<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended August 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-22154
MANUGISTICS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1469385
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2115 East Jefferson Street, Rockville, Maryland 20852
(Address of principal executive offices) (Zip code)
(301) 984-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 27.5 million shares of common
stock, $.002 par value per share, as of October 12, 1999.
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MANUGISTICS GROUP, INC.
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
August 31, 1999 (Unaudited) and February 28, 1999 3
Condensed Consolidated Statements of Income -
Three and Six months ended August 31, 1999 and 1998 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Six months ended August 31, 1999 and 1998 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements -
August 31, 1999 (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
PART II OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURE 24
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MANUGISTICS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
August 31, February 28,
1999 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 22,432 $ 20,725
Marketable securities 23,885 22,637
Accounts receivable, net of allowance for doubtful
accounts of $5,765 and $6,299 at August 31, 1999 and
February 28, 1999, respectively 40,029 50,987
Other current assets 13,068 14,805
--------- ---------
Total current assets 99,414 109,154
--------- ---------
PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 16,351 21,832
NONCURRENT ASSETS:
Software development costs, net of accumulated amortization 19,252 20,540
Intangibles, net of accumulated amortization 8,224 9,382
Deferred tax asset 9,913 9,240
Other noncurrent assets 2,167 2,182
--------- ---------
Total noncurrent assets 39,556 41,344
--------- ---------
TOTAL ASSETS $ 155,321 $ 172,330
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,870 $ 8,142
Accrued compensation 2,860 7,815
Other accrued expenses 14,729 14,060
Deferred revenue 24,742 24,710
Restructuring accrual 9,058 13,789
Line of credit 9,500 9,500
--------- ---------
Total current liabilities 65,759 78,016
--------- ---------
LONG-TERM LIABILITIES 455 454
RESTRUCTURING ACCRUAL - LONG-TERM 3,716 8,138
COMMITMENTS AND CONTINGENCIES (Note 3) -- --
STOCKHOLDERS' EQUITY
Preferred stock -- --
Common stock, $0.002 par value per share;100,000,000 shares
authorized; 28,102,360 and 27,705,382 shares issued, and
27,349,850 and 26,952,872 shares outstanding at August 31,
1999 and February 28, 1999, respectively 56 55
Additional paid-in capital 183,472 179,996
Accumulated deficit (96,547) (93,258)
Accumulated other comprehensive loss (873) (354)
Treasury stock - 752,510 shares, at cost (717) (717)
--------- ---------
Total stockholders' equity 85,391 85,722
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 155,321 $ 172,330
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
MANUGISTICS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
August 31, August 31,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
License fees $ 10,754 $ 25,771 $ 23,852 $ 43,252
Consulting, solution support and other
services 23,041 27,169 49,136 50,811
--------- --------- --------- ---------
Total revenues 33,795 52,940 72,988 94,063
--------- --------- --------- ---------
OPERATING EXPENSES:
Cost of license fees 3,053 3,445 5,910 6,286
Cost of consulting, solution support and
other services 10,295 12,867 21,914 24,514
Sales and marketing 14,299 24,774 28,138 48,072
Product development 7,467 13,868 14,461 25,794
General and administrative 3,900 5,231 7,840 11,067
Restructuring costs (764) -- (682) --
Acquisition-related costs -- 3,095 -- 3,095
--------- --------- --------- ---------
Total operating expenses 38,250 63,280 77,581 118,828
--------- --------- --------- ---------
LOSS FROM OPERATIONS (4,455) (10,340) (4,593) (24,765)
OTHER INCOME-NET 517 640 874 1,731
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (3,938) (9,700) (3,719) (23,034)
BENEFIT FOR INCOME TAXES (503) (3,734) (673) (8,530)
--------- --------- --------- ---------
NET LOSS $ (3,435) $ (5,966) $ (3,046) $ (14,504)
========= ========= ========= =========
BASIC NET LOSS PER SHARE $ (0.13) $ (0.23) $ (0.11) $ (0.55)
========= ========= ========= =========
DILUTED NET LOSS PER SHARE $ (0.13) $ (0.23) $ (0.11) $ (0.55)
========= ========= ========= =========
SHARES USED IN COMPUTATION:
BASIC 27,291 26,415 27,151 26,167
========= ========= ========= =========
DILUTED 27,291 26,415 27,151 26,167
========= ========= ========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
MANUGISTICS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
August 31,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,046) $(14,504)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 10,520 11,449
Deferred tax asset (449) (8,387)
Tax benefit from stock options exercised 1,315 --
Write-off of purchased research and development -- 1,300
Other (93) 281
Changes in assets and liabilities:
Accounts receivable - net 10,958 (4,843)
Other current assets (180) (895)
Other noncurrent assets 15 (741)
Accounts payable and accrued expenses (7,557) (17,051)
Restructuring accrual (8,110) --
Deferred revenue 32 10,326
Income taxes payable/receivable 1,693 (1,205)
-------- --------
Net cash provided by (used in) operating activities 5,098 (24,270)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment - net (828) (11,230)
Capitalization of software development costs (2,553) (5,127)
Purchase of software licenses for resale (204) (388)
Net change in cash due to conforming year ends -- 446
(Purchase)/sale of marketable securities - net (1,248) 21,636
-------- --------
Net cash (used in)/provided by investing activities (4,833) 5,337
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt and capital
lease obligations - net 1 518
Proceeds from stock options and employee stock purchases 2,162 4,437
-------- --------
Net cash provided by financing activities 2,163 4,955
-------- --------
EFFECTS OF EXCHANGE RATES ON CASH BALANCES (721) 289
-------- --------
NET INCREASE (DECREASE) IN CASH 1,707 (13,689)
-------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 20,725 19,891
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 22,432 $ 6,202
-------- --------
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
MANUGISTICS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
AUGUST 31, 1999
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of Manugistics Group, Inc. ("the Company") have been prepared in accordance
with generally accepted accounting principles for interim reporting and in
accordance with the instructions to the Quarterly Report on Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal, recurring adjustments) which are
necessary for a fair presentation of the unaudited results for the interim
periods presented have been included. The results of operations for the
periods presented herein are not necessarily indicative of the results of
operations for the entire fiscal year, which ends on February 29, 2000.
The unaudited condensed consolidated financial statements for the
three and six months ended August 31, 1998 have been revised to give effect
to the acquisition by merger of TYECIN Systems, Inc. ("TYECIN") on June 1,
1998, which has been accounted for as a pooling of interests ("pooling").
These condensed consolidated financial statements should be read in
conjunction with the financial statements and notes thereto for the fiscal
year ended February 28, 1999 included in the Annual Report on Form 10-K of
the Company for that year filed with the Securities and Exchange
Commission.
2. Net Loss Per Share
Basic loss per share is computed using the weighted average number of
shares of common stock outstanding. Diluted loss 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. Common equivalent shares from options
were excluded from the calculation of diluted loss per share for the
three and six month periods ended August 31, 1999 and 1998, as including
them would be antidilutive. The following table sets forth the
computation of basic and diluted loss per share for such periods
(amounts in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months ended Six months ended
August 31, August 31,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average common shares 27,291 26,415 27,151 26,167
Dilutive potential common shares -- -- -- --
======== ======== ======== ========
Shares used in diluted computation 27,291 26,415 27,151 26,167
======== ======== ======== ========
Net loss $ (3,435) $ (5,966) $ (3,046) $(14,504)
======== ======== ======== ========
Basic loss per share $ (0.13) $ (0.23) $ (0.11) $ (0.55)
======== ======== ======== ========
Diluted loss per share $ (0.13) $ (0.23) $ (0.11) $ (0.55)
======== ======== ======== ========
</TABLE>
3. Commitments and Contingencies
On March 7, 1997, the Company, as part of the acquisition of certain
assets of Information Resources, Inc. ("IRI"), entered into several
agreements with IRI, including a Data Marketing and Guaranteed Revenue
Agreement ("Agreement") and an Asset Purchase Agreement ("Purchase
Agreement"). The Agreement set forth the obligations of the parties with
regard to revenues to be paid to IRI from the sale by the Company of
specified products provided by IRI. Under the terms of the Agreement, the
6
<PAGE>
Company guaranteed revenue to IRI in a total amount of $16.5 million over a
period of years following execution of the Agreement by way of three
separate revenue streams. The Company made an initial payment of
approximately $500,000 to IRI. In addition, as part of such commitment, the
Company agreed to guarantee revenues to IRI in a total amount of $12
million over an initial three year period from execution of the agreement
("First Revenue Stream").
The Company asserted that its ability to market the IRI products has
been impaired, which, under the terms of the Agreement, obligates the
parties to restructure the payments and/or modify the obligations with
regard to the First Revenue Stream. IRI responded, disagreeing that an
impairment existed, and in the alternative, that any impairment was
corrected. The parties discussed their disagreement over the impairment
issue until IRI filed a complaint in the Circuit Court of Cook County,
Illinois on January 15, 1999. The complaint alleged breach of the Agreement
and initially sought damages of approximately $12,000,000 for the Company's
failure to make guaranteed payments. The complaint also alleged a breach of
a separate Non-Competition and Non-Solicitation Agreement executed at the
same time as the Agreement, and sought damages in an amount in excess of
$100,000. The Company filed a Motion to Stay Proceedings and Compel
Arbitration, which was granted as to the claim under the Agreement and
denied as to the claim under the Non-Competition and Non-Solicitation
Agreement. Arbitration proceedings have commenced under the auspice of the
American Arbitration Association. Both the Cook County action and the
arbitration proceeding are in the early stages. In the arbitration, IRI
seeks a total of $15,930,563 in damages. The amount now sought by IRI
includes amounts which it claims are due under a second revenue stream
under the Agreement, triggered by the resolution of IRI's lawsuit with
Think Systems Corporation. The second revenue stream represents a total
guaranteed revenue of $1.75 million for the first and second year following
the Think Systems settlement and $2.25 million for the third year following
the settlement. The Company contends that the conditions to these amounts
becoming due under the second revenue stream have not been satisfied, and
that no amounts are due to IRI, because, among other reasons, of a failure
of consideration in the overall transaction.
On July 15, 1999, Template Software, Inc. ("Template") filed suit
against Manugistics, Inc. ("Manugistics"), the Company's principal
subsidiary, in the United States District Court for the Eastern District of
Virginia, Alexandria Division, alleging that Manugistics provided software
that did not satisfy the requirements of a software license agreement
Template entered into with Manugistics in November, 1998 (the "Agreement").
Template seeks damages of at least $1.25 million, which represents the
amount of software license fees paid by Template under the Agreement.
Manugistics has responded to the complaint and filed counterclaims against
Template including a counterclaim for recovery of approximately $600,000
for unpaid consulting services provided by Manugistics.
As previously reported in the Current Report on Form 8-K which the
Company filed with the SEC on August 17, 1999, the United States District
Court for the District of Maryland, issued an order dismissing the
previously reported class action complaint against the Company, its
chairman, and its former chief financial officer. The court dismissed the
complaint for failure to state a claim on which relief can be granted. The
plaintiffs have recently filed an appeal of the ruling, the outcome of
which is still pending.
It is not possible at this time to predict the outcome of the
arbitration or litigation or the amount or nature of any loss. Furthermore,
it is possible that these matters may be resolved adversely to the Company.
The adverse resolution of either of these proceedings could have a material
adverse effect on the Company's business, operating results, financial
condition and cash flows.
7
<PAGE>
4. Supplemental Information of Non-cash Investing and Financing Activities
Cash paid for income taxes amounted to approximately $ 60,260 and
$1,028,000 for the six months ended August 31, 1999 and 1998, respectively.
5. Comprehensive Loss
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for the reporting and display of
comprehensive loss and its components in the Company's financial
statements. SFAS No. 130 requires unrealized gains and losses on the
Company's available-for-sale securities and foreign currency translation
adjustments to be included in other comprehensive loss. The following table
sets forth the comprehensive loss for the three and six month periods ended
August 31,1999 and 1998(amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Six months ended
August 31, August 31,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss $ (3,435) $ (5,966) $ (3,046) $(14,504)
Other comprehensive loss (685) (691) (519) (818)
-------- -------- -------- --------
Total comprehensive loss $ (4,120) $ (6,657) $ (3,565) $(15,322)
======== ======== ======== ========
</TABLE>
6. Restructuring
During the second half of fiscal 1999, the Company recorded
restructuring and unusual charges primarily associated with the
implementation of the Company's restructuring plan. This plan reorganized
the Company to focus on its core business of providing supply chain
solutions to companies with dynamic supply chains, specifically those in
customer-driven industries. The table below presents the activity in the
first half of fiscal 2000 relating to the restructuring charge reserves
established in the third and fourth quarters of fiscal 1999 in connection
with the restructuring. The adjustments to the charge and utilization of
accrual amounts are consistent with the Company's estimates prepared as of
February 28, 1999. The Company believes that the reserves as of August 31,
1999 are adequate and that no revisions of estimates are necessary at this
time.
The following table sets forth restructuring activity through August
31, 1999 (amounts in thousands):
<TABLE>
<CAPTION>
Beginning Adjustments
Balance to Utilization of Accrual Ending Balance
March 1, 1999 Charge Cash Non-cash August 31, 1999
------------- ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Severance costs $ 1,152 $ 1,249 $ (1,061) $ 147 $ 1,487
Lease obligations costs 18,914 (2,053) (5,656) (83) 11,122
Impairment of long-lived assets 1,709 (94) (433) (1,029) 153
Other 152 -- (59) (81) 12
------------- ------------ ----------- ---------- ---------------
Total $ 21,927 $ (898) $ (7,209) $ (1,046) $ 12,774
============= ============ =========== ========== ==============
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Manugistics Group, Inc. (the "Company") is a leading provider of solutions
for customer-centric supply chain optimization. The Company's solutions are
comprised of software products and related services that enable clients to
improve the efficiency of the flow of materials within and between organizations
(e.g., the flow of raw materials through the manufacturing process and the
delivery of finished product to the end-user). The Company's solutions enable
its clients to create and optimize their supply chains around their customers.
With the Company's broad suite of supply chain software products, clients
can make improved operational decisions, resulting in increased revenues,
reduced inventories, improved customer service, improved relationships among
trading partners, greater speed to market, and lower overall costs throughout
the supply chain. The Company currently has clients in a broad spectrum of
industries around the world. The Company's products are primarily targeted at
companies with dynamic supply chains and, increasingly, at those that desire to
take advantage of emerging e-commerce opportunities.
The Company's integrated suite of strategic, tactical and operational
supply chain planning software products enables collaboration within and among
enterprises by addressing the four key operational areas of supply chain
planning, which are: demand planning; supply planning; manufacturing scheduling;
and transportation management. The Company's products allow its clients to
collaborate with their suppliers, their customers and other third parties.
In the second half of fiscal 1999, the Company instituted company-wide
restructuring activities that included overall cost containment initiatives as
the Company pursued its business strategies of returning to profitability,
expanding product innovation to enable companies to take advantage of e-
commerce, interface, and integration technology, and expanding its indirect
distribution channels through alliances with complementary software vendors and
consulting and implementation organizations. The Company's restructuring
included significant headcount reduction, hiring a new Chief Executive
Officer, reorganization and replacement of the Company's senior management team,
and increased investments in the Company's initiatives in e-commerce enabled
supply chain solutions. In addition, the Company experienced increased employee
attrition since the restructuring actions. During the second quarter the
attrition rate decreased to historical norms. There can be no assurances that
the Company's restructuring actions and decrease in operating expenses will be
sufficient to offset the Company's decrease in license fee revenues and return
the Company to sustainable profitability.
Results of Operations
Revenues:
The Company licenses software under non-cancelable license agreements and
provides related services, including installation, consulting, and maintenance.
License fees are generally recognized when a non-cancelable license agreement
has been signed, the software product has been shipped, there are no
uncertainties surrounding product acceptance, the fees are fixed and
determinable, no significant production, modification, or customization of the
software is required, and collection is considered probable in accordance with
Statement of Position 97-2, `Software Revenue Recognition'("SOP 97-2"). Fees are
allocated to the various elements included in license agreements based on the
Company's historical fair value experience. Fees related to consulting and
implementation services are recognized as the services are performed. When the
Company enters into a license agreement with a client that requires significant
customization, the Company recognizes revenue related to the license agreement
using contract accounting. When the company enters into an agreement with a
client to jointly fund the Company's software development, the funds received
are treated as a direct reduction of capitalized costs in accordance with SOP
97-2. The following table sets
9
<PAGE>
forth revenues for the three and six month periods ended August 31, 1999 and
1998 (amounts in thousands):
<TABLE>
<CAPTION>
Three months ended August 31, Six months ended August 31,
1999 Change 1998 1999 Change 1998
--------- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
License fees $ 10,754 (58.3%) $ 25,771 $ 23,852 (44.9%) $43,252
Percentage of total revenues 31.8% 48.7% 32.7% 46.0%
Consulting, solution support and other
services $ 23,041 (15.2%) $ 27,169 $ 49,136 (3.3%) $50,811
Percentage of total revenues 68.2% 51.3% 67.3% 54.0%
--------- --------- --------- -------
Total revenue $ 33,795 (36.2%) $ 52,940 $ 72,988 (22.4%) $94,063
Percentage of total revenues 100.0% 100.0% 100.0% 100.0%
</TABLE>
License fees. The Company's license fees consist primarily of software
license revenues from direct sales. The Company also earns license fees through
licenses to customers via indirect channels, including complementary software
vendors, consulting firms, distributors, and systems integrators.
License fees decreased for the three and six months ended August 31, 1999
as compared to 1998 because the Company experienced approximately 40% and 26%
decreases, respectively in the number of transactions closed during the periods
and approximately a 33% and 27% decrease, respectively in the average size of
transactions closed. Also, there was a reduction in the size of its direct sales
force in conjunction with its restructuring activities in the second half of
fiscal 1999, and there was increased attrition of certain key sales personnel.
Furthermore, the Company's operating results during fiscal 1999 raised concerns
with clients and prospects about the Company's financial viability, which tended
to lengthen sales cycles.
Consulting, solution support, and other services ("Services"). Services
revenues primarily consist of fees from software implementation engagements and
the related training, consulting, and solution support revenues. Revenues from
software implementation and consulting engagements are recognized as the
Services are performed and are billed on a time and materials basis. The
software implementation process typically requires two to twelve months to
complete, depending on the complexity, scope of the project, and client
resources available.
Solution support revenues are recognized ratably over the solution support
term defined in the contract. Payments for solution support fees are typically
made in advance of the support period.
Services revenue decreased for the three and six months ended August 31,
1999 as compared to 1998, primarily due to a decrease in the number of customer
implementations from fewer license fee transactions in prior periods. The
Company typically begins to recognize Services revenues in the months following
initiation of the implementation of software, which generally occurs within a
few weeks after execution of the license agreement.
Solution support revenues increased following the increase in the number of
clients that have licensed the Company's software products and entered into
annual maintenance contracts. Solution support revenues tend to track software
license fee transactions in prior periods. In the past three fiscal years,
approximately 95% of customers with maintenance contracts have renewed these
contracts.
There can be no assurance that this level of renewal will continue in the
future. See "Factors That May Affect Future Results" and "Forward-Looking
Statements."
10
<PAGE>
Operating Expenses:
General. In the second half of fiscal 1999, the Company executed company-
wide restructuring activities that included overall cost containment initiatives
as the Company pursued its business strategies of returning to profitability,
expanding product innovation to enable companies to take advantage of
e-commerce, interface, and integration technology, and expanding its indirect
distribution channels through alliances with complementary software vendors and
consulting and implementation organizations.
Due to the Company's cost containment actions, such as headcount and
occupancy reductions, expenses decreased for the three and six month periods
ended August 31, 1999 compared to the three and six months ended August 31,
1998. The following table sets forth operating expenses for the three and six
month periods ended August 31, 1999 and 1998 (amounts in thousands):
<TABLE>
<CAPTION>
Three months ended August 31, Six months ended August 31,
Operating expenses 1999 Change 1998 1999 Change 1998
------------ ---------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cost of license fees $ 3,053 (11.4%) $ 3,445 $ 5,910 (6.0%) $ 6,286
Percentage of total revenues 9.0% 6.5% 8.1% 6.7%
Cost of consulting, solution support
and other services $ 10,295 (20.0%) $ 12,867 $ 21,914 (10.6%) $ 24,514
Percentage of total revenues 30.5% 24.3% 30.0% 26.1%
Sales and marketing $ 14,299 (42.3%) $ 24,774 $ 28,138 (41.5%) $ 48,072
Percentage of total revenues 42.3% 46.8% 38.6% 51.1%
Product development $ 7,467 (46.2%) $ 13,868 $ 14,461 (43.9%) $ 25,794
Percentage of total revenues 22.1% 26.2% 19.8% 27.4%
General and administrative $ 3,900 (25.4%) $ 5,231 $ 7,840 (29.2%) $ 11,067
Percentage of total revenues 11.5% 9.9% 10.7% 11.8%
Restructuring costs $ (764) N/M $ - $ (682) N/M $ -
Percentage of total revenues N/M 0.0% N/M 0.0%
Acquisition-related expenses $ - (100.0%) $ 3,095 $ - (100.0%) $ 3,095
Percentage of total revenues 0.0% 5.8% 0.0% 3.3%
------------ ----------- ------------ -------------
Total operating expenses $ 38,250 (39.6%) $ 63,280 $ 77,581 (34.7%) $118,828
Percentage of total revenues 113.2% 119.5% 106.3% 126.4%
</TABLE>
Cost of license fees. Cost of license fees consists of amortization of
capitalized software development costs, cost of goods and other expenses, which
includes royalty fees associated with third-party software included with the
Company's licensed software, and amortization of goodwill associated with
certain acquisitions. Capitalized software development costs and acquired
research and development costs are amortized at the greater of the amount
computed using either the straight-line method over the estimated economic life
of the product, commencing with the date the product is first available for
general release, or the ratio that current gross revenues from the product bears
to the total current and anticipated future gross revenues. Generally, an
economic life of two to five years is assigned to capitalized software
development costs. Goodwill is amortized over five years.
Cost of license fees increased as a percentage of total revenues due to an
overall decrease in revenues generated for the three and six months ending
August 31, 1999 compared to the same period last year.
Cost of consulting, solution support and other services. Cost of
consulting, solution support and other services increased as a percentage of
total revenues, as a result of an overall decrease in revenues generated for the
three and six months ending August 31, 1999 compared to the same period last
year.
11
<PAGE>
Sales and marketing. Sales and marketing expenses consist primarily of
personnel costs, commissions, promotional events, and advertising. Sales and
marketing expenses decreased for the three and six months ended August 31, 1999
as a percentage of total revenues primarily due to the reduction of headcount
implemented under the Company restructuring activities during the second half of
fiscal 1999.
Product development. The Company records product development costs net of
capitalized software development costs for products that have reached
technological feasibility in accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed." The following table sets forth product
development costs for the three and six month periods ended August 31, 1999 and
1998 (amounts in thousands):
<TABLE>
<CAPTION>
Three months ended August 31, Six months ended August 31,
1999 Change 1998 1999 Change 1998
---------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gross product development costs $ 8,482 (49.0%) $ 16,636 $ 17,014 (45.0%) $ 30,921
Percentage of total revenues 25.1% 31.4% 23.3% 32.9%
Less: Capitalized product development
Cost $ 1,015 (63.3%) $ 2,768 $ 2,553 (50.2%) $ 5,127
Percentage of gross product
Development costs 12.0% 16.6% 15.0% 16.6%
---------- ----------- ----------- -----------
Product development costs $ 7,467 (46.2%) $ 13,868 $ 14,461 (43.9%) $ 25,794
Percentage of total revenues 22.1% 26.2% 19.8% 27.4%
</TABLE>
Gross product development costs and net product development costs decreased
for the three and six month periods ended August 31, 1999, versus the comparable
periods in 1998, primarily due to the reduction of headcount implemented under
the Company's restructuring plan during the second half of fiscal 1999. In
addition, the Company has focused its research and development on the further
development of existing core products.
General and administrative. General and administrative expenses consist
primarily of personnel costs, infrastructure expenses, and the fees and expenses
associated with legal, accounting, and other functions. General and
administrative expenses decreased for the three and six month periods ended
August 31, 1999, versus the comparable periods in 1998, due to the reduction of
headcount implemented under the Company's restructuring plan during the second
half of fiscal 1999 and the focus by the Company to monitor its discretionary
spending to aid in cost containment.
Restructuring costs. In connection with the corporate-wide restructuring
plan instituted during fiscal 1999, the Company reduced its previously recorded
restructuring charges by approximately $764,000 and $682,000, respectively, for
the three and six month periods ended August 31, 1999. The adjustments primarily
relate to the sub-lease of property that management had believed, at the time of
the restructuring, would not be sublet, and which adjustments were partially
offset by increases in the accrual for severance costs and impairment of long-
lived assets.
Other income - net:
The following table sets forth other income for the three and six month
periods ended August 31, 1999 and 1998 (amounts in thousands):
<TABLE>
<CAPTION>
Three months ended August 31, Six months ended August 31,
1999 Change 1998 1999 Change 1998
----------- ---------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Other income $ 517 (19.2%) $ 640 $ 874 (49.5%) $ 1,731
Percentage of total revenues 1.5% 1.2% 1.2% 1.8%
</TABLE>
Other income includes interest income from short-term investments, interest
expense from borrowings, foreign currency exchange gains or losses, and other
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<PAGE>
gains or losses. Other income decreased for the three and six months ended
August 31, 1999 primarily due to the Company's investment balances being reduced
to fund operating activities during fiscal 1999.
Benefit for income taxes:
The following table sets forth income tax benefits for the three and six
month periods ended August 31, 1999 and 1998 (amounts in thousands):
<TABLE>
<CAPTION>
Three months ended August 31, Six months ended August 31,
1999 Change 1998 1999 Change 1998
---------- ---------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Income tax benefit $ (503) (86.5%) $ (3,734) $ (673) (92.1%) $ (8,530)
Percentage of loss before
income taxes 12.8% 38.5% 18.1% 37.0%
</TABLE>
The income tax benefits for the three and six months ended August 31, 1999
were $503,000 and $673,000, respectively. The net increase is primarily from an
increase in US federal and state deferred tax assets related to depreciation and
a decrease in the deferred tax liability related to software development which
results in an income tax benefit. Management of the Company believes that in
fiscal 2000 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. The
Company's future utilization of deferred tax net operating losses may cause the
effective tax rate to differ from 39%. See "Forward-Looking Statements."
Net loss and net loss per share:
Net loss is derived by taking total revenues less total operating expenses,
determining the effect of other income-net, taking the resulting loss before
taxes and adding the income tax benefit. The following table sets forth net loss
for the three and six month periods ended August 31, 1999 and 1998(in thousands,
except per share data):
<TABLE>
<CAPTION>
Three months ended August 31, Six months ended August 31,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss $ (3,435) $ (5,966) $ (3,046) $(14,504)
Net loss per share - basic $ (0.13) $ (0.23) $ (0.11) $ (0.55)
Net loss per share - diluted $ (0.13) $ (0.23) $ (0.11) $ (0.55)
Shares used in basic computation 27,291 26,415 27,151 26,167
======== ======== ======== ========
Shares used in diluted calculation 27,291 26,415 27,151 26,167
======== ======== ======== ========
</TABLE>
Liquidity and capital resources:
The following table sets forth liquidity and capital resources as of August
31, 1999 and February 28, 1999 (amounts in thousands):
<TABLE>
<CAPTION>
As of As of
August 31, 1999 Change Februrary 28, 1999
-------------------- ---------- -------------------------
<S> <C> <C> <C>
Working capital $ 33,655 8.1% $ 31,138
Cash, cash equivalents
and marketable securities $ 46,317 6.8% $ 43,362
</TABLE>
The Company has historically financed its growth primarily through funds
generated from operations, through proceeds from offerings of capital stock, and
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<PAGE>
to a lesser extent, through short-term borrowings under a revolving credit
facility. The increase in working capital at August 31, 1999 as compared to
February 28, 1999 primarily resulted from increases in operating cash flows.
The Company's operating activities provided cash of approximately $5.1
million for the six months ended August 31, 1999. Operating cash flows increased
for the period as a result an increase in the non-cash operating expenses which
were partially offset by both the net loss for the period and the net change in
assets and liabilities.
Investing activities utilized cash of $4.8 million for the six months ended
August 31, 1999, primarily as a result of the purchase of marketable securities
and capitalization of software development costs. Financing activities provided
cash of approximately $2.2 million for the six months ended August 31, 1999,
primarily from proceeds received by the Company from the exercise of employee
stock options and purchases of stock through the employee stock purchase plan.
The Company has an unsecured revolving credit facility commitment with a
commercial bank. Under its terms, the Company may request cash advances, letters
of credit, or both in an 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 October 30, 1999, unless renewed. As of August 31, 1999, $10 million
was outstanding on the revolving credit facility, including letters of credit.
On September 1, 1999, the Company repaid $9.5 million of the $10 million
outstanding on the revolving credit facility . The remaining $500,000 represents
outstanding letters of credit. The Company currently anticipates that it will
renew or replace its existing credit facility. See "Forward Looking Statements."
For the fiscal year ended February 28, 1999, the Company incurred a loss of
approximately $96 million, which included a restructuring charge of
approximately $34 million. As noted above, the Company restructured certain of
its business operations during the second half of fiscal 1999 to reduce
operating expenses, continue its efforts to improve execution and efficiencies,
better align expenses with revenues, and enhance its sales and marketing
activities to meet the challenges of the marketplace. The Company's
restructuring activities included significant headcount reductions,
simplification and reorganization of the Company's senior management team,
hiring a new Chief Executive Officer and other members of the Executive Team,
and an increased focus on and increased investments in the Company's e-commerce
enabled supply chain solutions. The restructuring actions effected in fiscal
1999 decreased operating expenses in the three and six month periods ended
August 31, 1999 compared with the same periods in fiscal 1999. There can be no
assurances that the Company's restructuring actions and decrease in operating
expenses will be sufficient to return the Company to sustainable profitability.
The Company believes that its existing cash balances and marketable
securities, anticipated funds generated from operations, and amounts available
under its revolving credit facility and other possible sources of funding will
be sufficient to meet its anticipated liquidity and working capital requirements
in the near term. The Company anticipates, that in light of its operating
results for fiscal 1999, the cost of any additional funds which the Company
might obtain, might be greater than funds available to the Company under its
existing revolving credit facility or otherwise. In the event that the Company
requires additional financing and is unable to obtain it on terms satisfactory
to the Company, its liquidity, results of operations, and financial condition
would be materially adversely affected. The Company believes that inflation did
not have a material effect on its results of operations in fiscal 1999 or the
six month period ended August 31, 1999.
In June, 1999, the Company negotiated and executed agreements with a
developer and other parties to terminate certain obligations related to the
14
<PAGE>
development of a new office building. Under these agreements, the Company will
pay a total of approximately $3.7 million in installment payments. The Company
has made initial payments of $1.75 million and will make additional payments
through March 31, 2001. The Company believes that it will have adequate funds
available to meet the remaining payment obligations on a timely basis.
Certain information regarding commitments and contingencies, including
pending litigation, which may have an adverse impact on the Company's liquidity
and financial condition is set forth below under "Factors That May Affect Future
Results."
Year 2000 Compliance
General. Many older computer systems, software products, and embedded
microprocessor chips that are in use today were programmed to accept two digit
entries in the date code field (e.g., "98" for "1998"). These systems, software,
and embedded microprocessor chips need to be modified or upgraded to distinguish
twenty-first century dates (e.g., "2002") from twentieth century dates (e.g.,
"1902"), in order to avoid the possibility of erroneous results or systems
failures.
The Company has reviewed and continues to evaluate and update its formal
processes and procedures to address any potential Year 2000 compliance issues
relating to its corporate infrastructure and to the software products that it
licenses to clients. The Company believes that it has allocated adequate
resources for this purpose and expects its Year 2000 compliance program to be
completed by the Year 2000. While the Company believes that it has adequately
tested and modified the products it currently actively markets, the Company does
not intend to test or modify all prior versions of its software products or
certain software products that the Company plans to replace with either new
software products or Year 2000 compliant releases by the end of 1999. All
clients who have licensed the Company's software have been contacted and
strongly encouraged to upgrade to a Year 2000 compliant version of the Company
provided software. The Information Technology Association of America ("ITAA")
has recently certified the Company's software development processes as part of
the Company's comprehensive effort to address the Year 2000 issues. Contingency
plans for the various business areas of the Company are under development and
the Company believes these plans will be completed prior to the end of calendar
1999.
Corporate infrastructure state of readiness. The Company believes that its
identification of Year 2000 compliance issues is complete with respect to the
Company's internal operating systems. The infrastructure is composed of
Information Technology ("IT") systems (e.g. financial, human resources, order
entry, client support tracking, voicemail) and non-IT systems (i.e. elevators,
fire suppression systems, United Parcel Service systems). The Company has
identified those systems which are not affected and those systems which need
replacement or modification. The Company believes that all identified systems
that are at risk will be made Year 2000 compliant or be replaced before December
31, 1999 and that its business critical systems that have date sensitivity will
be fixed, tested, and in place before the year 2000. The Company believes that
it has communicated with all its material vendors, suppliers, landlords, and
other third parties regarding Year 2000 compliance of embedded processors in
computers, facilities, software, other information technology, and other
products and services which the Company obtains from such third parties. The
Company anticipates that affected embedded processors will be replaced before
the year 2000. Most of the Company's landlords have provided guarantees of Year
2000 compliance or descriptions of the work being performed to achieve
compliance with their facilities and operations. Although the Company has
completed its assessment of the Year 2000 compliance issues with respect to the
products, facilities, and services which it obtains from third parties, the
Company continues to monitor and assess Year 2000 issues relating to such
products, facilities, and services.
The Company has tested all business critical systems for Year 2000
compliance, whether or not these systems have been warranted Year 2000 compliant
by the manufacturer. The testing environment has been established and test
15
<PAGE>
development is ongoing. Test execution began at the end of October 1998 and
finished, for business critical systems, at the end of February 1999. The
Company is in the process of making required modifications to the IT and non-IT
systems within the corporate infrastructure. The Company anticipates these
modifications will be validated by the end of calendar fourth quarter 1999, and
fully implemented before the year 2000. Contingency plans for the various
business areas of the Company are under development and the Company believes
these plans will be completed prior to the end of calendar 1999.
Products. The Company has tested the products it actively markets in
environments containing third-party software and tools used in the production of
and embedded in the Company's solutions, along with supported relational
databases, and believes the software currently marketed by the Company to be
Year 2000 compliant. The Company, however, can make no assurances that those
third-party platforms will not experience issues related to the Year 2000.
Costs. The Company has expensed approximately $448,000 through August
31, 1999 in its Year 2000 compliance program, mainly for consulting services and
hardware costs. Approximately sixty percent (60%) of the costs were for
modification and replacement, approximately twenty-seven percent (27%) were for
testing, and approximately thirteen percent (13%) of the costs were for
identification and assessment of the Year 2000 issue. The Company currently
estimates that it will cost an additional $200,000, budgeted under its IT and
product development functions, prior to January 1, 2000, to modify its internal
information systems, other systems, and internally developed software products
affected by the Year 2000 issue; the portion of this amount attributable to
fiscal 2000 constitutes approximately two percent (2%) of the IT budget for
fiscal 2000. The Company estimates that of the remaining costs to be spent on
the Company's Year 2000 readiness program, eighty percent (80%) will be for
modification and replacement and twenty percent (20%) will be for testing. The
Company does not separately track the internal costs for its Year 2000
compliance project; such costs consist principally of the related payroll costs
for its employees working on the project, costs for outside consulting services
and hardware costs. See "Forward Looking Statements" below.
Risks. Software products as complex as those offered by the Company might
contain undetected errors or failures when first introduced or when new versions
are released. This includes the risk that products thought to be Year 2000
compliant are not Year 2000 compliant. While the Company believes that it has
adequately assessed, corrected, and tested its products to address the Year 2000
issue, there can be no assurances that the Company's software products contain
or will contain all necessary date code changes or that errors will not be found
in new products or product enhancements after commercial release, which could
result in loss of or delay in market acceptance or potential liability to our
client or other third parties. In addition, the Company might experience
unforeseen difficulties that could delay or prevent the continued successful
development and release of products that are Year 2000 compliant. If the Company
experiences any unforeseen delays or the Company's efforts to make the date code
changes necessary in order to achieve Year 2000 compliance of its products are
delayed, there could be a material adverse effect upon the Company's business,
operating results, financial condition, and cash flows.
The Company utilizes third-party vendor equipment, telecommunications
products, and software products. The Company is currently taking steps to
address the impact, if any, of the Year 2000 compliance issue surrounding such
third-party products. The Company has been communicating with such third parties
about their plans and progress in addressing the Year 2000 problem, and the
Company has requested assurances that equipment, products, and services provided
by such third parties will be Year 2000 compliant. The Company has received the
necessary assurances from the third-party vendors and continues to monitor
activity. However, such third parties' Year 2000 compliance efforts are not
within the control of the Company. In the event that such additional assurances
are not timely received, the Company will switch to another vendor or take such
16
<PAGE>
other action as the Company shall then deem appropriate. The failure of any
critical technology components to operate properly may have a material impact on
business operations or require the Company to incur unanticipated expenses to
remedy any problems.
There are substantial operational risks beyond the Company's control,
including the risk that vital services provided by utilities and governmental
agencies will be interrupted. It is possible that interruptions in vital
services in late calendar year 1999 and early calendar year 2000 will interfere
with normal business operations, and that such failures could materially and
adversely affect the Company's results of operations, financial condition and
cash flows.
Many companies, including the Company's clients and prospects, might need
to modify or upgrade their information systems to address this Year 2000 issue.
The effects of this issue and of the efforts by companies to address it are
unclear. The Company believes that Year 2000 issues might have affected the
purchasing patterns of clients and prospective clients. Many companies are
allocating significant resources to attain Year 2000 compliance. These
allocations might have resulted in reduced resources available to license
software products and utilize the implementation services such as those offered
by the Company. Additionally, Year 2000 issues inherent in a client's other
software programs might significantly limit that client's ability to realize the
intended benefits to be derived from the Company's supply chain planning
software. Due to the general uncertainty inherent in the Year 2000 issues
resulting, in part, from the possible risks described above, the consequences of
the Year 2000 failures will potentially have a material impact on the Company's
operating results, financial condition, and cash flows.
Factors That May Affect Future Results
In addition to the other information in this Quarterly Report on Form 10-Q,
the following factors should be considered in evaluating the Company and its
business. The Company's operating results have varied in the past and might vary
significantly in the future because of factors such as domestic and
international business conditions or the general economy, the timely
availability and acceptance of the Company's products, technological change,
issues with the Year 2000 problem faced by clients and prospects, the effect of
competitive products and pricing, the effects of marketing pronouncements by
competitors or potential competitors, changes in the Company's strategy, the mix
of direct and indirect sales, changes in operating expenses, personnel changes,
and foreign currency exchange rate fluctuations. Furthermore, clients may defer
or cancel their purchases of the Company's products if they experience a
downturn in their business or if there is a downturn in the general economy. The
discussion below addresses risk factors that have arisen or changed in the
second quarter. For a more thorough discussion of these and other factors that
may affect our business and future results, see the discussion under the caption
"Factors That May Affect Future Results" in the Company's Annual Report on Form
10-K filed June 16, 1999.
Year 2000 Issues
A discussion of certain risks relating to Year 2000 issues is set forth
above in Item 2 under "Year 2000 Compliance."
Recent Senior Management Changes
As previously reported, commencing in the first quarter of fiscal 2000, the
Company has experienced significant changes in its senior management team in the
quarter. During the second quarter the Company hired Terrence A. Austin as
Executive Vice President, Electronics and High Technology, Richard F. Bergmann
as Executive Vice President, Global Sales and Services, and James J. Jeter as
Senior Vice President of Marketing. The Company anticipates that it will attract
additional senior management in the near future. During the second quarter Peter
Q. Repetti, resigned the offices of Chief Financial Officer and Senior Vice
17
<PAGE>
President. The Company is actively recruiting a new Chief Financial Officer.
Mary Lou Fox, resigned the office of Senior Vice President. In addition, the
Company is actively recruiting for an executive to head its North American
direct sales organization.
The Company's success depends on the ability of its new management team to
work together and lead the Company effectively. The Company's business, revenues
and financial condition will be materially adversely affected if its new senior
management team does not manage the Company effectively or if it is unable to
attract additional senior management in a timely manner or retain existing
senior management personnel.
Dependence Upon Key Personnel
The loss of the services of one or more of the Company's executive officers
could have a material adverse effect on the Company's business, operating
results, cash flows, and financial condition. The Company does not have
employment contracts which provide for a term of employment with any of its
executive officers, other than its Chief Executive Officer and President,
Gregory J. Owens. There can be no assurance that the Company will be able to
retain its key personnel.
The Company's future success also depends on its continuing ability to
attract, assimilate, and retain highly qualified sales, technical, and
managerial personnel. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to attract, assimilate, or retain
such personnel in the future. In addition, in the event the Company's financial
performance should again result in a reduction in the Company's stock price it
could reduce, postpone or eliminate the potential financial benefit of stock
options granted to employees. The Company has experienced an increased rate of
attrition in its employee base in the past year, including the loss of certain
key sales personnel. If the Company continues to lose talented personnel in
key positions and is unable to replace such personnel in a timely manner, the
Company's business, operating results, and financial condition could be
adversely affected.
Forward-Looking Statements
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of this Quarterly Report on Form 10-Q contains
certain forward-looking statements that are subject to a number of risks and
uncertainties. In addition, the Company may publish forward-looking statements
from time to time relating to such matters as anticipated financial performance,
business prospects and strategies, sales and marketing efforts, technological
developments, new products, research and development activities, consulting
services, employee recruiting and retention efforts and similar matters. The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated results
or other expectations expressed in the Company's forward-looking statements in
this Quarterly Report or elsewhere. The risks and uncertainties that may affect
the business, operating results or financial condition of the Company include
those set forth above under "Factors That May Affect Future Results" and the
following:
Revenues for any period depend on the number, size, and timing of license
agreements. The number, size, and timing of license agreements depends in part
on the ability of the Company to hire and thereafter to train, integrate, and
deploy its sales force effectively. The size and timing of license agreements is
difficult to forecast because software sales cycles are affected by the nature
of the transactions, including the breadth of the solution to be licensed and
the organizational and geographic scope of the licenses. In addition, the
number, size, and timing of license agreements also may be affected by certain
external factors such as general domestic and international business or economic
18
<PAGE>
conditions, including the effects of such conditions on the Company's customers
and prospects, or competitors' actions. A small variation in the timing of
software licensing transactions, particularly near the end of any quarter or
year, can cause significant variations in software product license revenues in
any period.
The Company believes that the market for supply chain planning software
continues to expand, although more slowly than in prior periods. However, if
market demand for the Company's products does not manifest itself or grow as
rapidly as the Company expects, revenue growth, margins, or both could be
adversely affected. If competitors make acquisitions of other competitors or
establish cooperative relationships among themselves or with third parties to
enhance the ability of their products to address the supply chain planning needs
of prospects and customers, or if ERP or other software vendors that have
announced plans to develop or incorporate functionality that could compete with
the Company's products successfully develop and market such functionality,
revenue growth could be adversely affected.
There can be no assurance that the Company will be able to attract
complementary software vendors, consulting firms, or other organizations that
will be able to market the Company's products effectively or that will be
qualified to provide timely and cost-effective customer support and services. In
addition, there can be no assurance that a sufficient number of organizations
will continue their involvement with the Company and its products, and the loss
of current relationships with important organizations could materially adversely
affect the Company's results of operations.
Statements regarding the Company's or management's beliefs or estimates as
to the adequacy and effectiveness of the Company's Year 2000 efforts, when the
various phases or components of its Year 2000 efforts will be completed, and the
costs of such efforts, are based upon management's best estimates, which were
derived using certain assumptions, including the continued availability of
resources, adequacy and timeliness of third party modification or replacement
plans and other factors. Specific factors that might cause differences between
the estimates and actual results include, but are not limited to, the
availability and cost of personnel trained in these areas, the ability to locate
and correct all relevant computer code, timely responses to and corrections by
suppliers and other third parties, the ability to implement interfaces between
the new systems and the systems not being replaced and other similar
uncertainties. Due to the general uncertainty inherent in the Year 2000 problem
resulting from the possible risks described in "Year 2000 Compliance" above,
there can be no assurance that the Company will be able to timely and
cost-effectively resolve problems associated with the Year 2000 issue that may
affect its operations and business or expose it to third party liability.
19
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency. In the three and six months ended August 31, 1999, the
Company generated approximately 36% and 33%, respectively, of its revenues
outside the United States and Canada. International sales usually are made by
the Company's foreign subsidiaries in the local currencies and the expenses
incurred by foreign subsidiaries are denominated in the local currencies.
In certain circumstances, the Company enters into foreign currency
contracts with banking institutions to protect large foreign currency
receivables against currency fluctuations. When the foreign currency receivable
is collected, the contract is liquidated and the foreign currency receivable is
converted to U.S. dollars.
Interest rates. The Company manages its interest rate risk by maintaining
an investment portfolio of available-for-sale instruments with high credit
quality and relatively short average maturities. These instruments include, but
are not limited to, money-market instruments, bank time deposits, and taxable
and tax-advantaged variable rate and fixed rate obligations of corporations,
municipalities, and national, state and local government agencies, in accordance
with an investment policy approved by the Company's Board of Directors. These
instruments are denominated in U.S. dollars. The fair value of securities held
at August 31, 1999 were approximately $ 23.9 million.
The Company also holds cash balances in accounts with commercial banks in
the United States and foreign countries. These cash balances represent operating
balances only and are invested in short-term time deposits of the local bank.
Such operating cash balances held at banks outside the United States are
denominated in the local currency.
Many of the Company's investments carry a degree of interest rate risk.
When interest rates fall, the Company's income from investments in variable-rate
securities decline. When interest rates rise, the fair market value of the
Company's investments in fixed-rate securities declines. The Company attempts to
mitigate risk by holding fixed-rate securities to maturity, should its liquidity
needs force it to sell fixed-rate securities prior to maturity, the Company may
experience a loss of principal.
20
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, the Company is a party to legal
proceedings and claims. In addition, from time to time, the Company may have
contractual disagreements with certain clients 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 would not be likely to have a material adverse effect on the
financial position of the Company.
On March 7, 1997, the Company, as part of the acquisition of certain assets
of Information Resources, Inc. ("IRI"), entered into several agreements with
IRI, including a Data Marketing and Guaranteed Revenue Agreement ("Agreement")
and an Asset Purchase Agreement ("Purchase Agreement"). The Agreement set forth
the obligations of the parties with regard to revenues to be paid to IRI from
the sale by the Company of specified products provided by IRI. Under the terms
of the Agreement, the Company guaranteed revenue to IRI in a total amount of
$16.5 million over a period of years following execution of the Agreement by way
of three separate revenue streams. The Company made an initial payment of
approximately $500,000 to IRI. In addition, as part of its commitment, the
Company agreed to guarantee revenues to IRI in a total amount of $12 million
over an initial three year period from execution of the agreement ("First
Revenue Stream").
The Company asserted that its ability to market the IRI products has been
impaired, which, under the terms of the Agreement, obligates the parties to
restructure the payments and/or modify the obligations with regard to the First
Revenue Stream. IRI responded, disagreeing that an impairment existed, and in
the alternative, that any impairment was corrected. The parties discussed their
disagreement over the impairment issue until IRI filed a complaint in the
Circuit Court of Cook County,Illinois on January 15, 1999. The complaint alleged
breach of the Agreement and initially sought damages of approximately
$12,000,000 for the Company's failure to make guaranteed payments. The complaint
also alleged a breach of a separate Non-Competition and Non-Solicitation
Agreement executed at the same time as the Agreement, and sought damages in an
amount in excess of $100,000. The Company filed a Motion to Stay Proceedings and
Compel Arbitration, which was granted as to the claim under the Agreement and
denied as to the claim under the Non-Competition and Non-Solicitation Agreement.
Arbitration proceedings have commenced under the auspice of the American
Arbitration Association. Both the Cook County action and the arbitration
proceeding are in the early stages. In the arbitration, IRI seeks a total of
$15,930,563 in damages. The amount now sought by IRI includes amounts which it
claims are due under a second revenue stream under the Agreement, triggered by
the resolution of IRI's lawsuit with Think Systems Corporation. The second
revenue stream represents a total guaranteed revenue of $1.75 million for the
first and second year following the Think Systems settlement and $2.25 million
for the third year following the settlement. The Company contends that the
conditions to these amounts becoming due under the second revenue stream have
not been satisfied, and that no amounts are due to IRI, because, among other
reasons, of a failure of consideration in the overall transaction
On July 15, 1999, Template Software, Inc. ("Template") filed suit against
Manugistics, Inc. ("Manugistics"), the Company's principal subsidiary, in the
United States District Court for the Eastern District of Virginia, Alexandria
Division, alleging that Manugistics provided software that did not satisfy the
requirements of a software license agreement Template entered into with
Manugistics in November, 1998 (the "Agreement"). Template seeks damages of at
least $1.25 million, which represents the amount of software license fees paid
by Template under the Agreement. Manugistics has responded to the complaint and
filed counterclaims against Template including a counterclaim for recovery of
approximately $600,000 for unpaid consulting services provided by Manugistics.
As previously reported in the Current Report on Form 8-K which the Company
filed with the SEC on August 17, 1999, the United States District Court for the
District of Maryland, issued an order dismissing the previously reported class
action complaint against the Company, its chairman, and its former chief
financial officer. The court dismissed the complaint for failure to state a
claim on which relief can be granted. The plaintiffs have recently filed an
appeal of the ruling, the outcome of which is still pending.
21
<PAGE>
The ultimate outcome of these lawsuits, as with litigation generally, is
inherently uncertain, and it is possible that these matters may be resolved
adversely to the Company. The adverse resolution of these lawsuits could have a
material adverse effect on the Company's business, operating results, financial
condition and cash flows.
Item 4. Submission of Matters to Vote of Security Holders
On July 23, 1999, the Company held its 1999 Annual Meeting Shareholders
(the "Annual Meeting"). At the meeting, the shareholders elected as Class III
directors Jack A. Arnow (with 21,850,730 affirmative votes and 1,356,059 votes
withheld), Lynn C. Fritz (with 21,859,048 affirmative votes and 1,347,741 votes
withheld), and J. Michael Cline (with 21,862,628 affirmative votes and 1,344,161
votes withheld).
In addition, the shareholders approved an amendment to the Company's 1998
Stock option Plan to increase the number of shares of Common Stock authorized to
be issued thereunder by 3,000,000 to 5,237,900 shares (with 9,731,920
affirmative votes, 3,216,329 against, 52,433 abstentions, and 10,206,107 non-
votes).
The shareholders also approved an amendment to the Company's 1998 Stock
Option Plan to increase the number of shares of Common Stock for which options
may be issued to any employee in any calendar year under the Plan from 250,000
to 1,000,000 shares (with 21,687,556 affirmative votes, 1,465,469 against,
53,764 abstentions).
22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.34 Employment Agreement dated June 3, 1999 between Manugistics,
Inc. and Richard F. Bergmann, as amended.
10.35 Employment Agreement dated June 7, 1999 between Manugistics,
Inc. and Terrence A. Austin, as amended.
10.36 Employment Agreement dated August 25, 1999 between Manugistics,
Inc. and James J. Jeter.
10.37 Termination of Employment Agreement dated July 23, 1999, between
Manugistics, Inc. and Peter Q. Repetti.
10.38 Termination of Employment Agreement dated August 25, 1999
between Manugistics, Inc. and Mary Lou Fox.
27 Financial Data Schedule
(b) Reports on Form 8-K
1. On August 17, 1999 the Company filed a Current Report on Form 8-K
following its issuance of a press release on August 17, 1999 announcing that the
United States District Court for the district of Maryland issued an order
dismissing the previously reported class action complaint against the Company,
its chairman, and its former chief financial officer.
----------------------
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Manugistics Group, Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MANUGISTICS GROUP, INC.
(Registrant)
Date: October 14, 1999 By: /s/ Gregory J. Owens
-----------------------------------
Gregory J. Owens
President, Chief Executive Officer
Acting Principal Accounting Officer
24
<PAGE>
June 3, 1999 [LOGO OF MANUGISTICS APPEARS HERE]
EXHIBIT 10.34
Mr. Rich Bergmann
16 Olympic Oaks Drive
Lafayette, California 94956
Dear Rich,
On behalf of Manugistics, Inc., as well as its parent company, Manugistics
Group, Inc., and the Board of Directors of both, we are very pleased to confirm
our verbal offer for the position of Executive Vice President as of June 16,
1999. This position reports to the President and CEO of Manugistics.
Cash Compensation. In this position, your annual base salary is $250,000. In
addition, you are eligible to receive an annual incentive bonus of up to 100% of
your annual base salary. The incentive bonus is payable as follows: 50% based on
the financial performance of the Company and 50% based upon management
objectives. The bonuses will be payable under the plan submitted by you within
the first ninety (90) days of your employment and approved by the President and
CEO. During the first twelve (12) months of your employment with the Company,
you will earn a minimum of fifty percent (50 %) of the bonuses, payable to you
on a quarterly basis.
Sales Incentive. In addition to the foregoing, Manugistics will pay you an
additional quarterly bonus (annualized at $250,000 per year) based on
significant participation in revenue generation as follows;
Quarter 2 $2.5 million in revenue to Manugistics = a bonus of $62,500
Quarter 3 $2.5 million in revenue to Manugistics = a bonus of $62,500
Quarter 4 $2.5 million in revenue to Manugistics = a bonus of $62,500
[LETTERHEAD APPEARS HERE]
<PAGE>
Mr. Rich Bergmann
June 3, 1999
Page Two
Stock Options. We are also pleased to offer you a stock option package as
follows:
An option, granted as of your date of hire, to purchase 400,000 shares of
Manugistics Group, Inc. common stock ("Manugistics Stock") in accordance with
the Manugistics 1998 Stock Option Plan. The vesting period for the stock options
under this first option shall commence on the date of grant and vest over a four
(4) year period, in equal monthly increments.
Additional Stock Award. In addition, you will receive an option to purchase
additional shares of Manugistics Stock as follows:
. If the revenue for FY00 increases by 15% over FY99, you will have the
option to purchase an additional 30,000 shares of Manugistics Stock at a
price equal to the average of the high and low prices of the Manugistics
Stock on the last day of the fiscal year;
. If Manugistics Stock price reaches $20/share, you will have the option to
purchase 30,000 shares on the last day of the fifteen (15) day period
during which the stock maintains a closing price of at least $20/share;
. If the revenue for FY01 increases by 25% over FY00, you have the option to
purchase an additional 30,000 shares of Manugistics Stock at a price equal
to the average of the high and low prices of the Manugistics Stock on the
last day of the fiscal year.
Benefits. Effective on your first day of employment and as a key executive in
the Company, you will be eligible for the comprehensive Manugistics benefits
program in accordance with the Company's written plans and which includes:
. Stock Options -- as set forth above
. Employee Stock Purchase Plan
. 401 (k) Retirement Plan
. Comprehensive Medical Care
. Dental Care
. Employee Vision Care
. Life Insurance
. Accidental Death and Dismemberment Insurance
. Long-Term Disability
<PAGE>
Mr. Rich Bergmann
June 3, 1999
Page Three
Termination. If the Company terminates your employment for reasons other than
cause, you will receive your base salary and benefits in accordance with the
Company's payroll practices during the six (6) month period commencing on your
termination date ("severance period"). The foregoing salary and benefits
payments will cease if you secure alternative employment during the severance
period. In addition, if the Company terminates your employment for reasons other
than cause, the Company will continue the monthly vesting of the options granted
to you pursuant to this letter for a period of six (6) months following your
termination date.
Change of Control. In the event that the Company has a change of control, which
is defined as fifty one percent (51%) of the Company's voting stock having a
change in ownership: (a) if your responsibilities are not affected, fifty
percent (50%) of your outstanding options set out above shall immediately vest
(b) if your responsibilities are significantly diminished or you are
constructively terminated. i.e., your responsibilities no longer consist of
those reasonably associated with the position of an Executive Vice President one
hundred percent (100%) of the outstanding options set out above shall
immediately vest.
Final Determination by Board. All compensation and benefits included as part of
this offer will conform to the Company's standard policies, practices and plans.
In the event of any question with regard to the compensation and benefits
described in this letter, the Compensation Committee of the Board of Directors
will make the final determination with regard to any interpretation relating to
the elements of your compensation package.
In keeping with Manugistics policy, all offers are contingent upon execution of
Manugistics, Inc.'s Conditions of Employment.
<PAGE>
Mr. Rich Bergmann
June 3, 1999
Page Four
Please signify your acceptance of this offer by signing and dating this letter.
We look forward to your joining Manugistics as an Executive Vice President and
we are confident that the association will be mutually rewarding.
Sincerely,
/s/ Gregory J. Owens
Gregory J. Owens
Accepted by Rich Bergmann
/s/ Rich Bergmann
<PAGE>
[LOGO OF MANUGISTICS(R) APPEARS HERE]
June 3, 1999
EXHIBIT 10.35
Mr. Terry Austin
2180 Bay Hill Court
Half Moon Bay, California 94019
Dear Terry,
On behalf of Manugistics, Inc., as well as its parent company, Manugistics
Group, Inc., and the Board of Directors of both, we are very pleased to confirm
our verbal offer for the position of Executive Vice President as of June 16,
1999 reporting to the President and CEO and serving as a member of the executive
committee.
Cash Compensation. As Executive Vice President, your annual base salary is
$200,000 payable semi-monthly. In addition, you are eligible to receive an
annual incentive bonus of up to 100% of your annual base salary payable
quarterly. The incentive bonus is payable as follows: 50% based on the financial
performance of the Company which will be defined by the Executive Committee and
approved by the Board and 50% based upon management objectives. The management
objectives based bonuses will be payable under the plan submitted by you within
the first ninety (90) days of your employment and approved by the President and
CEO. During the first twelve (12) months of your employment with the Company,
you will earn a minimum of fifty percent (50%) of the bonuses, payable to you on
a quarterly basis. In addition, a one-time signing bonus of $25,000 will be paid
to you in the first pay period after your start date.
Sales Incentive. In addition to the foregoing, Manugistics will pay you an
additional quarterly bonus (annualized at $200,000 per year) based on
significant participation in revenue generation as follows:
Quarter 2 $2.5 million in revenue to Manugistics = a bonus of $50,000
Quarter 3 $2.5 million in revenue to Manugistics = a bonus of $50,000
Quarter 4 $2.5 million in revenue to Manugistics = a bonus of $50,000
[LETTERHEAD APPEARS HERE]
<PAGE>
Mr. Terry Austin
June 3, 1999
Page Two
Your base cash compensation, variable cash compensation and sales incentives
will be reviewed and adjusted at the end of FY00 and on an annual basis
thereafter based on your job performance and Manugistics' performance.
Stock Options. We are also pleased to offer you a Stock Option package as
follows:
An option, granted as of your date of hire, to purchase 240,000 shares of
Manugistics Group, Inc. common stock ("Manugistics Stock") in accordance with
the Manugistics 1998 Stock Option Plan. The vesting period for the stock options
under this first option shall commence on the date of grant and vest over a four
(4) year period, in equal monthly increments.
Additional Stock Award. In addition, you will receive an option to purchase
additional shares of Manugistics Stock as follows:
. If the revenue for FY00 increases by 15% over FY99, you have the option to
purchase a minimum of 30,000 shares of Manugistics Stock at a price equal
to the average of the high and low prices of Manugistics Stock on the last
day of the fiscal year.
. If the revenue for FY01 increases by 25% over FY00, you have the option to
purchase a minimum of 30,000 shares of Manugistics Stock at a price equal
to the average of the high and low prices of Manugistics Stock on the last
day of the fiscal year.
Benefits. Effective on your first day of employment and as a key executive in
the Company, you shall receive the comprehensive Manugistics benefits program in
accordance with the Company's written plans and which includes:
. Stock Options -- as set forth above
. Employee Stock Purchase Plan
. 401 (k) Retirement Plan
. Comprehensive Medical Care
<PAGE>
Mr. Terry Austin
June 3, 1999
Page Three
. Dental Care
. Employee Vision Care
. Life Insurance
. Accidental Death and Dismemberment Insurance
. Long-Term Disability
Termination. If the Company terminates your employment for reasons other than
cause, you will receive your base salary, corresponding management objectives
bonus, and benefits in accordance with the Company's payroll practices for the
equivalent of a six (6) month period commencing on your termination date
("severance period"). Your base salary and corresponding management objectives
bonus will be paid in one lump sum immediately. The foregoing benefits payments
will cease if you secure alternative employment during the severance period. In
addition, if the Company terminates your employment for reasons other than
cause, the Company will continue the monthly vesting of the options granted to
you pursuant to this letter for a period of six (6) months following your
termination date.
Change of Job Status. If the company changes your job status such that you no
longer report directly to the President, are no longer a member of the Executive
staff, or in any way changes your responsibilities such that they no longer
consist of those reasonably associated with the position of Executive Vice
President, you will have the option of terminating your employment and receiving
the same severance benefits as those set out in the termination section above.
Change of Control. In the event that the Company has a change of control, which
is defined as fifty one percent (51%) of the Company's voting stock having a
change in ownership: (a) if your responsibilities are not affected, fifty
percent (50%) of your outstanding options set out above shall immediately vest;
(b) if your responsibilities are significantly diminished or you are
constructively terminated, i.e., your responsibilities no longer consist of
those reasonably associated with the position of Executive Vice President one
hundred percent (100%) of the outstanding options set out above shall
immediately vest.
<PAGE>
Mr. Terry Austin
June 3, 1999
Page Four
Final Determination by Board. All compensation and benefits included as part of
this offer will conform to the Company's standard policies, practices and plans.
In the event of any question with regard to the compensation and benefits
described in this letter, the Compensation Committee of the Board of Directors
will make the final determination with regard to any interpretation relating to
the elements of your compensation package.
In keeping with Manugistics policy, all offers are contingent upon execution of
Manugistics, Inc.'s Conditions of Employment.
Arbitration. In the event of a dispute concerning the terms and conditions of
employment, the parties agree to binding arbitration by and under the rules of
the American Arbitration Association, and each party shall pay its own fees and
expenses.
Please signify your acceptance of this offer by signing and dating this letter.
We look forward to your joining Manugistics as Executive Vice President and we
are confident that the association will be mutually rewarding.
Sincerely,
/s/ Gregory J. Owens
Gregory J. Owens
Accepted by Terry Austin
/s/ Terry A. Austin 6/7/99
- ------------------------------
<PAGE>
[LOGO OF MANUGISTICS(R) APPEARS HERE]
July 22, 1 999
EXHIBIT 10.36
Mr. James J. Jeter
17 Rte. de Thonon
1222 Vesenaz
Switzerland
Dear Jeff,
On behalf of Manugistics, Inc., as well as its parent company, Manugistics
Group, Inc., and the Board of Directors of both, we are very pleased to confirm
our verbal offer for the position of Senior Vice President of Marketing as of
Aug 16, 1999. This position reports to the President and CEO of Manugistics.
Cash Compensation. In this position, your annual base salary is $210,000. In
addition, you are eligible to receive an annual incentive bonus of up to 60% of
your annual base salary. The incentive bonus is payable as follows 50% based
on the financial performance of the Company and 50% based upon management
objectives. The bonuses will be payable under the plan submitted by you within
the first ninety (90) days of your employment and approved by the President and
CEO. During the first twelve (12) months of your employment with the Company,
you will earn a minimum of fifty percent (50%) of the bonuses, payable to you on
a quarterly basis.
Stock Options. We are also pleased to offer you a stock option package as
follows:
An option, granted as of your date of hire, to purchase 160,000 shares of
Manugistics Group, Inc. common stock ("Manugistics Stock") in accordance with
the Manugistics 1998 Stock Option Plan.
[LETTERHEAD APPEARS HERE]
<PAGE>
Mr. James J. Jeter
July 22, 1999
Page Two
The vesting period for the stock options under this first option shall commence
on the date of grant and vest over a four (4) year period, in equal monthly
increments.
Additional Stock Award. In addition, you will receive an option to purchase
additional shares of Manugistics Stock as follows:
. If Manugistics Stock price reaches $30/share, you will have the option to
purchase 10,000 shares on the last day of the fifteen (15) day period
during which the stock maintains a closing price of at least $30/share;
Benefits. Effective on your first day of employment and as a key executive in
the Company, you will be eligible for the comprehensive Manugistics benefits
program in accordance with the Company's written plans and which includes:
. Stock Options -- as set forth above
. Employee Stock Purchase Plan
. 401(k) Retirement Plan
. Comprehensive Medical Care
. Dental Care
. Employee Vision Care
. Life Insurance
. Accidental Death and Dismemberment Insurance
. Long Term Disability
Relocation. You are also eligible to receive relocation benefits. Please refer
to the attached Manugistics Relocation Expense Reimbursement Agreement and
Relocation Policy. The details of your relocation package will be agreed upon by
you and the President and CEO.
<PAGE>
Mr. James J. Jeter
July 22, 1999
Page Three
Termination. If the Company terminates your employment for reasons other than
cause, you will receive your base salary and benefits in accordance with the
Company's payroll practices during the six (6) month period commencing on your
termination date ("severance period"). The foregoing salary and benefits
payments will cease if you secure alternative employment during the severance
period. In addition, if the Company terminates your employment for reasons other
than cause, the Company will continue the monthly vesting of the options granted
to you pursuant to this letter for a period of six (6) months following your
termination date.
Change of Control. In the event that the Company has a change of control, which
is defined as fifty one percent (51%) of the Company's voting stock having a
change in ownership: (a) if your responsibilities are not affected, fifty
percent (50%) of your outstanding options set out above shall immediately vest;
(b) if your responsibilities are significantly diminished or you are
constructively terminated, i.e., your responsibilities no longer consist of
those reasonably associated with the position of a Senior Vice President, one
hundred percent (100%) of the outstanding options set out above shall
immediately vest.
Final Determination by Board. All compensation and benefits included as part of
this offer will conform to the Company's standard policies, practices and plans.
In the event of any question with regard to the compensation and benefits
described in this letter, the Compensation Committee of the Board of Directors
will make the final determination with regard to any interpretation relating to
the elements of your compensation package.
In keeping with Manugistics policy, all offers are contingent upon execution of
Manugistics, Inc.'s Conditions of Employment.
<PAGE>
Mr. James J. Jeter
July 22, 1999
Page Four
Please signify your acceptance of this offer by signing and dating this letter.
We look forward to your joining Manugistics as a Senior Vice President and we
are confident that the association will be mutually rewarding.
Sincerely,
/s/ Gregory J. Owens
Gregory J. Owens
Accepted by James J. Jeter
/s/ James J. Jeter, Aug 1, 1999
- --------------------------------
<PAGE>
EXHIBIT 10.37
Manugistics, Inc.
2115 E. Jefferson Street
Rockville, Maryland 20852
TERMINATION OF EMPLOYMENT AGREEMENT
Date Presented: July 20, 1999
This Termination of Employment Agreement ("Agreement") is entered into by
Manugistics, Inc. ("Manugistics") and Pete Repetti ("you") who has been employed
since October, 1994. Both you and Manugistics agree to set forth the terms and
conditions upon which the employment relationship is to be terminated. You also
agree that you have received valuable and sufficient consideration for entering
into this Agreement. Any payment made by Manugistics after your last day worked
will only be made after there has been a signed agreement between the parties.
The parties agree to the following terms:
1. Termination Date.
Your Severance Period will begin on September 1, 1999 and continue through
April 30, 2000. You will not be required to perform company work during
your Severance Period except as otherwise noted in this Agreement. You will
receive your current base pay and benefits during the period September 1,
1999 through December 31, 1999, a period of eighteen (18) weeks. You will
receive Severance pay during this eighteen (18) week period even if you
should secure employment with another employer.
Your termination of employment from Manugistics will be effective as of
close of business on your Termination Date, April 30, 2000 and you will
vest stock options through this date.
1a. Extension of Severance Period with Pay and Benefits.
In the event you have not begun full time professional employment with
another employer by December 31, 1999, your severance pay and benefits
will be continued through April 30, 2000, or until professional employment
begins with another employer, whichever occurs first, provided you have
made a good faith effort to secure such employment. Occasional "spot"
consulting assignments will not be considered as employment.
lb. Supplemental Severance Payments
Immediately following the last payment made to you under paragraph 1 and
la., you will be paid an additional $58,500. Such payout will be made at
$6,500, per pay period for nine (9) successive pay periods. Payments will
be made through Manugistics payroll system and will be reduced by statutory
tax deductions. You will receive company paid benefits during this period
in the event you remain unemployed. You will not vest stock options beyond
April 30, 2000. You will be required to exercise any vested stock options
that may be due you within thirty (30) days following the last day of pay
as defined by this paragraph.
2. Reason for Termination.
It is mutually agreed by the parties that you have resigned your employment
with Manugistics in order to secure employment that is more aligned with
your career objectives. Effective close of business, August 31, 1999, or
sooner if directed by the CEO, you will discontinue your official duties
and responsibilities as Sr. Vice President, CFO, member of EXEC and other
offices held with Manugistics. If the employee and Manugistics mutually
agree to extend the last day of work
<PAGE>
beyond August 31, 1999, then all terms and dates of this Agreement will be
similarly extended by the same period of time. Announcement of your
resignation from Manugistics will be at a time and in manner agreeable to
the parties.
3. Severance Pay.
a. Severance paychecks will be issued according to Manugistics' regular
payroll procedures. As part of severance payment, you agree to provide
reasonable transition assistance to Manugistics during the severance
period.
b. Manugistics may offset against any amounts due to you under this
Severance Agreement: (a) all amounts due from you to Manugistics; and (b)
the value of any property of Manugistics that is in your possession which
is not returned to Manugistics by the Severance Date.
4. Benefits.
a. You will receive all the benefits of employment with Manugistics that
you have in force as of the date of this Agreement. These benefits will
continue through your Termination Date, unless this Agreement specifically
provides otherwise. This Agreement will not affect any rights or
obligations you have otherwise accrued under Manugistics benefit plans,
including Manugistics Insurance Plans, and the Manugistics, Inc. 401(K)
Retirement Savings Plan. However, the terms of those Plans shall control
the termination of benefits under those plans. You will be eligible for
Short Term Disability and Good Health Subsidy until your Severance Period
begins. The Employee Assistance Plan (1-800-225-8451) is available to you
for six months following your Termination Date. PC Subsidy and Tuition
Assistance must have been approved by HRD prior to the date of this letter
to be considered. You may be eligible for unemployment compensation
benefits to the extent state law allows. Severance payments made to you
include all vacation, holiday entitlements and fully satisfy any claim you
may have for such benefit entitlements.
b. Following your Termination Date, you will be able to continue your
company health insurance plan as set forth under COBRA. To be eligible, you
must complete a timely COBRA application for coverage. Under COBRA law you
will be eligible for at least 18 months of coverage. You will be
responsible for payment of the full premium and administrative costs:
Standard Plan (approximately $215.91 per month for Employee only, $481.14
-------------
per month for Employee plus one dependent, or $630.83 per month for Family
coverage); HMO, (approximately $184.29 per month for Employee only, or
---
$497.60 per month for Family coverage). Insurance premiums are subject to
change as such changes would apply to other employees.
c. On request, Carl Di Pietro will meet with you regarding employment
sources and otherwise provide employment counseling. Based on your
performance to date, you are eligible for reemployment with Manugistics
should a suitable opportunity exist.
d. To assist you in your job search, you may retain your notebook computer.
Please provide the Manugistics equipment number or serial number. Your AT&T
company calling card will be deactivated as of your last day of work,
August 31, 1999. During your Severance Period, you will be entitled to
reimbursement of up to $1,000 for telephone calls, and to defray other job
search costs, that are required in your search for employment. Submit
expense reports to HRD for reimbursement in no less than $100 increments.
To be paid, expense reports must be submitted no later than 30 days
following your Termination Date.
e. You will be paid for all FY00 incentive bonus objectives that have been
completed, or that are completed to the satisfaction of the CEO through the
last day of work.
<PAGE>
5. Condition Precedent.
All obligations of Manugistics under this Agreement are conditioned upon
your compliance with your obligations herein.
6. Termination Procedure.
a. You will comply with the duties and responsibilities noted in
Manugistics' termination procedures set forth in the on-line Employee
Encyclopedia and which the parties agree are a part of this Agreement.
These duties and responsibilities include, but are not limited to,
returning licensed manuals, proprietary information, computer
equipment/software, office keys, access cards, credit cards and paying off
Diner's Club in full. Your current voicemail and email shall continue until
September 1, 1999. Effective September 1, 1999, Manugistics will provide
you with a new voice mailbox so that you can receive employment related
calls from outside the Company. On or before your Termination Date, the new
voice mailbox, may be deactivated at the discretion of the company or at
your request. You agree to remove your personal property from and leave
Manugistics premises, during regular Manugistics' business hours, on or
before September 15, 1999 unless there is mutual agreement to extend this
period of time.
7. Release of Claims.
a. Employee Release. You hereby release Manugistics and its directors,
officers, and employees from past and present claims based on acts or
omissions occurring before and as of today's date. These include, but are
not limited to, claims for salary, benefits, commissions and damages which
are directly or indirectly related to your employment by Manugistics or the
termination of your employment. This release does not include any claims
which might arise out of the securities class action lawsuits. In re
Manugistics Group, lnc. Securities Litigation, No.98-CV-1542 (D.D.C.):
Zalzman v. Manugistics Group, Inc. No. S-98-CV-1-881, and consolidated
actions (D-Md.); and Bosshart v. Manugistics Group, Inc. No. 98-CV-1504
(D. Minn.), and any other similar lawsuits that are filed.
b. Manugistics Release. Manugistics and its directors, officers,
successors, agents and attorneys hereby release you and your heirs,
administrators, executors, representatives, agents and attorneys from past
and present claims based on acts or omissions occurring before and as of
today's date. These include, but are not limited to, breach of contract,
breach of duties, personal injury or torts, which are directly or
indirectly related to your employment by Manugistics or the termination of
your employment.
c. Limitation of Releases. The releases in this Section apply to your
employment or termination of your employment, but do not apply to claims
for breach of this Agreement.
d. Indemnification. Manugistics shall indemnify Employee to the maximum
extent allowed under the corporate by-laws of Manugistics and its parent
company, Manugistics Group, Inc. (collectively, "By-laws") as amended
January 14, 1999 for any litigation now pending, including the cases
described above, or arising in the future and involving acts or omissions
of the employee in his capacity as CFO, occurring during Employee's
employment with Manugistics. A copy of the resolution modifying the By-laws
as approved by the Board of Directors of Manugistics and its parent company
to include former officers in the indemnification, consistent with Delaware
corporate law, is attached hereto as Exhibit A. It is the intention of
those By-laws to permit indemnification and advancement of expenses "to the
fullest extent authorized under Delaware General Corporation Law as in
effect from time to time." This paragraph exercises that authority granted
under the By-laws to commit to indemnification of Employee, and to
advancement of expenses, under all circumstances and to the fullest extent
permitted under such By-laws and not prohibited by the Delaware General
Corporation Law. No changes in the
<PAGE>
corporate By-laws shall adversely affect this commitment with regard to
employee hereunder.
8. Noninterference.
a. You agree to maintain a cooperative attitude toward Manugistics, not to
disrupt Manugistics ongoing business, and not to make disparaging remarks
about Manugistics. You agree to act in good faith in your conduct and to
refrain from any involvement in the business affairs of Manugistics except
as provided in this section or expressly directed by the CEO.
b. Manugistics, on behalf of itself. its officers, directors, employees and
agents, agrees to act in good faith and not to make disparaging remarks
about you. Manugistics, again on behalf of itself and its officers,
directors, employees and agents, agrees to refrain from making any public
statements at all about you, your performance, or your activities as CFO,
whether oral or written, in any form, without prior written approval from
you. This prohibition shall not bar communications to Manugistics attorney,
accountants, as required by law or by any judicial, regulatory or
governmental authority, or as required by Manugistics legal duty to make
appropriate public disclosures under SEC or NASD rules and regulations.
This prohibition, includes, but is not limited to, preventing any
statements about you from being made to representatives of the media or any
other person outside Manugistics.
c. Both parties agree that Manugistics' consent to the obligation under
subparagraph b. above is an important consideration for you to enter into
this Agreement and that these obligations are meant to protect your
reputation, both personal and professional. Manugistics understands the
value of this provision to you and also agrees that you may not be able to
fully protect your rights through money damages. Therefore, Manugistics
understands that you may seek injunctive relief in order to ensure that
this provision is enforced.
9. Noncompete.
For three (3) months after Manugistics makes the last payment under this
agreement, you agree not to directly or indirectly:
a. Solicit, attempt to solicit or contact for the purpose of soliciting for
employment (for you or for any other person or business) any employee of
Manugistics.
b. Solicit, attempt to solicit or contact for the purpose of soliciting
(for you or for any other person or business) any person or business which
was a customer of Manugistics during employment with Manugistics, or any
person or business to whom Manugistics had proposed future service within
the three (3) month period prior to August 31, 1999. The solicitation
restrictions of this paragraph applies to you if you are associated with or
representing, directly or indirectly, any interest with products and
services that are in direct competition with Manugistics. i2, the supply
chain practice of SAP, Logility, J.D. Edwards, Mc Hugh, Synquest and
Paragon are considered direct competition.
c. Seek or accept employment with i2, SAP, Logility, J.D. Edwards, McHugh,
Synquest and Paragon. Once you have decided on a new employer, you agree to
notify Manugistics' Director of Human Resources, in writing, with the
employer's name and address, date of employment, your new job title.
You understand that you cannot disclose any confidential information and/or
trade secrets of Manugistics as set out in your Conditions of Employment or
applicable law. Breach of any of the obligations in the Code of Conduct or
Conditions of Employment are deemed a breach of this Agreement
<PAGE>
d. Both parties agree that your consent to your obligations under this
Noncompete Section is an important consideration for Manugistics to enter
into this Agreement and that these obligations are meant to protect
Manugistics confidential information which is a valuable asset and could be
used by its competitors to Manugistics detriment. You understand the value
of this provision to Manugistics, and you also agree that Manugistics may
not be able to fully protect its rights through money damages. Therefore,
you understand that Manugistics may seek injunctive relief in order to
ensure that this provision is enforced. If a court with proper jurisdiction
finds that this provision is too broad, both parties agree that the court
may limit it so that it may be enforced to the fullest extent possible.
10. Reaffirmation of Your Obligations.
You also agree to be available by telephone and in person until Termination
Date to the extent that Manugistics reasonably finds such necessary.
Questions you receive concerning the daily business affairs of Manugistics,
after your last day of work, including questions from customers of
Manugistics, should be promptly referred to the CEO or his designee. During
the time through August 31, 1999 you will be performing your duties as CFO
and Sr. Vice President with full force and commitment.
You agree to reaffirm the obligations under the Manugistics Employee Code
of Conduct and the Manugistics Conditions of Employment to which you have
been bound since your first day of employment by Manugistics. Receipt of
Manugistics payments and benefits as noted in this Agreement or elsewhere,
are subject to your full compliance with the Manugistics Code of Conduct
and Conditions of Employment.
11. Entire Agreement.
This Agreement is the entire agreement between the parties with regard to
your employment with Manugistics, and the termination of your employment,
and supersedes all previous communications between you and Manugistics
relating to your employment or termination.
12. Confidentiality.
You hereby agree to keep the terms of this Agreement confidential and not
to disclose this Agreement with anyone other than your tax or legal
advisors, without Manugistics' consent which will not be unreasonably
withheld. Manugistics agrees to keep this Agreement confidential and not
disclose its terms except to its attorneys, accountants and other
professional advisors and except as required by law or by any judicial,
regulatory or governmental authority or upon the advice of counsel, and as
further subject to Manugistics legal duty to make appropriate public
disclosures under SEC or NASD rules and regulations.
13. Acknowledgment of Understanding.
YOU AGREE THAT YOU HAVE READ AND FULLY UNDERSTAND AND AGREE WITH THE TERMS
OF THIS AGREEMENT. YOU ALSO AGREE THAT YOU HAVE NOT BEEN COERCED IN ANY
MANNER WITH REGARD TO THIS AGREEMENT, AND HAVE AGREED TO THESE TERMS AFTER
FULL AND FAIR NEGOTIATION.
This Agreement is agreed to and accepted by:
YOU: MANUGISTICS:
<PAGE>
By: /s/ Pete Repetti By: /s/ Carl Di Pietro
(Signature) (Signature)
Print Name: Pete Repetti Print Name: Carl Di Pietro
Title: CFO & Sr. Vice President Title: Director, Human Resources
Date Signed: 7/23/99 Date Signed: 7/23/99
<PAGE>
EXHIBIT 10.38
Manugistics, Inc
2115 E. Jefferson Street
Rockville, Maryland 20852
TERMINATION OF EMPLOYMENT AGREEMENT
Date Presented: August 19, 1999
Supercedes Previously Issued Agreement
This Termination of Employment Agreement ("Agreement") is entered into by
Manugistics, Inc. ("Manugistics") and Mary Lou Fox ("you") who has been employed
since June, 1982. Both you and Manugistics agree to set forth the terms and
conditions upon which the employment relationship is to be terminated. You also
agree that you have received valuable and sufficient consideration for entering
into this Agreement. Any payment made by after your last day worked will only be
made after there has been a signed agreement between the parties. The parties
agree to the following terms:
1. Termination Date.
Your Severance Period will begin on September 1, 1999 and continue through
May 31, 2000. You will not be required to perform company work during your
Severance Period except as otherwise noted in this Agreement. You will
receive your current base pay and benefits during the period September 1,
1999 through February 29, 2000, a period of six (6) months. You will
receive Severance pay during this six month period even if you should
secure employment with another employer.
Your termination of employment from Manugistics will be effective as of
close of business on your Termination Date, May 31, 2000 and you will vest
stock options through this date.
1a. Extension of Severance Period with Pay and Benefits.
In the event you have not begun full time professional employment with
another employer by February 29, 2000, and you have made a good faith
effort to secure such employment, your severance pay and benefits will be
continued through May 31, 2000, or until professional employment begins
with another employer, whichever occurs first. Occasional "spot' consulting
assignments will not be considered as employment. Should this paragraph 1a.
be placed in force, your Termination Date will become the last day of pay
eligibility under this paragraph la, but at no time shall your Termination
Date be sooner than May 31, 2000.
2. Reason for Termination.
It is mutually agreed by the parties that you have resigned your employment
with Manugistics in order to secure employment that is more aligned with
your career objectives. To clarify your resignation reason, you will
provide a written statement to Carl Di Pietro no later than September 1,
1999 describing your reasons for leaving Manugistics. You agree to remove
your personal property from and leave Manugistics premises, during regular
Manugistics' business hours, on or before September 15, 1999 unless there
is mutual agreement to extend this period of time. Effective close of
business, August 31, 1999, or sooner if directed by the CEO, you will
discontinue your official duties and responsibilities as Sr. Vice
President, member of EXEC and other offices held with Manugistics. If the
employee and Manugistics mutually agree to extend the last day of work
beyond August 31, 1999, then all terms and dates of this Agreement will be
similarly extended by the same period of time. Announcement of your
resignation from Manugistics will be at a time and in manner agreeable to
the parties.
3. Severance Pay.
<PAGE>
a. Severance paychecks will be issued according to Manugistics' regular
payroll procedures. As part of severance payment, you agree to provide
reasonable transition assistance to Manugistics during the severance
period.
b. Manugistics may offset against any amounts due to you under this
Severance Agreement: (a) all amounts due from you to Manugistics; and (b)
the value of any property of Manugistics that is in your possession which
is not returned to Manugistics by the Severance Date,
4. Benefits.
a. You will receive all the benefits of employment with Manugistics that
you have in force as of the date of this Agreement. These benefits will
continue through your Termination Date, unless this Agreement specifically
provides otherwise. This Agreement will not affect any rights or
obligations you have otherwise accrued under Manugistics benefit plans,
including Manugistics Insurance Plans, and the Manugistics, Inc. 401(K)
Retirement Savings P1an. However, the terms of those Plans shall control
the termination of benefits under those plans. You will be eligible for
Short Term Disability and Good Health Subsidy until your Severance Period
begins. The Employee Assistance Plan (1-800-225-8451) is available to you
for six months following your Termination Date. PC Subsidy and Tuition
Assistance must have been approved by HRD prior to the date of this letter
to be considered. You may be eligible for unemployment compensation
benefits to the extent state law allows. Severance payments made to you
include all vacation, holiday entitlements and fully satisfy any claim you
may have for such benefit entitlements.
b. Following your Termination Date, you will be able to continue your
company health insurance plan as set forth under COBRA. To be eligible, you
must complete a timely COBRA application for coverage. Under COBRA law you
will be eligible for at least 18 months of coverage. You will be
responsible for payment of the full premium and administrative costs:
Standard Plan (approximately $215.91 per month for Employee only, $481.14
per month for Employee plus one dependent, or $630.83 per month for Family
coverage): HMO, (approximately $184.29 per month for Employee only, or
$497.60 per month for Family coverage). Insurance premiums are subject to
change as such changes would apply to other employees.
c. On request, Carl Di Pietro will meet with you regarding employment
sources and otherwise provide employment counseling. Based on your
performance to date, you are eligible for reemployment with Manugistics
should a suitable opportunity exist.
d. To assist you in your job search, you may retain your notebook
computer/printer and Palm Pilot, dockins/station and monitor. Please
provide the Manugistics equipment number or serial number. Your AT&T
company calling card will be deactivated as of your last day of work,
August 31, 1999. During your Severance Period, you will be entitled to
reimbursement of up to $500. For long distance telephone calls, and to
defray other job search costs that are required in your search for
employment. You will also receive reimbursement for professional job
coaching services provided prior to your Termination Date, up to an amount
of $1,500. Submit expense reports for items noted in this paragraph d to
HRD for reimbursement in no less than $100 increments. To be paid, expense
reports must be submitted no later than 30 days following your Termination
Date.
e. You will be paid for all FY00 incentive bonus objectives that have been
earned for Q1 and Q2 for global consulting service and under the Executive
Annual Incentive Plan. The revenue/profit matrix as used in the VP
Consulting Comp Plans will be used to determine the employees bonus for Q1
and Q2.
5. Condition Precedent.
<PAGE>
All obligations of Manugistics under this Agreement are conditioned upon
your compliance with your obligations herein.
6. Termination Procedure.
a. You will comply with the duties and responsibilities noted in
Manugistics' termination procedures set forth in the on-line Employee
Encyclopedia and which the parties agree are a part of this Agreement.
These duties and responsibilities include, but are not limited to,
returning licensed manuals, proprietary information, computer
equipment/software, office keys, access cards, credit cards and paying off
Diner's Club in full. Your current voicemail and email shall continue until
October 1, 1999. Effective September 1, 1999, Manugistics will provide you
with a new voice mailbox so that you can receive employment related calls
from outside the Company. On or before your Termination Date, the new voice
mailbox may be deactivated at the discretion of the company or at your
request.
7. Release of Claims.
a. Employee Release. You hereby release Manugistics and its directors,
officers, and employees from past and present claims based on acts or
omissions occurring before and as of today's date. These include, but are
not limited to, claims for salary, benefits, commissions and damages which
are directly or indirectly related to your employment by Manugistics or the
termination of your employment.
b. Manugistics Release. Manugistics and its directors, officers,
successors, agents and attorneys hereby release you and your heirs,
administrators, executors, representatives, agents and attorneys from past
and present claims based on acts or omissions occurring before and as of
today's date. These include, but are not limited to, breach of contract,
breach of duties, personal injury or torts, which are directly or
indirectly related to your employment by Manugistics or the termination of
your employment.
c. Limitation of Releases. The releases in this Section apply to your
employment or termination of your employment, but do not apply to claims
for breach of this Agreement.
d. Indemnification. Manugistics shall indemnify Employee to the maximum
extent allowed under the corporate by-laws and subject to the corporate
by-laws of Manugistics and its parent company, Manugistics Group, Inc.
(collectively, "By-laws") as amended January 14, 1999 for any litigation
now pending, including the cases described above, or arising in the future
and involving acts or omissions of the employee in your capacity as Sr.
Vice President, occurring during Employee's employment with Manugistics. A
copy of the resolution modifying the By-laws as approved by the Board of
Directors of Manugistics and its parent company to include former officers
in the indemnification, consistent with Delaware corporate law, is attached
hereto as Exhibit A. It is the intention of those By-laws to permit
indemnification and advancement of expenses "to the fullest extent
authorized under Delaware General Corporation Law as in effect from time to
time." Manugistics hereby commits to indemnification of Employee, and to
advancement of expenses, under the circumstances and to the fullest extent
not prohibited by the Delaware General Corporation Law in accordance with
the By-laws as amended, subject to any discretionary determination of the
Board as set forth in such By-laws. No changes in the corporate By-laws
shall adversely affect this commitment with regard to employee hereunder.
8. Noninterference.
a. You agree to maintain a cooperative attitude toward Manugistics, not to
disrupt Manugistics ongoing business, and not to make disparaging remarks
about Manugistics. You agree to act in good faith in your conduct and to
refrain from any involvement in the business affairs of Manugistics except
as provided in this section or expressly directed by the CEO.
b. Manugistics, on behalf of itself, its officers, directors, employees and
agents, agrees to act in good
<PAGE>
faith and not to make disparaging remarks about you. Manugistics, again on
behalf of itself and its officers. directors, employees and agents, agrees
to refrain from making any public statements at all about you, your
performance, or your activities as Sr., Vice President, whether oral or
written, in any form, without prior written approval from you. This
prohibition shall not bar communications to Manugistics' attorney,
accountants, as required by law or by any judicial, regulatory or
governmental authority, or as required by Manugistics legal duty to make
appropriate public disclosures under SEC or NASD rules and regulations.
This prohibition, includes, but is not limited to, preventing any
statements about you from being made to representatives of the media or any
other person outside Manugistics.
a. Both parties agree that Manugistics' consent to the obligation under
subparagraph b. above is an important consideration for you to enter into
this Agreement and that these obligations are meant to protect your
reputation, both personal and professional. Manugistics understands the
value of this provision to you and also agrees that you may not be able to
fully protect your rights through money damages. Therefore, Manugistics
understands that you may seek injunctive relief in order to ensure that
this provision is enforced.
9. Noncompete.
For three (3) months after Manugistics makes the last payment under this
agreement, you agree not to directly or indirectly:
a. Solicit, attempt to solicit or contact for the purpose of soliciting for
employment (for you or for any other person or business) any employee of
Manugistics.
b. Solicit, attempt to solicit or contact for the purpose of soliciting
(for you or for any other person or business) any person or business which
was a customer of Manugistics during employment with Manugistics, or any
person or business to whom Manugistics had proposed future service within
the three (3) month period prior to August 31, 1999. The solicitation
restrictions of this paragraph applies to you if you are associated with or
representing, directly or indirectly, any interest with products and
services that are in direct competition with Manugistics. i2, the supply
chain practice of SAP, Logility, J.D. Edwards, McHugh, Synquest and
Paragon are considered direct competition.
c. Seek or accept employment with i2, SAP, Logility, J.D. Edwards, McHugh,
Synquest and Paragon. Once you have decided on a new employer, you agree to
notify Manugistics' Director of Human Resources, in writing, with the
employer's name and address, date of employment, your new job title.
You understand that you cannot disclose any confidential information and/or
trade secrets of Manugistics as set out in your Conditions of Employment or
applicable law. Breach of any of the obligations in the Code of Conduct or
Conditions of Employment are deemed a breach of this AGREEMENT.
d. Both parties agree that your consent to your obligations under this
Noncompete Section is an important consideration for Manugistics to enter
into this Agreement and that these obligations are meant to protect
Manugistics confidential information which is a valuable asset and could be
used by its competitors to Manugistics detriment. You understand the value
of this provision to Manugistics, and you also agree that Manugistics may
not be able to fully protect its rights through money damages. Therefore,
you understand that Manugistics may seek injunctive relief in order to
ensure that this provision is enforced. If a court with proper jurisdiction
finds that this provision is too broad, both parties agree that the court
may limit it so that it may be enforced to the fullest extent possible.
10. Reaffirmation of Your Obligations.
You also agree to be available by telephone and in person until Termination
Date to the extent that Manugistics reasonably finds such necessary.
Questions you receive concerning the daily business affairs
<PAGE>
of Manugistics, after your last day of work, including questions from
customers of Manugistics, should be promptly referred to the CEO or his
designee. During the time through August 31, 1999 you will be performing
your duties as Sr. Vice President with full force and commitment and report
to Rich Bergmann Executive Vice President.
You agree to reaffirm the obligations under the Manugistics Employee Code
of Conduct and the Manugistics Conditions of Employment to which you have
been bound since your first day of employment by Manugistics. Receipt of
Manugistics payments and benefits as noted in this Agreement or elsewhere,
are subject to your full compliance with the Manugistics Code of Conduct
and Conditions of employment.
11. Entire Agreement.
This Agreement is the entire agreement between the parties with regard to
your employment with Manugistics, and the termination of your employment,
and supersedes all previous communications between you and Manugistics
relating to your employment or termination.
12. Confidentiality.
You hereby agree to keep the terms of this Agreement confidential and not
to disclose this Agreement with anyone other than your tax or legal
advisors, without Manugistics' consent which will not be unreasonably
withheld. Manugistics agrees to keep this Agreement confidential and not
disclose its terms except to its attorneys, accountants and other
professional advisors and except as required by law or by any judicial,
regulatory or governmental authority or upon the advice of counsel, and as
further subject to Manugistics legal duty to make appropriate public
disclosures under SEC or NASD rules and regulations.
13. Acknowledgment of Understanding.
YOU AGREE THAT YOU HAVE READ AND FULLY UNDERSTAND AND AGREE WITH THE TERMS
OF THIS AGREEMENT. YOU ALSO AGREE THAT YOU HAVE NOT BEEN COERCED IN ANY
MANNER WITH REGARD TO THIS AGREEMENT, AND HAVE AGREED TO THESE TERMS AFTER
FULL AND FAIR NEGOTIATION.
This Agreement is agreed to and accepted by:
YOU: MANUGISTICS:
By: /s/ Mary Lou Fox By: /s/ Carl Di Pietro
(Signature) (Signature)
Print Name: Mary Lou Fox Print Name: Carl Di Pietro
Title Sr. Vice President Title: Director, Human Resources
Date Signed: 8/25/99 Date Signed: 8/25/99
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT FOR THE PERIOD ENDED AUGUST 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-END> AUG-31-1999
<CASH> 22,432
<SECURITIES> 23,885
<RECEIVABLES> 45,794
<ALLOWANCES> 5,765
<INVENTORY> 66
<CURRENT-ASSETS> 99,414
<PP&E> 42,194
<DEPRECIATION> 25,843
<TOTAL-ASSETS> 155,321
<CURRENT-LIABILITIES> 65,759
<BONDS> 455
0
0
<COMMON> 56
<OTHER-SE> 85,335
<TOTAL-LIABILITY-AND-EQUITY> 155,321
<SALES> 23,852
<TOTAL-REVENUES> 72,988
<CGS> 5,910
<TOTAL-COSTS> 50,052
<OTHER-EXPENSES> 14,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,719)
<INCOME-TAX> (673)
<INCOME-CONTINUING> (3,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,046)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
