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As filed with The Securities and Exchange Commission on January 18, 2001
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MANUGISTICS GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 52-1469385
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
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2115 East Jefferson Street
Rockville, Maryland 20852
(301) 984-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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Gregory J. Owens
Chief Executive Officer
Manugistics Group, Inc.
2115 East Jefferson Street
Rockville, Maryland 20852
(301) 984-5000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
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Copy to:
Joseph H. Jacovini, Esquire
Merritt A. Cole, Esquire
Dilworth Paxson LLP
3200 Mellon Bank Center
1735 Market Street
Philadelphia, Pennsylvania 19103-7595
(215) 575-7000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED PER UNIT PRICE REGISTRATION FEE
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5% Convertible Subordinated Notes
due November 1, 2007........... $250,000,000 100%(1) $250,000,000(1) $62,500(1)
Common Stock, par value $0.002
per share...................... 5,673,758 shares(2) --(3) --(3) --(3)
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(i) of the Securities Act of 1933.
(2) This number represents the number of shares of common stock that are
initially issuable upon the conversion of 5% Convertible Subordinated Notes
due November 1, 2007 (the "Notes" or "Convertible Notes") registered hereby.
For purposes of estimating the number of shares of common stock to be
included in the Registration Statement upon the conversion of the Notes, we
calculated the number of shares issuable upon conversion of the Notes based
on a conversion rate of approximately 22.695 shares per $1,000 principal
amount of the Notes. In addition to the shares set forth in the table,
pursuant to Rule 416 under the Securities Act of 1933, as amended, the
amount to be registered includes an indeterminate number of shares of common
stock issuable upon conversion of the Notes, as this amount may be adjusted
as a result of stock splits, stock dividends and antidilution provisions.
(3) No additional consideration will be received for the common stock, and,
therefore, no registration fee is required pursuant to Rule 457(i).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES NOR A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES
WHERE THE OFFER AND SALE IS NOT PERMITTED.
Subject to Completion, dated January 18, 2001
[MANUGISTICS LOGO]
$250,000,000
5% CONVERTIBLE SUBORDINATED NOTES DUE 2007 AND
COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
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We issued the Notes in a private placement in October and November 2000.
Selling holders will use this prospectus to sell the Notes and the shares of
common stock into which the Notes are convertible at any time at market prices
prevailing at the time of the sale or at privately negotiated prices. The
selling holders may sell the Notes or the common stock directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in
the form of discounts, concessions or commissions.
The holders of the Notes may convert the Notes into shares of our common
stock at any time at a conversion rate of approximately 22.695 shares per $1,000
principal amount of Notes. The conversion price is $44.0625 per share. Interest
on the Notes is payable on May 1 and November 1 of each year, commencing on May
1, 2001. At any time on or after November 7, 2003, we may redeem the Notes, in
whole or in part, at the redemption prices as set forth in this prospectus.
However, we may not redeem the Notes unless the closing price of our stock
exceeds 120% of the conversion price for at least 20 trading days in a
consecutive 30-day period preceding the date we mail the redemption notice.
In the event of a change in control, as defined in this prospectus, each
holder of Notes may require us to repurchase the Notes for cash at 100% of the
principal amount of the Notes plus accrued interest.
The Notes are unsecured obligations that are subordinated in right of
payment to all of our existing and future senior indebtedness. There are no
sinking fund provisions.
Our common stock is listed on The Nasdaq National Market under the symbol
"MANU." On January 17, 2001, the closing sale price of our common stock, as
reported on The Nasdaq National Market, was $45.50.
INVESTING IN THE NOTES AND OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
The securities offered or sold under this prospectus have not been approved
by the SEC or any state securities commission, nor have these organizations
determined that this prospectus is accurate or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is , 2001
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In connection with this offering, no person is authorized to give any
information or to make any representations not contained in this prospectus. If
information is given or representations are made, you may not rely on that
information or those representations as having been authorized by us. This
prospectus is neither an offer to sell nor a solicitation of an offer to buy any
securities other than those registered by this prospectus, nor is it an offer to
sell or a solicitation of an offer to buy securities where an offer or
solicitation would be unlawful. You may not imply from the delivery of this
prospectus, nor from any sale made under this prospectus, that our affairs are
unchanged since the date of this prospectus or that the information contained in
this prospectus is correct as of any time after the date of this prospectus.
Manugistics is a registered trademark, and the Manugistics logo and the
phrase "Leveraged Intelligence" are trademarks of Manugistics, Inc. All other
product or company names mentioned are used for identification purposes only,
and may be trademarks of their respective owners.
Unless the context otherwise requires, the terms "we," "our," "us" or
"Manugistics" refers to Manugistics Group, Inc., a Delaware corporation.
All share numbers in this prospectus reflect the Company's two-for-one
stock split effective December 7, 2000.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
In addition to the historical information contained in this prospectus,
this prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Exchange Act of 1934, as amended. Such statements are based upon current
expectations that involve risks and uncertainties. Any statements contained
herein that are not statements of historical fact may be deemed forward-looking
statements. For example, words such as "may", "will", "should", "estimates",
"predicts", "potential", "continue", "strategy", "believes", "anticipates",
"plans", "expects", "intends", and similar expressions are intended to identify
forward-looking statements. Our actual results and the timing of certain events
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those discussed under the heading "Risk
Factors" and the risks discussed in our future filings under the Exchange Act of
1934, as amended.
You should read this prospectus completely and with the understanding that
actual future results may be materially different from what we expect. We will
not update these forward-looking statements, even though our situation may
change in the future.
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PROSPECTUS SUMMARY
The following is a summary of our business. You should carefully read the
section entitled "Risk Factors" in this prospectus for more information on our
business and the risks involved in investing in our securities.
MANUGISTICS
OUR BUSINESS
We are a leading global provider of Enterprise Profit
Optimization(TM) -- the combination of supply chain management and pricing and
revenue optimization -- and eBusiness solutions for enterprises and
eMarketplaces. Our solutions include infrastructure and application software
products, solution support, strategic consulting and implementation services.
Our solutions help our clients monitor and streamline their core internal
operational processes involving the design, purchase, manufacturing, storage,
transportation, marketing and selling of their goods and services. Our solutions
also help integrate clients' internal processes with trading partners and
provide the collaboration and optimization required across extended
eMarketplaces. Our solutions help our clients improve resource allocation
through more cost-effective and efficient operational decisions and improve
customer service -- driving costs lower and revenues higher.
Increasing global competition, shortening product life cycles and
developing eBusiness initiatives of new and existing competitors are driving
enterprises to provide greater levels of customer service while shortening their
time-to-market. We were an early innovator in trading partner collaboration,
with our first Internet-ready products commercially available in late 1997. Our
technology initiatives continue to focus on the changing needs of companies in
the markets we serve, as well as the requirements of the new eBusiness economy.
We have developed a web architecture for our Manugistics NetWORKS(TM)
collaborative solutions through our proprietary WebWORKS(TM) infrastructure and
have provided advanced integration to disparate systems through our WebConnect
products. Through our exchange platform ExchangeWORKS(TM), we are now addressing
the new eBusiness processes enabled by the Internet, such as auctions, dynamic
pricing, procurement, track and trace, as well as order and pipeline visibility.
We offer solutions to companies in a diverse array of industries including
agriculture, apparel, chemicals, consumer goods, electronics & high technology,
energy, food, government, healthcare, logistics, metals, motor vehicles & parts,
paper, pharmaceuticals and retail. Our customer base of over 1,000 clients
includes large, multinational enterprises such as 3Com, Coca-Cola Bottling,
Cisco Systems, Astec Power Division of Emerson, Levi Strauss & Co., Fuji Photo
Film USA, Ford, Harley-Davidson, Marriott, The Limited, Texas Instruments and
Unilever, as well as medium-sized enterprises and emerging eBusinesses.
Our principal executive offices are located at 2115 East Jefferson Street,
Rockville, Maryland 20852, and our main telephone number is (301) 984-5000. We
have offices in Atlanta, Chicago, Denver, Irving, Mountain View, Philadelphia
and San Mateo in the United States, and internationally in Australia, Belgium,
Brazil, Canada, France, Germany, Italy, Japan, Mexico, The Netherlands,
Singapore and the United Kingdom.
RECENT DEVELOPMENTS
As previously announced, on December 21, 2000, we completed the acquisition
of Talus Solutions, Inc. ("Talus"), a Delaware corporation, in a stock-for-stock
merger (the "Merger"). Talus, headquartered in Atlanta, Georgia, is a leading
provider of Pricing and Revenue Optimization (PRO) products and services.
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In connection with the closing of the Merger, we issued a total of
7,026,260 shares of our common stock on December 21, 2000. Of these shares, a
total of approximately 5,972,530 shares were delivered to the our exchange agent
for direct transfer to the former Talus stockholders following closing of the
Merger. A total of approximately 1,053,730 shares were delivered to State Street
Bank and Trust Company, as escrow agent, to secure potential indemnification
claims we may have. To the extent that the escrowed shares are not subject to
indemnification claims, the escrowed shares will be delivered to the former
Talus stockholders in two installments, on October 31, 2001 and on July 2, 2002.
In addition, a total of approximately 1,373,608 shares have been reserved
for issuance upon exercise of Talus stock options and warrants assumed by us in
connection with the Merger.
Certain former Talus stockholders holding a total of approximately
5,456,460 shares of our common stock, including escrowed shares, have agreed not
to resell such shares prior to three staged release dates: January 18, 2001, May
31, 2001 and October 31, 2001. All remaining shares shall be released on October
31, 2001.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following historical consolidated statement of operations data for the
years ended February 29 or 28, 1998, 1999 and 2000 is derived from our audited
financial statements. The unaudited statement of operations data for the nine
months ended November 30, 1999 and 2000 and consolidated balance sheet data as
of November 30, 2000 is derived from our Quarterly Report on Form 10-Q filed on
January 16, 2001 with the Securities and Exchange Commission (the "SEC"). The
unaudited pro forma combined condensed financial data is derived from the
Current Report on Form 8-K filed with the SEC on January 18, 2001.
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HISTORICAL HISTORICAL
------------------------------------------ PRO FORMA --------------------------- PRO FORMA
FISCAL YEAR ENDED ------------ ------------
FEBRUARY 29 OR 28, NINE MONTHS NINE MONTHS
------------------------------------------ FEBRUARY 29, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1998 1999 2000 2000(1),(2) 1999 2000 2000(1),(2)
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CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
License fees............... $107,547 $ 73,802 $ 60,421 $ 60,645 $ 38,423 $ 90,290 $ 92,217
Consulting, solution
support and other
services................. 72,716 103,762 92,012 129,638 70,359 88,375 118,338
-------- -------- -------- --------- -------- -------- ---------
Total revenues......... $180,263 $177,564 $152,433 $ 190,283 $108,782 $178,665 $ 210,555
-------- -------- -------- --------- -------- -------- ---------
Operating expenses:
Cost of license fees....... $ 11,102 $ 13,415 $ 13,685 $ 13,835 $ 9,596 $ 14,365 $ 14,365
Cost of consulting,
solution support and
other services........... 33,213 50,585 44,346 74,715 32,703 39,636 57,778
Sales and marketing........ 66,228 103,006 61,439 70,920 43,212 78,844 85,201
Product development........ 32,794 49,389 29,150 36,455 21,977 25,179 32,150
General and
administrative........... 14,639 19,828 15,837 114,393 11,736 16,282 92,329
Acquisition-related
expenses................. -- 3,095 -- -- -- -- --
Non-cash stock compensation
expense.................. -- -- -- 7,597 -- 14,638(4) 20,986
Restructuring costs........ -- 33,775 (1,506) 2,450 (699) -- (211)
Purchased research and
development.............. 47,340 -- -- -- -- -- --
-------- -------- -------- --------- -------- -------- ---------
Total operating expenses.... $205,316 $273,093 $162,951 $ 320,365 $118,525 $188,944 $ 302,598
-------- -------- -------- --------- -------- -------- ---------
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HISTORICAL HISTORICAL
------------------------------------------ PRO FORMA --------------------------- PRO FORMA
FISCAL YEAR ENDED ------------ ------------
FEBRUARY 29 OR 28, NINE MONTHS NINE MONTHS
------------------------------------------ FEBRUARY 29, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1998 1999 2000 2000(1),(2) 1999 2000 2000(1),(2)
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Loss from operations........ (25,053) (95,529) (10,518) (130,082) (9,743) (10,279) (92,043)
Other income -- net......... 2,863 2,362 1,389 (12,027) 1,235 1,021 (8,489)
-------- -------- -------- --------- -------- -------- ---------
Loss before income taxes.... (22,190) (93,167) (9,129) (142,109) (8,508) (9,258) (100,532)
Provision (Benefit)
provision for income
taxes...................... (9,025) 2,945 (184) (184) (657) 2,154 2,154
-------- -------- -------- --------- -------- -------- ---------
Net loss.................... $(13,165) $(96,112) $ (8,945) $(141,925) $ (7,851) $(11,412) $(102,686)
======== ======== ======== ========= ======== ======== =========
Basic loss per share........ $ (0.28) $ (1.82) $ (0.16) $ (2.29) $ (0.14) $ (0.20) $ (1.59)
======== ======== ======== ========= ======== ======== =========
Shares used in basic share
computation................ 46,968 52,804 54,972 61,998 54,594 57,378 64,404
======== ======== ======== ========= ======== ======== =========
Diluted loss per share...... $ (0.28) $ (1.82) $ (0.16) $ (2.29) $ (0.14) $ (0.20) $ (1.59)
======== ======== ======== ========= ======== ======== =========
Shares used in diluted share
computation................ 46,968 52,804 54,972 61,998 54,594 57,378 64,404
======== ======== ======== ========= ======== ======== =========
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NOVEMBER 30, 2000
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ACTUAL PRO FORMA(3)
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CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities............ $280,774 $293,105
Working capital............................................. 287,640 291,977
Total assets................................................ 434,132 834,337
Long-term debt (less current portion)....................... 250,116 254,054
Accumulated deficit......................................... (113,614) (113,614)
Total stockholders' equity.................................. 110,220 485,974
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(1) The pro forma consolidated statement of operations data for the year ended
February 29, 2000 and the nine months ended November 30, 2000 reflects
Manugistics' acquisition of Talus Solutions, Inc. as if it had taken place
on March 1, 1999. See the Current Report on Form 8-K filed with the SEC on
January 18, 2001 which is incorporated herein by reference.
(2) The pro forma consolidated statement of operations data for the year ended
February 29, 2000 and nine months ended November 30, 2000 reflects the note
offering as if it had taken place on March 1, 1999. See the Current Report
on Form 8-K filed with the SEC on January 18, 2001 which is incorporated
herein by reference.
(3) The pro forma balance sheet data reflects Manugistics acquisition of Talus
Solutions, Inc. as if it had taken place on November 30, 2000. See the
Current Report Form 8-K filed with the SEC on January 18, 2001 which is
incorporated herein by reference.
(4) During the nine months ended November 30, 2000, we incurred non-cash stock
compensation expense totaling $14.6 million in connection with the
application of FASB Interpretation No. 44 (FIN 44) "Accounting for Certain
Transactions Involving Stock Compensation" to the January 1999 repriced
stock options. See our Quarterly Report on Form 10-Q filed on January 16,
2001 for the impact of the non-cash stock compensation on the various
expense line items.
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RISK FACTORS
An investment in the Notes or the shares of common stock into which the
Notes are convertible involves a high degree of risk. Before you decide to
purchase the Notes or the shares of common stock into which the Notes are
convertible, you should carefully consider these risk factors together with all
of the other information included in this prospectus.
RISKS RELATED TO OUR BUSINESS
AS A RESULT OF RECENT SIGNIFICANT CHANGES IN OUR MANAGEMENT, PERSONNEL AND
PRODUCTS, YOU MAY HAVE DIFFICULTY EVALUATING OUR PROSPECTS BASED ON OUR
SIGNIFICANT LOSSES IN RECENT FISCAL YEARS.
We experienced operational difficulties in fiscal 1999 and the first half
of fiscal 2000. Problems with our direct sales operation and intense
competition, among other factors, contributed to net losses in fiscal 1999 and
fiscal 2000, and for the nine months ended November 30, 2000. In response to our
problems, we hired a new executive management team, enhanced our supply chain
optimization and eBusiness products and services and improved our direct sales
organization. Our ability to continue to achieve operational improvements and
improve our financial performance will be subject to a number of risks and
uncertainties, including the following:
- slower growth in the market for supply chain and eBusiness software;
- our ability to introduce new software products and services to respond to
technological and client needs;
- our ability to manage our anticipated growth;
- our ability to hire, integrate and deploy our direct sales force
effectively;
- our ability to expand our distribution capability through indirect sales
channels;
- our ability to respond to competitive developments and pricing; and
- our dependence on our current executive officers and key employees.
If we fail to successfully address these risks and uncertainties, our
business could be harmed and we could continue to incur significant losses.
WE HAVE EXPERIENCED SIGNIFICANT LOSSES IN RECENT FISCAL YEARS. OUR FUTURE
RESULTS WILL BE ADVERSELY AFFECTED BY SEVERAL TYPES OF NON-CASH CHARGES. IF WE
DO NOT ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE, OUR STOCK PRICE MAY
DECLINE.
We have recently incurred significant losses, including net losses of $11.4
million for the nine-months ended November 30, 2000, $8.9 million in fiscal 2000
and $96.1 million in fiscal 1999. We will incur non-cash charges in the future
related to the write-off of goodwill and non-cash compensation expenses
associated with our acquisition of Talus, and related to investment banking fees
associated with our private placement of 5% subordinated convertible notes. In
addition, we may incur non-cash compensation charges related to our stock option
repricing. We cannot assure you that our revenues will grow or that we will
achieve or maintain profitability in the future. Our ability to increase
revenues and achieve profitability will be affected by the other risks and
uncertainties described in this section. Our failure to achieve profitability
could cause our stock price to decline, and our ability to finance our
operations could be impaired.
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OUR OPERATING RESULTS FLUCTUATE, AND IF WE FAIL TO MEET THE EXPECTATIONS OF THE
INVESTMENT COMMUNITY IN ANY PERIOD, OUR STOCK PRICE COULD DECLINE SIGNIFICANTLY.
Our revenues and operating results are difficult to predict, and we believe
that period-to-period comparisons of our operating results will not necessarily
be indicative of future performance. The factors that may cause fluctuations of
our quarterly operating results include the following:
- the size, timing and contractual terms of licenses and sales of our
products and services;
- the potentially long and unpredictable sales cycle for our products;
- technical difficulties in our software that could delay the introduction
of new products or increase their costs;
- introductions of new products or new versions of existing products by us
or our competitors;
- changes in prices or the pricing models for our products and services or
those of our competitors;
- changes in the mix of our software license revenues, consulting revenues
and solution support revenues;
- changes in the mix of sales channels through which our products and
services are sold; and
- changes in rules relating to revenue recognition or in interpretations of
those rules.
Due to fluctuations from quarter to quarter, our operating results may not
meet the expectations of securities analysts or investors. If this occurs, the
price of our common stock could decline significantly.
VARIATIONS IN THE TIME IT TAKES US TO SELL OUR SOLUTIONS MAY CAUSE FLUCTUATIONS
IN OUR OPERATING RESULTS.
The time it takes to sell our solutions to prospective clients varies
substantially, but typically ranges between six and twelve months. Variations in
the length of our sales cycles could cause our revenues to fluctuate widely from
period to period. Because we typically recognize a substantial portion of our
license revenues in the last month of a quarter, any delay in the sale of our
products could cause significant variations in our revenues from quarter to
quarter. Furthermore, because our operating expenses are relatively fixed over
the short term and we devote significant time and resources to prospective
clients, these fluctuations could cause our operating results to suffer in some
future periods. The length of our sales cycle depends on a number of factors,
including the following:
- the complexities of the supply chain and eBusiness problems our solutions
address;
- the breadth of the solution required by the client, including the
technical, organizational and geographic scope of the license;
- the evaluation and approval process employed by the client;
- the sales channel through which the solution is sold; and
- any other delays arising from factors beyond our control.
THE SIZE AND SCOPE OF OUR CONTRACTS WITH CLIENTS ARE INCREASING, WHICH MAY CAUSE
FLUCTUATIONS IN OUR OPERATING RESULTS.
Our clients and prospective clients are seeking to solve increasingly
complex supply chain and eBusiness problems. Further, we are now focusing on
providing total solutions to our clients, as opposed to only licensing software.
As the complexity of the problems our clients seek to solve
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increases, the size and scope of our contracts with clients increase. As a
result, our operating results could fluctuate due to the following factors:
- the complexity of our contracts;
- contractual terms may vary widely, which may result in differing methods
of accounting for revenue from each contract;
- losses of, or delays in concluding, larger contracts could have a
proportionately greater effect on our revenues for a particular period;
and
- the sales cycles related to larger contracts may be longer and subject to
greater delays.
Any of these factors could cause our revenues to decline or fluctuate
significantly in any quarter and could cause a decline in our stock price.
WE HAVE EXPERIENCED DIFFICULTIES INTEGRATING ACQUISITIONS IN THE PAST AND MAY
EXPERIENCE PROBLEMS WITH FUTURE ACQUISITIONS THAT COULD MATERIALLY HARM OUR
BUSINESS.
Acquisitions involve the integration of companies that have previously
operated independently. In connection with any acquisition, there can be no
assurance that we will:
- effectively integrate employees, operations, products and systems;
- realize the expected benefits of the transaction;
- retain key employees;
- effectively develop and protect key technologies and proprietary
know-how;
- avoid conflicts with our clients who have commercial relationships or
compete with the acquired company;
- avoid unanticipated operational difficulties or expenditures; and
- effectively operate our existing business lines, given the significant
diversion of resources and management attention required to successfully
integrate acquisitions, including the acquisition of Talus in December
2000.
We experienced significant difficulties with the integration of the
products and operations of ProMIRA Software, Inc. (ProMIRA), and TYECIN Systems,
Inc. (TYECIN), which we acquired in the first half of calendar year 1998. These
difficulties included problems integrating the prior ProMIRA sales forces and
the delayed releases of the in-process technology acquired as part of the
transaction. In addition, as a result of the poor financial performance we
experienced in fiscal 1999, the technology acquired in conjunction with the
TYECIN acquisition was not integrated into our solutions and, therefore,
revenues generated from this technology have been nominal. Similar difficulties
with future acquisitions could materially and adversely affect our business,
results of operations and financial condition.
WE MAY ENCOUNTER PROBLEMS EFFECTIVELY INTEGRATING TALUS.
On December 21, 2000, we completed the acquisition of Talus, a privately
held company that provides pricing and revenue optimization products and
services. This acquisition is substantially larger than all of our prior
acquisitions, not all of which have been successful. In addition to the risks
described above in connection with acquisitions generally, the ultimate success
of our acquisition of Talus is dependent on factors which include the following:
- our ability to complete the commercial release of Talus' custom-developed
products;
- our ability to protect and maintain Talus' intellectual property rights;
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- our ability to successfully market and license the products Talus has
developed and is developing for commercial release;
- our ability to successfully integrate Talus' technologies;
- our ability to retain and motivate Talus' employees;
- market acceptance of the products Talus has commercially developed to
date;
- our ability to fulfill our strategic plan for the acquisition of Talus by
integrating our supply chain and eBusiness capabilities and products with
Talus' pricing and revenue optimization products and services;
- market acceptance of our combined supply chain, eBusiness and pricing and
revenue optimization products;
- our ability, together with Talus, to cross-sell products and services
into our respective markets; and
- the outcome of disputes and litigation which have arisen in the ordinary
course of business.
OUR ACQUISITION OF TALUS WILL ADVERSELY AFFECT OUR COMBINED FINANCIAL RESULTS.
We will incur substantial dilution to our earnings per share in accordance
with generally accepted accounting principles for the foreseeable future as a
result of the Talus acquisition. In connection with the acquisition, we will
amortize approximately $23 million of deferred compensation related to unvested
stock options over four years. Further, we will incur an annual amortization
charge of approximately $92 million related to goodwill and intangible assets
over the next four years.
WE DEPEND ON SALES OF OUR SUPPLY CHAIN OPTIMIZATION AND EBUSINESS SOLUTIONS, AND
OUR
BUSINESS WILL BE MATERIALLY AND ADVERSELY AFFECTED IF THE MARKET FOR OUR
PRODUCTS DOES
NOT CONTINUE TO GROW.
Substantially all of our software license fees, consulting revenues and
solution support revenues have arisen from, or are related directly to, our
supply chain optimization and eBusiness solutions. We expect to continue to be
dependent upon these products in the future, and any factor adversely affecting
the products or the market for supply chain and eBusiness solutions, in general,
would materially and adversely affect our ability to generate revenues. While we
believe the market for supply chain and eBusiness solutions will continue to
expand, it may grow more slowly than in the past. If the market for our products
does not grow as rapidly as we expect, revenue growth, operating margins or both
could be adversely affected.
OUR MARKET IS VERY COMPETITIVE, AND WE MAY NOT BE ABLE TO EFFECTIVELY COMPETE.
The market for our solutions is very competitive. The intensity of
competition in our markets has significantly increased and we expect to increase
in the future, particularly in the eBusiness software applications market. Our
current and potential competitors may make acquisitions of other competitors and
may establish cooperative relationships among themselves or with third parties.
Further, our current or prospective clients and partners may become competitors
in the future. Increased competition is likely to result in price reductions,
lower gross margins, longer sales cycles and the loss of market share. Each of
these developments could materially and adversely affect our growth and
operating performance.
9
<PAGE> 11
MANY OF OUR COMPETITORS HAVE SIGNIFICANTLY MORE RESOURCES THAN WE DO AND,
THEREFORE, WE
MAY BE AT A DISADVANTAGE IN COMPETING WITH THEM.
We directly compete with other application software vendors including:
Adexa, Inc., Aspen Technology, Inc., The Descartes Systems Group Inc., i2
Technologies, Inc., Logility, Inc. and SynQuest, Inc. Some eBusiness software
companies that do not currently offer competitive products or solutions, such as
Ariba, Inc. and Commerce One, may begin to compete directly with us. In
addition, some enterprise resource planning (ERP) companies such as Invensys plc
(which acquired Baan Company N.V.), J.D. Edwards & Company, Oracle Corporation,
PeopleSoft, Inc., and SAP AG have acquired or developed and are continuing to
develop supply chain planning software products. Some of our current and
potential competitors, particularly the ERP vendors, have significantly greater
financial, marketing, technical and other competitive resources than us, as well
as greater name recognition and a larger installed base of clients. In addition,
many of our competitors have well-established relationships with our current and
potential clients and have extensive knowledge of our industry. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in client requirements or to devote greater resources to the
development, promotion and sale of their products than we can. Any of these
factors could materially impair our ability to compete and adversely affect our
revenue growth and operating performance.
IF WE FAIL TO DEVELOP NEW PRODUCTS AND SERVICES IN THE FACE OF OUR INDUSTRY'S
RAPIDLY
EVOLVING TECHNOLOGY, OUR FUTURE RESULTS MAY BE MATERIALLY AND ADVERSELY
AFFECTED.
The market for supply chain optimization and eBusiness solutions is subject
to rapid technological change, changing client needs, frequent new product
introductions and evolving industry standards that may render existing products
and services obsolete. Our growth and future operating results will depend, in
part, upon our ability to enhance existing applications and develop and
introduce new applications or capabilities that:
- meet or exceed technological advances in the marketplace;
- meet changing client requirements;
- comply with changing industry standards;
- achieve market acceptance;
- integrate third-party software effectively; and
- respond to competitive offerings.
Our product development and testing efforts have required, and are expected
to continue to require, substantial investment. We may not possess sufficient
resources to continue to make the necessary investments in technology. In
addition, we may not successfully identify new software opportunities or develop
and bring new software to market in a timely and efficient manner. If we are
unable, for technological or other reasons, to develop and introduce new and
enhanced software in a timely manner, we may lose existing clients and fail to
attract new clients, which may adversely affect our performance.
DEFECTS IN OUR SOFTWARE OR PROBLEMS IN THE IMPLEMENTATION OF OUR SOFTWARE COULD
LEAD TO CLAIMS FOR DAMAGES BY OUR CLIENTS, LOSS OF REVENUES OR DELAYS IN THE
MARKET ACCEPTANCE OF OUR PRODUCTS.
Our software products are complex and are frequently integrated with a wide
variety of third-party software. We may license products that contain undetected
errors or failures when new products are first introduced or as new versions are
released. We may also be unable to meet client expectations in implementing our
solutions. These problems may result in claims for damages suffered by our
clients or a loss of, or delays in, the market acceptance of our products.
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<PAGE> 12
In the past, we have discovered software errors in our new releases and new
products after their introduction. In the event that we experience significant
software errors in future releases, we could experience claims for damages,
delays in product releases, client dissatisfaction and potentially lost revenues
during the period required to correct these errors. In the future, we may
discover errors or limitations in new releases or new products after the
commencement of commercial shipments. Any of these errors, defects or delays
could materially harm our business.
WE ARE DEPENDENT ON THIRD-PARTY SOFTWARE INCORPORATED IN OUR PRODUCTS AND
SOLUTIONS, AND
IMPAIRED RELATIONS WITH THESE THIRD PARTIES, DEFECTS IN THIRD-PARTY SOFTWARE OR
THE INABILITY TO ENHANCE THEIR SOFTWARE OVER TIME COULD HARM OUR BUSINESS.
We incorporate third-party software into our products and solutions. We are
likely to incorporate additional third-party software into our products and
solutions as we expand our product offerings. The operation of our products
would be impaired if errors occur in the third-party software that we utilize.
It may be more difficult for us to correct any defects in third-party software
because the software is not within our control. Accordingly, our business could
be adversely affected in the event of any errors in this software. There can be
no assurance that these third parties will continue to invest the appropriate
levels of resources in their products and services to maintain and enhance the
software capabilities. Furthermore, it may be difficult for us to replace any
third-party software if a vendor seeks to terminate our license to the software.
Any impairment in our relationship with these third parties could adversely
impact our business and financial condition.
WE ARE SUBSTANTIALLY DEPENDENT ON THIRD PARTIES TO INTEGRATE OUR SOFTWARE WITH
OTHER SOFTWARE PRODUCTS AND PLATFORMS.
We depend on companies such as Extricity, Inc. and Vignette Corporation to
integrate our software with software and platforms developed by third parties.
If these companies are unable to develop or maintain software that effectively
integrates our software and is free from errors, our ability to license our
products and provide solutions could be impaired. Further, we rely on these
companies to maintain relationships with the companies that provide the external
software that is vital to the functioning of our products and solutions. The
loss of any company that we use to integrate our software products could
adversely affect our business, results of operations and financial condition.
OUR EFFORTS TO DEVELOP RELATIONSHIPS WITH VENDORS SUCH AS SOFTWARE COMPANIES,
CONSULTING FIRMS, RESELLERS AND OTHERS TO IMPLEMENT AND PROMOTE OUR SOFTWARE
PRODUCTS MAY FAIL.
We are developing, maintaining and enhancing significant working
relationships with complementary vendors, such as software companies, consulting
firms, resellers and others that we believe can play an important role in
marketing our products. We are currently investing, and intend to continue to
invest significant resources to develop and enhance these relationships, which
could adversely affect our operating margins. We may be unable to develop
relationships with organizations that will be able to market our products
effectively. Our arrangements with these organizations are not exclusive and, in
many cases, may be terminated by either party without cause. Many of the
organizations with whom we are developing or maintaining marketing relationships
have commercial relationships with our competitors. Therefore, there can be no
assurance that any organization will continue its involvement with us and our
products. The loss of relationships with important organizations could
materially and adversely affect our results of operations.
WE HAVE ONLY RECENTLY ENTERED INTO CONTRACTS WITH GOVERNMENTAL AGENCIES. THESE
CONTRACTS OFTEN INVOLVE LONG PURCHASE CYCLES AND COMPETITIVE PROCUREMENT
PROCESSES.
We have recently begun providing our solutions to government agencies and
expect that a significant portion of our future revenues may be derived from
government agency clients.
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<PAGE> 13
Obtaining government contracts may involve long purchase cycles, competitive
bidding, qualification requirements, performance bond requirements, delays in
funding, budgetary constraints and extensive specification development and price
negotiations. In order to facilitate doing business with the federal government,
we submit a schedule of prices for our products and services to the General
Services Administration. We are permitted to update our schedule of prices only
on an annual basis. Each government agency maintains its own rules and
regulations with which we must comply and which can vary significantly among
agencies. Government agencies also often retain a significant portion of fees
payable upon completion of a project and collection of such fees may be delayed
for several months. Accordingly, our revenues could decline as a result of these
government procurement processes. In addition, it is possible that, in the
future, some of our government contracts are fixed price contracts which may
prevent us from recovering costs incurred in excess of our budgeted costs. Fixed
price contracts may require us to estimate the total project cost based on
preliminary projections of the project's requirements. The financial viability
of any given project depends in large part on our ability to estimate such costs
accurately and complete the project on a timely basis. In the event our actual
costs exceed the fixed contract cost, we will not be able to recover the excess
costs. If we fail to properly anticipate costs on fixed price contracts, our
profit margins will decrease. Some government contracts are also subject to
termination or renegotiation at the convenience of the government, which could
result in a large decline in revenue in any given quarter. Multi-year contracts
are contingent on overall budget approval by Congress and may be terminated due
to lack of funds.
INCREASED SALES THROUGH INDIRECT CHANNELS MAY ADVERSELY AFFECT OUR OPERATING
PERFORMANCE.
Even if our marketing efforts through indirect channels are successful and
result in increased sales, our average selling prices and operating margins
could be adversely affected because of the lower unit prices that we receive
when selling through indirect channels.
IF WE FAIL TO EFFECTIVELY EXPAND OUR SALES ORGANIZATION, OUR ABILITY TO GROW
WILL BE LIMITED.
Our continuing efforts to expand our sales organization will require
significant resources. New sales personnel will require training and may take a
long time to achieve full productivity. Further, the competition for qualified
sales personnel is intense, and there is no assurance that we can attract and
retain qualified sales people at levels sufficient to support our growth. Any
failure to adequately sell and support our products could limit our growth and
adversely affect our performance.
THE LIMITED ABILITY OF LEGAL PROTECTIONS TO SAFEGUARD OUR INTELLECTUAL PROPERTY
RIGHTS COULD
IMPAIR OUR ABILITY TO COMPETE EFFECTIVELY.
Our success and ability to compete are substantially dependent on our
internally developed technologies and trademarks, which we protect through a
combination of confidentiality procedures, contractual provisions, patent,
copyright, trademark and trade secret laws. Despite our efforts to protect our
proprietary rights, unauthorized parties may copy aspects of our products or
obtain and use information that we regard as proprietary. Policing unauthorized
use of our products is difficult and, although we are unable to determine the
extent to which piracy of our software products exists, we expect software
piracy to be a problem. In addition, the laws of some foreign countries do not
protect our proprietary rights to the same extent as the laws of the United
States. Furthermore, our competitors may independently develop technology
similar to ours.
OUR PRODUCTS MAY INFRINGE UPON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY
CAUSE US TO INCUR UNEXPECTED COSTS OR PREVENT US FROM SELLING OUR PRODUCTS.
The number of intellectual property claims in our industry may increase as
the number of competing products grows and the functionality of products in
different industry segments overlaps. In recent years, there has been a tendency
by software companies to file substantially
12
<PAGE> 14
increasing numbers of patent applications. We have no way of knowing what patent
applications third parties have filed until a patent is issued. It can take as
long as three years for a patent to be granted after an application has been
filed. Although we are not aware that any of our products infringe upon the
proprietary rights of third parties, there can be no assurance that third
parties will not claim infringement by us with respect to current or future
products. Any of these claims, with or without merit, could be time-consuming to
address, result in costly litigation, cause product shipment delays or require
us to enter into royalty or license agreements. These royalty or license
agreements might not be available on terms acceptable to us or at all, which
could materially and adversely affect our business.
OUR INTERNATIONAL OPERATIONS POSE RISKS FOR OUR BUSINESS AND FINANCIAL
CONDITION.
We currently conduct operations in a number of countries around the world.
These operations require significant management attention and financial
resources and subject us to risks inherent in doing business internationally,
such as:
- regulatory requirements;
- difficulties in staffing and managing foreign operations;
- longer collection cycles;
- different accounting practices;
- problems in collecting accounts receivable;
- legal uncertainty regarding liability, ownership and protection of
intellectual property;
- tariffs and other trade barriers;
- seasonal reductions in business activities;
- potentially adverse tax consequences; and
- political instability.
Any of the above factors could adversely affect the success of our
international operations. One or more of these factors could have a material
adverse effect on our business and operating results.
FLUCTUATIONS IN FOREIGN CURRENCIES COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
Although the majority of our contracts are denominated in U.S. dollars,
most of the revenues from licenses with customers outside the United States have
been denominated in foreign currencies, typically in the local currency of our
selling business unit. We anticipate that the proportion of our revenues
denominated in foreign currencies will increase. A decrease in the value of
foreign currencies relative to the U.S. dollar could result in losses from
foreign currency fluctuations. With respect to our international sales that are
U.S. dollar-denominated, an increase in the value of the U.S. dollar relative to
the value of foreign currencies could make our products and services less
competitive with respect to price.
IF WE LOSE OUR KEY PERSONNEL, THE SUCCESS AND GROWTH OF OUR BUSINESS MAY SUFFER.
Our success depends significantly on the continued service of our executive
officers. We do not have fixed-term employment agreements with any of our
executive officers, and we do not maintain key person life insurance on our
executive officers. The loss of services of any of our officers for any reason
could have a material adverse effect on our business, operating results,
financial condition and cash flows.
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<PAGE> 15
THE FAILURE TO HIRE AND RETAIN QUALIFIED PERSONNEL WOULD HARM OUR BUSINESS.
We believe that our success also will depend significantly on our ability
to attract, integrate, motivate and retain additional highly skilled technical,
managerial, sales, marketing and services personnel. Competition for skilled
personnel is intense, and there can be no assurance that we will be successful
in attracting, motivating and retaining the personnel required to grow and
operate profitably. In addition, the cost of hiring and retaining skilled
employees is high, and this reduces our profitability. Failure to attract and
retain highly skilled personnel could materially and adversely affect our
business. An important component of our employee compensation is stock options.
A decline in our stock price could adversely affect our ability to attract and
retain employees, as it has in the past.
WE HAVE RECENTLY EXPERIENCED SIGNIFICANT CHANGES IN OUR SENIOR MANAGEMENT TEAM
AND THERE IS NO ASSURANCE THE TEAM WILL WORK TOGETHER EFFECTIVELY.
Commencing in the first quarter of fiscal 2000, we have completely changed
our senior management team. Gregory J. Owens, our Chief Executive Officer,
joined us in April 1999. With one exception, all of our other present executive
officers joined us after Mr. Owens. Our success depends on the ability of our
management team to work together effectively. Our business, revenues and
financial condition will be materially and adversely affected if our senior
management team does not manage our company effectively or if we are unable to
retain our senior management.
EXPENSES ARISING FROM OUR STOCK OPTION REPRICING MAY HAVE A MATERIAL ADVERSE
IMPACT ON FUTURE PERFORMANCE.
In response to the poor performance of our stock price between May 1998 and
January 1999, we offered to reprice employee stock options, other than those
held by our executive officers or directors, effective January 29, 1999, to
bolster employee retention. The effect of this repricing resulted in options to
acquire approximately 3,040,000 shares being repriced and the four-year vesting
period starting over. The recently adopted FASB Interpretation No. 44 of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," requires us to record compensation expense or benefit associated
with the change in the market price of these options. The increase in our common
stock market price since the FASB-mandated measurement date of July 1, 2000
resulted in a non-cash stock compensation expense of $14.6 million being
recorded for the nine months ended November 30, 2000. This non-cash stock
compensation expense caused what would otherwise have been reported as net
income for the nine months of $3.2 million, or $0.05 per basic and diluted
share, to be reported as a net loss of $11.4 million, or $0.20 per basic and
diluted share. In each future quarter, we will record the additional expense or
benefit related to the repriced stock options still outstanding based on the
change in our common stock price as compared to the measurement date. As a
result, the repricing may continue to have a material adverse impact on reported
financial results and could therefore negatively affect our stock price.
WE MAY BE SUBJECT TO FUTURE LIABILITY CLAIMS, AND OUR COMPANY'S AND PRODUCTS'
REPUTATION
MAY SUFFER.
Many of our implementations involve projects that are critical to the
operations of our clients' businesses and provide benefits that may be difficult
to quantify. Any failure in a client's system could result in a claim for
substantial damages against us, regardless of our responsibility for the
failure. We have entered into and plan to continue to enter into agreements with
software vendors, consulting firms, resellers and others whereby they market our
solutions. If these vendors fail to meet their clients' expectations or cause
failures in their clients' systems, the reputation of our company and products
could be materially and adversely affected even if our software products perform
in accordance with their functional specifications.
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<PAGE> 16
RISKS RELATED TO OUR INDUSTRY
LACK OF GROWTH OR DECLINE IN INTERNET USAGE OR eBUSINESS COULD BE DETRIMENTAL TO
OUR
FUTURE OPERATING RESULTS.
The growth of the Internet has increased demand for supply chain
optimization and eBusiness solutions, as well as created markets for new and
enhanced product offerings. Therefore, our future sales and profits are
substantially dependent upon the Internet as a viable commercial marketplace.
The Internet may not succeed in becoming a viable marketplace for a number of
reasons, including:
- potentially inadequate development of network infrastructure or delayed
development of enabling technologies and performance improvements;
- delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity;
- concerns that may develop among businesses and consumers about
accessibility, security, reliability, cost, ease of use and quality of
service;
- increased taxation and governmental regulation; or
- changes in, or insufficient availability of, communications services to
support the Internet, resulting in slower Internet user response times.
The occurrence of any of these factors could require us to modify our
technology and our business strategy. Any such modifications could require us to
expend significant amounts of resources. In the event that the Internet does not
become and remain a viable commercial marketplace, our business, financial
condition and results of operations could be materially and adversely affected.
NEW LAWS OR REGULATIONS AFFECTING THE INTERNET, eBUSINESS OR COMMERCE IN GENERAL
COULD
REDUCE OUR REVENUES AND ADVERSELY AFFECT OUR GROWTH.
Congress and other domestic and foreign governmental authorities have
adopted and are considering legislation affecting the use of the Internet,
including laws relating to the use of the Internet for commerce and
distribution. The adoption or interpretation of laws regulating the Internet, or
of existing laws governing such things as consumer protection, libel, property
rights and personal privacy, could hamper the growth of the Internet and its use
as a communications and commercial medium. If this occurs, companies may decide
not to use our products or services, and our business and operating results
could suffer.
THE VIABILITY OF ELECTRONIC EXCHANGES IS UNCERTAIN.
Electronic exchanges that allow collaboration over the Internet among
trading partners are relatively new and unproven. There can be no assurance that
trading partners will adopt exchanges as a method of doing business. Trading
partners may fail to participate in exchanges for a variety of reasons,
including:
- concerns about the confidentiality of information provided electronically
to exchanges;
- the inability of technological advances to keep pace with the volume of
information processed by exchanges; and
- regulatory issues, including antitrust issues that may arise when trading
partners collaborate through exchanges.
15
<PAGE> 17
Any of these factors could limit the growth of exchanges as an accepted
means of commerce. Slower growth or the abandonment of the exchange concept in
one or more industries could have a material adverse affect on our results of
operations and financial condition.
RISKS RELATED TO THE NOTES
OUR INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.
In November 2000, we completed a debt offering of $250 million in 5%
subordinated convertible notes. Our indebtedness could have important
consequences for investors. For example, it could:
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to obtain additional financing;
- require the dedication of a substantial portion of our cash flow from
operations to the payment of principal of, and interest on, our
indebtedness, thereby reducing the availability of such cash flow to fund
our growth strategy, working capital, capital expenditures and other
general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry; and
- place us at a competitive disadvantage relative to our competitors with
less debt.
Although we have no present plans to do so, we may incur substantial
additional debt in the future. Neither the terms of our credit facility nor the
terms of these Notes fully prohibit us from doing so. If a significant amount of
new debt is added to our current levels, the related risks described above could
intensify.
WE MAY HAVE INSUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE OBLIGATIONS.
We will be required to generate cash sufficient to pay all amounts due on
the Notes and to conduct our business operations. We have net losses, and we may
not be able to cover our anticipated debt service obligations. This may
materially hinder our ability to make principal and interest payments on the
Notes. Our ability to meet our future debt service obligations will be dependent
upon our future performance, which will be subject to financial, business and
other factors affecting our operations, many of which are beyond our control.
RESALES OF SIGNIFICANT AMOUNTS OF OUR COMMON STOCK ISSUED IN CONNECTION WITH THE
ACQUISITION OF TALUS SOLUTIONS MAY CAUSE OUR STOCK PRICE TO DECLINE.
In connection with the acquisition of Talus Solutions, Inc., we issued
7,026,260 new shares of our common stock. Of these shares, a total of 5,972,530
shares were delivered to Manugistics' exchange agent for direct transfer to the
former Talus stockholders and a total of 1,053,730 shares were delivered to
State Street Bank and Trust Company, as escrow agent, to secure potential
indemnification claims of Manugistics. To the extent that the escrowed shares
are not subject to indemnification claims, the escrowed shares will be released,
subject to existing claims, in two installments, on October 31, 2001 and July 2,
2002. Of the 5,972,530 shares delivered to the exchange agent, approximately 1.3
million shares were freely tradable upon completion of the acquisition. The
remaining approximately 4.6 million shares are subject to share transfer
restrictions and will become available for sale in three stages in accordance
with the terms of the share transfer restriction agreements signed by certain
principals of Talus Solutions, Inc. The first release date is January 18, 2001,
at which time approximately 1.2 million shares will be released. The balance of
these shares will be released, in accordance with the terms of the share
transfer restriction agreements, on May 31, 2001 and October 31, 2001.
16
<PAGE> 18
In addition, at closing, a total of approximately 1.4 million shares were
reserved for issuance upon exercise of outstanding Talus Solution's stock
options and warrants which were assumed by Manugistics. Options to purchase a
total of approximately 700,000 shares were exercisable at the time of completion
of the acquisition. In addition, a total of approximately 370,000 of these
shares are subject to share transfer restrictions which expire January 18, 2001.
SALES OF SIGNIFICANT AMOUNTS OF OUR COMMON STOCK BY OUR EXECUTIVE OFFICERS AND
DIRECTORS MAY CAUSE OUR STOCK PRICE TO DECLINE.
Certain of our executive officers have entered into pre-established trading
plans to sell up to a total of approximately 515,000 shares of our common stock
in January 2001 and thereafter in amounts ranging from approximately 275,000 to
300,000 shares per fiscal quarter. These quarterly sales will continue until the
trading plans are modified or terminated. Certain of our other executive
officers and directors are considering establishing similar plans to sell shares
on a quarterly basis. The sale of these shares may cause the market price of our
stock price to decline.
OUR CHARTER AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE
A TAKEOVER EVEN IF BENEFICIAL TO STOCKHOLDERS.
Our charter and our bylaws, in conjunction with Delaware law, contain
provisions that could make it more difficult for a third party to obtain control
of us even if doing so would be beneficial to stockholders. For example, our
bylaws provide for a classified board of directors and allow our board of
directors to expand its size and fill any vacancies without stockholder
approval. In addition, our bylaws require a two-thirds vote of stockholders to
remove a director from office. Furthermore, our board has the authority to issue
preferred stock and to designate the voting rights, dividend rate and privileges
of the preferred stock all of which may be greater than the rights of common
stockholders.
OUR STOCK PRICE HAS BEEN AND IS LIKELY TO CONTINUE TO BE VOLATILE.
The trading price of our common stock has been and is likely to be highly
volatile. Our stock price could be subject to wide fluctuations in response to a
variety of factors, including the following:
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations;
- new products or services offered by us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the supply chain and eBusiness software industry;
- changes in the performance and/or market valuations of other supply chain
and eBusiness companies and the software industry in general;
- our announcement of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- adoption of industry standards and the inclusion of our technology in, or
compatibility of our technology with, such standards;
- adverse or unfavorable publicity regarding us or our products;
- additions or departures of key personnel;
- our sales of additional capital stock; and
- other events or factors that may be beyond our control.
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<PAGE> 19
In addition, the stock markets in general, The Nasdaq National Market and
the market for software companies in particular, have recently experienced
extreme price and volume volatility and a significant cumulative decline in
recent months. Such volatility and decline have affected many companies
irrespective of or disproportionately to the operating performance of these
companies. These broad market and industry factors may materially and adversely
further affect the market price of our common stock, regardless of our actual
operating performance.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for the years ended February 28,
1997 and February 29, 1996 was 57x and 22x, respectively. Our earnings were
insufficient to cover fixed charges in the years ended February 29 or 28, 1998,
1999 and 2000 and the nine-month periods ended November 30, 1999 and 2000.
Additional earnings of $13.2 million, $96.1 million, $8.9 million, $7.9 million
and $11.4 million were necessary to provide a 1:1 coverage ratio for the years
ended February 29 or 28, 1998, 1999 and 2000 and for the nine-month periods
ended November 30, 1999 and 2000, respectively. For the purpose of these
calculations, "earnings" consist of income before taxes, plus fixed charges, and
"fixed charges" consist of interest expense incurred and the portion of rental
expense deemed by us to be representative of the interest factor of rental
payment under leases.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Notes or the common
stock into which the Notes are convertible. The selling holders will receive all
of the net proceeds from the sale of the Notes and the common stock into which
the Notes are convertible, which they respectively own.
PRICE RANGE OF COMMON STOCK
Our common stock trades on The Nasdaq National Market under the symbol
"MANU." The following table sets forth, for the periods indicated, the high and
low sales prices per share for our common stock, as reported on The Nasdaq
National Market for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR 1999
First Quarter............................................. $33.19 $12.63
Second Quarter............................................ 15.75 7.00
Third Quarter............................................. 8.25 3.07
Fourth Quarter............................................ 8.69 3.75
FISCAL YEAR 2000
First Quarter............................................. $ 5.63 $ 2.63
Second Quarter............................................ 8.00 4.34
Third Quarter............................................. 8.94 4.53
Fourth Quarter............................................ 29.06 8.50
FISCAL YEAR 2001
First Quarter............................................. $35.13 $12.53
Second Quarter............................................ 46.66 11.25
Third Quarter............................................. 66.06 30.88
Fourth Quarter (December 1 through January 17)............ 64.38 34.44
</TABLE>
On January 17, 2001, the last reported sale price of our common stock as
reported on The Nasdaq National Market was $45.50 per share. On January 17,
2001, there were approximately 210 holders of record of our common stock.
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<PAGE> 20
DIVIDEND POLICY
We have never paid any cash dividends on our capital stock. We currently
anticipate that we will retain earnings to support our operations and to finance
the growth and development of our business, and we do not anticipate paying any
cash dividends for the foreseeable future. We have an unsecured committed
revolving credit facility with a commercial bank that will expire on September
30, 2001, unless it is renewed. Under the terms of the credit facility, we are
prohibited from declaring or paying cash dividends on our common stock.
SELLING HOLDERS
We originally issued the Notes and the Notes were sold by the initial
purchasers in a transaction exempt from the registration requirements of the
Securities Act to persons reasonably believed by the initial purchasers to be
qualified institutional buyers as defined by Rule 144A under the Securities Act
or to persons other than U.S. persons. Selling holders, including their
transferees, pledges or donees or their successors, may from time to time offer
and sell pursuant to this prospectus any or all of the Notes and common stock
into which the Notes are convertible. We agreed to use reasonable efforts to
keep the registration statement effective until October 20, 2002. Our
registration of the Notes and the shares of common stock into which the Notes
are convertible does not necessarily mean that the selling holders will sell any
or all of the Notes or the shares of the common stock into which the Notes are
convertible.
The following table sets forth information, as of January 17, 2001, with
respect to the selling holders and the principal amounts of Notes beneficially
owned by each selling holder that may be offered under this prospectus. The
information is based on information provided by or on behalf of the selling
holders. The selling holders may offer all, some or none of the Notes or common
stock into which the Notes are convertible. Because the selling holders may
offer all or some portion of the Notes or the common stock, no estimate can be
given as to the amount of the Notes or the common stock that will be held by the
selling holders upon termination of any sales. In addition, the selling holders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their Notes since the date on which they provided the information
regarding their Notes in transactions exempt from the registration requirements
of the Securities Act.
Each selling holder proposes to sell up to all of the common stock issuable
to such holder upon conversion of the Notes.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT COMMON STOCK
OF NOTES ISSUABLE UPON
BENEFICIALLY OWNED CONVERSION OF
SELLING HOLDER AND OFFERED THE NOTES(1)
-------------- ------------------ -----------------
<S> <C> <C>
[to be provided]
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT COMMON STOCK
OF NOTES ISSUABLE UPON
BENEFICIALLY OWNED CONVERSION OF
SELLING HOLDER AND OFFERED THE NOTES(1)
-------------- ------------------ -----------------
<S> <C> <C>
[to be provided]
------------ ---------
Total.......................................... $250,000,000 5,673,758
============ =========
</TABLE>
---------------
(1) Assumes a conversion rate of approximately 22.695 shares of common stock per
$1,000 principal amount of Notes and a cash payment in lieu of any
fractional interest.
None of the Selling holders nor any of their affiliates, officers,
directors or principal equity holders has held any position or office or has had
any material relationship with us within the past three years. The selling
holders purchased all of the Notes in a private transaction. All of the Notes
and the shares of common stock into which the Notes are convertible are
"restricted securities" under the Securities Act.
Information concerning the selling holders may change from time to time and
any changed information will be set forth in supplements to this prospectus if
and when necessary. In addition, the conversion price, and therefore the number
of shares of common stock issuable upon conversion of the Notes, is subject to
adjustment under certain circumstances. Accordingly, the aggregate principal
amount of Notes and the number of shares of common stock into which the Notes
are convertible may increase or decrease.
PLAN OF DISTRIBUTION
The selling holders and their successors, including their transferees,
pledgees, or donees or their successors, may sell the Notes and the common stock
into which the Notes are convertible directly to purchasers or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions from the selling holders or the
purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
The Notes and the common stock into which the Notes are convertible may be
sold in one or more transactions at fixed prices, at prevailing market prices at
the time of sale, at prices related to the prevailing market prices, at varying
prices determined at the time of sale, or at negotiated
20
<PAGE> 22
prices. These sales may be effected in transactions, which may involve crosses
or block transactions:
- on any national securities exchange or U.S. inter-dealer system of a
registered national securities association on which the Notes or the
common stock may be listed or quoted at the time of sale;
- in the over-the-counter market;
- in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
- through the writing of options, whether the options are listed on an
options exchange or otherwise;
- by pledge to secure debts and other obligations;
- through the settlement of short sales; or
- a combination of any of the above transactions.
In connection with the sale of the Notes and the common stock into which
the Notes are convertible or otherwise, the selling holders may enter into
hedging transactions with broker-dealers or other financial institutions, which
may in turn engage in short sales of the Notes or the common stock into which
the Notes are convertible in the course of hedging the positions they assume.
The selling holders may also sell the Notes or the common stock into which the
Notes are convertible short and deliver these securities to close out their
short positions, or loan or pledge the Notes or the common stock into which the
Notes are convertible to broker-dealers that in turn may sell these securities.
The aggregate proceeds to the selling holders from the sale of the Notes or
common stock into which the Notes are convertible offered by them will be the
purchase price of the Notes or common stock less discounts and commissions, if
any. Each of the selling holders reserves the right to accept and, together with
their agents from time to time, to reject, in whole or in part, any proposed
purchase of Notes or common stock to be made directly or through agents. We will
not receive any of the proceeds from this offering.
Our outstanding common stock is listed for trading on The Nasdaq National
Market. We do not intend to list the Notes for trading on any national
securities exchange or on The Nasdaq National Market and can give no assurance
about the development of any trading market for the Notes.
In order to comply with the securities laws of some states, if applicable,
the Notes and common stock into which the Notes are convertible may be sold in
these jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the Notes and common stock into which the Notes are
convertible may not be sold unless they have been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the Notes and common stock into which the Notes are
convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling holders who are "underwriters" within the meaning of
Section of 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act. The selling holders have
acknowledged that they understand their obligations to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M.
21
<PAGE> 23
In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling holder
may not sell, transfer, gift, or otherwise dispose of any Notes or common stock
described in this prospectus by any means other than as described in this
prospectus.
To the extent required, the specific Notes or common stock to be sold, the
names of the selling holders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement of which this prospectus is a part.
We entered into a registration rights agreement for the benefit of holders
of the Notes to register their Notes and common stock under applicable federal
and state securities laws under specific circumstances and at specific times.
The registration rights agreement provides for cross-indemnification of the
selling holders and us and their and our respective directors, officers and
controlling persons against specific liabilities in connection with the offer
and sale of the Notes and the common stock, including liabilities under the
Securities Act.
A prospectus has not been and will not be filed under the securities laws
of any province or territory of Canada to qualify the sale of Notes in such
jurisdictions. The Notes are not being offered and may not be offered or sold,
directly or indirectly, in Canada or to or for the account of any resident of
Canada except in compliance with or pursuant to an exemption from the
registration and prospectus requirements of applicable securities laws in
Canada.
DESCRIPTION OF NOTES
The Notes were issued under an Indenture between Manugistics Group, Inc.
and State Street Bank and Trust Company, as trustee. The following description
is only a summary of the material provisions of the Indenture, the Notes and the
registration rights agreement. We urge you to read the Indenture, the Notes and
the registration rights agreement in their entirety because they, and not this
description, define your rights as holders of the Notes. You may request copies
of these documents at our address shown under the caption "Where You Can Find
More Information." The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended. For purposes of this section, references to "we," "us," "ours"
and "Manugistics" include only Manugistics Group, Inc. and not its subsidiaries.
GENERAL
We issued the Notes with a principal amount of $250,000,000. The Notes are
unsecured, subordinated obligations of Manugistics and will mature on November
1, 2007, unless earlier redeemed at our option as described under "-- Optional
Redemption of the Notes" or repurchased by us at a holder's option upon a change
in control of Manugistics as described under "-- Right to Require Purchase of
Notes upon a Change in Control." Interest on the Notes will accrue at the rate
per annum shown on the cover page of this prospectus and will be payable
semiannually in arrears on May 1 and November 1 of each year, commencing on May
1, 2001. Interest on the Notes will accrue from the date of original issuance
or, if interest has already been paid, from the date it was most recently paid.
We will make each interest payment to the holders of record of the Notes on the
immediately preceding April 15 and October 15, whether or not this day is a
business day. Interest on the Notes will be computed on the basis of a 360-day
year comprised of twelve 30-day months. The Indenture does not contain any
restriction on:
- the payment of dividends;
- the issuance of Senior Indebtedness (as defined below) or other
indebtedness; or
22
<PAGE> 24
- the repurchase of securities of Manugistics;
and does not contain any financial covenants. Other than as described under
"-- Right to Require Purchase of Notes upon a Change in Control," the Indenture
contains no covenants or other provisions to afford protection to holders of
Notes in the event of a highly leveraged transaction or a change in control of
Manugistics.
We will pay the principal of, premium, if any, and interest on the Notes at
the office or agency maintained by us in the Borough of Manhattan in New York
City. Holders may register the transfer of their Notes at the same location. We
reserve the right to pay interest to holders of the Notes by check mailed to the
holders at their registered addresses or by wire transfer to holders of at least
$5,000,000 aggregate principal amount of Notes. Except under the limited
circumstances described below, the Notes will be issued only in fully-registered
book-entry form, without coupons, and will be represented by one or more Global
Notes. There will be no service charge for any registration of transfer or
exchange of Notes. We may, however, require holders to pay a sum sufficient to
cover any tax or other governmental charge payable in connection with any
transfer or exchange.
CONVERSION RIGHTS
A holder may, at any time after January 18, 2001 and before the close of
business on October 31, 2007, convert a Note or any portion of a Note (if the
portions are $1,000 or whole multiples of $1,000) into shares of common stock
initially at the conversion price of $44.0625 per share (which is equivalent to
a conversion rate of approximately 22.695 shares per $1,000 principal amount of
Notes), unless the Note or a portion of the Note has been previously redeemed or
repurchased. The right to convert a Note called for redemption will terminate at
the close of business on the business day immediately preceding the date fixed
for redemption, unless we default in making the payment due on the redemption
date. For information as to notices of redemption, see "-- Optional Redemption
of the Notes." If a holder of a Note has delivered notice of its election to
have the Note repurchased as a result of a Change in Control, the Note may be
converted only if the notice of election is withdrawn as described under
"-- Right to Require Purchase of Notes upon a Change in Control."
We will adjust the conversion price if (without duplication):
(1) we issue common stock as a dividend or distribution on our common
stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to substantially all holders of our common stock rights,
warrants or options entitling them to subscribe for or purchase common
stock at less than the then current market price;
(4) we distribute to substantially all holders of common stock
evidences of our indebtedness, shares of capital stock (other than common
stock), securities, cash, property, rights, warrants or options, excluding:
- those rights, warrants or options referred to in clause (3) above;
- any dividend or distribution paid exclusively in cash not referred to
in clause (5) below; and
- any dividend or distribution referred to in clause (1) above;
(5) we make a cash distribution to substantially all holders of our
common stock, that together with all other all-cash distributions and
consideration payable in respect of any tender or exchange offer by us or
one of our subsidiaries for our common stock made within the preceding
twelve months exceeds 10% of our aggregate market capitalization on the
date of the distribution; or
23
<PAGE> 25
(6) we complete a repurchase (including by way of a tender offer) of
our common stock which involves an aggregate consideration that, together
with:
- any cash and other consideration payable in respect of any tender or
exchange offer by us or one of our subsidiaries for our common stock
concluded within the preceding twelve months; and
- the amount of any all-cash distributions to all holders of our common
stock made within the preceding twelve months,
exceeds 10% of our aggregate market capitalization on the expiration of the
tender or exchange offer.
The conversion price will not be adjusted until adjustments amount to 1% or
more of the conversion price as last adjusted. We will carry forward any
adjustment we do not make and will include it in any future adjustment.
If our common stock is converted into the right to receive other
securities, cash or other property as a result of reclassifications,
consolidations, mergers, sales or transfers of assets or other transactions,
each Note then outstanding would, without the consent of any holders of Notes,
become convertible only into the kind and amount of securities, cash and other
property receivable upon the transaction by a holder of the number of shares of
common stock which would have been received by a holder immediately prior to the
transaction if the holder had converted the Note.
We will not issue fractional shares of common stock to a holder who
converts a Note. In lieu of issuing fractional shares, we will pay cash based
upon the market price.
Except as described in this paragraph, no holder of Notes will be entitled,
upon conversion of the Notes, to any actual payment or adjustment on account of
accrued and unpaid interest or on account of dividends on shares of common stock
issued in connection with the conversion. If any holder surrenders a note for
conversion between the close of business on any record date for the payment of
an installment of interest and the opening of business on the related interest
payment date the holder must deliver payment to us of an amount equal to the
interest payable on the interest payment date on the principal amount converted
together with the note being surrendered. The foregoing sentence shall not apply
to Notes called for redemption on a redemption date within the period between
and including the record date and interest payment date.
If we make a distribution of property to our stockholders which would be
taxable to them as a dividend for federal income tax purposes and the conversion
price of the Notes is reduced, this reduction may be deemed to be the receipt of
taxable income to holders of the Notes.
In addition, we may make any reductions in the conversion price that our
board of directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of
stock, or rights to acquire stock, or from any event treated as such for income
tax purposes or for any other reasons.
SUBORDINATION
The payment of the principal or, premium, if any, and interest on the Notes
will, to the extent described in the Indenture, be subordinated in right of
payment to the prior payment in full of all our Senior Indebtedness. The holders
of all Senior Indebtedness will first be entitled to receive payment in full of
all amounts due or to become due on the Senior Indebtedness, or provision for
payment in money or money's worth, before the holders of the Notes will be
entitled to receive any
24
<PAGE> 26
payment in respect of the Notes, when there is a payment or distribution of
assets to creditors upon our:
- liquidation;
- dissolution;
- winding up;
- reorganization;
- assignment for the benefit of creditors;
- marshaling of assets;
- bankruptcy;
- insolvency; or
- similar proceedings.
In addition, because our subsidiaries are not obligated under the Notes,
the Notes will be effectively subordinated to all existing and future
indebtedness and other liabilities of our subsidiaries.
No payments on account of the Notes or on account of the purchase or
acquisition of Notes may be made if a default in any payment with respect to
Senior Indebtedness has occurred and is continuing. If (1) there is a default on
any Designated Senior Indebtedness other than a payment default that occurs that
permits the holders of that Designated Senior Indebtedness to accelerate its
maturity and (2) the Trustee and Manugistics receive the notice required by the
Indenture, no payments may be made on the Notes for up to 179 days in any
365-day period unless the default is cured or waived. By reason of this
subordination, in the event of our insolvency, holders of the Notes may recover
less ratably than holders of our Senior Indebtedness.
"Senior Indebtedness" means:
- the principal of and premium, if any, and interest on, and fees, costs,
enforcement expenses, collateral protection expenses and other
reimbursement or indemnity obligations in respect of all of our
indebtedness or obligations of us to any person for money borrowed that
is evidenced by a note, bond, debenture, loan agreement, or similar
instrument or agreement;
- commitment or standby fees due and payable to lending institutions with
respect to credit facilities available to us;
- all of our noncontingent obligations (1) for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction, (2) under interest rate swaps, caps, collars, options, and
similar arrangements, and (3) under any foreign exchange contract,
currency swap agreement, futures contract, currency option contract or
other foreign currency hedge;
- all of our obligations for the payment of money relating to capitalized
lease obligations;
- any liabilities of others described in the preceding clauses that we have
guaranteed or which are otherwise our legal liability; and
- renewals, extensions, refundings, refinancings, restructurings,
amendments and modifications of any such indebtedness or guarantee, other
than any indebtedness or other obligation of ours that by its terms is
not superior in right of payment to the Notes.
"Designated Senior Indebtedness" means our obligations under any particular
Senior Indebtedness in which the instrument creating or evidencing the same or
the assumption or guarantee
25
<PAGE> 27
thereof, or related agreements or documents to which we are a party, expressly
provides that such indebtedness shall be designated Senior Indebtedness for
purposes of the Indenture. The instrument, agreement or other document
evidencing any Designated Senior Indebtedness may place limitations and
conditions of the right of such senior debt to exercise the rights of Designated
Senior Indebtedness.
As of December 31, 2000, we had no indebtedness that would have constituted
Senior Indebtedness. We expect from time to time to incur additional
indebtedness. The Indenture does not limit or prohibit us from incurring
additional Senior Indebtedness or other indebtedness. See "Risk Factors -- We
may not be able to repurchase the Notes in the event of a change in control."
OPTIONAL REDEMPTION OF THE NOTES
At any time on or after November 7, 2003, we may redeem the Notes in whole,
or from time to time, in part, at our option on at least 30 days' notice if the
trading price of our common stock for 20 trading days in a period of 30
consecutive trading days ending on the day prior to the mailing of notice of
redemption exceeds 120% of the conversion price of the Notes. The redemption
price, expressed as a percentage of the principal amount, will be as follows:
<TABLE>
<CAPTION>
REDEMPTION
REDEMPTION PERIOD PRICE
----------------- ----------
<S> <C>
November 7, 2003 through October 31, 2004................... 103.0%
November 1, 2004 through October 31, 2005................... 102.0%
November 1, 2005 through October 31, 2006................... 101.0%
</TABLE>
and 100% of the principal amount on and after November 1, 2006.
If we opt to redeem less than all of the Notes at any time, the trustee
will select or cause to be selected the Notes to be redeemed by any method that
it deems fair and appropriate. In the event of a partial redemption, the trustee
may provide for selection for redemption of portions of the principal amount of
any Note of a denomination larger than $1,000.
MANDATORY REDEMPTION
Except as set forth below under "-- Right to Require Purchase of Notes upon
a Change of Control," we are not required to make mandatory redemption of, or
sinking fund payments with respect to, the Notes.
RIGHT TO REQUIRE PURCHASE OF NOTES UPON A CHANGE IN CONTROL
If a Change in Control (as defined below) occurs, each holder of Notes may
require that we repurchase the holder's Notes on the date fixed by us that is
not less than 45 nor more than 60 days after we give notice of the Change in
Control. We will repurchase the Notes for an amount of cash equal to 100% of the
principal amount of the Notes on the date of purchase, plus accrued and unpaid
interest, if any, to the date of repurchase.
"Change in Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of
Manugistics and its subsidiaries, taken as a whole, to any person or group of
related persons, as defined in Section 13(d) of the Securities Exchange Act of
1934, (a "Group"); (ii) the approval by the holders of capital stock of
Manugistics of any plan or proposal for the liquidation or dissolution of
Manugistics (whether or not otherwise in compliance with the provisions of the
applicable indenture); (iii) any person or Group shall become the owner,
directly or indirectly, beneficially or of record, of shares representing more
than 50% of the aggregate ordinary voting power represented by Manugistics'
issued and outstanding voting stock
26
<PAGE> 28
of, or any successor to, all or substantially all of Manugistics' assets; or
(iv) the first day on which a majority of the members of Manugistics' board of
directors are not Continuing Directors.
The definition of Change in Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Manugistics and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all", there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require Manugistics to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of Manugistics and its
subsidiaries taken as a whole to another person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the board of directors of Manugistics who (i) was a member of such board of
directors on the date of the original issuance of the Notes or (ii) was
nominated for election or elected to such board of directors with the approval
of a majority of the Continuing Directors who were members of such board at the
time of such nomination or election.
On or prior to the date of repurchase, we will deposit with a paying agent
an amount of money sufficient to pay the aggregate repurchase price of the Notes
which is to be paid on the date of repurchase.
We may not repurchase any Note at any time when the subordination
provisions of the Indenture otherwise would prohibit us from making payments of
principal in respect of the Notes. If we fail to repurchase the Notes when
required under the preceding paragraph, this failure will constitute an event of
default under the Indenture whether or not repurchase is permitted by the
subordination provisions of the Indenture.
On or before the 30th day after the Change in Control, we must mail to the
trustee and all holders of the Notes a notice of the occurrence of the Change in
Control, stating:
- the repurchase date;
- the date by which the repurchase right must be exercised;
- the repurchase price for the Notes; and
- the procedures which a holder of Notes must follow to exercise the
repurchase right.
To exercise the repurchase right, the holder of a Note must deliver, on or
before the third business day before the repurchase date, a written notice to us
and the trustee of the holder's exercise of the repurchase right. This notice
must be accompanied by certificates evidencing the Note or Notes with respect to
which the right is being exercised, duly endorsed for transfer. This notice of
exercise may be withdrawn by the holder at any time on or before the close of
business on the business day preceding the repurchase date.
The effect of these provisions granting the holders the right to require us
to repurchase the Notes upon the occurrence of a Change in Control may make it
more difficult for any person or group to acquire control of us or to effect a
business combination with us. Moreover, under the Indenture, we will not be
permitted to pay principal of or interest on, or otherwise acquire the Notes,
including any repurchase at the election of the holders of Notes upon the
occurrence of a Change in Control, if a payment default on our Senior
Indebtedness has occurred and is continuing, or if our Senior Indebtedness is
not paid in full in the event of our insolvency, bankruptcy, reorganization,
dissolution or other winding up. Our ability to pay cash to holders of Notes
following the occurrence of a Change in Control may be limited by our then
existing financial resources. We cannot assure you that sufficient funds will be
available when necessary to make any required repurchases. See "Risk
Factors -- We may not be able to repurchase the Notes in the event of a change
in control."
27
<PAGE> 29
If a Change in Control occurs and the holders exercise their rights to
require us to repurchase Notes, we intend to comply with applicable tender offer
rules under the Exchange Act with respect to any repurchase.
The term "beneficial owner" shall be determined in accordance with Rules
13d-3 and 13d-5 promulgated by the SEC under the Securities Exchange Act or any
successor provision, except that a person shall be deemed to have "beneficial
ownership" of all shares that the person has the right to acquire, whether
exercisable immediately or only after the passage of time.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of any of the Notes, consolidate
with or merge into any other person or convey, transfer or lease our properties
and assets substantially as an entirety to, any other person, if:
- we are the resulting or surviving corporation or the successor,
transferee or lessee, if other than us, is a corporation organized under
the laws of any U.S. jurisdiction and expressly assumes our obligations
under the Indenture and the Notes by means of a supplemental Indenture
entered into with the trustee; and
- after giving effect to the transaction, no event of default and no event
which, with notice or lapse of time, or both, would constitute an event
of default, shall have occurred and be continuing.
Under any consolidation, merger or any conveyance, transfer or lease of our
properties and assets as described in the preceding paragraph, the successor
company will be our successor and shall succeed to, and be substituted for, and
may exercise every right and power of, Manugistics under the Indenture. Except
in the case of a lease, if the predecessor is still in existence after the
transaction, it will be released from its obligations and covenants under the
Indenture and the Notes.
MODIFICATION AND WAIVER
We and the trustee may enter into one or more supplemental Indentures that
add, change or eliminate provisions of the Indenture or modify the rights of the
holders of the Notes with the consent of the holders of at least a majority in
principal amount of the Notes then outstanding. However, without the consent of
each holder of an outstanding Note, no supplemental Indenture may, among other
things:
- change the stated maturity of the principal of, or any installment of
interest on, any Note;
- reduce the principal amount of, or the premium or rate of interest on,
any Note;
- change the currency in which the principal of any Note or any premium or
interest is payable;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any Note when due;
- adversely affect the right provided in the Indenture to convert any Note;
- modify the subordination provisions of the Indenture in a manner adverse
to the holders of the Notes;
- modify the provisions of the Indenture relating to our requirement to
offer to repurchase Notes upon a Change in Control in a manner adverse to
the holders of the Notes;
- reduce the percentage in principal amount of the outstanding Notes
necessary to modify or amend the Indenture or to consent to any waiver
provided for in the Indenture; or
- waive a default in the payment of principal of, or any premium or
interest on, any Note.
28
<PAGE> 30
The holders of a majority in principal amount of the outstanding Notes may,
on behalf of the holders of all Notes:
- waive compliance by us with restrictive provisions of the Indenture other
than as provided in the preceding paragraph; and
- waive any past default under the Indenture and its consequences, except a
default in the payment of the principal of or any premium or interest on
any Note or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Note affected.
Without the consent of any holders of Notes, we and the trustee may enter
into one or more supplemental Indentures for any of the following purposes:
- to cure any ambiguity, omission, defect or inconsistency in the
Indenture;
- to evidence a successor to us and the assumption by the successor of our
obligations under the Indenture and the Notes;
- to make any change that does not adversely affect the rights of any
holder of the Notes;
- to comply with any requirement in connection with the qualification of
the Indenture under the Trust Indenture Act; or
- to complete or make provision for certain other matters contemplated by
the Indenture.
EVENTS OF DEFAULT
Each of the following is an "event of default":
(1) a default in the payment of any interest upon any of the Notes
when due and payable, continued for 30 days;
(2) a default in the payment of the principal of and premium, if any,
on any of the Notes when due, including on a redemption date;
(3) failure to pay when due the principal of or interest on
indebtedness for money borrowed by us or our subsidiaries in excess of
$20.0 million, or the acceleration of that indebtedness that is not
withdrawn within 15 days after the date of written notice to us by the
trustee or to us and the trustee by the holders of at least 25% in
principal amount of the outstanding Notes;
(4) a default by us in the performance, or breach, of any of our other
covenants in the Indenture which are not remedied by the end of a period of
60 days after written notice to us by the trustee or to us and the trustee
by the holders of at least 25% in principal amount of the outstanding
Notes; or
(5) events of bankruptcy, insolvency or reorganization of Manugistics
or any Significant Subsidiary of Manugistics.
If an event of default described in clauses (1), (2), (3) or (4) occurs and
is continuing, either the trustee or the holders of at least 25% in principal
amount of the outstanding Notes may declare the principal amount of and accrued
interest on all Notes to be immediately due and payable. This declaration may be
rescinded if the conditions described in the Indenture are satisfied. If an
event of default of the type referred to in clause (5) occurs, the principal
amount of and accrued interest on the outstanding Notes will automatically
become immediately due and payable.
"Significant Subsidiary" means a "significant subsidiary" as defined in
Regulation S-X under the Securities Exchange Act.
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Within 90 days after a default, the trustee must give to the registered
holders of Notes notice of all uncured defaults known to it. The trustee will be
protected in withholding the notice if it in good faith determines that the
withholding of the notice is in the best interests of the registered holders,
except in the case of a default in the payment of the principal of, or premium,
if any, or interest on, any of the Notes when due or in the payment of any
redemption obligation.
The holders of not less than a majority in principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceedings for any remedy available to the trustee, or exercising any trust or
power conferred on the trustee. Subject to the provisions of the Indenture
relating to the duties of the trustee, if an event of default occurs and is
continuing, the trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any of the
holders of the Notes unless the holders have offered to the trustee reasonable
indemnity or security against any loss, liability or expense. Except to enforce
the right to receive payment of principal, premium, if any, or interest when due
or the right to convert a Note in accordance with the Indenture, no holder may
institute a proceeding or pursue any remedy with respect to the Indenture or the
Notes unless it complies with the conditions provided in the Indenture,
including:
- holders of at least 25% in principal amount of the outstanding Notes have
requested the trustee to pursue the remedy; and
- holders have offered the trustee security or indemnity satisfactory, to
the trustee against any loss, liability or expense.
We are required to deliver to the trustee annually a certificate indicating
whether the officers signing the certificate know of any default by us in the
performance or observance of any of the terms of the Indenture. If the officers
know of a default, the certificate must specify the status and nature of all
defaults.
BOOK-ENTRY, DELIVERY AND FORM
We issued the Notes sold in the United States in reliance on Rule 144A, or
in offshore transactions in reliance on Regulation S, in the form of Global
Notes. The Global Notes were deposited with, or on behalf of, the clearing
agency registered under the Exchange Act that is designated to act as depositary
for the Notes and registered in the name of the depositary or its nominee. The
DTC was the initial depositary.
Investors who are "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) and who purchase Notes in reliance on Rule 144A under
the Securities Act may hold their interests in a Global Note directly through
DTC if they are DTC participants, or indirectly through organizations that are
DTC participants.
Investors who purchase Notes in offshore transactions in reliance on
Regulation S under the Securities Act may hold their interests in a Global Note
directly through Morgan Guaranty Trust Company of New York, Brussels office, as
operator of, the Euroclear System and Clearstream Banking, if they are
participants in these systems, or indirectly through organizations that are
participants in these systems. Euroclear and/or Clearstream Banking will hold
interests in a Global Note on behalf of their participants through their
respective depositaries, which in turn will hold the interests in a Global Note
in customers' securities accounts in the depositaries' names on the books of
DTC. Citibank, N.A., is acting initially as depositary for Clearstream Banking
and The Chase Manhattan Bank is acting initially as, depositary for Euroclear.
Except as set forth below, a Global Note may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
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DTC has advised us that DTC is:
- a limited-purpose trust company organized under the laws of the State of
New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Securities Exchange Act.
DTC was created to hold securities of institutions that have accounts with
DTC and to facilitate the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations.
Access to DTC's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or indirectly.
Pursuant to the procedures established by DTC (1) upon the issuance of a
Global Note, DTC credited, on its book-entry registration and transfer system,
the respective principal amount of the individual beneficial interests
represented by the Global Note to the accounts of participants and (2) ownership
of beneficial interests in a Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
DTC (with respect to participants' interests) and the participants (with respect
to the owners of beneficial interests in the Global Note other than
participants). The accounts credited were designated by the initial purchasers
of the beneficial interests. Ownership of beneficial interests in a Global Note
is limited to participants or persons that may hold interests through
participants.
So long as DTC or its nominee is the registered holder and owner of a
Global Note, DTC or its nominee, as the case may be, will be considered the sole
legal owner of the Notes represented by the Global Note for all purposes under
the Indenture and the Notes. Except as set forth below, owners of beneficial
interests in a Global Note will not be entitled to receive definitive Notes and
will not be considered to be the owners or holders of any Notes under the Global
Note. We understand that under existing industry practice, in the event an owner
of a beneficial interest in a Global Note desires to take any action that DTC,
as the holder of the Global Note, is entitled to take, DTC would authorize the
participants to take the action, and that participants would authorize
beneficial owners owning through the participants to take the action or would
otherwise act upon the instructions of beneficial owners owning through them. No
beneficial owner of an interest in a Global Note will be able to transfer the
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the indenture and, if applicable, those of Euroclear
and Clearstream Banking.
We will make payments of the principal of, and interest on, the Notes
represented by a Global Note registered in the name of and held by DTC or its
nominee to DTC or its nominee, as the case may be, as the registered owner and
holder of the Global Note.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a Global Note, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the Global Note as shown on the records of DTC or its
nominee. We also expect that payments by participants and indirect participants
to owners of beneficial interests in a Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for accounts of customers registered in
the names of nominees for these customers. The
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payments, however, will be the responsibility of the participants and indirect
participants, and neither we, the trustee nor any paying agent will have any
responsibility or liability for:
- any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a Global Note;
- maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
- any other aspect of the relationship between DTC and its participants; or
- the relationship between the participants and indirect participants and
the owners of beneficial interests in a Global Note.
Unless and until it is exchanged in whole or in part for definitive Notes,
a Global Note may not be transferred except as a whole by DTC to a nominee of
DTC or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC will effect transfers with other participants in the
ordinary way in accordance with DTC rules and will settle transfers in same-day
funds. Participants in Euroclear and Clearstream Banking will effect transfers
with other participants in the ordinary way in accordance with the rules and
operating procedures of Euroclear and Clearstream Banking, as applicable. If a
holder requires physical delivery of a definitive Note for any reason, including
to sell Notes to persons in jurisdictions which require physical delivery or to
pledge Notes, the holder must transfer its interest in a Global Note in
accordance with the normal procedures of DTC and the procedures set forth in the
indenture.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream Banking participants, on the other,
will be effected in DTC in accordance with DTC rules on behalf Euroclear or
Clearstream Banking, as the case may be, by its respective depositary; however,
these cross-market transactions will require delivery of instructions to
Euroclear or Clearstream Banking, as the case may be, by the counterparty in the
system in accordance with its rules and procedures and within its established
deadlines (Brussels time). Euroclear or Clearstream Banking, as the case may be,
will, if the transaction meets its settlement requirements, deliver instructions
to its respective depositary to take action to effect final settlement on its
behalf by delivering or receiving interests in a Global Note in DTC, and making
or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream Banking
participants may not deliver instructions directly to the depositaries for
Euroclear or Clearstream Banking.
Because of time zone differences, the securities account of a Euroclear or
Clearstream Banking participant purchasing an interest in a Global Note from a
DTC participant will be credited during the securities settlement processing day
(which must be a business day for Euroclear or Clearstream Banking, as the case
may be) immediately following the DTC settlement date, and the credit of any
transactions interests in a Global Note settled during the processing day will
be reported to the relevant Euroclear or Clearstream Banking participant on that
day. Cash received in Euroclear or Clearstream Banking as a result of sales of
interests in a Global Note by or through a Euroclear or Clearstream Banking
participant to a DTC participant will be received with value on the DTC
settlement date, but will be available in the relevant Euroclear or Clearstream
Banking cash account only as of the business day following settlement in DTC.
We expect that DTC will take any action permitted to be taken by a holder
of Notes (including the presentation of Notes for exchange as described below)
only at the direction of one or more participants to whose accounts at the DTC
interests in a Global Note are credited and only in respect of the portion of
the aggregate the principal amount of the Notes as to which the participant or
participants has or have given direction. However, if there is an event of
default under the Notes, DTC will exchange the Global Notes for definitive
Notes, which it will distribute to its
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participants. These definitive Notes are subject to certain restrictions on
registration of transfers and will bear appropriate legends restricting their
transfer. Although we expect that DTC, Euroclear and Clearstream Banking will
agree to the foregoing procedures in order to facilitate transfers of interests
in Global Notes among their participants, DTC, Euroclear and Clearstream Banking
are under no obligation to perform or continue to perform these procedures, and
these procedures may be discontinued at any time. Neither we nor the Trustee
have any responsibility for the performance by DTC, Euroclear or Clearstream
Banking or their participants or indirect participants of their obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
Global Notes or ceases to be a clearing agency registered under the Securities
Exchange Act and we do not appoint a successor depositary within 90 days, we
will issue definitive Notes in exchange for the Global Notes. The definitive
Notes will be subject to certain restrictions on registration of transfers and
will bear appropriate legends concerning these restrictions.
CONVERTIBLE NOTES
In October and November 2000, we issued an aggregate $250,000,000 of 5%
Convertible Subordinate Notes due in November 2007. The Notes are convertible
into shares of common stock at a conversion price of $44.0625 per share at any
time on or 90 days following the last day of original issuance through maturity,
unless previously redeemed or repurchased. We may redeem some or all of the
Notes at any time on or after November 7, 2003 at the redemption prices set
forth in this prospectus, if the closing price of our stock exceeds 120% of the
conversion price for at least 20 trading days within a period of 30 consecutive
trading days ending on the trading day prior to the date of mailing of the
redemption notice. Interest is payable semiannually.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement between us and the holders of
the Notes, we agreed to, at our cost:
- on or prior to January 18, 2001, file a shelf registration statement with
the SEC covering resales of the Notes and the common stock issuable on
conversion of the Notes;
- use all reasonable efforts to cause the shelf registration statement to
be declared effective under the Securities Act no later than April 18,
2001; and
- use all reasonable efforts to keep the shelf registration statement
effective after its effective date for as long as required to permit
sales under Rule 144(k) under the Securities Act or any successor rule or
regulation.
We have the right to suspend use of the shelf registration statement,
during specified periods of time relating to pending corporate developments and
public filings with the SEC and similar events. If, after the shelf registration
statement has been declared effective, we fail to keep the shelf registration
statement effective or usable in accordance with and during the periods
specified in the registration rights agreement, then we will pay liquidated
damages to all holders of Notes and all holders of common stock issued on
conversion of the Notes equal to 0.5% of the aggregate principal amount of Notes
per annum until such failure is cured.
A holder who elects to sell any securities pursuant to the shelf
registration statement:
- will be required to be named as selling security holder;
- will be required to deliver a prospectus to purchasers;
- will be subject to the civil liability provisions under the Securities
Act in connection with any sales; and
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- will be bound by the provisions of the registration rights agreement,
which are applicable, including indemnification obligations.
We refer to the Notes and the common stock issuable on conversion of the
Notes as registrable securities. Promptly upon request from any holder of
registrable securities, we will provide a form of notice and questionnaire to be
completed and delivered by that holder to us at least three business days before
any intended distribution of registrable securities under the shelf registration
statement. If we receive from a holder of registrable securities a completed
questionnaire, together with such other information as may be reasonably
requested by us, after the effectiveness of the shelf registration statement, we
will file an amendment to the shelf registration statement or supplement to, the
related prospectus to permit the holder to deliver a prospectus to purchasers of
registrable securities. Any holder that does not complete and deliver a
questionnaire or provide such other information will not be named as a selling
security holder in the prospectus and therefore will not be permitted to sell
any registrable securities under the shelf registration statement.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflict
of laws.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of common
stock, par value $0.002 per share, and 4,620,253 shares of preferred stock, par
value $0.01 per share.
COMMON STOCK
As of December 20, 2000, there were 65,200,156 shares of our common stock
outstanding held of record by approximately 210 holders, including 7,026,260
shares issued in connection with our acquisition of Talus.
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of our stockholders. Holders
of our common stock do not have the right to cumulate their votes. Directors are
elected by a plurality of votes cast; all other matters are approved by a
majority of the votes cast.
Subject to preferences that may be applicable to any outstanding shares of
our preferred stock, the holders of our common stock are entitled to receive
ratably such dividends as may be declared by our board of directors out of funds
legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of our company, holders of our common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any outstanding shares of our
preferred stock. Holders of our common stock have no preemptive rights and no
right to convert our common stock into any other securities. There are no
redemption or sinking fund provisions applicable to our common stock. All
outstanding shares of our common stock are fully paid and non-assessable.
PREFERRED STOCK
We may, by resolution of our board of directors, and without any further
vote or action by our stockholders, authorize and issue, subject to certain
limitations prescribed by law, up to an aggregate of 4,620,253 shares of
preferred stock. The preferred stock may be issued in one or more classes or
series of shares of any class or series. With respect to any classes or series,
our board of directors may determine the designation and the number of shares,
preferences, limitations and special rights, including dividend rights,
conversion rights, voting rights, redemption rights and liquidation preferences.
Because of the rights that may be granted, the issuance of
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preferred stock may delay, defer or prevent a change of control. No shares of
preferred stock are outstanding and we presently have no plans to issue shares
of preferred stock.
LIMITATION ON LIABILITY
Our certificate of incorporation limits or eliminates the liability of our
directors to us or our stockholders for monetary damages to the fullest extent
permitted by the Delaware General Corporation Law. As permitted by the Delaware
General Corporation Law, our certificate of incorporation provides that our
directors shall not be personally liable to us or our stockholders for monetary
damages for a breach of fiduciary duty as a director, except for liability:
- for any breach of such person's duty of loyalty;
- for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
- for the payment of unlawful dividends and certain other actions
prohibited by Delaware corporate law; and
- for any transaction resulting in receipt by such person of an improper
personal benefit.
Our certificate of incorporation also contains provisions indemnifying our
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law. We also have directors' and officers' liability insurance to
provide our directors and officers with insurance coverage for losses arising
from claims based on breaches of duty, negligence, errors and other wrongful
acts.
CERTAIN ANTI-TAKEOVER PROVISIONS
Our by-laws provide for the division of our board of directors into three
classes. Each class must be as nearly equal in number as possible. Additionally,
each class must serve a three-year term. The terms of each class are staggered
so that each term ends in a different year over a three-year period. Any
director not elected by holders of preferred stock may be removed only for cause
and only by the vote of more than 67% of the shares entitled to vote for the
election of directors.
Our certificate of incorporation provides that our board of directors may
establish the rights of, and cause us to issue, substantial amounts of preferred
stock without the need for stockholder approval. Further, our board of directors
may determine the terms, conditions, rights, privileges and preferences of the
preferred stock. Our board is required to exercise its business judgment when
making such determinations. Our board of directors' use of the preferred stock
may inhibit the ability of third parties to acquire Manugistics. Additionally,
our board may use the preferred stock to dilute the common stock of entities
seeking to obtain control of Manugistics. The rights of the holders of common
stock will be subject to, and may be adversely affected by, any preferred stock
that may be issued in the future. Our preferred stock provides desirable
flexibility in connection with possible acquisitions, financings and other
corporate transactions. However, it may have the effect of discouraging,
delaying or preventing a change in control of Manugistics. We have no present
plans to issue any shares of preferred stock. The existence of the foregoing
provisions in our certificate of incorporation and by-laws could make it more
difficult for third parties to acquire or attempt to acquire control of us or
substantial amounts of our common stock.
Section 203 of the Delaware General Corporation Law applies to Manugistics.
Section 203 of the Delaware General Corporation Law generally prohibits certain
"business combinations" between a Delaware corporation and an "interested
stockholder." An "interested stockholder" is generally defined as a person who,
together with any affiliates or associates of such person, beneficially owns, or
within three years did own, directly or indirectly, 15% or more of the
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outstanding voting shares of a Delaware corporation. The statute broadly defines
business combinations to include:
- mergers;
- consolidations;
- sales or other dispositions of assets having an aggregate value in excess
of 10% of the consolidated assets of the corporation or aggregate market
value of all outstanding stock of the corporation; and
- certain transactions that would increase the "interested stockholder's"
proportionate share ownership in the corporation.
The statute prohibits any such business combination for a period of three
years commencing on the date the "interested stockholder" becomes an "interested
stockholder," unless:
- the business combination is approved by the corporation's board of
directors prior to the date the "interested stockholder" becomes an
"interested stockholder"; or
- the "interested stockholder" acquired at least 85% of the voting stock of
the corporation (other than stock held by directors who are also officers
or by certain employee stock plans) in the transaction in which it
becomes an "interested stockholder" if the business combination is
approved by a majority of the board of directors and by the affirmative
vote of at least two-thirds of the outstanding voting stock that is not
owned by the "interested stockholder."
The Delaware General Corporation Law contains provisions enabling a
corporation to avoid Section 203's restrictions if stockholders holding a
majority of the corporation's voting stock approve an amendment to the
corporation's certificate of incorporation or by-laws to avoid the restrictions.
We have not and do not currently intend to "elect out" of the application of
Section 203 of the Delaware General Corporation Law.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income tax
considerations relating to the purchase, ownership and disposition of the Notes
and common stock into which Notes may be converted, but does not purport to be a
complete analysis of all the potential tax considerations relating thereto. This
summary is based on laws, regulations, rulings and decisions now in effect, all
of which are subject to change or differing interpretation possibly with
retroactive effect. Except as specifically discussed below with regard to
Non-U.S. Holders (as defined below), this summary applies only to beneficial
owners that will hold Notes and common stock into which Notes may be converted
as "capital assets" (within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the "Code")) and who, for U.S. federal income tax
purposes, are (i) individual citizens or residents of the U.S., (ii)
corporations, partnerships or other entities created or organized in or under
the laws of the U.S. or of any political subdivision thereof (unless, in the
case of a partnership, Treasury Regulations otherwise provide), (iii) estates,
the incomes of which are subject to U.S. federal income taxation regardless of
the source of such income or (iv) trusts subject to the primary supervision of a
U.S. court and the control of one or more U.S. persons or any trust that has a
valid election in effect under applicable Treasury Regulations to be treated as
a U.S. person ("U.S. Holders"). Persons other than U.S. Holders ("Non-U.S.
Holders") are subject to special U.S. federal income tax considerations, some of
which are discussed below. This discussion does not address tax considerations
applicable to an investor's particular circumstances or to investors that may be
subject to special tax rules, such as banks or other financial institutions,
holders subject to the alternative minimum tax, tax-exempt organizations,
insurance companies, regulated investment companies, foreign persons or entities
(except to the extent specifically set forth below), dealers in securities,
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commodities or currencies, initial holders whose "functional currency" is not
the U.S. dollar, persons that will hold Notes as a position in a hedging
transaction, "straddle" or "conversion transaction" for tax purposes or persons
deemed to sell Notes or common stock under the constructive sale provisions of
the Code. This summary discusses the tax considerations applicable to initial
holders of the Notes who purchase the Notes at their "issue price" as defined in
Section 1273 of the Code and certain tax considerations applicable to subsequent
purchasers of the Notes. We have not sought any ruling from the Internal Revenue
Service (the "IRS") or an opinion of counsel with respect to the statements made
and the conclusions reached in the following summary, and there can be no
assurance that the IRS will agree with such statements and conclusions. In
addition, the IRS is not precluded from successfully adopting a contrary
position. This summary does not consider the effect of the federal estate or
gift tax laws or the tax laws (except as set forth below with respect to
Non-U.S. Holders) of any applicable foreign, state, local or other jurisdiction.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE FEDERAL, ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
U.S. HOLDERS
TAXATION OF INTEREST
Interest paid on the Notes will be included in the income of a U.S. Holder
as ordinary income at the time it is treated as received or accrued, in
accordance with such holder's regular method of accounting for U.S. federal
income tax purposes. Under Treasury Regulations, the possibility of an
additional payment under a Note may be disregarded for purposes of determining
the amount of interest or original issue discount income to be recognized by a
holder in respect of such Note (or the timing of such recognition) if the
likelihood of the payment, as of the date the Notes are issued, is remote. Our
failure to file or cause to be declared effective a shelf registration statement
as described under "Description of Notes-Registration Rights" may result in the
payment of predetermined liquidated damages in the manner described therein. In
addition, a holder may require us to redeem any and all of his Notes in the
event of a Change in Control. We believe that the likelihood of a liquidated
damages payment with respect to the Notes is remote and do not intend to treat
such possibility as affecting the yield to maturity of any Note. Similarly, we
intend to take the position that a Change in Control is remote under the
Treasury Regulations, and likewise do not intend to treat the possibility of a
"Change in Control" as affecting the yield to maturity of any Note. In the event
either contingency occurs, it would affect the amount and timing of the income
that must be recognized by a U.S. Holder of Notes. There can be no assurance
that the IRS will agree with such positions. Our determination that there is a
remote likelihood of paying additional interest on the Notes is binding on each
U.S. Holder unless the holder explicitly discloses in the manner required by
applicable Treasury Regulations that its determination is different from ours.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange (other than a conversion) or redemption of a Note,
a U.S. Holder generally will recognize capital gain or loss equal to the
difference between (i) the amount of cash proceeds and the fair market value of
any property received on the sale, exchange or redemption (except to the extent
such amount is attributable to accrued interest income not previously included
in income, which will be taxable as ordinary income, or is attributable to
accrued interest that was previously included in income, which amount may be
received without generating further income) and (ii) such holder's adjusted tax
basis in the Note. A U.S. Holder's adjusted tax basis in a Note generally will
equal the cost of the Note to such holder. Such capital gain or loss will be
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long-term capital gain or loss if the U.S. Holder's holding period in the Note
is more than one year at the time of sale, exchange or redemption. Long term
capital gains recognized by certain non-corporate U.S. Holders, including
individuals, will generally be subject to a maximum federal rate of tax of 20%.
The deductibility of capital losses is subject to limitations.
MARKET DISCOUNT
The resale of the Notes may be affected by the impact on a purchaser of the
"market discount" provisions of the Code. For this purpose, the market discount
on the Notes generally will be equal to the amount, if any, by which the stated
redemption price at maturity of the Notes immediately after acquisition (other
than at original issue) exceeds the holder's adjusted tax basis in the Notes.
Subject to a de minimis exception, these provisions generally require a U.S.
Holder who acquires Notes at a market discount to treat as ordinary income any
gain recognized on the disposition of such Notes to the extent of the "accrued
market discount" on such Notes at the time of disposition, unless the holder
elects to include accrued market discount in income currently. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first day of the first taxable
year to which the election applies and may not be revoked without the consent of
the IRS. In general, market discount will be treated as accruing on a
straight-line basis over the remaining term of the Notes at the time of
acquisition, or, at the election of the holder, under a constant yield method. A
holder who acquires Notes at a market discount and who does not elect to include
accrued market discount in income currently may be required to defer the
deduction of a portion of the interest on any indebtedness incurred or
maintained to purchase or carry the Notes until such Notes are disposed of in a
taxable transaction. If a holder acquires Notes with market discount and
receives our common stock upon conversion of such Notes, the amount of accrued
market discount not previously included in income with respect to the converted
Notes through the date of conversion will be treated as ordinary income upon the
disposition of the common stock.
Under the President's fiscal year 2001 budget proposal, accrual basis
taxpayers could be required to accrue market discount currently, subject to
certain limitations. No such legislation is currently pending.
AMORTIZABLE PREMIUM
A holder who purchases a Note at a premium over its stated principal
amount, plus accrued interest, generally may elect to amortize such premium
("Section 171 premium") from the purchase date to the Note's maturity date under
a constant-yield method that reflects semiannual compounding based on the Note's
payment period. Amortizable premium, however, will not include any premium
attributable to a Note conversion feature. The premium attributable to the
conversion feature is the excess, if any, of the Note's purchase price over what
the Note's fair market value would be if there were no conversion feature.
Amortized Section 171 premium is treated as an offset to interest income on a
Note and not as a separate deduction. The election to amortize a premium on a
constant yield method, once made, applies to all debt obligations held or
subsequently acquired by the electing U.S. Holder on or after the first day of
the first taxable year to which the election applies and may not be revoked
without the consent of the IRS.
DEDUCTIBILITY OF INTEREST
Generally, under Section 279 of the Code, an interest deduction in excess
of $5.0 million per year is not permitted with respect to certain "corporate
acquisition indebtedness." Corporate acquisition indebtedness includes any
indebtedness that is:
- issued to provide consideration for the direct or indirect acquisition of
stock or assets of another corporation;
- subordinated;
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- convertible directly or indirectly into the stock of the issuing
corporation; and
- issued by a corporation that has a debt to equity ratio that exceeds 2 to
1.
Our ability to deduct all of the interest payable on the Notes will depend
on the application of the foregoing tests to us. The availability of an interest
deduction with respect to the Notes was not determinative in our issuance of the
Notes pursuant to this offering.
Under Section 163(l) of the Code, no deduction is permitted for interest
paid or accrued on any indebtedness of a corporation that is "payable in equity"
of the issuer or a related party. Debt is treated as debt payable in equity of
the issuer if the debt is part of an arrangement designed to result in payment
of the instrument with or by reference to the equity. Such arrangements could
include debt instruments that are convertible at the holder's option if it is
substantially certain that the option will be exercised. The legislative history
indicates that it is not expected the provision will affect debt with a
conversion feature where the conversion price is significantly higher than the
market price of the stock on the date of the debt issuance. Accordingly, we do
not believe that our interest deduction with respect to interest payments on the
Notes will be adversely affected by these rules.
CONVERSION OF THE NOTES
A U.S. Holder generally should not recognize any income, gain or loss upon
conversion of a Note into common stock except with respect to cash received in
lieu of a fractional share of common stock and with respect to market discount,
as described above under "Market Discount." A U.S. Holder's tax basis in the
common stock received on conversion of a Note should be the same as such
holder's adjusted tax basis in the Note at the time of conversion (reduced by
any basis allocable to a fractional share interest), and the holding period for
the common stock received on conversion should generally include the holding
period of the Note converted.
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the holder's adjusted tax
basis in the fractional share).
DISTRIBUTIONS ON COMMON STOCK
Distributions, if any, made on the common stock after a conversion
generally will be included in the income of a U.S. Holder as ordinary dividend
income to the extent of our current or accumulated earnings and profits.
Distributions in excess of our current and accumulated earnings and profits will
be treated as a return of capital to the extent of the U.S. Holder's basis in
the common stock and thereafter as capital gain. A dividend distribution to a
corporate U.S. Holder may qualify for a dividends received deduction.
ADJUSTMENT OF CONVERSION PRICE
Holders of convertible debt instruments such as the Notes may, in certain
circumstances, be deemed to have received distributions of stock if the
conversion price of such instruments is adjusted. Adjustments to the conversion
price made pursuant to a bona fide reasonable adjustment formula which has the
effect of preventing the dilution of the interest of the holders of the debt
instruments, however, will generally not be considered to result in a
constructive distribution of stock. Certain of the possible adjustments provided
in the Notes (including, without limitation, adjustments in respect of taxable
dividends to our stockholders) will not qualify as being pursuant to a bona fide
reasonable adjustment formula. If such adjustments are made, the U.S. Holders of
Notes will be deemed to have received constructive distributions taxable as
dividends to the extent of our current and accumulated earnings and profits even
though they have not received any cash
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or property as a result of such adjustments. In certain circumstances, the
failure to provide for such an adjustment may result in taxable dividend income
to the U.S. Holders of common stock.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) such U.S. Holder's adjusted tax basis in the common stock.
Such capital gain or loss will be long-term capital gain or loss if the U.S.
Holder's holding period in common stock is more than one year at the time of the
sale or exchange. Long-term capital gains recognized by certain non-corporate
U.S. Holders, including individuals, will generally be subject to a maximum
federal rate of tax of 20%. A U.S. Holder's basis and holding period in common
stock received upon conversion of a Note are determined as discussed above under
"Conversion of the Notes." The deductibility of capital losses is subject to
limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
payments pursuant to the terms of a Note or common stock to a U.S. Holder that
is not an "exempt recipient" and that fails to provide certain identifying
information (such as the holder's taxpayer identification number ("TIN")) in the
manner required. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a Note or common stock must be reported to the IRS, unless the U.S.
Holder is an exempt recipient or otherwise establishes an exemption. The amount
of any backup withholding from a payment to a U.S. Holder will be allowed as a
credit against the U.S. Holder's federal income tax liability and may entitle
such holder to a refund, provided that the required information is furnished to
the IRS.
Treasury Regulations, generally effective after December 31, 2000, subject
to certain transition rules, modify the currently effective information
withholding and backup withholding procedures and requirements. U.S. Holders
should consult their own tax advisors concerning the application of the new
withholding regulations.
SPECIAL TAX RULES APPLICABLE TO NON-U.S. HOLDERS
TAXATION OF INTEREST
In general, subject to the discussion below concerning backup withholding:
payments of interest on the Notes by us or any paying agent to a beneficial
owner of a Note that is a Non-U.S. Holder will not be subject to U.S.
withholding tax, provided that, (i) such Non-U.S. Holder does not own, actually
or constructively, 10% or more of our total combined voting power of all classes
of stock entitled to vote within the meaning of Section 871(h)(3) of the Code,
(ii) such Non-U.S. Holder is not a "controlled foreign corporation" with respect
to which we are a "related person" within the meaning of the Code, (iii) such
Non-U.S. Holder is not a bank receiving interest described in Section
881(c)(3)(A) of the Code, and (iv) the certification requirements under Section
871(h) or Section 881(c) of the Code and Treasury Regulations thereunder
(discussed below) are satisfied.
Interest on Notes not excluded from U.S. withholding tax as described above
generally will be subject to U.S. withholding tax at a 30% rate, except where an
applicable tax treaty provides for the reduction or elimination of such
withholding tax.
To satisfy the certification requirements referred to in (iv) above,
Sections 871(h) and 881(c) of the Code and currently effective Treasury
Regulations thereunder require that either (i) the beneficial owner of a Note
must certify, under penalties of perjury, to us or our paying agent, as the case
may be, that such owner is a Non-U.S. Holder and must provide such owner's
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name and address, and U.S. TIN, if any, or (ii) a securities clearing
organization, bank or other financial institution that holds customer securities
in the ordinary course of its trade or business (a "Financial Institution") and
holds the Note on behalf of the beneficial owner thereof must certify, under
penalties of perjury, to us or our paying agent, as the case may be, that such
certificate has been received from the beneficial owner and must furnish the
payor with a copy thereof. Such requirement will be fulfilled if the beneficial
owner of a Note certifies on IRS Form W-8BEN or successor form, under penalties
of perjury, that it is a Non-U.S. Holder and provides its name and address or
any Financial Institution holding the Note on behalf of the beneficial owner
files a statement with the withholding agent to the effect that it has received
such a statement from the beneficial owner (and furnishes the withholding agent
with a copy thereof).
Treasury Regulations effective for payments made after December 31, 2000,
will provide alternative methods for satisfying the certification requirements
described above and below, subject to certain grandfathering provisions. These
new regulations also require, in the case of Notes held by a foreign
partnership, that (i) the certification be provided by the partners rather than
by the foreign partnership and (ii) the partnership provide certain information,
including a TIN. A look-through rule will apply in the case of tiered
partnerships.
If a Non-U.S. Holder of a Note is engaged in a trade or business in the
U.S. and if interest on the Note is effectively connected with the conduct of
such trade or business (and, if certain tax treaties apply, is attributable to a
U.S. permanent establishment maintained by the Non-U.S. Holder in the U.S.), the
Non-U.S. Holder will generally be subject to U.S. federal income tax on such
interest on a net income basis in the same manner as if it were a U.S. Holder.
In lieu of the certificate described above, such a Non-U.S. Holder will be
required, under currently effective Treasury Regulations, to provide us with a
properly executed IRS Form W-8ECI or 4224 or successor form in order to claim an
exemption from any applicable withholding tax. In addition, if such Non-U.S.
Holder is a foreign corporation, it may be subject to a branch profits tax equal
to 30% (or such lower rate provided by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments.
CONVERSION OF THE NOTES
A Non-U.S. Holder generally will not be subject to U.S. federal withholding
tax on the conversion of a Note into common stock. To the extent a Non-U.S.
Holder receives cash in lieu of a fractional share of common stock upon
conversion, such cash may give rise to gain that would be subject to the rules
described above with respect to the sale or exchange of a Note or common stock.
See "Sale, Exchange or Redemption of the Notes or Common Stock" below.
ADJUSTMENT OF CONVERSION PRICE
The conversion price of the Notes is subject to adjustment in certain
circumstances. Any such adjustment could, in certain circumstances, give rise to
a deemed distribution to Non-U.S. Holders of the Notes. See "U.S.
Holders -- Adjustment of Conversion Price" above. In such case, the deemed
distribution would be subject to the rules below regarding withholding of U.S.
federal tax on dividends in respect of common stock.
DISTRIBUTIONS ON COMMON STOCK
Distributions on common stock will constitute a dividend for U.S. federal
income tax purposes to the extent of our current or accumulated earnings and
profits as determined under U.S. federal income tax principles. Dividends paid
on common stock held by a Non-U.S. Holder will be subject to U.S. federal
withholding tax at a rate of 30% (or lower treaty rate, if applicable) unless
the dividend is effectively connected with the conduct of a U.S. trade or
business by the Non-U.S. Holder and, if required by a tax treaty, is
attributable to a permanent establishment maintained in the United States, in
which case the dividend will be subject to U.S. federal income tax on net
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income that applies to U.S. persons generally (and with respect to corporate
holders under certain circumstances, the branch profits tax). A Non-U.S. Holder
may be required to satisfy certain requirements in order to claim a reduction of
or exemption from withholding under the foregoing rules. However, prior to
January 1, 2001, for purposes of an applicable tax treaty, if a stockholder's
address is outside the United States it will be assumed that such stockholder is
a citizen or resident of that country absent the payor's knowledge to the
contrary.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES OR COMMON STOCK
A Non-U.S. Holder of a Note or common stock will not be subject to U.S.
federal income tax on gains realized on the sale, exchange or other disposition
of such Note or common stock unless (i) such Non-U.S. Holder is an individual
who is present in the U.S. for 183 days or more in the taxable year of sale,
exchange or other disposition, and certain conditions are met, (ii) such gain is
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business in the U.S. and, if certain U.S. income tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the Non-U.S.
Holder, (iii) the Non-U.S. Holder is subject to Code provisions applicable to
certain U.S. expatriates, or (iv) in the case of a Note or common stock held by
a person who holds more than 5% of our stock, we are or have been, at any time
within the shorter of the five-year period preceding such sale or other
disposition or the period such Non-U.S. Holder held the common stock, a U.S.
real property holding corporation (a "USRPHC") for U.S. federal income tax
purposes. We do not believe that we currently are a USRPHC or that we will
become one in the future.
U.S. FEDERAL ESTATE TAX
A Note held by an individual who at the time of death is not a citizen or
resident of the U.S. (as specially defined for U.S. federal estate tax purposes)
will not be subject to U.S. federal estate tax if the individual did not
actually or constructively own 10% or more of the total combined voting power of
all classes of our stock and, at the time of the individual's death, payments
with respect to such Note would not have been effectively connected with the
conduct by such individual of a trade or business in the U.S. Common stock held
by an individual who at the time of death is not a citizen or resident of the
U.S. (as specially defined for U.S. federal estate tax purposes) will be
included in such individual's estate for U.S. federal estate tax purposes,
unless an applicable estate tax treaty otherwise applies.
Non-U.S. Holders should consult with their tax advisors regarding U.S. and
foreign tax consequences with respect to the Notes and common stock.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In the case of payments of interest on a Note to a Non-U.S. Holder,
Treasury Regulations provide that backup withholding and information reporting
will not apply to payments with respect to which either requisite certification
has been received or an exemption has otherwise been established (provided that
neither we nor our paying agent has actual knowledge that the holder is a U.S.
Holder or that the conditions of any other exemption are not in fact satisfied).
Dividends on common stock paid to Non-U.S. Holders that are subject to U.S.
withholding tax, as described above, generally will be exempt from U.S. backup
withholding tax but will be subject to certain information reporting.
Payments of the proceeds of the sale of a Note or common stock to or
through a foreign office of a U.S. broker or a foreign broker that is a
"controlled foreign corporation" within the meaning of the Code or a foreign
person, 50% or more of whose gross income from all sources for the three-year
period ending with the close of its taxable year preceding the payment was
effectively connected with the conduct of a trade or business within the U.S.
are currently subject to certain information reporting requirements, unless the
payee is an exempt recipient or such broker has
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evidence in its records that the payee is a non-U.S. Holder and no actual
knowledge that such evidence is false and certain other conditions are met.
Temporary Treasury Regulations indicate that such payments are not currently
subject to backup withholding.
Under current Treasury Regulations, payments of the proceeds of a sale of a
Note or common stock to or through the U.S. office of a broker will be subject
to information reporting and backup withholding unless the payee certifies under
penalties of perjury as to his or her status as a Non-U.S. Holder and satisfies
certain other qualifications (and no agent of the broker who is responsible for
receiving or reviewing such statement has actual knowledge that it is incorrect)
and provides his or her name and address or the payee otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder of a Note or common stock will be allowed as a credit against
such holder's U.S. federal income tax, if any, or will be otherwise refundable
provided that the required information is furnished to the IRS in a timely
manner.
As noted above, new regulations will generally be applicable to payments
made after December 31, 2000. In general, these new regulations do not
significantly alter the substantive withholding and information reporting
requirements but unify current certification procedures and forms and clarify
reliance standards. Under these new regulations, special rules apply which
permit the shifting of primary responsibility for withholding to certain
financial intermediaries acting on behalf of beneficial owners. A Non-U.S.
Holder of a Note or common stock should consult with its tax advisor regarding
the application of the backup withholding rules to its particular situation, the
availability of an exemption therefrom, the procedure for obtaining such an
exemption, if available, and the impact of these new regulations on payments
made with respect to Notes or common stock after December 31, 2000.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISER AS TO THE PARTICULAR
U.S. FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES OF PURCHASING, HOLDING AND
DISPOSING OF THE NOTES AND OUR COMMON STOCK. TAX ADVISORS SHOULD ALSO BE
CONSULTED AS TO THE U.S. ESTATE AND GIFT TAX CONSEQUENCES AND THE FOREIGN TAX
CONSEQUENCES OF PURCHASING, HOLDING OR DISPOSING OF OUR NOTES AND COMMON STOCK,
AS WELL AS THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
DESCRIPTION OF MANUGISTICS
BUSINESS
We are a leading global provider of Enterprise Profit Optimization(TM)
(EPO) solutions -- the powerful combination of supply chain management and
pricing and revenue optimization (PRO) solutions -- and eBusiness solutions for
enterprises and eMarketplaces. Our solutions include infrastructure and
application software products, solution support, strategic consulting and
implementation services. Our solutions help our clients monitor and streamline
their core internal operational processes involving the design, purchase,
manufacture, storage, transportation, marketing and selling of their goods and
services. Our solutions also help integrate clients' internal processes with
trading partners and provide the collaboration and optimization required across
extended eMarketplaces. Our solutions help our clients improve resource
allocation through more cost-effective and efficient operational decisions and
improve customer service -- driving costs lower and revenues higher.
Increasing global competition, shortening product life cycles and
developing eBusiness initiatives of new and existing competitors are driving
enterprises to provide greater levels of customer
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service while shortening their time-to-market. We were an early innovator in
trading partner collaboration, with our first Internet-ready products
commercially available in late 1997. Our technology initiatives continue to
focus on the changing needs of companies in the markets we serve, as well as the
requirements of the new eBusiness economy. We have developed a web architecture
for our Manugistics NetWORKS(TM) collaborative solutions through our proprietary
WebWORKS(TM) infrastructure and have provided advanced integration to disparate
systems through our WebConnect products. Through our exchange platform
ExchangeWORKS(TM), we are now addressing the new eBusiness processes enabled by
the Internet, such as auctions, dynamic pricing, procurement, track and trace,
as well as order and pipeline visibility.
We offer solutions to companies in a diverse array of industries including
agriculture, apparel, chemicals, consumer goods, electronics & high technology,
energy, food, government, healthcare, logistics, metals, motor vehicles & parts,
paper, pharmaceuticals and retail. Our customer base of over 1,000 clients
includes large, multinational enterprises such as 3Com, Coca-Cola Bottling,
Cisco Systems, Astec Power Division of Emerson, Levi Strauss & Co., Fuji Photo
Film USA, Harley-Davidson, The Limited, Texas Instruments and Unilever, as well
as medium-sized enterprises and emerging eBusinesses.
INDUSTRY BACKGROUND
Today's leading companies know that an effective supply chain optimization
strategy will make them more competitive and profitable. In addition, companies
must combine their optimized supply chains with effective eBusiness strategies
to respond to increased global competition, to differentiate themselves and to
grow market share. We combine our traditional supply chain strengths with our
innovative eBusiness solutions to enable effective communication and real-time
collaboration among global trading partners. Once implemented, our solutions can
provide greater access to information, channel visibility and a consolidated
view of client requirements, ultimately delivering optimization across the
extended supply chain.
Clients are utilizing our solutions to share information within their
enterprises and among their trading partners in their supply chain to more
effectively coordinate and make decisions to meet or exceed the rapidly changing
requirements of their customers. Our solutions address the business processes
that enable responsive and intelligent decision-making and are uniquely focused
on managing decisions, events and plans with the flexibility of adapting to
different forms of a trading network. These processes cover the supply chain
needs of enterprises and trading networks. These processes range from design,
buy and make to the additional processes of move, store, market and sell. In
addition, our solutions allow companies to utilize the Internet, as a business
collaboration medium to collaborate, monitor, measure and improve their business
processes over time.
STRATEGY
Our objective is to continue to be a leading global provider of EPO and
eBusiness solutions for enterprises and trading networks, while achieving and
maintaining profitability. Our strategy to achieve these objectives includes the
following elements:
EXPAND OUR EPO AND EBUSINESS OFFERINGS -- We believe that we have
significant experience and domain expertise, enhanced through our relationships
with clients, industry experts and third-party alliances, in developing and
providing EPO and eBusiness solutions. We intend to leverage our experience and
domain expertise by continuing to extend the capabilities and scope of our
solutions to solve a broader range of problems and improve processes within and
among companies in trading networks.
PROVIDE ADVANCED TECHNOLOGICAL INNOVATION -- We develop and offer to our
clients leading technological software solutions. We do this through in-depth
expertise among our personnel and through our commitment to our research and
development initiatives. In addition, we will consider tactical and strategic
acquisitions with other companies to speed our time to market or to further
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differentiate ourselves. We utilize tactical acquisitions to enhance or fill out
our existing offerings. We utilize strategic acquisitions to extend beyond our
existing offerings and to differentiate ourselves through new offerings. See
"-- Product Development."
PROVIDE A STANDARD MARKETPLACE PLATFORM BASED ON BEST-OF-BREED
PARTNERSHIPS -- We prefer to focus our resources on the development and
enhancement of our core competencies and to utilize the competencies of third
parties with best-of-breed capabilities in areas complementary to our core
areas. This permits us to offer our clients leading and complete solutions that
can better meet all their needs.
ENABLE AND OPTIMIZE INTELLIGENT TRADING NETWORKS -- Although the market for
eBusiness solutions is new, we believe that it is growing rapidly, will become
large and is a significant opportunity. We intend to take advantage of this
opportunity and continue expanding our role as a leading provider of eBusiness
solutions that enable and optimize intelligent trading networks.
EXPAND CURRENT AND EXPLORE NEW VERTICAL MARKETS -- We continue to expand
our presence and focus on vertical markets in sectors such as agriculture,
consumer durables, consumer packaged goods, electronics & high technology,
energy, government, logistics, metals, motor vehicles & parts, pharmaceutical,
pulp and paper, retail, services and transport, travel and hospitality.
Additionally, we are examining opportunities outside of our current market
segments as we drive growth and expand penetration of our supply chain
optimization and eBusiness solutions.
DEVELOP STRATEGIC ALLIANCES AND NEW BUSINESS RELATIONSHIPS -- We continue
to expand and enhance our current solutions and solution implementation
capabilities through alliances with technology providers and consulting firms.
We believe that, together with our complementary technology and consulting
providers, we will continue to provide clients with a broad range of EPO and
eBusiness solutions and expertise to assist businesses in implementing EPO and
eBusiness solutions to solve their business problems.
PRODUCTS AND EBUSINESS SOLUTIONS
Manugistics' solutions footprint includes four distinctive components:
Manugistics NetWORKS intelligent engines, Manugistics NetWORKS collaborative
services, Manugistics WebConnect integration platform and Manugistics
ExchangeWORKS exchange platform. All of our solutions are powered by our
underlying WebWORKS architecture.
Manugistics NetWORKS family of products and solutions are designed to
collaborate, optimize, measure and analyze across each of the key supply chain
business process areas -- design, buy, make, store, move, market, sell and
price.
Manugistics NetWORKS include the core optimization technologies and
algorithmic expertise that we have accumulated by many years of developing
supply chain and pricing and revenue solutions. The intelligent engines included
in Manugistics NetWORKS are designed to facilitate strategic, tactical and
operational decision-making. Strategic decisions typically consider a time-frame
of quarters to years. Tactical decisions typically consider a time-frame of
weeks to months. Operational decisions typically consider a time-frame of
minutes to days. Detailed descriptions of the NetWORKS intelligent engines
follow:
NETWORKS COMMIT(TM) -- NetWORKS Commit(TM) helps drive accurate, reliable,
real-time promises of, and commitments for, delivery of products by
simultaneously performing availability checks of inventory, production,
materials, manufacturing scheduling, distribution and transportation and then
immediately allocating appropriate resources.
NETWORKS DEMAND(TM) -- NetWORKS Demand(TM) is designed to predict and
forecast future customer demand with a high degree of accuracy, alerting a
company to potential supply problems and finding patterns undetected by
traditional forecasting solutions.
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NETWORKS DYNAMIC PRICING(TM) -- NetWORKS Dynamic Pricing(TM) uses advanced
statistical methods and algorithms to predict how a micro-market segment will
respond to a company's products and prices. Based on the predicted customer
response, the solution determines the optimal price to offer to which customers
for each product in order to maximize profit, market share, or other strategic
goals.
NETWORKS FULFILLMENT(TM) -- NetWORKS Fulfillment(TM) is designed to
orchestrate the time-phased storage and flow of supply to match demand, giving
companies the end-to-end visibility to minimize inventory and reduce logistics
costs while maximizing customer service.
NETWORKS MASTER PLANNING(TM) -- NetWORKS Master Planning(TM) optimizes the
use of constrained resources to improve customer service levels and increase
profit margins by simultaneously optimizing across factors such as resource
capacity, availability of raw materials, inflow and outflow (throughput) for
facilities, transportation and availability of components and labor.
NETWORKS PROMOTIONS(TM) -- NetWORKS Promotions(TM) enables a company to
determine the impact of proposed promotions before committing. Using historical
data and statistically-derived market response models, it tests promotional
scenarios and forecasts the results.
NETWORKS SCHEDULING(TM) -- NetWORKS Scheduling(TM) helps enable single and
multi-site planning, detailed scheduling, production sequencing, and real-time
communication with the plant floor.
NETWORKS SOURCING(TM) -- NetWORKS Sourcing(TM) helps further reduce
expenditures by expanding beyond simple, catalog-based procurement models to
complex procurement of direct materials. This solution streamlines procurement
of direct materials using integrated, strategic sourcing while leveraging the
Internet to provide the collaboration tools required for effective eBusiness.
NETWORKS STRATEGY(TM) -- NetWORKS Strategy(TM) enables enterprises and
extended trading networks to more efficiently design optimal supply chain
networks. By modeling end-to-end trading partner relationships, this product
helps optimize the most profitable supply chain strategy, including choice of
trading partners, optimal inventory levels, optimal lane volumes and appropriate
seasonal pre-builds and product mix, as well as determine optimal production,
storage and distribution locations.
NETWORKS SUPPLY(TM) -- NetWORKS Supply(TM) provides the tactical level
functionality in supply planning to help facilitate effective management of
material flow between trading partners on complex bills of material, while
simultaneously employing intelligent substitution and configuration of
constrained materials.
NETWORKS TARGET PRICING(TM) -- NetWORKS Target Pricing(TM) systematically
integrates market information, cost information, customer information, and
strategic goals to determine the most profitable pricing recommendation for a
price quotation. The solution uses advanced statistical methods to strike a
balance between the probability of winning a deal and its total contribution to
profit.
NETWORKS TRANSPORT(TM) -- NetWORKS Transport(TM) is designed to
simultaneously optimize transportation plans and execute all inbound, outbound
and intercompany transportation moves, including freight payment, tracking and
reporting. With a competitive advantage in multi-point to multi-point
transportation planning, this solution helps drive optimized transportation
plans to be shared with carriers and manufacturers via the Internet.
NETWORKS VMI(TM) -- NetWORKS VMI(TM) (Vendor Managed Inventory) gives
clients visibility into demand at the trading partner level -- often where the
consumer or purchaser is found -- to improve the flow of products, eliminate
inefficiencies, and lower costs. NetWORKS VMI creates a consumption-based demand
forecast, compares forecast to inventory on-hand and in-transit, develops
requirements at the customer sites, and recommends shipments.
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STATGRAPHICS(TM) -- STATGRAPHICS(TM) contains a comprehensive set of
statistical tools to control, manage and improve the quality of production
processes in manufacturing companies.
STATGRAPHICS utilizes statistical quality control and a design of experiments to
implement quality management in individual locations throughout an enterprise or
manufacturing plant.
Our collaborative solutions provide collaboration and communication that
extend the intelligent engines into new business processes that are created in
concert with trading partners. These proven products enable businesses to expand
their supply chains into true eBusiness trading networks.
NETWORKS COLLABORATE(TM) -- NetWORKS Collaborate(TM) is a comprehensive
solution that enables clients to collaboratively plan, monitor and measure
clients trading relationships. NetWORKS Collaborate is a business-to-business,
eCommerce solution that ensures the creation and maintenance of joint business
plans, monitors the execution of those plans, and measures their success.
NETWORKS MONITOR(TM) -- NetWORKS Monitor(TM) allows clients to monitor and
manage their pre-defined critical planning and event information and provides
robust alerting technology to all appropriate trading partners. NetWORKS Monitor
provides a web-based portal for all exception information across the entire
trading networks, enables role-based security for interaction with that data and
provides recommended and auto-resolution paths for repairing those exceptions.
NETWORKS ONEVIEW(TM) -- NetWORKS OneVIEW(TM) is based on industry-standard
OLAP technology that enables operational monitoring, performance measurement,
business process design, and network policy setting. Its multi-dimensional
analyses increases the speed, accuracy, and efficiency of knowledge discovery
and proactive decision-making. NetWORKS OneVIEW extends client decision support
by providing business process-specific analyses based on data sourced from other
Manugistics applications, ERP systems, financial systems, customer relationship
management systems, and POS data providers.
NETWORKS PROCUREMENT(TM) -- NetWORKS Procurement(TM) utilizes real-time
supplier connectivity to enable clients to share forecast projections and
materials requirements with suppliers, to request updates to outstanding orders,
and to request and auto-select supplier bids based upon pre-defined business
rules.
NETWORKS VISIBILITY(TM) -- NetWORKS Visibility(TM) provides real-time and
historical views of mission-critical pipeline and order status information from
one central web-based portal. Using role-based security, trading partners can
view orders and actions that pertain to their responsibilities within the
trading network.
WEBCONNECT INTEGRATION PLATFORM -- Our WebConnect integration platform
utilizes leading edge enterprise application integration, or EAI, technology.
WebConnect provides pre-built connectors to common enterprise systems such as
SAP AG, J.D. Edwards & Company and Oracle Corporation and automated data
transformation and mapping between these systems and ours. Through these
pre-built connectors, WebConnect provides seamless integration between our
solutions and the many disparate systems that are often resident within an
enterprise. In addition, WebConnect provides robust business process
coordination and messaging for integration to external trading partners and
heterogeneous trading network environments. The integration visualization tools
allow integrations to be easily updated and maintained by users.
EXCHANGEWORKS(TM) EXCHANGE PLATFORM -- ExchangeWORKS(TM) is an advanced,
configurable exchange platform for integrated supply chains and eBusiness
trading networks. ExchangeWORKS helps facilitate sustainable, real-time trading
environments and addresses key eBusiness requirements to drive critical
collaboration activities with trading partners. Since it is designed to enable
recurring trade between many buyers and sellers, ExchangeWORKS helps clients
develop and benefit from complex, online business relationships. ExchangeWORKS
supports a variety of transaction capabilities, such as auctions, negotiated
eCommerce, dynamic
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pricing, procurement, track and trace, and order and pipeline visibility. In
addition, it provides the underlying foundation for these transactions with
capabilities such as content aggregation, profile management and
personalization, information repository, real-time alerts, integration for
financial clearinghouse functions, and many-to-many data and functional
security. ExchangeWORKS' open architecture enables a modular, end-to-end
eBusiness platform that can be configured to fit each client's existing
technology infrastructure and integrate with other technology providers.
All of our solutions and products work within the bstreamz(TM) operating
environment:
BSTREAMZ(TM) -- bstreamz is an innovative eBusiness solution that enables
synchronized intelligence, transforming supply chains and Internet exchanges
into intelligent eBusiness trading networks. Comprised of a configurable
combination of intelligent engines, architecture, knowledge base, eBusiness
processes, and services, bstreamz solutions create an optimal environment for
intelligent decision-making within market-specific trading networks.
Manugistics also provides a suite of solutions -- AirRMS(TM), CargoRMS(TM),
HotelRMS(TM), Lease Rent Optimizer(TM), and Rental Car RMS(TM) -- which are
specifically designed for the transport, travel and hospitality industry. This
industry faces unique problems of product perishability and capacity
utilization. Our solutions are designed to help our clients in this industry to
overcome these challenges and to maximize their revenues and profits.
GLOBAL CONSULTING SERVICES
A key element of our business strategy is to provide clients with
comprehensive solutions for their enterprise and trading network supply chain
and eBusiness optimization problems. By combining our products with professional
services we deliver an end-to-end solution that helps enable clients to derive
the maximum benefit from our solutions. In order to achieve the benefits of our
solutions for eBusiness trading networks, clients will typically make many
changes to their processes and overall operations, including their planning
functions, while implementing our solutions. To assist clients in making these
changes, we offer a wide range of solution-related services, including supply
chain and eBusiness development consulting to maximize competitive advantage,
business operations consulting, change management consulting, and end-user and
system administrator education and training. These services help clients
re-engineer their operations to take advantage of our solutions and effective
supply chain optimization in eBusiness.
These solution-related services are generally provided separately from our
software products in our software license agreements and are provided on a time
and materials basis. Our solution-related services group consisted of 330
employees as of December 31, 2000.
CLIENT SUPPORT
Another element of our comprehensive solutions is providing on-going
support to existing clients. Substantially all of our clients enter into annual
solution support agreements entitling them to receive solution support,
including access to a hotline and an electronic bulletin board and to receive
product revisions and enhancements. Our client support function also collects
information to assist in focusing future product development efforts and in
identifying market demand. As of December 31, 2000, our client support group
consisted of 74 employees.
PRODUCT DEVELOPMENT
Our product development efforts are directed toward the development of new
complementary products, the enhancement of the capabilities of existing
products, expansion of eBusiness capabilities, enhancements for use in foreign
countries and the development of products tailored to the specific requirements
of particular industries and foreign language translations. To date, most of our
products, including product documentation, have been developed by our internal
staff and occasionally supplemented by acquisitions and complementary business
relationships.
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In developing new products or enhancements, we work closely with current
and prospective clients, as well as with other industry leaders, to address
client needs and requirements. We believe that these collaborative efforts will
lead to improved software functionality and will result in superior products and
solutions likely to have greater market demand. We maintain committees of users
and developers for our products which, among other things, define and rank
issues associated with products and discuss product enhancement priorities and
directions.
We conduct a Product Launch Program for new applications and major
enhancements, which allows clients to review design specifications and
prototypes and participate in product testing. We have also established channels
for client feedback, which include periodic surveys and focus groups. In
addition, our product development staff works closely with our marketing, sales,
support and services groups to develop products that meet the needs of our
current and prospective clients. As of December 31, 2000, our product
development staff consisted of 352 employees.
Since our inception, we have made substantial investments in product
development. We believe that getting products to market quickly, without
compromising quality, is critical to the success of these products. We continue
to make the product development expenditures that we believe are necessary for
us to rapidly deliver new product features and functions.
SALES AND MARKETING
Our sales operation for North and South America is headquartered at our
offices in Rockville, Maryland and includes field sales personnel in the
Atlanta, Philadelphia, Hartford, Charlotte, Chicago, Columbus, Dallas, Denver,
Detroit, Los Altos, Los Angeles, Ottawa, San Francisco, Sao Paulo (Brazil) and
Toronto metropolitan areas. Our direct sales organization focuses on licensing
supply chain optimization and eBusiness solutions to large, multi-national
enterprises, as well as mid-sized enterprises with a variety of supply chain and
eBusiness issues.
We market our solutions in regions outside of North and South America,
primarily through subsidiaries. Our British, German, French, Belgian and Dutch
subsidiaries, located in Bracknell, England; Ratingen, Germany; Paris, France;
Brussels, Belgium; and Utrecht, The Netherlands, respectively, provide direct
sales, services and support primarily to clients located in continental Europe
and the United Kingdom. We established a subsidiary in Tokyo, Japan to license
and support our solutions in Japan. We also have a subsidiary in Australia for
sales and support to clients in the Pacific Rim, including Taiwan. We adapt our
solutions for use in international markets by addressing different languages,
different standards of weights and measures and other operational
considerations. We also license our STATGRAPHICS product in the U.S. and in
other countries through independent distributors, national resellers and local
dealers. In fiscal 2000, approximately 36% of our total licensing and services
revenues were attributable to sales outside the Americas.
We also use indirect sales channels to market our solutions, complementary
software vendors, third-party alliances and distributorships. See
"-- Alliances." Using these channels, we seek to increase the market penetration
of our solutions via joint marketing and sales activities. These relationships
enhance our sales resources in target markets and expand our expertise to bring
optimum supply chain and eBusiness solutions to prospects and clients.
We support our sales activities by conducting a variety of marketing
programs, including an annual industry supply chain and eBusiness event, client
"steering committees," and appearances at industry conferences such as those
organized by the American Production and Inventory Control Specialists (APICS)
organization, Supply Chain World, Retail Systems and Auto-Tech. We also
participate in solution demonstration seminars and client conferences hosted by
complementary software vendors. In addition, we conduct lead-generation programs
including advertising, direct mail, public relations, seminars, telemarketing
and ongoing client communication programs.
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As of December 31, 2000, we had 165 employees engaged in sales activities,
56 employees engaged in marketing activities and 163 employees engaged in
business development consulting activities.
ALLIANCES
We have established business alliances with leading software companies,
consulting firms, resellers and other complementary vendors. We have entered
into agreements with a number of other prominent software companies such as BEA
Systems, Inc., ClearCross Inc., Extricity, Inc., Metiom, Inc., Moai
Technologies, Inc., Siebel Systems, Inc., Vastera, Inc. and Vignette
Corporation. In support of these joint efforts, our WebConnect framework will
continue to be enhanced to integrate our solutions with the software
applications of the companies mentioned above and other ERP, warehouse
management systems, manufacturing execution systems, customer relationship
management, configuration and other related application vendors.
We continue to develop relationships with leading consulting firms in order
to complement our own marketing efforts. We also have formal relationships with
many national and major regional consulting firms including Andersen Consulting,
Ernst & Young, IBM Consulting and others. In addition to formal programs, we
cooperate with other professional services firms informally on a
client-by-client basis.
CLIENTS
Our supply chain products have been licensed by organizations in process
manufacturing industries, such as consumer packaged goods, food & beverage,
chemicals, paper and pharmaceuticals industries and by clients in discrete and
high-volume repetitive industries, including the apparel, consumer durables,
electronics & high technology and motor vehicles & parts industries. We have
licensed various combinations of our software products to clients worldwide.
Here is a sample of some of our clients who have either licensed software
products from us or our distributors, purchased solution support, consulting or
other services or both during fiscal 2000. See "-- Sales and Marketing."
CONSUMER PACKAGED GOODS
Eveready Battery
Revlon
Sweetheart Holdings
Unilever Home & Personal Care, USA
FOOD & BEVERAGE
Coca-Cola Bottling Co. Consolidated
Food Lion
Great Atlantic & Pacific Tea Company
Nabisco, Inc.
Ocean Spray
Safeway
Starbucks Corporation
RETAIL DRUG/MASS MERCHANDISE/SPECIALTY RETAIL
Canadian Tire Corp., Ltd.
Kmart
Rite Aid
Spalding Sports
Target (Dayton Hudson Corporation)
Toys R Us
APPAREL
The Limited, Inc
MOTOR VEHICLES & PARTS
Deere & Co.
Ford
Harley-Davidson, Inc.
Tenneco
CHEMICALS, PETROCHEMICALS AND PROCESS
BASF
BP
Fuji Photo Film, USA
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ELECTRONICS & HIGH TECHNOLOGY
3Com Corporation
Analog Devices
Cisco Systems, Inc.
Compaq Computer Corporation
Hewlett Packard
IBM
Lexmark
Philips Lighting B.V.
Texas Instruments Incorporated
TRADING NETWORKS
Agora
EConnections
Elemica
FreightWise, Inc
TRANSPORT, TRAVEL & HOSPITALITY
Marriott
United Airlines
We generally provide our software products to clients under non-exclusive,
non-transferable license agreements. To protect our intellectual property rights
we do not sell or transfer title of our products to our clients. Under our
current standard license agreement, licensed software may be used solely for the
client's internal operations. We are expanding our products and services to
provide solutions to emerging e-commerce markets including engaging in joint
development efforts and providing non-exclusive software licenses to enable
trading exchanges.
COMPETITION
The market for supply chain optimization and eBusiness solutions is highly
competitive. Other application software vendors, including companies targeting
mainframe or mid-range clients and certain professional services organizations,
including such vendors as Adexa, Aspen Technology, The Descartes Systems Group,
Inc., i2 Technologies, Logility and SynQuest offer products that are directly
competitive with some of the software applications marketed by us. In addition,
certain ERP vendors, most of which are substantially larger than we are, have
acquired or developed supply chain planning software companies, products or
functionality or have announced intentions to develop and sell supply chain
planning solutions, including such vendors as Invensys plc (which acquired Baan
Company N.V.), J.D. Edwards & Company, Oracle Corporation, PeopleSoft, Inc. and
SAP AG.
The principal competitive factors in the supply chain optimization and
eBusiness solutions markets served by us include product functionality and
quality, domain expertise, product suite integration, ease of use, customer
service and satisfaction, the ability to provide client references, product
support, product-related services, compliance with industry standards and
requirements, the ability of the solution to generate business benefits, vendor
reputation and, in international markets, availability in foreign languages. We
believe that our principal competitive advantages are our comprehensive,
integrated solutions, our significant list of referenceable clients, our
substantial investment in product development, the strength of our solutions to
generate business benefits, the speed at which our solutions generate returns or
are implemented, our strong client support services and our extensive knowledge
of supply chain optimization and eBusiness solutions.
LICENSE AGREEMENTS AND PRICING
License fees consist principally of fees generated from licenses of our
software products. In consideration of the payment of license fees, we generally
grant nonexclusive, nontransferable, perpetual licenses which are primarily
business unit and user specific. License fee arrangements vary depending upon
the type of software product being licensed and the computer environment.
License fees are based primarily on which products are licensed, the complexity
of the client's problem and on the number of users and locations. Licensing
dollar amounts for supply chain
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optimization solutions may be tens of millions of dollars for a large scope of
supply chain and eBusiness initiatives.
Clients may obtain solution support for an annual fee, depending on the
level of support and the size of the license fee. The solution support fee is
generally billed annually and is subject to changes in solution support list
prices. We also provide pre-installation assistance, systems administration,
training and other product-related services, generally on a time and materials
basis. This allows our clients to determine the level of support or services
appropriate for their needs.
PROPRIETARY RIGHTS AND LICENSES
We regard our software as proprietary and rely on a combination of trade
secret, copyright and trademark laws, license agreements, confidentiality
agreements with our employees and nondisclosure and other contractual
requirements imposed on our clients, consulting partners and others to protect
proprietary rights in our products. We distribute our supply chain optimization
and eBusiness software under software license agreements, which typically grant
clients nonexclusive, nontransferable licenses to our products and have
perpetual terms unless terminated for breach. Under these types of license
agreements, we retain all rights to market our products.
Use of the licensed software is usually restricted to clients' internal
operations and to designated users. In sales to virtual service providers, the
licensed software is restricted to clients' internal operations of designated
users and the processing of defined customer's client data. Use is subject to
terms and conditions prohibiting unauthorized reproduction or transfer of the
software. We also seek to protect the source code of our software as a trade
secret and as an unpublished, copyrighted work.
EMPLOYEES
As of December 31, 2000, we had 1,334 full-time regular employees. None of
our employees are represented by a labor union. We have experienced no work
stoppages and believe that our employee relations are generally good.
MANAGEMENT AND ADDITIONAL INFORMATION
Information relating to executive compensation, various benefit plans,
voting securities and the principal holders of voting securities, relationships
and related transactions and other related matters as to Manugistics is
incorporated by reference or set forth in Manugistics' Annual Report on Form
10-K for the year ended February 29, 2000, which is incorporated into this
prospectus by reference. Stockholders desiring copies of such documents may
contact Manugistics at its address or phone number indicated under "Where You
Can Find More Information" on page .
LEGAL MATTERS
Certain legal matters with respect to the validity of the Notes and the
common stock issuable upon conversion of the Notes offered by this prospectus
are being passed upon for Manugistics by Dilworth Paxson LLP, Philadelphia,
Pennsylvania. Joseph H. Jacovini, Chairman and a member of Dilworth Paxson LLP,
is a member of the board of directors of Manugistics. On January 10, 2001, Mr.
Jacovini was the beneficial owner of 192,000 shares of common stock (including
2,672 shares of common stock held by his spouse and a total of 73,328 shares of
common stock issuable upon exercise of certain options).
EXPERTS
The consolidated financial statements of Manugistics as of February 29,
2000 and February 28, 1999 and 1998 and for each of the three years in the
period ended February 29, 2000, incorporated in this prospectus by reference
from the Manugistics Annual Report on Form 10-K for the period ended February
29, 2000, have been audited by Deloitte and Touche LLP, independent
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auditors, as stated in their report, which is incorporated herein by reference
and has been so incorporated in reliance upon the report of Deloitte and Touche
LLP given upon their authority as experts in accounting and auditing.
The consolidated balance sheets of Talus Solutions and its subsidiary as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1999, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of TYECIN Systems, Inc., not
separately presented in this prospectus, have been audited by
PricewaterhouseCoopers LLP, independent accountants whose report thereon is
incorporated by reference herein. Such consolidated financial statements, to the
extent they have been included in the financial statements of Manugistics, have
been so incorporated by reference in reliance on the report of such independent
accountants given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any materials we file with the
SEC at the SEC's public reference room at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C., as well as at the SEC's regional offices at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, NY 10048. You can request copies of these documents by writing
to the SEC and paying a fee for the copying cost. Please call the SEC at
1-800-SEC-0330 for more information about the operation of the public reference
rooms. Our SEC filings are also available at the SEC's Internet website at
"http://www.sec.gov." In addition, you can read and copy our SEC filings at the
office of the National Association of Securities Dealers, Inc. at 1735 K Street,
Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act:
- Annual Report on Form 10-K for the year ended February 29, 2000;
- Current Report on Form 8-K, filed March 2, 2000;
- Current Report on Form 8-K, filed April 27, 2000;
- Quarterly Report on Form 10-Q for the quarter ended May 31, 2000;
- Current Report on Form 8-K, filed September 22, 2000;
- Current Report on Form 8-K/A, filed October 10, 2000;
- Current Report on Form 8-K, filed October 11, 2000;
- Current Report on Form 8-K/A, filed October 11, 2000;
- Quarterly Report on Form 10-Q for the quarter ended August 31, 2000;
- Current Report on Form 8-K, filed October 20, 2000;
- Current Report on Form 8-K, filed November 1, 2000;
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- Current Report on Form 8-K, filed November 2, 2000;
- Current Report on Form 8-K, filed November 8, 2000;
- Current Report on Form 8-K, filed November 28, 2000;
- Current Report on Form 8-K, filed December 7, 2000;
- Current Report on Form 8-K, filed December 8, 2000;
- Current Report on Form 8-K, filed December 21, 2000;
- Current Report on Form 8-K, filed December 22, 2000;
- Current Report on Form 8-K, filed January 4, 2001;
- Quarterly Report on Form 10-Q for the quarter ended November 30, 2000;
- Current Report on Form 8-K/A, filed January 16, 2001;
- Current Report on Form 8-K, filed January 18, 2001; and
- The description of our common stock contained in our Registration
Statement on Form 8-A, as amended, including any amendment or report
filed to update the description.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
INVESTOR RELATIONS
MANUGISTICS GROUP, INC.
2115 EAST JEFFERSON STREET
ROCKVILLE, MD 20852
(301) 984-5000
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided in
this prospectus and the Registration Statement. We have authorized no one to
provide you with different information. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
We have not authorized any dealer, sales person or other person to give any
information or to make any representations other than those contained in this
prospectus or any prospectus supplement. You must not rely on any unauthorized
information. This prospectus is not an offer of these securities in any state
where an offer is not permitted. The information in this prospectus is, except
where otherwise specified, current as of , 2001. You should not
assume that this prospectus is accurate as of any other date.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Disclosure Regarding Forward Looking Statements............. 2
Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Ratio of Earnings to Fixed Charges.......................... 18
Use of Proceeds............................................. 18
Price Range of Common Stock................................. 18
Dividend Policy............................................. 19
Selling Holders............................................. 19
Plan of Distribution........................................ 20
Description of Notes........................................ 22
Description of Capital Stock................................ 34
Certain United States Federal Income Tax Considerations..... 36
Description of Manugistics.................................. 43
Legal Matters............................................... 52
Experts..................................................... 52
Where You Can Find More Information......................... 52
</TABLE>
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the registration of the Notes and the common stock
into which the Notes are convertible. All amounts are estimated, except the SEC
registration fee.
<TABLE>
<S> <C>
SEC Registration............................................ $62,500
Printing Expenses...........................................
Legal Fees and Expenses.....................................
Accountants' Fees and Expenses..............................
Transfer Agent..............................................
Miscellaneous...............................................
Total.............................................
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We have adopted the provisions of Section 102(b)(7) of the Delaware GCL,
which eliminate or limit the personal liability of a director to us or our
stockholders for monetary damages for breach of fiduciary duty under certain
circumstances. Furthermore, under Section 145 of the Delaware GCL, we shall
indemnify each of our directors and officers against expenses (including
reasonable costs, disbursements and counsel fees) in connection with any
proceeding involving such person by reason of having been an officer or
director, to the extent such person acted in good faith and in a manner
reasonably believed to be in, or not opposed to, our best interest, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The determination of whether indemnification
is proper under the circumstances, unless made by a court, shall be made by a
majority of a quorum of disinterested members of our Board of Directors, our
independent legal counsel or our stockholders.
Our Certificate of Incorporation states that our directors shall not be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except that this provision shall not eliminate or
limit a director's liability for any breach of the director's duty of loyalty to
us or our stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, under Section 174 of the
Delaware GCL, or for any transaction from which the director derived an improper
personal benefit.
Our bylaws further provide that we shall indemnify our officers, directors
and employees to the fullest extent permitted by law. The bylaws also permit us
to purchase insurance on behalf of any such person against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not we would have the
power to indemnify such person against such liability under the foregoing
provision of the bylaws. We maintain such insurance.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 Form of Note for Manugistics Group, Inc.'s 5% Convertible
Subordinated Notes due November 1, 2007.
4.2 Indenture between Manugistics Group, Inc., as Issuer, and
State Street Bank and Trust Company, as Trustee, dated as of
October 20, 2000. (incorporated by reference to Exhibit 4.2
of our Quarterly Report on Form 10-Q for the period ended
November 30, 2000)
4.3 Purchase Agreement between Manugistics Group, Inc. and
Deutsche Bank Securities, Inc. dated October 16, 2000.
(incorporated by reference to Exhibit 4.1 of our Quarterly
Report on Form 10-Q for the period ended November 30, 2000)
4.4 Registration Rights Agreement by and among Manugistics
Group, Inc., Deutsche Bank Securities, Inc. and Banc of
America Securities LLC dated as of October 20, 2000.
(incorporated by reference to Exhibit 4.3 of our Quarterly
Report on Form 10-Q for the period ended November 30, 2000)
*5 Opinion of Dilworth Paxson LLP.
12 Statement regarding computation of ratios.
23.1 Consent of Deloitte & Touche LLP regarding the Consolidated
Financial Statements of Manugistics Group, Inc. and
subsidiaries.
23.2 Consent of KPMG LLP regarding the Consolidated Financial
Statements of Talus Solutions, Inc. and subsidiary.
23.3 Consent of PricewaterhouseCoopers LLP regarding the
Consolidated Financial Statements of TYECIN Systems, Inc.
and subsidiaries.
*23.4 Consent of Dilworth Paxson LLP (included in Exhibit 5).
24 Power of Attorney (included in the signature page of this
Registration Statement).
25 Statement of eligibility of Trustee.
</TABLE>
---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that:
(i) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
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The undersigned Registrant hereby further undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material
change to such information in the Registration Statement;
(2) that, for the purpose of determining liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction, the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rockville, State of Maryland, on the 18th day of
January, 2001.
MANUGISTICS GROUP, INC.
By: /s/ GREGORY J. OWENS
------------------------------------
Gregory J. Owens
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of Manugistics Group, Inc.
whose signature appears below hereby appoints Gregory J. Owens and Raghavan
Rajaji, jointly and individually, as attorneys-in-fact for the undersigned with
full power of substitution, to execute in his or her name and on behalf of such
person, individually, and in each capacity stated below, this Registration
Statement on Form S-3 and one or more amendments (including post-effective
amendments) to this Registration Statement and any related registration
statement under Rule 462(b) as the attorney-in-fact shall deem appropriate, and
to file any such amendment (including exhibits thereto and other documents in
connection herewith) to this Registration Statement on Form S-3 or Rule 462(b)
registration statement with the Securities and Exchange Commission, granting
unto said attorneys-in-fact, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or either of them, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GREGORY J. OWENS Director and Chief Executive Officer January 18, 2001
------------------------------------------ (Principal Executive Officer)
Gregory J. Owens
/s/ RAGHAVAN RAJAJI Executive Vice President and Chief January 18, 2001
------------------------------------------ Financial Officer (Principal
Raghavan Rajaji Financial Officer and Principal
Accounting Officer)
/s/ WILLIAM M. GIBSON Chairman of the Board of Directors January 18, 2001
------------------------------------------
William M. Gibson
/s/ J. MICHAEL CLINE Director January 18, 2001
------------------------------------------
J. Michael Cline
</TABLE>
II-4
<PAGE> 61
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEVEN A. DENNING Director January 18, 2001
------------------------------------------
Steven A. Denning
/s/ ESTHER DYSON Director January 18, 2001
------------------------------------------
Esther Dyson
/s/ LYNN C. FRITZ Director January 18, 2001
------------------------------------------
Lynn C. Fritz
/s/ JOSEPH H. JACOVINI Director January 18, 2001
------------------------------------------
Joseph H. Jacovini
/s/ HAU L. LEE Director January 18, 2001
------------------------------------------
Hau L. Lee
/s/ WILLIAM G. NELSON Director January 18, 2001
------------------------------------------
William G. Nelson
/s/ THOMAS A. SKELTON Director January 18, 2001
------------------------------------------
Thomas A. Skelton
</TABLE>
II-5
<PAGE> 62
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 Form of Note for Manugistics Group, Inc.'s 5% Convertible
Subordinated Notes due November 1, 2007.
4.2 Indenture between Manugistics Group, Inc., as Issuer, and
State Street Bank and Trust Company, as Trustee, dated as of
October 20, 2000. (incorporated by reference to Exhibit 4.2
of our Quarterly Report on Form 10-Q for the period ended
November 30, 2000)
4.3 Purchase Agreement between Manugistics Group, Inc. and
Deutsche Bank Securities, Inc. dated October 16, 2000.
(incorporated by reference to Exhibit 4.1 of our Quarterly
Report on Form 10-Q for the period ended November 30, ,2000)
4.4 Registration Rights Agreement by and among Manugistics
Group, Inc., Deutsche Bank Securities, Inc. and Banc of
America Securities LLC dated as of October 20, 2000.
(incorporated by reference to Exhibit 4.3 of our Quarterly
Report on Form 10-Q for the period ended November 30, 2000)
*5 Opinion of Dilworth Paxson LLP.
12 Statement regarding computation of ratios.
23.1 Consent of Deloitte & Touche LLP regarding the Consolidated
Financial Statements of Manugistics Group, Inc. and
subsidiaries.
23.2 Consent of KPMG LLP regarding the Consolidated Financial
Statements of Talus Solutions, Inc. and subsidiary.
23.3 Consent of PricewaterhouseCoopers LLP regarding the
Consolidated Financial Statements of TYECIN Systems, Inc.
and subsidiaries.
*23.4 Consent of Dilworth Paxson LLP (included in Exhibit 5).
24 Power of Attorney (included in the signature page of this
Registration Statement).
25 Statement of eligibility of Trustee.
</TABLE>
---------------
* To be filed by amendment.
