whether as an original party or as an assignee or successor) as of the date
hereof.
4.17 INSURANCE. SCHEDULE 4.17 contains a description of all
policies or binders of insurance insuring Tyecin and any Subsidiary (including
without limitation any errors and omissions insurance) or any directors and
officers thereof or any of its properties or assets (specifying the insurer, the
amount of the coverage, the type of insurance, the risks insured, the expiration
date, the policy number, the premium and any agent or broker). SCHEDULE 4.17
also contains a description of all outstanding performance bonds which have been
delivered to any person in connection with the business and operations of Tyecin
and the Subsidiaries.
4.18 CAPITAL EXPENDITURES. SCHEDULE 4.18 sets forth the current
capital budget for Tyecin and the Subsidiaries and the status of expenditures
under such budget.
4.19 LITIGATION.
(a) Except as set forth in SCHEDULE 4.19 annexed hereto,
as of the date hereof: (i) there are no actions, suits, arbitrations, legal or
administrative proceedings or investigations threatened or pending or claims
asserted against Tyecin or any Subsidiary of which Tyecin or any Subsidiary has
knowledge and Tyecin and the Subsidiaries have no knowledge of any basis for
such actions, suits arbitrations, legal or administrative proceedings; and (ii)
neither Tyecin nor any of the Subsidiaries nor the assets, properties or
business of any of them is subject to any judgment, order, writ, injunction or
decree of any court, governmental agency or arbitration tribunal.
(b) Tyecin and the Subsidiaries are not a party to any
suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or, to the knowledge of Tyecin or any
Subsidiary, threatened which might have an adverse effect or restrict the
ability of Tyecin or any Subsidiary to consummate the transactions contemplated
by this Agreement or to perform its obligations thereunder.
(c) There is no judgment, order, injunction or
<PAGE> 17
decree of any court, governmental authority or regulatory agency to which Tyecin
or any Subsidiary is subject which could reasonably be expected to have an
adverse effect or restrict the ability of Tyecin or any Subsidiary to consummate
the transactions contemplated by this Agreement or to perform its obligations
thereunder.
4.20 COMPLIANCE WITH LAW. Except as set forth in SCHEDULE 4.20
annexed hereto, neither Tyecin nor any Subsidiaries have received written notice
or is aware of the fact that:
(a) Tyecin or any Subsidiaries has not complied with, or
is in violation of, any law, ordinance or governmental rule or regulation to
which it or its business is subject; or
(b) Tyecin, any Subsidiary, or any employee thereof, has
failed to obtain any material license, permit, certificate or other governmental
authorization or inspection necessary to the ownership or use of its assets and
properties or to the conduct of its business.
4.21 TAX MATTERS.
(a) Tyecin and each of the Subsidiaries has filed or will
file all required Federal, foreign, state, county, local, and other tax returns
and reports including without limitation, income tax, estimated tax, excise tax,
sales tax, gross receipts tax, franchise tax, employment and payroll-related
tax, property tax and returns and reports, whether or not measured in whole or
in part by net income, within the prescribed period or any extension thereof for
all periods to the Effective Date, except where the prescribed period (and any
extension thereof) will not have expired by the Effective Date, and all such
returns are true, correct and complete. Tyecin and the Subsidiaries have paid,
and with respect to the 1997 tax year and preceding years will pay or will
reserve for, all taxes shown to be due on such returns and reports or due or to
become due pursuant to any written assessment, deficiency notice, 30-day letter
or similar written notice actually received by Tyecin for any period prior to
the Effective Date, including interest and penalties with respect thereto,
except as set forth on SCHEDULE 4.21. There are no tax liens upon any property
of Tyecin or any of the Subsidiaries except for liens for current taxes not yet
due. All amounts required to be withheld by Tyecin and the Subsidiaries from
employees for income taxes, social security and other payroll taxes have been
collected and withheld, and either paid to the respective governmental agencies,
set aside in accounts for such purpose, or accrued, reserved against and entered
upon the books and records of the employer. For the purpose of this Agreement,
unless otherwise expressly provided, the term "tax" shall include all Federal,
foreign, state and local taxes or assessments, including any interest or
penalties applicable thereto.
<PAGE> 18
(b) The Federal income tax returns of Tyecin and the
Subsidiaries have either been audited by the Internal Revenue Service (the
"IRS") or the period during which any assessments may be made has expired
without waiver or extension, for all periods to and including the year ended
1994. Except as set forth on SCHEDULE 4.21 hereto, all Federal income tax
deficiencies asserted in writing as a result of such examinations have been paid
or finally settled. Further, no written notice has been received by Tyecin
proposing the assessment of any Federal income tax liability against Tyecin.
Except as set forth in SCHEDULE 4.21, none of the foreign, state or local income
or franchise tax returns of Tyecin or the Subsidiaries has been audited by any
governmental agency within the past five (5) years.
(c) Except as set forth on SCHEDULE 4.21, neither Tyecin
nor any of the Subsidiaries is a party to any pending action by any governmental
authority for assessment or collection of taxes, or party to any dispute or, to
the knowledge of Tyecin, any threatened dispute, and no such claim for
assessment or collection of taxes has been made upon Tyecin or any of the
Subsidiaries nor to the knowledge of Tyecin is there any basis for such action
or claim.
(d) Neither Tyecin nor any of the Subsidiaries has, with
regard to any assets or property held, acquired or to be acquired, filed a
consent to the application of Section 341(f)(2) of the Code.
(e) Except as set forth on SCHEDULE 4.21 hereto, Tyecin
and each of its Subsidiaries (i) have made all payments of estimated taxes
required to be made; (ii) have not taken any action that could have the effect
of deferring any liability for taxes from any taxable period ending on or before
the Closing Date to any taxable period ending thereafter; (iii) have not made
any payment which will be or may be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code; and (iv) have no
net operating loss carryovers available as reflected on its returns arising in
years after 1994, which are restricted as of the Effective Date by Sections 382,
383 or 384 of the Code, except to the extent affected by this Agreement and the
transactions evidenced hereby.
(f) During the past ten (10) years, except as set forth on
SCHEDULE 4.21, neither Tyecin nor any of the Subsidiaries has agreed and has not
been requested in writing by IRS to make any adjustment under Section 481(a) of
the Code by reason of a change in accounting method.
(g) None of the Subsidiaries which are incorporated under
the laws of a foreign country have been subject to tax as: a "foreign personal
holding company" within the meaning of Section 552 of the Code; a "foreign
investment company" within the meaning of Section 1246 of the Code; or a
"passive foreign investment company" within the meaning of Section 1296 of the
Code.
<PAGE> 19
(h) Set forth on SCHEDULE 4.21 is a correct and complete
list of:
(i) all Federal, foreign, state and local income and
franchise, tax returns and reports filed individually or on a consolidated basis
by Tyecin and the Subsidiaries within the past five years;
(ii) all currently effective agreements, consents,
elections and waivers filed or made with Federal, state, local or foreign taxing
authorities relating to Tyecin and the Subsidiaries; and
(i) all methods of accounting utilized by Tyecin and the
Subsidiaries together with the book/tax adjustments made by them in preparing
their tax returns comply with the Code and associated regulations, and Tyecin
and the Subsidiaries have made all proper elections which support the methods of
accounting utilized.
Tyecin has made available to Acquisition and Manugistics all Federal,
foreign, state and local tax returns referred to on SCHEDULE 4.21.
4.22 EMPLOYEE BENEFIT PLANS
(a) SCHEDULE 4.22 lists all employee benefit (including
multiemployer) plans, funds or programs (within the meaning of the Code or
ERISA), whether or not they are or are intended to be (i) covered or qualified
under the Code, ERISA or any other applicable law, (ii) funded or unfunded, or
(iii) generally available to all employees of Tyecin, which are maintained
and/or contributed to by Tyecin ("Plan"). For purposes of this Section 4.22,
references to Tyecin shall include any corporation which is a member of a
controlled group of corporations (as defined in section 414(b) of the Code)
which includes Tyecin; any trade or business (whether or not incorporated) which
is under common control (as defined in section 414(c) of the Code) with Tyecin;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in section 414(m) of the Code) which
includes Tyecin; and any other entity required to be aggregated with Tyecin
pursuant to regulations under section 414(o) of the Code.
(b) Tyecin has delivered to Manugistics (i) copies of all
Plan documents and other instruments relating to all Plans sponsored solely by
Tyecin or any Subsidiary ("Company Plans"), if any, (ii) copies of the most
recent financial statements with respect to such Plans, if any (iii) true and
complete copies of all annual reports for such Plans prepared within the past
three (3) years, if any, and (iv) all filings with respect to such Plans
submitted to and any correspondence received by Tyecin or any Subsidiary from
any government agency within the past two (2) years with respect to such
filings, if any.
<PAGE> 20
(c) Each Plan which is intended to be qualified under
section 401(a) and exempt from tax under section 501(a) of the Code has been
determined by the IRS to be so qualified and such determination remains in
effect and has not been revoked. Neither Tyecin nor any Subsidiary has taken or
omitted to take any action since the date of any such determination which might
adversely affect such qualification or exemption, or result in the imposition of
excise taxes or tax on unrelated business income under the Code or ERISA.
(d) Except in the case of multiemployer plans, (i) no
reportable event (as defined in section 4043 of ERISA or the regulations
thereunder) for which the reporting requirements have not been fully waived, or
accumulated funding deficiency whether or not waived (as defined in section 302
of ERISA), or liability to the Pension Benefit Guaranty Corporation ("PBGC")
under section 4062 of ERISA, nor any prohibited transaction (as defined in
section 406 of ERISA or section 4975 of the Code), has occurred and/or exists
with respect to any Plan; and (ii) each of the Plans and provisions thereof, the
trusts created thereby, and the operation of the Plans is currently in
compliance with and conform to applicable provisions of the Code (including but
not limited to section 412), ERISA, other statutes, and governmental rules and
regulations.
(e) There is no action, audit, suit or claim pending or,
threatened in writing relating to any Plan, fiduciary of any such Plan or assets
of any such Plan, before any court, tribunal or government agency and there are
no other claims (other than routine claims for benefits under the Plans).
(f) Tyecin has delivered to Acquisition the most recent
Plan audit reports, actuarial reports and annual reports for the Plans, if any.
(g) Neither Tyecin nor any Subsidiary has, with respect to
any multiemployer plan, suffered or caused a complete withdrawal or partial
withdrawal (as such terms are respectively defined in sections 4203 and 4205 of
ERISA).
(h) With respect to any Plan that is an employee welfare
benefit plan within the meaning of Section 3(1) of ERISA (a "Welfare Plan"),
neither Tyecin nor any Subsidiary has any knowledge or received written notice
that (i) any such Welfare Plan the contributions to which are claimed as a
deduction under any provision of the Code is not currently in compliance with
all applicable requirements pertaining to such deduction, (ii) with respect to
any welfare benefit fund within the meaning of section 419 of the Code that
comprises part of a Welfare Plan, there is no disqualified benefit within the
meaning of section 4976(b) of the Code that would subject Tyecin to a tax under
section 4976(a) of the Code, or (iii) with respect to any group health plan,
there is
<PAGE> 21
no failure to meet the requirements of Section 4980(B)(f) of the Code that would
subject Tyecin to the tax under Section 4980(B)(b), or with respect to years
beginning before the effective date of such Section, any such Plan that was a
group health plan within the meaning of section 162(i)(3) of the Code as of that
date did not meet all of the then requirements of section 162(k) of the Code.
4.23 EMPLOYEES.
(a) Annexed hereto as SCHEDULE 4.23 is a list of the
names, titles and current annual salary rates of and bonuses paid or payable to
all present officers and employees of Tyecin and the Subsidiaries ("Employees").
(b) Except as set forth in SCHEDULE 4.23, neither Tyecin
nor any of the Subsidiaries has any employment agreement with, maintains any
Plans or has any obligations for any employee benefits or bonuses with respect
to, any Employees. Neither Tyecin nor any of the Subsidiaries has received a
written notice of default with respect to any such agreements.
(c) Except as set forth on SCHEDULE 4.23, neither Tyecin
nor any of the Subsidiaries has any existing obligations for bonuses or deferred
compensation to Employees or any employment agreements, severance agreement or
change of control agreements with any Employees, officers or directors.
4.24 LABOR AGREEMENTS. Neither Tyecin nor any Subsidiary is a
party to or is bound by any labor or collective bargaining agreement.
4.25 ENVIRONMENTAL LAWS.
(a) Tyecin and the Subsidiaries have obtained all permits,
licenses and other authorizations which are required with respect to the
operation of its business under Federal, state, foreign and local laws relating
to pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial
toxic or hazardous substances or wastes (the "Environmental Laws").
(b) Neither Tyecin nor any of its Subsidiaries has
received written notice that it is not in compliance with any other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or contained in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
<PAGE> 22
(c) Other than the items listed in SCHEDULE 4.25, there is
no civil, criminal or administrative action, suit, demand, claim, hearing notice
or demand letter pending against Tyecin of which it has received written notice,
relating in any way to the Environmental Laws or any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder.
4.26 BANK ACCOUNTS, LETTERS OF CREDIT AND POWERS OF ATTORNEY.
SCHEDULE 4.26 lists (a) all bank accounts, lock boxes and safe deposit boxes
relating to the business and operations of Tyecin and the Subsidiaries (SCHEDULE
4.26 also sets forth, opposite the identification of each such account or box by
its account or box number, the name, address, telephone number, and contact
person for the Bank or other institution where such account or box is located,
the account balance or description of the box contents, and the name of each
authorized signatory thereto), (b) all outstanding letters of credit issued by
financial institutions for the account of Tyecin and the Subsidiaries (setting
forth, in each case, the name, address, telephone number, and contact person for
each financial institution issuing such letter of credit, the maximum amount
available under such letter, the terms (including the expiration date) of such
letter of credit and the party or parties in whose favor such letter of credit
was issued), and (c) the name, address, and telephone number of each person who
has a power of attorney to act on behalf of Tyecin and the Subsidiaries. Tyecin
has heretofore delivered to Manugistics true, correct and complete copies of
each letter of credit and each power of attorney described on SCHEDULE 4.26.
4.27 ACCOUNTS AND NOTES RECEIVABLE. Annexed hereto as SCHEDULE
4.27 is a true and correct list, as of the date hereof, setting forth, by
customer or obligor (SCHEDULE 4.27 also sets forth, opposite the name of each
customer or obligor, the address, telephone number, and contact person for such
customer or obligor), an aging of the accounts and notes receivable of Tyecin
and the Subsidiaries in categories of less than 30 days due, 30 to 59 days due,
60 to 89 days due and 90 days or greater due.
4.28 ACCOUNTS PAYABLE. Annexed hereto as SCHEDULE 4.28 is a true
and correct list, as of the date hereof, of all of the accounts payable of
Tyecin and the Subsidiaries, setting forth, by vendor (SCHEDULE 4.28 also sets
forth, opposite the name of each vendor, the address, telephone number, and
contact person for such vendor), an aging of the accounts payable of Tyecin and
the Subsidiaries in categories of less than 30 days due, 30 to 59 days due, 60
to 89 days due and 90 days or greater due.
4.29 CUSTOMERS, SUPPLIERS, LICENSEES AND CONSULTING AGREEMENTS.
SCHEDULE 4.29 annexed hereto is a complete and correct list of the names,
addresses, telephone numbers and contacts of (a) all customers of Tyecin and the
Subsidiaries during the last three (3) years who have generated revenues for
Tyecin in excess of
<PAGE> 23
$10,000 per year for any of the three (3) years, (b) the ten (10) largest
suppliers of Tyecin and the Subsidiaries during the current fiscal year, (c) all
licensees of Tyecin and the Subsidiaries during the last three (3) years, and
(d) all persons for whom Tyecin and the Subsidiaries have performed consulting
services during the last three (3) years. SCHEDULE 4.29 includes the total sales
to, purchases by, or fees paid by each customer, licensee or party to a
consulting agreement and the total purchases by Tyecin from each supplier. No
supplier, customer, licensee, or party to a consulting arrangement with Tyecin
or the Subsidiaries during the last five (5) years has advised Tyecin or the
Subsidiaries, formally or informally, that it intends to terminate, discontinue
or substantially modify or reduce its business with Tyecin or the Subsidiaries
(i) by reason of the transactions contemplated by this Agreement or (ii)
otherwise. Neither Tyecin nor the Subsidiaries have any obligation or have made
any undertaking to perform work for customers, licensees, or parties to
consulting arrangements other than on a billable basis.
4.30 NO-SHOP AGREEMENT. From January 29, 1998, until March 14,
1998 Tyecin has complied in all respects with their obligations under the
January 29, 1998 No-Shop Agreement (the "No-Shop Agreement") between Tyecin and
Manugistics, Inc.
4.31 SOFTWARE MATTERS.
(a) Tyecin and the Subsidiaries own all software used in
the conduct of their business as described on SCHEDULE 4.31 (the "Owned
Software"). Except as set forth on SCHEDULE 4.31 hereto, Tyecin and the
Subsidiaries have the right and license to use that software described as
"Licensed Software" on SCHEDULE 4.31 (the "Licensed Software") free and clear of
any limitations or encumbrances. SCHEDULE 4.31 sets forth a list of all license
fees, rents, royalties or other charges that Tyecin and the Subsidiaries are
required or obligated to pay with respect to Licensed Software. Tyecin and the
Subsidiaries are in full compliance with all provisions of any license, lease or
other similar agreement pursuant to which Tyecin and the Subsidiaries have
rights to use the Licensed Software. Except as set forth in SCHEDULE 4.31, none
of the Licensed Software has been incorporated into or made a part of any other
Licensed Software. Except as set forth in SCHEDULE 4.31, the Owned Software and
Licensed Software constitute all software used in the business of Tyecin and/or
the Subsidiaries. Neither Tyecin nor the Subsidiaries are infringing any
intellectual property rights of any other person or entity with respect to the
Licensed Software or Owned Software, and, except as set forth in SCHEDULE 4.31,
no other person or entity is infringing any intellectual property rights of
Tyecin and/or the Subsidiaries with respect to the Licensed Software or Owned
Software which Tyecin and/or the Subsidiaries leases or licenses to such third
party.
(b) With respect to all software/computer applications
owned or licensed from others by Tyecin and/or any
<PAGE> 24
Subsidiary (other than standard off the shelf commercially available software),
including all source codes and related documentation (the "Software Materials"),
all of which are contained in SCHEDULE 4.31 hereto, there are no bugs, errors or
defects of any kind in said software/computer applications which could adversely
affect the value, utility, marketability, operability or any other aspect of
such software/computer applications, or which render the software/computer
applications unable to substantially conform to the Software Materials contained
in SCHEDULE 4.31 hereto.
(c) Tyecin and its Subsidiaries have conducted "Year 2000"
audits with respect to all software/computer applications owned or licensed from
others by Tyecin and/or the Subsidiaries as of the Closing Date, including the
Software Materials contained in SCHEDULE 4.31 hereto, the Owned Software and the
Licensed Software (the "Software Applications"), and all Software Applications
comply with and account for the fact of the arrival of the "year 2000" and will
not be adversely affected with respect to value, utility, marketability,
operability or any other aspect by virtue of the arrival of the "year 2000".
Without limiting the generality of the foregoing, except as set forth on
SCHEDULE 4.31 hereto, the Software Applications:
(i) will operate prior to, during and after the
calendar year 2000 A.D., and more specifically, will operate during each such
time period without error relating to date data, including any error relating
to, or the product of, date data which represents or references different
centuries or more than one century;
(ii) will not abnormally end or provide invalid or
incorrect results as a result of date data, including date data which
represents or references different centuries or more than one century; and
(iii) are capable of date data century recognition,
calculations which accommodate same century and multi-century formulas and date
values, and date data interface values that reflect the century.
(d) Tyecin and its Subsidiaries are in compliance with all
licenses from others for all software/computer applications used in or relating
to the business of Tyecin and its Subsidiaries as of the Effective Date,
including any such licenses with respect to the Software Materials contained in
Schedule 4.32 hereto, and Tyecin and its Subsidiaries have obtained and paid for
in full all necessary licenses for use of software/computer applications used in
or relating to the business of Tyecin and its Subsidiaries.
(e) Tyecin and the Subsidiaries have notified all of their
customers and/or vendors of any potential "Year 2000" problem contained in any
software or other products sold or licensed to such customers or vendors.
<PAGE> 25
4.32 TYECIN MERGER COSTS. Except as set forth on SCHEDULE 1.5(B),
Tyecin or the Principal Shareholders have not incurred and are not and will not
be liable for any fees, costs or expenses, including legal, accounting,
investment banking or broker fees, in connection with the transactions
contemplated by this Agreement. Except as contemplated by this Agreement,
Acquisition, Manugistics and the Surviving Company shall not be liable for any
fees of attorneys, accountants, consultants, finders or investment bankers or
other expenses incurred by or on behalf of Tyecin or any of its Subsidiaries or
shareholders in connection with the transactions contemplated by this Agreement.
4.33 ACCOUNTING MATTERS. Neither Tyecin nor its Subsidiaries have
through the date hereof and the Effective Date, taken, agreed to take, or will
take, any action, individually or if combined with others, that would prevent
Manugistics and the Surviving Company from treating the Merger for accounting
purposes as a "Pooling of Interests."
4.34 DOCUMENTS DELIVERED. Each of the Principal Shareholders has
received, reviewed and distributed to all of the shareholders of Tyecin, the
following documents pertaining to Manugistics, which documents have been filed
by Manugistics with the SEC: (A) Annual Report on Form 10-K for the fiscal year
ended February 28, 1997; and (B) third quarter reports on Form 10-Q for the
third quarter of the fiscal year ended February 28, 1998. The Principal
Shareholders have also distributed to all of the shareholders of Tyecin, the
following documents: (1) the Merger Agreement; (2) the Paying Agent Agreement;
(3) the Escrow Agreement; and (4) the Information Package (as defined in Section
9.3).
4.35 INFORMATION STATEMENT INFORMATION . Tyecin and the Principal
Shareholders represent and warrant that the information contained in the
Information Statement (as defined in Section 9.3) as it relates to Tyecin and
its Subsidiaries is true and correct as of the date thereof in all material
respects.
4.36 LIABILITIES AFTER FINANCIAL STATEMENTS. Except as disclosed
on SCHEDULE 4.7 and SCHEDULE 4.8, to the knowledge of the Principal Shareholders
there is no liability of Tyecin or the Subsidiaries that arises out of the
operations of Tyecin or the Subsidiaries at any time after the date of the most
recent Financial Statements and prior to the Effective Date (other than
liabilities arising in the ordinary course of business and consistent with past
practice during such period).
5. REPRESENTATIONS, WARRANTIES AND RELEASE OF PRINCIPAL
SHAREHOLDERS. The Principal Shareholders represent and warrant to Acquisition
and Manugistics that with respect to such Principal Shareholders:
(a) TITLE TO THE SHARES.
<PAGE> 26
(i) Such Principal Shareholder is the lawful record
and beneficial owner of, and has good and marketable title to, the number of
shares of Tyecin Common Stock, set forth opposite the name of such Principal
Shareholder on Schedule 2.2 hereto, free and clear of any and all liens,
security interests, charges, claims, pledges or other encumbrances and any other
rights of any third party pursuant to any agreement; (ii) there are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts (voting
or otherwise), or rights of any kind whatsoever granting to any person or entity
any interest in or the right to purchase or otherwise acquire any of such
Principal Shareholder's shares of Tyecin Common Stock at any time, or upon the
happening of any stated event; and (iii) there are no proxies, agreements or
understandings with respect to the voting of such Principal Shareholder's shares
of Tyecin Common Stock.
(b) POWER AND CAPACITY.
(i) Such Principal Shareholder has full right, power
and capacity to execute, deliver and perform this Agreement and to vote his
shares of Tyecin Common Stock in favor of the Merger and to execute and deliver
a consent in writing to the Merger pursuant to the terms hereof.
(ii) The execution and delivery of this Agreement, and
the consummation by such Principal Shareholder of the transactions herein
contemplated and the fulfillment by such Principal Shareholder of the terms
hereof, will not require any consent, approval, authorization, or order of,
notice to or filing with, any court, regulatory body, administrative agency or
other governmental body (except as may be required under the Securities Act or
state blue sky laws) and will not result in a breach of any of any indenture,
mortgage, deed of trust or other agreement or instrument to which such Principal
Shareholder is a party, or of any order, rule or regulation applicable to such
Principal Shareholder of any court or of any regulatory body or administrative
agency or other governmental body having jurisdiction.
(c) LITIGATION.
(i) Such Principal Shareholder is not a party to any
suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or threatened which might adversely affect
or restrict the ability of such Principal Shareholder to consummate the
transactions contemplated by this Agreement or to perform his obligations
hereunder.
(ii) There is no judgment, order, injunction or decree
of any court, governmental authority or
30
<PAGE> 27
regulatory agency to which such Principal Shareholder is subject which might
adversely affect or restrict the ability of such Principal Shareholder to
consummate the transactions contemplated by this Agreement or to perform his
obligations hereunder.
(d) SPOUSAL CONSENT. The person executing the Spousal
Consent delivered in connection herewith is the only person who holds any
community property rights, by virtue of marriage or otherwise, in connection
with each Principal Shareholder's shares of Tyecin Common Stock.
(e) ABSENCE OF CLAIMS. Except for any claim they may have
against Tyecin in connection with this Merger Agreement and the other documents
executed in connection with this Merger Agreement, the Principal Shareholders
have no claim against Tyecin, and do hereby release Tyecin from any and all
claims which they now have or may have against Tyecin. Each of the Principal
Shareholders has express notice of the provisions of California Civil Code
Section 1542, which provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him might have
materially affected his settlement with the debtor."
and being aware of said Code section, waives any rights they may have thereunder
as well as under any statutes or common law principles of similar effect in any
other states or any other jurisdiction or under Federal law.
(f) POOLING OF INTERESTS. The Principal Shareholders have
not taken any actions, individually or if combined with others, including
without limitation disposition of shares of Tyecin during certain periods prior
to the Merger, which would prevent Manugistics and the Surviving Company from
treating the Merger for accounting purposes as a "Pooling of Interests."
(g) ACCREDITED INVESTOR. Such Principal Shareholder
resides in the United States at the residence set forth on SCHEDULE 2.2 and is
an "accredited investor," as such term is defined in Rule 501(a) of Regulation D
of the Securities Act.
6. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND MANUGISTICS.
6.1 ORGANIZATION. Each of Acquisition and Manugistics is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and each has all requisite corporate power and authority and all
necessary licenses and permits to carry on its business as it has been and is
now
31
<PAGE> 28
being conducted and to own or lease and to operate the properties used in
connection therewith. Copies of the articles of incorporation and bylaws of
Manugistics and Acquisition made available to Tyecin are accurate and complete
as of the date hereof.
6.2 AUTHORIZATION; FREEDOM TO CONTRACT.
(a) The execution and delivery by Acquisition and
Manugistics of this Agreement, and the performance by each of them of its
respective obligations hereunder, has been duly authorized by all necessary
corporate actions.
(b) The execution and delivery of this Agreement by
Acquisition and Manugistics does not, and the performance by each of Acquisition
and Manugistics of its respective obligations hereunder will not, (i) violate or
conflict with any provision of its Certificates or Articles of Incorporation or
By-Laws thereof, as in effect on the date hereof or any amendments thereto or
restatements thereof, or (ii) violate any of the terms, conditions or provisions
of any applicable law, rule, regulation, order, writ, injunction, judgment or
decree of any court, governmental authority, or regulatory agency, or (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, agreement, license, franchise, permit, guaranty, joint
venture agreement, or other agreement, instrument or obligation, oral or
written, to which Acquisition and Manugistics is a party (whether as an original
party or as an assignee or successor) or by which any of their properties is
bound. No Permits and no Filings are required in connection with the execution,
delivery and performance of this Agreement by Acquisition and Manugistics and
the consummation of the transactions contemplated hereby, except (i) the filing
by Acquisition of the Certificate of Merger and California Merger Agreement, and
(ii) any filings required to be made with the Securities and Exchange
Commission.
6.3 LITIGATION.
(a) Acquisition and Manugistics are not parties to any
suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or, to the knowledge of either of them,
threatened which might have a material adverse effect or restrict their ability
to consummate the transactions contemplated by this Agreement or to perform
their obligations thereunder.
(b) There is no judgment, order, injunction or decree of
any court, governmental authority or regulatory agency to
32
<PAGE> 29
which Acquisition or Manugistics is subject which might have a material adverse
effect on or restrict their ability to consummate the transactions contemplated
by this Agreement or to perform their obligations thereunder.
6.4 ISSUANCE OF SHARES. The shares of Preferred Closing Stock,
Common Closing Stock and Escrow Stock to be issued pursuant to Section 2 hereof
are duly authorized and, when issued pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
6.5 SECURITIES EXCHANGE ACT OF 1934. Manugistics has two classes
of authorized capital stock: preferred stock, of which no shares presently are
outstanding, and common stock, par value $.002 per share. Such common stock is
registered pursuant to Section 12 of the Securities Exchange Act of 1934, has
been subject to the reporting requirements of Section 13 of that Act for a
period of at least the last ninety (90) days and Manugistics has filed all the
reports required to be filed thereunder during the past twelve (12) months.
Manugistics agrees to use its reasonable best efforts to file with the United
States Securities and Exchange Commission (the "SEC") in a timely manner
(including available extensions of time) all reports and other documents
required to be filed by an issuer of securities registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
6.6 INFORMATION PACKAGE INFORMATION. Manugistics and Acquisition
hereby represent and warrant that the information contained in the Confidential
Information Package as it relates to Manugistics and Acquisition is true and
correct as of the date thereof in all material respects, as supplemented by
EXHIBIT 6.6 (the "Consent and Acknowledgement"), except as otherwise provided in
that certain letter signed by Michael Sullivan of Manugistics to Tyecin, dated
May 29, 1998.
7. POST-CLOSING COVENANTS.
7.1 REGISTRATION. Manugistics shall (i) file with the Securities
and Exchange Commission within thirty (30) days after the Effective Date, a
Registration Statement on an appropriate form (the "Registration Statement") for
the registration for offer and sale under the Securities Act of all of the
Preferred Closing Stock and Common Closing Stock held by the Tyecin Shareholders
and the Escrow Agent, subject, with respect to each Tyecin Shareholder, to such
shareholder having provided Manugistics with such information and documents as
Manugistics may reasonably request in writing from time to time in connection
with the Registration (as defined below); and (ii) file for appropriate
qualifications (if any), required under applicable state "blue-sky" securities
laws of such jurisdictions as the Paying Agent, on behalf of the Tyecin
Shareholders, or any of them, shall reasonably request in writing from time to
time; Manugistics shall cause such
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filings to occur as promptly as reasonably practicable after receipt of written
request therefor (collectively, the "Registration"). However, Manugistics shall
not be obligated to take any such actions if:
(a) in any particular jurisdiction, Manugistics would be
required to execute a general consent to service of process in effecting the
Registration unless Manugistics is already subject to service in such
jurisdiction and except as may be required by the Securities Act; or if
(b) (i) in the good faith judgment of the Board of
Directors of Manugistics, such Registration, qualification or compliance would
be seriously detrimental to Manugistics and the Board of Directors of
Manugistics concludes, as a result, that it is essential to defer such
Registration, at such time, and (ii) Manugistics shall furnish to the Paying
Agent a certificate signed by the President of Manugistics stating that, in the
good faith judgment of the Board of Directors of Manugistics, it would be
seriously detrimental to Manugistics for such Registration to be filed in the
near future and that it is, therefore, essential to defer the filing for such
Registration, qualification or compliance, then Manugistics shall have the right
to defer such filing for a period of not more than ninety (90) days after the
Effective Date.
7.2 CERTAIN RESTRICTIONS ON TRANSFER.
(a) Each of the Principal Shareholders agrees
not to sell, transfer or otherwise dispose, or offer to sell, transfer or
otherwise dispose of any of the Common Closing Stock (i) during the period in
which any of the shareholders of Tyecin shall not be permitted to effect sales,
otherwise dispose of any shares of Manugistics Common Stock or take any other
actions, individually or in combination with others, including without
limitation the disposition of shares of Manugistics during certain periods after
the Merger, which would prevent Manugistics and the Surviving Company from
accounting for the Merger as a "Pooling of Interests" (the "Pooling Lock-Up
Period"); and (ii) if such action would violate any applicable federal or state
securities laws. Neither Principal Shareholder shall take any action to sell
even a de minimus amount of their shares of Manugistics Common Stock (less than
10% of their Manugistics Common Stock) during the Pooling Lock-up Period without
first notifying Manugistics and will not dispose of such shares until such
Principal Shareholder receives written confirmation from Manugistics that such
sale will not violate the aggregate de minimus test with respect to the combined
companies.
(b) Each Principal Shareholder will not take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or might reasonably be expected to
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constitute, the unlawful manipulation or stabilization of the price of common
stock or of any other securities of Manugistics, including without limitation,
in violation of Regulation M under the Securities Act.
7.3 PUBLICATION OF FINANCIALS. If Closing shall occur
on or before June 1, 1998, then on or before July 15, 1998, Manugistics shall
publish financial results covering at least thirty (30) days of post-Merger
combined operations for the period ending June 30, 1998.
7.4 WAIVER OF RIGHTS. Each of the Principal
Shareholders hereby waives, for himself and his heirs, legal representatives,
successors and assigns, the right to exercise any and all statutory and/or
contractual rights of redemption with respect to any of the shares of Tyecin
Common Stock and/or Tyecin Options owned of record or beneficially by such
Principal Shareholder, as well as the right to exercise any and all statutory
and/or contractual rights of appraisal with respect to any of the Tyecin Common
Stock or the Tyecin Options.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF TYECIN. All
obligations of Tyecin under this Agreement are subject to the fulfillment or
satisfaction, prior to or on the Closing Date, of each of the following
conditions precedent (any of which may be waived in writing in whole or in part
by Tyecin).
8.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF
EFFECTIVE DATE. The representations and warranties of Acquisition and
Manugistics contained in this Agreement shall be true on and as of the date
hereof and shall be true on and as of the Effective Date with the same effect as
though such representations and warranties were made on and as of the Effective
Date, except for changes permitted by this Agreement.
8.2 COMPLIANCE WITH THIS AGREEMENT. Acquisition and
Manugistics shall have performed and complied with all agreements and conditions
contained in this Agreement that are required to be performed or complied with
by them prior to or at the Closing.
8.3 COMPANY CERTIFICATE. Tyecin shall have received
certificates dated the Closing Date and signed by the President (or other duly
authorized officer) of Acquisition and Manugistics respectively, certifying that
the conditions specified in Sections 8.1 and 8.2 have been fulfilled.
8.4 OPINION OF COUNSEL. Tyecin shall have received
the written opinion dated the Effective Date of Dilworth Paxson LLP,
substantially in the form of EXHIBIT H hereto.
8.5 NO LITIGATION. No litigation, suit, action or
proceeding shall have been instituted by any party which (i) seeks
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to restrain or prohibit the transactions contemplated by this Agreement, (ii)
challenges the legality or validity of the transactions contemplated by this
Agreement, or (iii) seeks damages from Tyecin as a result of the transactions
contemplated by this Agreement.
8.6 CERTIFICATES. Tyecin shall have been furnished
with certificates dated the Closing Date and signed by the Secretary or an
Assistant Secretary of Acquisition and Manugistics setting forth (i) the names,
signatures and positions of the officers of Acquisition and Manugistics who have
executed this Agreement or any other document executed as a Closing document
hereunder, and (ii) a copy of the resolutions adopted by the board of directors
of Acquisition and Manugistics authorizing the execution, delivery and
performance of this Agreement.
8.7 FILING OF MERGER AGREEMENTS. Tyecin shall have
received evidence of the filing of the Certificate of Merger and the California
Merger Agreement.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUISITION AND
MANUGISTICS. All obligations of Acquisition and Manugistics under this Agreement
are subject to the fulfillment or satisfaction, prior to or on the Closing Date,
of each of the following conditions precedent (any of which may be waived in
writing in whole or in part by Acquisition and Manugistics).
9.1 REPRESENTATIONS AND WARRANTIES TRUE AS OF
EFFECTIVE DATE. The representations and warranties of Tyecin contained in this
Agreement shall be true on and as of the date hereof and shall be true on and as
of the Effective Date with the same effect as though such representations and
warranties were made on and as of the Effective Date, except for changes
permitted by this Agreement or changes in the ordinary course of business.
9.2 COMPLIANCE WITH THIS AGREEMENT.
(a) Tyecin shall have performed and complied and
shall have caused all of its Subsidiaries to perform and comply with all
agreements and conditions contained in this Agreement that are required to be
performed or complied with by it or its Subsidiaries prior to or at the Closing.
(b) The Principal Shareholders shall have
performed and complied with all agreements and conditions contained in this
Agreement that are required to be performed or complied with by the Principal
Shareholders prior to or at the Closing.
9.3 TYECIN CERTIFICATE. Acquisition and Manugistics
shall have received a certificate dated the Closing Date and signed by the
President of Tyecin and the Principal Shareholders
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certifying that the conditions specified in Sections 9.1 and 9.2 have been
fulfilled and that the shareholders and optionholders of Tyecin have each
received the information statement, which is attached hereto as EXHIBIT I (the
"Confidential Information Statement") as well as EXHIBIT 6.6, together with the
documents delivered in connection therewith, respectively.
9.4 OPINION OF COUNSEL. Acquisition and Manugistics
shall have received the written opinion, substantially in the form of EXHIBIT J
and annexed hereto, dated the Effective Date of Brobeck Phleger & Harrison LLP,
counsel to Tyecin and with respect to the Principal Shareholders, as provided
therein.
9.5 NO LITIGATION. No litigation, suit, action or
proceeding shall have been instituted by any party which (i) seeks to restrain
or prohibit the transactions contemplated by this Agreement, (ii) challenges the
legality or validity of the transactions contemplated by this Agreement, or
(iii) seeks damages from Acquisition, Manugistics, Tyecin or any Subsidiary as a
result of the transactions contemplated by this Agreement.
9.6 CERTIFICATES. Acquisition and Manugistics shall
have been furnished with certificates dated the Closing Date and signed by the
Secretary of Tyecin setting forth (i) the names, signatures and positions of the
officers of Tyecin who have executed this Agreement or any other document
executed as a Closing document hereunder, (ii) a copy of the resolutions adopted
by the board of directors Tyecin authorizing the execution, delivery and
performance of this Agreement and all documents referred to herein, and (iii)
after receipt of a copy of EXHIBIT 6.6 by the Tyecin Shareholders, shareholder
approval by a majority of the holders of Tyecin Common Stock to the execution,
delivery and performance of this Agreement and all documents referred to herein.
9.7 RESIGNATIONS. Tyecin shall have delivered to
Manugistics and Acquisition the written resignation of each director and each
officer of Tyecin, and shall have delivered to Manugistics and Acquisition the
written resignations of all trustees and committee members of all Plans
including the Tyecin Option Plans as shall be requested in writing by
Manugistics or Acquisition.
9.8 TERMINATION OF AUTHORITY. Tyecin and the
Subsidiaries shall have canceled the authority of all persons permitted to (A)
draw on Tyecin's and the Subsidiaries' bank accounts, (B) charge on Tyecin's and
the Subsidiaries' credit cards, (C) have access to Tyecin's and the
Subsidiaries' safe deposit boxes, and (D) exercise a power of attorney to act on
behalf of Tyecin and the Subsidiaries, all effective as of the Effective Date.
9.9 EMPLOYEES.
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(a) The Employees of Tyecin set forth on
SCHEDULE 9.9(A) annexed hereto shall have acknowledged their intent to remain as
employees of the Surviving Company at the Effective Date and to be guided by the
employment practices, policies, and procedures of Manugistics.
(b) The Surviving Company shall have entered
into Employment Agreements with the employees listed on SCHEDULE 9.9(B) annexed
hereto.
9.10 NO LIENS. None of the shares of Tyecin Common
Stock or Tyecin Preferred Stock held by the Tyecin Shareholders shall be subject
to a Lien and each of the Principal Shareholders shall have delivered an
executed Spousal Consent, substantially in the form of EXHIBIT K.
9.11 COVENANTS NOT TO COMPETE. Tyecin shall have
delivered executed covenants not to compete, from the employees of Tyecin set
forth on SCHEDULE 9.11 annexed hereto.
9.12 CLOSING AGREEMENTS.
(a) Acquisition, the Escrow Agent and the Paying
Agent shall have executed the Escrow Agreement and delivered a fully-executed
original to Acquisition or Manugistics.
(b) The Surviving Company, the Principal
Shareholders, and the Paying Agent shall have executed the Paying Agent
Agreement and delivered a fully-executed original to Acquisition or Manugistics.
9.13 TERMINATION OF AGREEMENTS. The agreements with
the entities listed on SCHEDULE 9.13 annexed hereto shall have been terminated,
and Tyecin shall deliver a written confirmation from each of the entities listed
on SCHEDULE 9.13 of their waiver and relinquishment of all rights against
Tyecin, the Subsidiaries, the Surviving Company, Acquisition, and Manugistics.
9.14 ASSIGNMENT OF AGREEMENTS. The agreements with the
entities listed on SCHEDULE 9.14 annexed hereto shall have been assigned and/or
assumed and Tyecin shall have delivered to Manugistics a written consent to the
transfer of ownership and/or an assignment of rights from the parties to such
agreements.
9.15 RELEASE FROM AGREEMENTS. Tyecin shall have
delivered a written release of all claims against Tyecin, the Subsidiaries, the
Surviving Company, Acquisition, and Manugistics from those entities or persons
listed on SCHEDULE 9.15.
9.16 BOARD APPROVAL. The boards of directors of each
of Manugistics and Acquisition shall have approved this Merger
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Agreement and transactions contemplated thereby.
9.17 FILING OF MERGER DOCUMENTS. Manugistics shall
have received evidence of the filing of the Certificate of Merger and the
California Merger Agreement.
9.18 POOLING TREATMENT.
(a) Manugistics shall have received a
consolidated balance sheet as of March 31, 1998 from Tyecin and an unaudited
consolidated balance sheet as of December 31, 1997 from Price Waterhouse,
Tyecin's accounting auditors.
(b) Manugistics and Acquisition shall have
received an opinion satisfactory in form and substance to Manugistics and
Acquisition from Tyecin's accounting auditors, that with respect to Tyecin, the
Merger qualifies for pooling of interests accounting treatment if consummated in
accordance with this Agreement.
9.19 TYECIN-INNOTECH WAIVER. Manugistics shall have
received a waiver from Innotech of any of its rights to put its stock in
Tyecin-Innotech to Tyecin and/or to terminate any of the existing agreements
between the Preferred Shareholder and Tyecin-Innotech.
9.20 CONVERSION BY PREFERRED SHAREHOLDER. The
Preferred Shareholder shall have converted all of the issued shares of Tyecin
Preferred Stock into shares of Tyecin Common Stock.
9.21 CONVERSION OF RELATED PARTY DEBTS. Before the
Closing Date, Manugistics shall have received a certificate stating that all
indebtedness, if any, of Tyecin to the Tyecin Shareholders or any other related
parties shall have been converted to equity in Tyecin or otherwise retired.
9.22 SHAREHOLDER TENDER. The holders of not less than
ninety-seven (97%) percent of the Tyecin Common Stock and of one hundred (100%)
percent of the Tyecin Preferred Stock shall have tendered their shares in
accordance with the terms of this Merger Agreement.
9.23 LETTERS OF TRANSMITTAL. The holders of not less
than ninety-seven (97%) percent of the Tyecin Common Stock and of one hundred
(100%) percent of the holders of Tyecin Preferred Stock shall have delivered an
executed Letter of Transmittal substantially in the form of EXHIBIT G and their
shares of Tyecin Common Stock and Tyecin Preferred Stock in accordance with the
terms of this Merger Agreement and the Letter of Transmittal.
9.24 LOCK-UP LETTERS FROM AFFILIATES. Each affiliate
of Tyecin shall have delivered to Manugistics a letter
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satisfactory in form and substance to counsel for Manugistics, to the effect
that (a) such affiliate or person has not taken and agrees not to take any
actions, individually or if combined with others, including disposition of any
shares of Tyecin and/or Manugistics during certain periods before and after the
Merger, which would preclude the Merger from qualifying for "Pooling of
Interests" treatment, and (b) has not taken any action which is in violation of
any applicable federal or state securities laws, and agrees not to take any such
action.
9.25 TYECIN OPTION PLAN RESOLUTION. Manugistics shall
have received from Tyecin a resolution from its board of directors, amending the
Option Plans to reduce the number of Tyecin Options issuable thereunder to that
number of Tyecin Options issued and outstanding as provided on SCHEDULE 1.2(D).
9.26 NOTICE OF SHAREHOLDER APPROVAL. Manugistics shall
have received notice from Tyecin of any holders of potentially Dissenting
Shares.
9.27 CONSENT AND ACKNOWLEDGEMENT. Tyecin shall have
delivered to all shareholders of Tyecin a Consent and Acknowledgement in the
form of EXHIBIT 6.6 and Manugistics shall have received an executed Consent and
Acknowledgement in the form of EXHIBIT 6.6 from each of the Tyecin Shareholders
who have tendered their shares pursuant to Section 9.22 hereof and delivered a
Letter of Transmittal pursuant to Section 9.23 hereof.
10. COOPERATION AND POST CLOSING OBLIGATIONS.
10.1 FURTHER ASSURANCES. From and after the Closing,
all of the parties to this Agreement agree to execute and deliver such further
documents and instruments and to do such other acts and things as any other
party, as the case may be, may reasonably request in order to effectuate the
transactions contemplated by this Agreement. In the event any party shall be
involved in litigation, threatened litigation or government inquiries with
respect to a matter involving any of them, the other parties shall also make
available to such first party, at reasonable times and subject to the reasonable
requirements of its or his own business, such of its or his personnel as may
have information relevant to the matters provided such first party shall
reimburse the providing party for its or his reasonable costs for employee time
incurred in connection therewith if more than one business day is required.
Following the Closing, the parties will cooperate with each other in connection
with tax audits and in the defense of any legal proceedings, consistent with the
other provisions for defense of claims provided in Section 10, to the extent
such cooperation does not cause unreasonable expense, unless such expense is
borne by the requesting party.
10.2 FURNISHING NOTICE. From the date of this
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Agreement through and including the Effective Date, each of the parties to this
Agreement agree to furnish to all other parties to this Agreement, copies of any
notices, documents, requests, court papers, or other materials received from any
governmental agency or any other third party with respect to the transactions
contemplated by this Agreement, except where it is obvious from such notice,
document, request, court paper or other material that the other parties were
already furnished with a copy thereof.
10.3 CERTIFICATE LEGENDS. Each stock certificate
evidencing the Preferred Closing Stock, Common Closing Stock and Escrow Stock
shall be designated with such legend or legends as shall be deemed necessary or
appropriate by Manugistics upon the advice of its counsel.
11. INDEMNIFICATION.
11.1 GENERAL. Manugistics shall indemnify each of the
Principal Shareholders and hold each of them harmless at all times from and
after the Effective Date against and in respect of:
(a) Any and all damages, losses, liabilities,
obligations, claims, encumbrances, deficiencies, costs and expenses, including
without limitation reasonable attorneys' fees and other costs and expenses
incident to, any action, investigation, claim or proceeding (all hereinafter
referred to as "Losses") resulting from the breach or failure of observance or
performance of any representation, warranty, covenant, agreement or commitment
made by Manugistics or Acquisition in this Agreement.
(b) Any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs, losses, damages, liabilities
and reasonable legal and other expenses incident to the foregoing.
The foregoing indemnity rights shall be in addition to any other rights
and remedies which the Principal Shareholders may have under this Agreement, the
Escrow Agreement or the Paying Agent Agreement and as a matter of law or equity.
Any indemnity by Manugistics hereunder shall be satisfied by the issuance of
shares of common stock of Manugistics in the amount of the claim using the
NASDAQ Exchange closing price on the Closing Date.
11.2 INDEMNIFICATION BY THE TYECIN SHAREHOLDERS. The
Tyecin Shareholders, including the Principal Shareholders, shall indemnify each
of the Surviving Company, Acquisition and Manugistics and hold each of them
harmless at all times from and after the Effective Date against and in respect
of:
(a) Any and all damages, losses, liabilities,
obligations, claims, encumbrances, deficiencies, costs and expenses, including,
without limitation, reasonable attorneys' fees
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and other costs and expenses incident to, any action, investigation, claim or
proceeding (all hereinafter referred to as "Losses") suffered, sustained,
incurred or required to be paid by Manugistics, Acquisition or the Surviving
Company by reason of the following:
(i) Any breach or failure of observance or
performance of any representation, warranty, covenant, agreement or commitment
made by Tyecin and/or the Principal Shareholders in this Agreement or in any
other agreement, certificate or document executed or delivered in connection
herewith or as a result of any such representation, warranty, covenant,
agreement or commitment being untrue or incorrect in any respect; and
(ii) Any claims by former Tyecin employees concerning
their Tyecin Options; provided, further, that nothing contained in this Section
11.2(a)(iii) shall be interpreted or construed to limit any claims that
Manugistics or the Surviving Company may have pursuant to Section 11.2(a)(i) and
(ii) hereof.
(iii) The civil action filed on April 23, 1998 in the
Superior Court of California, County of Santa Clara, No. CV773549, by a former
Tyecin employee and optionholder against Tyecin Systems, Inc. and Randall A.
Hughes.
(b) Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs, losses, damages, liabilities and
reasonable legal and other expenses incident to the foregoing.
The foregoing indemnity rights shall be in addition to any other rights
and remedies which the Surviving Company, Acquisition or Manugistics may have
under this Agreement, the Escrow Agreement, the Paying Agent Agreement or any
other agreement delivered in connection with the Merger, and as a matter of law
or equity.
11.3 PERIOD OF INDEMNITY. The aforesaid indemnities shall remain
in full force and effect with respect to claims relating to breaches of
representations, warranties, covenants, or agreements, for a period equal to the
earlier of one (1) year from the Effective Date or the first public release of
consolidated audited financial statements for the Surviving Company and
Manugistics.
11.4 NOTICE TO THE INDEMNITOR. Within a reasonable period after
the assertion of any claim by a third-party or occurrence of any event which may
give rise to a claim for indemnification from an indemnitor (the "Indemnitor")
under this Section 11, an indemnified party (the "Indemnified Party") shall
notify the Indemnitor in writing of such claim and advise the Indemnitor whether
the Indemnified Party intends to contest same, but the failure to give or delay
in giving such notice shall not
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affect the obligations of the Indemnitor hereunder except to the extent the
Indemnitor actually has been prejudiced thereby.
11.5 RIGHTS OF PARTIES TO SETTLE OR DEFEND. If the Indemnified
Party determines not to contest such claim, the Indemnitor shall have the right,
at its own expense, to contest and defend against such claim. If the Indemnified
Party determines to contest such claim, the Indemnitor shall have the right to
be represented, at its own expense by its own counsel and accountants, their
participation to be subject to the reasonable direction of the Indemnified
Party. In either case, the Indemnified Party shall make available to the
Indemnitor and its attorneys and accountants, at all reasonable times during
normal business hours, all books, records, and other documents in its possession
relating to such claim. The party contesting any such claim shall be furnished
all reasonable assistance in connection therewith by the other party. If the
Indemnitor fails to undertake the defense of or settle or pay any such
third-party claim within ten (10) days after the Indemnified Party has given
written notice to the Indemnitor advising that the Indemnified Party does not
intend to contest such claim, or if the Indemnitor, after having received such
notification from the Indemnified Party, fails forthwith to defend, settle or
pay such claim, then the Indemnified Party may take any and all necessary action
to dispose of such claim including, without limitation, the settlement or full
payment thereof upon such terms as it shall deem appropriate, in its sole
discretion, subject to the following with respect to any proposed settlement
thereof.
11.6 SETTLEMENT PROPOSALS. In the event the Indemnified Party
desires to settle any such third-party claim (whether or not contested by the
Indemnitor), the Indemnified Party shall advise the Indemnitor of the amount it
proposes to pay in settlement thereof (the "Proposed Settlement"). If such
Proposed Settlement is unsatisfactory to the Indemnitor, it shall have the
right, at its expense, to contest such claim by giving written notice of such
election to the Indemnified Party within ten (10) days after the Indemnitor has
been advised of the Proposed Settlement. If the Indemnitor does not deliver such
written notice within ten (10) days after the Indemnitor has been advised of the
Proposed Settlement, the Indemnified Party may offer the Proposed Settlement to
the third party making such claim. If the Proposed Settlement is not accepted by
the party making such claim, any new Proposed Settlement figure which the
Indemnified Party may wish to present to the party making such claim shall first
be presented to the Indemnitor who shall have the right, subject to the
conditions hereinabove set forth in this Section, to contest such claim. In all
such events, the Indemnitor shall indemnify the Indemnified Party and hold it
harmless against and from any and all costs of defense, payment or settlement,
including reasonable attorneys' fees incurred in connection therewith.
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11.7 REIMBURSEMENT.
(a) IN GENERAL. At the time that the Indemnified Party
shall suffer a Loss because of a breach of any warranty, representation,
covenant or agreement by the Indemnitor or at the time the amount of any
liability on the part of the Indemnitor under this Section is determined (which
in the case of payments to third persons shall be the earlier of (i) the date of
such payments or (ii) the date that a court of competent jurisdiction shall
enter a final judgment, order or decree (after exhaustion of appeal rights
establishing such liability), the Indemnitor shall forthwith, upon notice from
the Indemnified Party, pay to the Indemnified Party, the amount of the indemnity
claim; provided, however, that unless the Indemnitor expressly denies in writing
its indemnity obligation hereunder, the Indemnitor shall pay the reasonable
attorneys' fees and other litigation expenses from time to time incurred by the
Indemnified Party promptly upon the submission of invoices therefor by the
Indemnified Party. If such amount is not paid forthwith, then the Indemnified
Party may, at its option, take legal action against the Indemnitor for
reimbursement in the amount of its indemnity claim. For purposes hereof the
indemnity claim shall include the amounts so paid (or determined to be owing) by
the Indemnified Party together with costs and reasonable attorneys' fees and
interest on the foregoing items at the rate of nine percent (9%) per annum from
the date the obligation is due from the Indemnitor to the Indemnified Party, as
hereinabove provided, until the indemnity claim shall be paid.
(b) ESCROW STOCK. If the Indemnified Party is Manugistics,
Acquisition or the Surviving Company then the Indemnified Party shall have the
right to obtain payment of its Losses from the Escrow Fund pursuant to and in
accordance with the terms of the Escrow Agreement, such Escrow Fund having been
created as security for any claims for indemnification brought by Manugistics,
Acquisition or the Surviving Company as provided in this Section 11, except for
claims relating to the breach of the representations, warranties and covenants
contained in Sections 5(a), 5(b), 5(c), 5(g) 7.2(a)(ii), and 7.2(b), which
claims shall not be satisfied from the Escrow Fund. The terms and conditions of
the Escrow Agreement shall govern any claims brought by Manugistics or
Acquisition or the Surviving Company for payment from the Escrow Fund.
11.8 SHAREHOLDER/OPTIONHOLDER CLAIMS. Without in any way limiting
the generality of the foregoing Section 11.2 of this Agreement, the Tyecin
Shareholders shall indemnify each of the Surviving Company, Acquisition and
Manugistics and hold each of them harmless at all times from and after the
Closing Date against and in respect of any claims brought by any shareholder of
Tyecin or any optionholder of Tyecin for acts or omissions prior to the
Effective Date related to the stock or option holdings in Tyecin.
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11.9 LIMITATION OF LIABILITY.
(a) It is understood and acknowledged that each of the
Surviving Company, Acquisition and Manugistics may demand tender of the entire
amount of Escrow Stock to the extent that the conditions precedent to
disbursement thereof as set forth in the Escrow Agreement are met and nothing in
this Section 11.9 shall limit the ability of Manugistics, the Surviving Company
and Acquisition to so demand and receive the Escrow Stock.
(b) Subject to the provisions of Section 11.9(a) above and
to Section 11.9(d) below, but otherwise notwithstanding anything contained
herein to the contrary, the total liability of the Tyecin Shareholders,
including the Principal Shareholders, for payment to Manugistics, Acquisition
and the Surviving Company for all Losses, by reason of any breach of this
Agreement or otherwise, shall be limited to the Escrow Fund. Each reduction in
the Escrow Fund pursuant to the terms of the Escrow Agreement shall reduce each
Tyecin Shareholder's share of the Escrow Stock on a pro rata basis based on the
percentage share of the total Manugistics Common Stock to which they are
entitled to receive pursuant to Sections 1.2(a) and 1.2(b) of this Agreement.
(c) Except for any breach of any obligations under Section
7.3, no amount shall be payable by the Principal Shareholders hereunder until
the aggregate amount of the Losses suffered or sustained by Manugistics,
Acquisition and Surviving Company collectively exceeds $50,000 (the "Base
Amount"), and at such time as such aggregate Losses exceed the Base Amount, all
Losses in excess of the Base Amount shall be due and owing from the Tyecin
Shareholders, as the case may be.
(d) Any claims relating to the breach of representations,
warranties and covenants contained in Sections 5(a), 5(b), 5(c), 5(g) and
7.2(a)(ii) and 7.2(b) shall not be satisfied out of the Escrow Stock nor shall
such claims be limited to the value of the Escrow Stock but, rather, shall be
limited to the value of the consideration received by the person or entity
against whom the claim is made. Satisfaction of any such claims shall be made
first from Manugistics Common Stock (using the NASDAQ Exchange closing price on
the Closing Date) then owned by the Indemnitor(s) and then from cash and/or
other assets of the Indemnitor(s).
12. BROKERS' AND FINDERS' FEES. Each of the Principal
Shareholders, Tyecin, Acquisition and Manugistics represent and warrant to each
other party hereto that no person or entity is entitled to a brokerage fee or
other commission in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby, except, with respect to
Tyecin, Broadview Associates whose fees are listed on SCHEDULE 1.5(B).
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13. PRESS RELEASES; CONFIDENTIALITY. Except as required by a
judicial, regulatory or governmental authority with competent jurisdiction,
including, but not limited to, obligations of Manugistics to make public
disclosures under Federal and state securities laws, and except as required by
the rules of the National Association of Securities Dealers ("NASD") applicable
to Manugistics, no party hereto shall issue any press release nor otherwise make
public any information with respect to this Agreement or the transactions
contemplated thereby, prior to the Effective Date, without the consent of the
other parties to this Agreement. The parties agree that all discussions,
negotiations, and transactions contemplated hereby and all information exchanged
pursuant hereto and in connection with due diligence, shall be kept strictly
confidential, except as otherwise provided in this Section 13. Each Principal
Shareholder covenants and agrees that, at all time following execution of this
Agreement, he shall not use for his own benefit or divulge to any other person,
firm, or corporation, any confidential information or trade secrets which
Tyecin, the Surviving Company, Acquisition or Manugistics may have imparted to
such Principal Shareholder.
14. CONTENTS OF AGREEMENT; PARTIES IN INTEREST; ETC. This
Agreement and the agreements referred to herein set forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby. Except as set forth in Sections 4 and 5 of this Agreement
and the Schedules and Exhibits hereto, there are no representations or
warranties, express or implied, made by any party to this Agreement with respect
to the subject matter of this Agreement. This Agreement shall not be amended
except by a written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement and the documents referred to herein, except for the
confidentiality provisions of Section 12 hereof, the No-Shop Agreement and the
Confidentiality Agreement which shall continue in full force and effect.
15. ASSIGNMENT AND BINDING EFFECT. This Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties. All of the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other document or agreement
delivered in connection herewith, the obligation of Manugistics to file the
Registration Statement is solely for the personal benefit of each Tyecin
Shareholder.
16. WAIVER. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party.
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17. TERMINATION. This Agreement may be terminated by the mutual
agreement of all of Tyecin, Acquisition and Manugistics at any time prior to the
Effective Date. Any termination pursuant to this Section 17 shall be without
liability on the part of any party to the other party hereto.
18. NOTICES. Any notice, request, demand, waiver, consent,
approval, or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given only if
delivered to the party personally or sent to the party by telegram or by
registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:
If to Acquisition or Manugistics:
c/o
Manugistics Group, Inc.
2115 East Jefferson Street
Rockville, MD 20852
Attn: Helen Nastasia, Esquire
with a copy to:
Lawrence F. Shay, Esquire
Dilworth Paxson LLP
3200 Mellon Bank Center
1735 Market Street
Philadelphia, PA 19103
If to Tyecin or the Principal Shareholders(prior to
the Closing):
Tyecin Systems, Inc.
Randall A. Hughes and
Richard Zuanich
Four Main Street
Los Altos, CA 94022
with a copy to:
Thomas W. Kellerman, Esquire
Brobeck Phleger & Harrison LLP
2 Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
If to the Principal Shareholders (after the Closing):
Randall A. Hughes
Richard Zuanich
c/o Tyecin Systems, Inc.
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Four Main Street
Los Altos, CA 94022
If to Tyecin (after the Closing):
Tyecin Systems, Inc.
Four Main Street
Los Altos, CA 94022
with a copy to:
Lawrence F. Shay, Esquire
Dilworth Paxson LLP
3200 Mellon Bank Center
1735 Market Street
Philadelphia, PA 19103
or to such other address or person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, telegraphed or mailed.
19. GOVERNING LAW. This Agreement shall be governed
by and interpreted and enforced in accordance with the laws of the State of
Delaware as applied to contracts made and fully performed in such state, except
insofar as the CGCL shall be mandatorily applicable to the Merger and the rights
of shareholders of Tyecin in connection therewith.
20. NO BENEFIT TO OTHERS. The representations,
warranties, covenants, agreements and indemnities contained in this Agreement
are for the sole benefit of the parties hereto, and their respective successors
and assigns, and they shall not be construed as conferring, and are not intended
to confer, any rights on any other persons.
21. SECTION HEADINGS. All section headings are for
convenience only and shall in no way modify or restrict any of the terms or
provisions hereof.
22. SCHEDULES AND EXHIBITS. All Schedules and
Exhibits referred to herein are intended to be and hereby are specifically made
a part of this Agreement.
23. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, and Tyecin,
Acquisition, and Manugistics and each of the Principal Shareholders may become a
party hereto by executing a counterpart
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hereof. This Agreement and any counterpart so executed shall be deemed to be one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement on the date first above written.
Attest: TYECIN SYSTEMS, INC.
By: By:
--------------------------- -----------------------------
Secretary President
Attest: TYECIN ACQUISITION, INC.
By: By:
--------------------------- -----------------------------
Secretary President
Attest: MANUGISTICS GROUP, INC.
By: By:
--------------------------- -----------------------------
Secretary President
PRINCIPAL SHAREHOLDERS:
Witness: RANDALL A. HUGHES
- ------------------------------------------------------------------------
Witness: RICHARD A. ZUANICH
[SIGNATURE TO AGREEMENT AND PLAN OF MERGER]
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EXHIBITS AND SCHEDULES
EXHIBITS:
Exhibit A Certificate of Merger
Exhibit B California Merger Agreement
Exhibit C Tyecin Option Plan
Exhibit D Tyecin Option Plan
Exhibit E Escrow Agreement
Exhibit F Paying Agent Agreement
Exhibit G Letter of Transmittal
Exhibit H Opinion of Dilworth Paxson LLP
Exhibit I Confidential Information Statement
Exhibit J Opinion of Brobeck, Phleger & Harrison LLP
Exhibit K Spousal Consent
Exhibit 6.6 Consent and Acknowledgement
SCHEDULES:
1.2(d) Tyecin Options
1.5(b) Tyecin Merger Costs
2.2 Closing Stock Recipients
4.1 Qualification
4.3 Authorization; Freedom to Contract
4.4 Subsidiaries and Affiliates
4.5 Charter and Organizational Documents
4.6 Financial Statements
4.7 Liabilities
4.8 Absence of Change of Events
4.9 Title to Properties
4.10 Real Property
4.11 Machinery and Equipment
4.12 Inventory
4.13 Leases and Licenses
4.14 Patents, Copyrights and Trademarks
4.15 Contracts
4.16 Defaults
4.17 Insurance
4.18 Capital Expenditures
4.19 Litigation
4.20 Legal Compliance
4.21 Tax Matters
4.22 Employee Benefit Plan
4.23 Employees
4.24 Labor Agreements
4.25 Environmental Laws
4.26 Bank Accounts, Letters of Credit and Powers of
Attorney
4.27 Accounts and Note Receivable
4.28 Accounts Payable
4.29 Customers, Suppliers, Licensees and Consulting
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Agreements
4.32 Software Matters
9.9(a) Employee Acknowledgements
9.9(b) Employment Agreements
9.13 Termination of Agreements
9.14 Assignments and Consents
9.15 Releases
1
