INDUS INTERNATIONAL, INC.

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


(Mark One)
	þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended March 31, 2006

OR

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission File Number: 0-22993

INDUS INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)


Delaware		94-3273443
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

3301 Windy Ridge Parkway Atlanta, Georgia		30339 (Zip code)
(Address of Principal Executive Offices)

Registrant’s telephone number, including area code

(770) 952-8444

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value

Series A Junior Participating Preferred Stock

(Title of Class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing sale price of $2.67 per share of the Common Stock on September 30, 2005, as reported on the Nasdaq National Market, was approximately $131,275,596.

The number of shares outstanding of the Registrant’s Common Stock, $.001 par value, was 58,976,095 at June 9, 2006.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III is omitted from this Report. The Registrant will file an amendment to this Report on Form 10-K/A (“Form 10-K/A”) containing such information not later than 120 days after the end of the fiscal year covered by this Report in accordance with General Instruction G (3) of Form 10-K.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, as well as documents incorporated herein by reference, may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect management’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of phrases and expressions such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will” or other similar words or phrases. These statements, which speak only as of the date given, are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our expectations or projections. These risks include, but are not limited to, projected growth in the emerging markets for service delivery management market and field service management, market acceptance and the success of our new products and enhancements and upgrades to our existing products, market acceptance of our service delivery management strategy, current market conditions for our products and services, the capital spending environment generally, our ability to achieve growth in our Asset Suite, Customer Suite and Service Suite products, our ability to license software to new customers, the success of our product development strategy, delays in professional services projects, our competitive position, our ability to establish and retain partnership arrangements, our ability to develop our indirect sales channels, changes in our executive management team, uncertainty relating to and the management of personnel changes, timely development and introduction of new products, releases and product enhancements, current economic conditions, heightened security and war or terrorist acts in countries of the world that affect our business, and other risks identified in Item 1A. Risk Factors, beginning on page 15. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

PART I


Item 1.	*Business*

General

Indus International, Inc. develops, licenses, implements, supports, and hosts service delivery management (“SDM”) solutions, which help clients in a broad array of industries optimize the management of their customers, assets, workforce, spare parts inventory, tools and documentation in order to maximize performance and customer satisfaction while reducing operating expenses. Our software products consist of three primary product suites: customer management, asset management and field service management. These software products, along with our service offerings, enable our clients to reduce costs, increase production capacity and competitiveness, improve service to their customers, facilitate billing for services and ensure regulatory compliance. Historically, our products have been focused on asset management, and more recently on customer management and field service management. Through our acquisitions of best-in-class customer management software in March 2003 and field service management software in January 2004, we believe that we are the first company to offer comprehensive suites of world-class customer, asset, and field service management products, which we market and sell as our SDM solutions.

As of March 31, 2006, our software products have been licensed for use by more than 400 companies in more than 40 countries, representing diverse industries, including utilities, manufacturing, chemical, oil and gas, pulp and paper, telecommunications, government, education, transportation, and consumer packaged goods. Clients include industry leaders such as American Electric Power Service Corporation, British Energy Plc., Duke Energy Corporation, Dell USA L.P. (an affiliate of Dell Inc.), Deutsche Telekom AG, EDS Information Services, LLC, Entergy Services, Inc., GE Plastics and GE Power Systems, operating units of the General Electric Company, Electric Power Development Company Limited (also known as JPower), Johnson Controls Inc., Nuclear Management Company, L.L.C., Progress Energy Service Company LLC, Shaw

Industries, Inc., Sierra-Pacific Resources, Smurfit-Stone Container Corporation, The Kroger Co., Tokyo Electric Power Company, and Xcel Energy Services, Inc.

We are a Delaware corporation formed in 1997 by the merger of The Indus Group, Inc., a California corporation, and TSW International, Inc., a Georgia corporation. In March 2003, we acquired Indus Utility Systems, Inc. (“IUS”) (formerly known as SCT Utility Systems, Inc.) from Systems and Computer Technology Corporation (“SCT”). In January 2004, we acquired Wishbone Systems, Inc. (“Wishbone”). References in this filing to the “Company,” “Indus,” “we,” “our,” and “us” refer to Indus International, Inc., our predecessors and our wholly-owned and consolidated subsidiaries. Our principal executive offices are located at 3301 Windy Ridge Parkway, Atlanta, Georgia 30339, and our telephone number at that location is 770-952-8444.

Service Delivery Management Background

As technologies have improved in recent years for mobile devices and global positioning systems, many companies are realizing that their assets and the workforce retained to service those assets can be managed more efficiently to provide higher quality services to their customers than many of the legacy manual or custom systems currently being utilized. In addition, the current economic climate, including increasing global competition, demands that organizations in diverse industries control costs while simultaneously increasing production capacity. For this reason, most organizations share very similar goals: increase revenues, reduce operations and maintenance expenses, increase the reliability and performance of production facilities and infrastructure, improve customer service and loyalty, reduce inventory, and make better use of capital. Many software vendors have offered products aimed at assisting companies with various aspects of these challenges — such as customer relationship management (“CRM”), customer information systems (“CIS”), enterprise asset management (“EAM”), and workforce management (“WFM”). These conventional approaches, which focus only on discrete areas and systems, have yielded some operational improvements, but not at levels that actually transform the customer’s business and facilitate operational excellence. In addition to these software vendors, larger enterprise resource planning (“ERP”) vendors may not have an equivalent level of functionality as compared to our solutions. We believe there is a significant opportunity for a comprehensive solution to rationalize these fragmented enterprise products, eliminate the inefficiencies of discrete systems, and enable companies to achieve many of their operational goals more efficiently.

The Indus Solution

To capitalize on this opportunity, we have developed a unique approach to operational excellence called service delivery management, or SDM, which allows our customers to eliminate the inefficiencies of employing multiple discrete enterprise systems and practices and to achieve the goals described above. The SDM approach allows organizations to manage the business processes related to its customers, assets, and workforce across the entire enterprise — incorporating customer service, field service, design service, construction service, and maintenance service into a single comprehensive solution. Unlike any one of the discrete ERP, EAM, CRM, CIS or WFM products, which tend to be customer-centric, asset-centric, or workforce-centric, our SDM solutions are process-centric. SDM addresses the business flows within and across each of these disciplines, and optimizes business processes. The focus of our SDM solutions is on operational business flows across the entire organization, breaking down informational and operational silos.

Our SDM software products encompass three disciplines in a comprehensive product set: customer management, asset management and field service management. Focusing on the business flows within and across these critical disciplines, Indus SDM optimizes business processes to achieve operational efficiencies that can enable superior performance. Sharing this process-centric approach to operational improvement, our three product suites within SDM drive real-time responsiveness to service needs.

Our SDM products allow customers to push key analytics at the right time so that critical decisions can be made on a timely and informed basis via real-time performance management. With our products, users

view and analyze key performance indicators to proactively improve efficiency and minimize costs throughout their organization. Our SDM products, together with our various service offerings, enable our customers to:


	•	Improve Asset Performance. Our products help organizations control and reduce all asset lifecycle costs, as well as budget and plan more accurately, by ensuring that assets operate at peak performance to avoid unnecessary downtime and shorten planned outages. This requires that the organization have real-time visibility into the health and condition of facilities, equipment and/or critical parts.

	•	Maximize Financial Performance. Organizations must transition from reactive to proactive decision-making in order to optimize performance and maximize financial gain. Our products facilitate this transition by providing the right tools to analyze and balance the financial impact of strategic and operational initiatives across the organization, and to determine best-case alternatives.

	•	Optimize Workforce Efficiency. Organizations must operate their workforces at optimum efficiency, addressing planned and unplanned work requests in a timely and efficient manner. Instant field communications and feedback is vital. Our products give organizations real-time visibility into resource availability, skill sets, parts, tools, customer requirements, and documentation. In addition, our products provide the remote workforce mobile applications which allow real-time communication of service requests and the status of such request.

	•	Ensure Customer Loyalty. Customer loyalty is the most accurate barometer of superior performance. Our products enable organizations to instantly access and analyze enterprise-wide information, rapidly respond to customer requests and issues, make timely and appropriate decisions, and provide accurate billing and collection.

	•	Streamline the Supply Chain. Our products help organizations operate their supply chain more efficiently, with better planning and streamlined logistics. Our products provide organizations with increased visibility into the availability of spare parts, and enable them to optimize inventory levels and reduce the number of suppliers, while helping to deliver the right parts to the right place at the right time.

Business Strategy

Our objective is to establish and maintain Indus as the leading provider of SDM solutions. We aim to achieve this objective by delivering the industry’s most comprehensive set of best-in-class customer, asset, and field service management products.

Our strategies to accomplish our objective include the following:

Develop and Enhance Software Solutions. We intend to continue to focus our product development resources on the development and enhancement of our software solutions. We offer what we believe to be the broadest solution set in the SDM marketplace and the only suite offering best-in-class products for customer, asset, and field service management. In order to provide additional functionality and value to our products, we plan to continue to provide enhancements to and integration of our existing products and to introduce new products to address evolving industry standards and market needs. We will identify further enhancements to our products and opportunities for new products through our Global Client Services organization as well as ongoing customer consulting engagements and implementations, interactions with our user groups and special interest groups and participation in industry standards and research committees, such as the Association for Services Management International, Machinery Information Management Open Systems Alliance, and the Nuclear Energy Institute.

Expand Our Strategic Alliances and Indirect Sales Channels. We currently sell our products primarily through our direct sales force. We work on joint projects and joint sales initiatives on a case-by-case basis with industry-leading consultants and software systems implementers, including most of the large consulting firms, such as Accenture, IBM Global Services, Capgemini, Science Applications International Corporation (SAIC) and BearingPoint. Our relationships with third parties allow us to supplement our direct sales force and professional services organization. We have been

expanding our indirect sales channels through reseller agreements, marketing agreements and agreements with third-party software providers, particularly internationally. Our agreements with Peregrine Systems, Inc., Materna GmbH Information & Communications, in Germany, and Electric Power Development Company Limited (also known as JPower) in Japan, extend our market coverage and provide us with new business leads and access to trained implementation personnel. We also have strategic alliances with complementary software providers. These product partnerships, including our arrangements with NextAxiom Technology, Inc. (“NextAxiom”), Business Objects, Inc. (“Business Objects”), and Oracle Corporation (“Oracle”), extend our product footprints to best meet our customers’ requirements.

Expand International Sales. We believe that our products offer significant benefits for customers in international markets. We have approximately 75 employees outside the United States, primarily in Europe and Asia Pacific, focused on international sales, servicing our international clients, and developing reseller channels. In addition to offices in the United Kingdom, France, Japan, and Australia, we have established reseller and referral arrangements in countries across the globe, including Germany, Holland, Romania, Poland and South Africa. Our international strategy includes leveraging the strength of our relationships with current customers that also have significant overseas operations and the pursuit of strategic marketing opportunities with international systems integrators and third-party software application providers that are complementary to our products.

Acquire or Invest in Complementary Businesses. We will continue to investigate strategic acquisitions of technologies, products, and businesses that may enable us to enhance and expand our SDM software products and service offerings. Where appropriate, we intend to investigate and pursue acquisitions that will provide us with complementary products and technologies, extend our presence into other vertical markets with similar operational challenges, and/or further solidify our leadership position within the emerging SDM market.

Products

Our SDM software products help clients in a broad array of industries optimize the management of their customers, assets, workforce, spare parts inventory, tools and documentation. Our clients rely on our best-in-class products to minimize operating costs, improve asset reliability, optimize customer satisfaction, improve billing processes, and ensure regulatory compliance. Our products are comprised of three distinct suites: Customer Suite, Asset Suite and Service Suite. Our Customer Suite provides specific functionality for the energy and utility markets, while the Asset Suite and Service Suite provide functionality for multiple markets.

Customer Suite

Our Customer Suite for energy and utility customers provides the functionality required to optimize customer-facing activities. This seamless product suite encompasses call center, customer information tracking, billing, and accounts receivable functions. At the core of the Customer Suite is the advanced architecture of the CIS product. Built on Oracle10g application server technology, the Customer Suite features an adaptive infrastructure and takes advantage of Oracle’s world-class functionality for Internet or intranet deployment and streamlined business processes. The Customer Suite combines proven and scalable functionality to facilitate enterprise-wide access to information, cost controls, regulatory responsiveness, and reduced cycle times from meter reading to collection of accounts receivable. Enhancing the Customer Suite is a layer of customer relationship management functionality built exclusively for energy and utility companies, positioning them to lower costs and improve customer service. Further fortifying the Customer Suite is a complex billing solution that helps energy and utility companies use integrated applications to design, market, administer, and bill new pricing options, regardless of the market requirements. The complex billing solution, EnerLink, includes flexible pricing options, robust rate modeling and bill calculation, support for a complex array of contract models, integrated data management, and meter data access.

Asset Suite

Indus Asset Suite combines an industry-leading feature set with an advanced services-oriented architecture and a user interface offering a self-evident design for ease of use and tailorability to fit a variety of business practices. This product’s wide array of predefined integrations to Indus and third-party applications allows companies’ entire workforces to deliver improved efficiencies and more informed, faster business decisions throughout the enterprise.

Indus Asset Suite supports an organization’s operations and maintenance workforce, inventory management and procurement professionals, safety and compliance engineers, and other decision-making personnel affected by asset care decisions throughout the enterprise. This suite includes the following components: asset and work management systems; materials and procurement systems; supply chain for parts inventory; e-procurement systems; and safety and compliance systems. Work management systems coordinate and communicate discrete work task requirements and priorities to all departments and disciplines throughout the enterprise. Safety and compliance systems operate with other enterprise systems to improve regulatory compliance and reporting. Materials and procurement systems improve overall plant performance. E-procurement capabilities add further value by streamlining the procurement process. Other complementary components include mobile computing (see WorkMobile under Service Suite below), enterprise asset integration tools, sophisticated search capabilities, data warehousing products, and integration to leading ERP products for financial and human resources functions. Our Asset Suite provides improved efficiencies to the management of assets, work orders, inventory, and purchasing. It helps organizations establish effective maintenance strategies for the assets they service and enables supply chain optimization. This proactive, condition-based strategy lowers maintenance costs and reduces production stoppages.

The Indus Asset Suite incorporates key capabilities of its predecessor products, PassPort, InsiteEE and EMPAC. Indus offers clearly defined migration paths to the Indus Asset Suite for its legacy PassPort, InSiteEE and EMPAC customers. Indus will continue to support each of those products in accordance with its stated policies.

Service Suite

Our Service Suite provides resource optimization to generate superior performance at low cost. This suite allows customers to dispatch resources with all of the required tools, information, and parts at the promised time. Schedules are optimized based on customer or asset demands, travel times, service level agreements, technician skills requirements, and internal costs, enabling more hours “on the job, able to work.” The suite includes the following applications:


	•	WorkCenter. Indus WorkCenter^tm is the web-based order entry and management module. As the starting point of work and order processing, WorkCenter provides a variety of options and tools to accommodate the needs of both customers and service providers. With WorkCenter, call center representatives can initiate service requests, schedule service appointments, and check service status from any web browser. Appointment scheduling is immediate, and the service organization is notified automatically. Business rules and customer preferences ensure timely fulfillment by the most appropriate service provider.

	•	WorkManager. Indus WorkManager^tm helps manage the constantly changing dynamics of field service by furnishing dispatchers with a real-time graphical representation of people, places and things in an information and response portal. All updates and changes to the schedule can be viewed as they happen. Rule violations, cost and time overruns, and other performance indicators are highlighted for action. Visual cues and filters assist management personnel with understanding the status of all work at any time. Relationships between work orders, dependencies, and the parent/child relationship within a work order are evident. Integration with leading global positioning systems further enhances understanding of where personnel are deployed and how they can be routed.

	•	WorkMobile. Indus WorkMobile^tm equips mobile service resources with real-time interactive wireless applications and access to organizational data. WorkMobile provides online web-based or wireless

access, as well as offline/sync access. Handheld and wireless communication devices enable bi-directional updates that expedite service delivery. Service personnel have real-time access to schedules, customer details, and operational response rules. They can update, close or reschedule service orders from the field with current customer information.


	•	WorkOptimizer. Indus WorkOptimizer^tm enhances operational achievements with optimization technology. The product employs proprietary algorithms to calculate and accommodate complex but known variables in the field service chain to help overcome operational inefficiencies and ensure the optimal balance between profitability, effectiveness, and customer satisfaction. Real-time logistical support allows the organization to deploy field personnel with the right skills to the right place at the right time.

Real-Time Performance Management^tm (RPM)

Indus Real-time Performance Management^tm (“RPM”) is a data warehouse built on Informatica technology and business intelligence solution built on Business Objects technology. With the introduction of RPM, Indus clients can fully leverage the depth of data in its core applications to further optimize asset and field service management. RPM provides quick, easy access to the actionable business metrics, analysis and reports needed to drive operational excellence across the organization. Compared to similar products on the market, RPM goes well beyond just providing dashboard or report visibility into key metrics (i.e. it goes beyond simply information delivery). RPM provides flexibility to access different views for varying roles and responsibilities. It helps organizations optimize processes with visibility and analysis of key performance dependencies. In addition, the solution’s robust business intelligence toolset enables tailoring of the views for unique industry and business needs.

Indus Foundation Architecture^tm

The Indus Foundation Architecture (“IFA”), a common architectural platform for all of our applications, ensures smooth and seamless integration between our applications and those of our partners utilizing XML, service-oriented architecture, and other advanced integration tools and techniques. IFA is a new convergent technology strategy that provides common tools across all Indus suites to deliver a common interface and software platform. Developed using a service-orientated architecture, the IFA provides enhanced configurability and agility to meet rapidly evolving business needs. In addition, it offers a low total cost of ownership for our SDM solutions by enabling organizations to harness best-of-breed, process-oriented business applications for asset, customer and field service management, while minimizing effort and expense for integration and training.

Services

Our SDM solutions include services, tools and programs that address the full lifecycle of our solutions, including implementation, production, and continuous business improvement. Our service offerings include comprehensive implementation programs, strategic consulting, e-Learning and training solutions, two-tiered maintenance and support plans, and hosting and outsourcing services. Indus offers a variety of tailored or packaged services designed to help clients continuously improve their operations, achieve a faster return on investment, and meet their unique business challenges. The following services are offered: professional services, training, Global Client Services, and hosted services.

Professional Services

Our professional services include sophisticated implementation services, as well as strategic consulting in pre-implementation assessment/selection analysis, project justification, business case support, performance benchmarking, root cause analysis, and post-implementation optimization. Extended services include migration and upgrade assistance. Our professional services are provided by subject matter experts that typically have a long tenure with Indus. These regionally located experts support our sales organization by helping customers implement advanced principles, theories, and other advanced best practice strategies designed to provide a

Our development efforts are focused on adding new functionality to existing products, integrating our various existing products, enhancing the operability of our products across distributed and alternative hardware platforms, operating systems and database systems, and developing new products. We believe that our future success depends in part upon our ability to continue to enhance and integrate existing products, to respond to rapidly changing customer requirements, and to develop new or enhanced products that incorporate new technological developments and emerging maintenance and industry standards. To that end, our development efforts frequently focus on base system enhancements and integrations and the incorporation into our products of new user requirements and features identified and created through customer and industry interactions and systems implementations. As a result, we are able to continue to offer our customers a packaged, highly configurable product with increasing functionality rather than a custom-developed software program.

integrator or implementer. We work with the systems integrators on proposals to prospective customers to license and implement our software. We typically enter into teaming arrangements that set forth the parties’ respective obligations in the proposal process. We will typically enter into a license agreement and a support agreement directly with the customer, and the systems integrator will typically have the direct contractual relationship with the customer for professional services.

Channel Partners

In addition to working with large systems integrators to expand our sales channels and marketing efforts, we also enter into reseller agreements, referral agreements, and marketing agreements with third parties that can extend our market coverage, particularly internationally. For example, our agreements with Peregrine Systems, Inc., Materna GmbH Information & Communications, in Germany, and Electric Power Development Company Ltd. (also known as JPower) in Japan, extend our market coverage and provide us with new business leads and access to trained implementation and support personnel.

Software Product Partners

We enter into strategic relationships with software product partners to expand the functionality of our existing products, enabling us to continue our focus on developing and delivering SDM solutions. We plan to continue our strategy of leveraging strategic partnerships as the needs of our customers continually evolve and the global marketplace expands. By combining our own SDM software solutions with our partners’ market-focused products and services, we provide our customers with the ability to maximize their return on investment, while providing us with additional software license fees and services.

Our strategic relationships with third party software providers take a variety of forms, such as reseller agreements and embedded software arrangements. Reseller agreements, such as our agreement with Oracle, typically allow us to develop software products using third party software, and resell that third party software in connection with our software products. Embedded software arrangements, such as our agreements with NextAxiom and Business Objects, typically allow us to develop software products using third party software, and resell that third party software embedded in our software products.

The following highlights a few of our software product partners:


	•	NextAxiom — provides a highly differentiated software platform used to produce, consume and deploy software components as standard-based services. Business applications built upon these reusable components are significantly easier to tailor, manage and integrate with existing software assets.

	•	Oracle — we are a member of the Oracle Partner Network, as a Certified Partner.

	•	Business Objects — supports our Real-Time Performance Management (RPM) product enabling users to monitor and improve operational performance across the service delivery organization.

Customers

We provide software products and services to customers in the following industries:


	•	Utilities, including water and waste water treatment, power generation, and energy transmission and distribution

	•	Manufacturing

	•	Chemical and petrochemical

	•	Oil and gas

	•	Pulp and paper

	•	Metals and mining

	•	Telecommunications


	•	Government and education

	•	Transportation

	•	Consumer packaged goods

	•	Medical

	•	Managed services

Customers include industry leaders such as American Electric Power Service Corporation, British Energy Plc., Duke Energy Corporation, Dell USA L.P. (an affiliate of Dell Inc.), Deutsche Telekom AG, EDS Information Services, LLC, Entergy Services, Inc., GE Plastics and GE Power Systems, operating units of the General Electric Company, Electric Power Development Company Limited (also known as JPower), Nuclear Management Company, L.L.C., Progress Energy Service Company LLC, Shaw Industries, Inc., Sierra-Pacific Resources, Smurfit-Stone Container Corporation, The Kroger Co., Tokyo Electric Power Company, and Xcel Energy Services, Inc.

Competition

Our products are targeted at the SDM market, which is highly fragmented. The customer, asset, and field service management software markets in which we compete are highly competitive and characterized by rapid technological change. They are significantly affected by new product and technology innovations brought about by industry participants. We believe that the principal competitive factors in our businesses are:


	•	Product quality, return on investment, performance, and functionality;

	•	Adaptability to new trends driven by technology and customer requirements;

	•	Cost of internal product development as compared with cost of purchase of products from outside vendors;

	•	Ease and speed of implementation;

	•	Cost of ongoing maintenance; and

	•	Time-to-market with, and market acceptance of, new products, enhancements, functionality and services.

In the asset management market, our main competitors are MRO Software, Inc., Infor (through its acquisition of Datastream Systems, Inc.), SAP, Oracle, Mincom Corp., Industrial and Financial Systems, Invensys, Logica and Synercom. In the customer management market, our primary competitors include SPL WorldGroup, SAP and Peace Software. In the field service management market, our primary competitors include SAP, Oracle (through its acquisition of Siebel Systems, Inc.), Mobile Data Solutions Inc., ClickSoftware Technologies Ltd., ViryaNet, Ltd. and Astea International.

We believe that we have key competitive strengths that will help us establish and maintain leadership in the emerging SDM market. Our strategic assets and competitive advantages include:


	•	Depth and breadth of products. We believe that no other software vendor offers the breadth of customer, asset, and field service management applications, coupled with the depth of functionality offered in our products.

	•	Scalability of our products. Our products are able to scale up to multiple thousands of users.

	•	Substantial installed base. Over the past 25 years, we have attained the leading market share position in the “Tier 1” market (customers having annual revenues greater than $1 billion dollars) for asset management software products, especially among utilities and process manufacturers. This installed customer base provides us with a fertile source for selling our comprehensive SDM solutions, including our Customer Suite and Service Suite software products, as well as providing us with numerous client references that can help us close deals with new prospects.


	•	Industry expertise. Our professional services are provided by experts with extensive industry experience. This experience and domain knowledge gained from prior implementations allows us to enhance new implementations with industry-specific best practices.

International Operations

Our international revenue was approximately $30.8 million, $34.5 million and $28.1 million for the fiscal years ended March 31, 2004, 2005 and 2006, respectively, which represents approximately 21%, 24% and 21% of our total revenue for each of those periods, respectively. International revenue includes all revenue derived from sales to customers outside the United States. We have approximately 75 employees outside the United States, more than half of whom are located in the United Kingdom. We also have offices in Australia, France and Japan.

We conduct our direct European operations principally out of our United Kingdom office, where we have approximately 40 employees. Revenue generated from sales in the United Kingdom was approximately $17.4 million, $13.1 million and $10.9 million for the fiscal years ended March 31, 2004, 2005, and 2006, respectively. Total revenue for European operations was approximately $14.7 million for the fiscal year ended March 31, 2006, which represents approximately 11% of our total revenue for the year. Our direct Asia-Pacific operations are conducted out of our offices in Brisbane, Australia and Tokyo, Japan. Total revenue for Asia-Pacific operations was approximately $8.6 million for the fiscal year ended March 31, 2006, which represents approximately 6% of our total revenue for the year.

Proprietary Rights and Licensing

We rely on a combination of the protections provided under applicable copyright, trademark, and trade secret laws, as well as on confidentiality procedures, licensing arrangements, and other contractual arrangements to establish and protect our rights in our software. Despite our efforts, it may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or obtain and use information that we regard as proprietary. In addition, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States. Furthermore, we have no patents, and existing copyright laws afford only limited protection. Accordingly, there can be no assurance that we will be able to protect our proprietary software against unauthorized third-party copying or use, which could adversely affect our competitive position.

We license our applications to customers under license agreements, which are generally in standard form, although each license is individually negotiated and may contain variations. The standard form agreement allows the customer to use our products solely on the customer’s computer equipment for the customer’s internal purposes, and the customer is generally prohibited from sub-licensing or transferring the applications. The agreements generally provide that the warranty for our products is limited to correction or replacement of the affected product, and in most cases the warranty liability may not exceed the licensing fees from the customer. Our standard form agreement also includes a confidentiality clause protecting proprietary information relating to the licensed applications.

Our products are generally provided to customers in object code (machine-readable) format only. From time to time, in limited circumstances, we license source code (human-readable form) for asset management software, subject to customary protections such as use restrictions and confidentiality agreements. We have historically licensed source code for certain customer management applications, subject to customary protections such as use restrictions and confidentiality agreements. In addition, customers can be beneficiaries of a master source code escrow for the applications, pursuant to which the source code will be released to end users upon the occurrence of certain events, such as the commencement of bankruptcy or insolvency proceedings by or against us, or certain material breaches of the agreement. We have the right to object to the release of the source code in such circumstances, and to submit the matter to dispute resolution procedures. In the event of any release of the source code from escrow, the customer’s license is limited to use of the source code to maintain, support, and configure our applications solely for their organization.

We may, from time to time, receive notices from third parties claiming infringement by our products of proprietary rights of others. As the number of software products in the industry increases and the functionality of these products further overlap, we believe that software developers may become increasingly subject to infringement claims. Any such claims, with or without merit, can be time consuming and expensive to defend, can divert management’s attention and resources and could require us to enter into royalty and licensing agreements. Such agreements, if required, may not be available on terms acceptable to us.

Indus, Service Delivery Management, SDM, Indus Asset Suite, Indus Customer Suite, Indus Service Suite, Indus Foundation Architecture, Real-Time Performance Management, Indus WorkCenter, Indus WorkManager, Indus WorkMobile, Indus WorkOptimizer, IndusPro, IndusWorld, PassPort, EMPAC, and InSite EE are trademarks and service marks of the Company. All other brand names or trademarks referenced in this Annual Report are the property of their respective holders.

Employees

At May 31, 2006, Indus had approximately 650 full-time employees. None of our employees are covered by a collective bargaining agreement, and we have never experienced a work stoppage, strike or labor dispute. We believe that our relations with our employees are good.

Executive Officers

The executive officers of the Company are as follows:


Name of Executive Officer	Age		Principal Occupation

Gregory J. Dukat		45	President and Chief Executive Officer
Patrick M. Henn		38	Executive Vice President and Chief Financial Officer
John D. Gregg		57	Executive Vice President of Field Operations
Joseph T. Trino		57	Executive Vice President of Corporate Strategy
Arthur W. Beckman		50	Executive Vice President and Chief Technical Officer

Mr. Dukat has served as President of Indus since August 2003 and as Chief Executive Officer of Indus since February 2004. From August 2003 until his promotion in February 2004, Mr. Dukat served as President and Chief Operating Officer. Mr. Dukat joined Indus in September 2002 as Executive Vice President of Worldwide Operations to lead the Company’s global sales and marketing efforts, and was promoted to President and Chief Operating Officer in August 2003 with responsibility for all sales, marketing, customer service, product strategy, and product development functions. From September 2001 to April 2002, Mr. Dukat served as the Chief Executive Officer for 180 Commerce, Inc., a start-up reverse supply chain enterprise software company. From October 1989 to September 2001, Mr. Dukat served in various positions at J.D. Edwards, an enterprise software provider, most recently as Vice President and General Manager. Mr. Dukat is a board member of CSS International, Inc., a software implementation consulting firm.

Mr. Henn joined Indus as its Executive Vice President and Chief Financial Officer in October 2005. Prior to joining Indus, Mr. Henn held several positions with Manhattan Associates, Inc., a publicly traded enterprise software provider, from January 1998 to October 2005, most recently as Vice President, Controller and Assistant Treasurer. Prior to joining Manhattan Associates, Mr. Henn served as auditing manager for Ernst & Young, LLP, from September 1990 to December 1997, primarily supporting publicly and privately held technology companies.

Mr. Gregg was promoted to Executive Vice President of Field Operations in February 2004. Prior to his promotion, Mr. Gregg served as President of the IUS division since March 2003, when Indus acquired SCT Utility Systems, Inc. from SCT. From November 1993 to March 2003, Mr. Gregg served in various positions with SCT Utility Systems, Inc., a wholly-owned subsidiary of SCT, most recently as President from November 2000 until the acquisition by Indus. Mr. Gregg served as the Executive Coordinator of Northside Baptist Church during a 10-month sabbatical in 1999.

Mr. Trino accepted his current position as Executive Vice President of Corporate Strategy in January 2005. Prior to joining Indus, Mr. Trino served as a strategic consultant to Indus from November 2002 to January 2005, a position in which he was instrumental in negotiating the acquisitions of IUS and Wishbone. From May 1994 to November 2002, Mr. Trino served in various executive roles at SynQuest, Inc., a publicly-traded software company, including Chief Executive Officer from July 1996 to November 2002, Chairman of the Board from September 2000 to November 2002 and President from May 1994 to December 1999. From April 1992 to December 1993, Mr. Trino was President of Kaseworks, Inc., an Atlanta-based provider of application development tools. From January 1980 to April 1992, he was employed at Dun & Bradstreet Software Inc. From December 1988 to April 1992, Mr. Trino was president of Dun & Bradstreet Software’s Manufacturing Systems Business Unit.

Mr. Beckman was promoted to Executive Vice President and Chief Technical Officer in January 2006. Prior to his promotion, Mr. Beckman served as Vice President, Hosting and Chief Technical Officer since joining Indus in January 1999. From October 1993 through 1998, Mr. Beckman served as Executive Director of Operations Planning and Technical Support at Pacific Bell, which then merged with SBC Communications. From June of 1979 through September of 1993 Mr. Beckman held various infrastructure and application development positions within the Computer Systems and Services department at Pacific Gas & Electric Company.

Employment Agreements

All the current executive officers of the Company have employment contracts with the Company.

Exchange Act Reports

We maintain an Internet website at the following address: www.indus.com. The information on our website is not incorporated by reference in this Annual Report on Form 10-K.

We make available on or through our website certain reports and amendments to those reports that we file or furnish to the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended. These include our Annual Reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.


Item 1A.	*Risk Factors*

The nature of forward-looking information is that such information involves significant assumptions, risks and uncertainties. Certain of our public documents and statements made by our authorized officers, directors, employees, agents and representatives acting on our behalf may include forward-looking information which will be influenced by the factors described below and by other assumptions, risks and uncertainties. Forward-looking information is based on assumptions, estimates, forecasts and projections regarding our future results as well as the future effectiveness of our strategic plans and our operational decisions. Forward-looking statements made by or on behalf of us are subject to the risk that the forecasts, projections and expectations of management, or assumptions underlying such forecasts, projections and expectations, may prove to be inaccurate. Accordingly, actual results and our implementation of our plans and operations may differ materially from forward-looking statements made by or on behalf of us. The following discussion identifies certain important factors that could affect our actual results and actions and could cause such results and actions to differ materially from forward-looking statements.

Our operating results have fluctuated in the past and may continue to fluctuate significantly from quarter-to-quarter which could negatively affect our results of operations and our stock price.

Our operating results have fluctuated in the past, and our results may fluctuate significantly in the future. Our operating results may fluctuate from quarter-to-quarter and may be negatively affected as a result of a number of factors, including:


	•	the variable size and timing of individual license transactions and services engagements;

	•	delays in maintenance renewals or non-renewals or cancellation of maintenance services;

	•	delays in the completion of product implementations or other consulting projects;

	•	changes in the proportion of revenues attributable to license fees, hosting fees and services;

	•	risks and delays related to successful completion of customer funded development;

	•	restructuring charges related to internal restructuring activities, including possible revisions to assumptions underlying previous restructuring charges;

	•	changes in the level of operating expenses;

	•	our success in, and costs associated with, developing, introducing and marketing new products;

	•	delays associated with product development, including the development and introduction of new products and new releases of existing products;

	•	the development and introduction of new operating systems and/or technological changes in computer systems that require additional development efforts;

	•	software defects and other product quality problems and the costs associated with solving those problems; and

	•	personnel changes, including changes in our management.

Changes in operating expenses or variations in the timing of recognition of specific revenues resulting from any of these factors can cause significant variations in operating results from quarter-to-quarter and may in some future quarter result in losses or have a material adverse effect on our business or results of operations. Accordingly, we believe that quarter-to-quarter comparisons of results of operations are not necessarily meaningful and should not be relied upon as an indication of future performance.

If the markets for service delivery management solutions and our Service Suite solution do not grow as anticipated or if our service delivery management solutions are not accepted in the marketplace, we may not be able to grow our business.

Given the saturation of the market for asset management and customer management software generally, we have broadened our product offerings in recent years to include our Service Suite solution. We did this in order to compete in the service delivery management market in general and the field service management market in particular. The market for service delivery management solutions in general, and our Service Suite solution in particular, are emerging markets and may not evolve as we anticipate they will. If customers’ demands in these emerging markets do not grow as anticipated or if our service delivery management solutions and Service Suite solution are not accepted in the marketplace, then we may not be able to grow our business.

If the market does not accept our new products and enhancements or upgrades to our existing products that we launch from time to time, our operating results and financial condition would be materially adversely affected.

From time to time, we may acquire new products, launch new products, and release enhancements or upgrades to existing products. For example, in December 2004, we released a new product called the Indus Asset Suite, which incorporates the key capabilities of our legacy PassPort and InsiteEE product lines. The Indus Asset Suite includes the Indus Foundation Architecture, or IFA, our new services-oriented architecture,

and a new user interface. In 2006 we released a new product called RPM, which is a data warehouse and business intelligence solution designed to help clients drive improvements across their asset, field service and customer service operations. There can be no assurance that these or any other new or enhanced products will be sold successfully or that they can achieve market acceptance. Our future success with these products and other next generation products will depend on our ability to accurately determine the functionality and features required by our customers, as well as the ability to enhance and integrate our products and deliver them in a timely manner. We cannot predict the present and future size of the potential market for our next generation of products, and we may incur substantial costs to enhance, modify and integrate our products and services in order to meet the demands of this potential market.

Demand for our Asset Suite and Customer Suite products may grow slowly or decrease in upcoming quarters, which may impair our business and could materially adversely affect our results of operations and financial condition.

Overall demand for our Asset Suite and Customer Suite products in general may grow slowly or decrease in upcoming quarters and years because of unfavorable general economic conditions, decreased spending by companies in need of our products or other reasons. This may reflect the capital spending environment generally, a saturation of the market for asset management and customer management software generally, as well as deregulation and retrenchments affecting the way companies purchase these types of software. To the extent that there is a slowdown in the overall market for our products, our business, results of operations and financial condition are likely to be materially adversely affected.

If we are not able to license software to more new customers not currently using our software, our business and long-term prospects could be harmed.

During fiscal 2005 and fiscal 2006, a substantial portion of our software license sales were to existing customers. This has been part of our strategy to license our service delivery management solutions to our installed base of customers. However, in the future we believe we will need to grow the percentage of our software license sales that are made to new customers because those sales typically generate more new services and maintenance revenue. If we are not able to grow our software license sales to new customers, it will impair our ability to grow our business and maintain consistent profitability.

As a result of our lengthy sales cycle and the large size of our typical orders from new customers, any delays we experience will affect our operating results.

The purchase of our software products, particularly the Asset Suite and the Customer Suite, generally involves a significant commitment of capital over a long period of time by a customer. There are inherent risks of delays frequently associated with large capital expenditures procedures within an organization, such as budgetary constraints and internal approval reviews. During the sales process, we may devote significant time and resources to a prospective customer, including costs associated with multiple site visits, product demonstrations and feasibility studies, and experience significant delays over which we will have no control. Any such delays in the execution of orders have caused, and may in the future cause, material fluctuations in our operating results.

Our ability to use our net operating loss carryforwards to reduce future consolidated taxable income will be subject to annual limitations under U.S. tax rules, which could have a negative effect on financial results in future periods.

As of December 31, 2006, we had net operating loss carryforwards of approximately $64.9 million available for federal income tax purposes. Such carryforwards may be used to reduce consolidated taxable income, if any, in future years. These net operating loss carryforwards begin to expire in the year 2012. We have determined, upon the advice and analysis of our tax experts, that utilization of these net operating loss carryforwards will be subject to annual limitations under the provisions of Section 382 of the Internal Revenue Code due to changes in our ownership. These annual limitations may cause us to be in a tax payment position in future years, which could have a negative effect on financial results. Depending on the amount and timing

of any taxable income, these annual limitations may also hinder our ability to utilize all of the net operating loss carryforwards before they expire.

If we experience delays in product development or the introduction of new products or new versions of existing products, our business and sales will be negatively affected.

We have, in the past, experienced delays in product development that have negatively affected our relationships with existing customers and have resulted in lost sales of our products and services to existing and prospective customers and our failure to recover our product development costs. In addition, delays in product development can, in some instances, delay the recognition of deferred software license revenue. There can be no assurance that we will not experience delays in connection with our current product development or future development activities. If we are unable to develop and introduce new products, or enhancements to and integrations of our existing products, in a timely manner in response to changing market conditions or customer requirements, our business, operating results and financial condition will be materially and adversely affected. Because we have limited resources, we must effectively manage and properly allocate and prioritize our product development efforts and our porting efforts relating to newer products and operating systems. There can be no assurance that these efforts will be successful or, even if successful, that any resulting products or operating systems will achieve customer acceptance.

Delays in our performance of software implementation and other consulting projects may negatively affect our business.

Following license sales to new customers, our consulting services may be engaged to assist in the implementation of our products and their extended solutions. Implementation may involve a lengthy process, including evaluation of customer requirements and business processes, customer training and consultation. In addition, we are often engaged by our existing customers for other lengthy consulting projects. A successful implementation or other consulting project requires a close working relationship between us, the customer and, if applicable, third-party consultants and systems integrators who assist in the process. These factors may increase the costs associated with completion of any given consulting project, increase the risks of collection of amounts due during implementation or other consulting projects, and increase risks of cancellation or delay of such projects. Delays in the completion of a product implementation or with any other consulting project may require that the revenues associated with such implementation or project be recognized over a longer period than originally anticipated, or may result in disputes with customers regarding performance by us and payment by the customers. Such delays have caused, and may in the future cause, material fluctuations in our operating results. Similarly, customers typically may cancel implementation and other services projects at any time without significant penalty, and any such cancellations could have a material adverse effect on our business or results of operations. Because our expenses are relatively fixed, a small variation in the timing of recognition of specific revenues can cause significant variations in operating results from quarter-to-quarter and may in some future quarter result in losses or have a material adverse effect on our business or results of operations.

Our growth is dependent, in part, upon the successful development of our indirect sales channels and maintaining good working relationships with systems integrators and other technology companies.

We believe that our future growth will depend, in part, on developing and maintaining successful strategic relationships or partnerships with systems integrators and other technology companies. One of our strategies is to continue to increase the proportion of customers served through these indirect channels. If we are not able to successfully partner with qualified systems integrators and other technology companies, it could adversely affect our results of operations. Because lower unit prices are often charged on sales made through indirect channels, increased indirect sales could reduce our average selling prices and result in lower gross margins. As indirect sales increase, our direct contact with our customer base could decrease, and we may have more difficulty accurately forecasting sales, evaluating customer satisfaction and recognizing emerging customer requirements. In addition, sales of our products through indirect channels may reduce our service revenues, as the third-party systems integrators reselling our products provide these services. Further, when third-party

integrators install our products and train customers to use our products, it could result in incorrect product installation, failure to properly train the customer, or general failure of an integrator to satisfy the customer, any of which could have a negative effect on our relationship with the integrator and the customer. Such problems could damage our reputation and the reputation of our products and services. In addition, we may face additional competition from these systems integrators and third-party software providers who develop, acquire or market products competitive with our products.

Our strategy of marketing our products directly to customers and indirectly through systems integrators and other technology companies may result in distribution channel conflicts. Our direct sales efforts may compete with those of our indirect channels and, to the extent different systems integrators target the same customers, systems integrators may also come into conflict with each other. Any channel conflicts that develop may have a material adverse effect on our relationships with systems integrators or hurt our ability to attract new systems integrators to market our products.

If we are unable to maintain consistent profitability and positive operating cash flow in future quarters, our business and long-term prospects may be harmed.

We have a recent history of generating net losses and negative cash flow from operations. For example, we generated a net loss of $12.0 million and $6.1 million in the fiscal years ended March 31, 2004 and 2005, respectively, and used cash of $3.4 million and provided cash of $1.3 million in operating activities during the same periods. Although we were profitable and cash flow positive in the second half of fiscal 2005 and all four quarters of fiscal 2006, if we are unable to maintain consistent profitability and positive cash flow from operations in future quarters, it will negatively affect our capacity to implement our business strategy and may require us to take actions in the short-term that will impair the long-term prospects of our business. If we are unable to maintain consistent profitability and positive cash flow from operations in future quarters, it may also result in liquidity problems and impair our ability to finance our continuing business operations on terms that are acceptable to us. Further, we may need to enter into financing transactions that are dilutive to our stockholders’ equity ownership in our Company.

We have experienced significant change in our executive management team and our board of directors, and the current executive management team and board have only recently begun to work together.

We have experienced significant change in our executive management team and our board of directors. In January 2006, Arthur Beckman was promoted to Executive Vice President and Chief Technology Officer. In October 2005, Patrick Henn joined the Company as Executive Vice President and Chief Financial Officer. We appointed Joseph Trino as Executive Vice President of Corporate Strategy in January 2005. Gregory Dukat was promoted to Chief Executive Officer and John Gregg was promoted to Executive Vice President of Field Operations in February 2004. Furthermore, we have experienced significant change in our board of directors as five of our current seven board members have been on the board twenty-four months or less. The current executive management team and the board of directors have only recently begun to work together, and they may be unable to integrate and work effectively as a team. There are no assurances that we will be able to motivate and retain the current executive management team or that they will be able to work together effectively. There are also no assurances that there will not be further turnover on our board of directors. If we lose any member of our executive management team or they are unable to work together effectively, or if there is further board turnover, our business, operations and financial results could be adversely affected.

Our success depends upon our ability to attract and retain key personnel.

Our future success depends, in significant part, upon the continued service of our key technical, sales and senior management personnel, as well as our ability to attract and retain new personnel. Competition for qualified sales, consulting, technical and other personnel is intense, and there can be no assurance that we will be able to attract, assimilate or retain additional highly qualified employees in the future. Our ability to attract, assimilate and retain key personnel may be adversely impacted by the fact that we went through several reductions in force during the fiscal years ended March 31, 2004 and 2005. If we are unable to offer competitive salaries and bonuses, our key sales, consulting, technical and senior management personnel may

be unwilling to continue service for us, and it may be difficult for us to attract new personnel. If we are unable to hire and retain personnel, particularly in senior management positions, our business, operating results and financial condition will be materially adversely affected. The loss of any of our key sales, consulting, technical and senior management personnel, particularly if lost to competitors, could impair our ability to grow business. Further additions of new personnel and departures of existing personnel, particularly in key positions, could be disruptive and have a material adverse effect on our business, operating results and financial condition.

Our business may suffer from risks associated with growth through acquisitions, should they occur.

In recent years we have acquired IUS and Wishbone, and we evaluate acquisition opportunities from time to time. All acquisitions involve specific risks. Some of these risks include:


	•	the assumption of unanticipated liabilities and contingencies;

	•	diversion of our management’s attention;

	•	inability to achieve market acceptance of acquired products; and

	•	possible reduction of our reported asset values and earnings because of:


	•	goodwill impairment;

	•	increased interest costs;

	•	issuances of additional securities or debt; and

	•	difficulties in integrating acquired businesses and assets.

As we grow and attempt to integrate any business and assets that we may acquire, we can give no assurance that we will be able to:


	•	properly maintain and take advantage of the business or value of any acquired business and assets;

	•	identify suitable acquisition candidates;

	•	complete any additional acquisitions; or

	•	integrate any acquired businesses or assets into our operations.

The strain on our management may negatively affect our business and our ability to execute our business strategy.

Changes to our business and customer base have placed a strain on management and operations. Previous expansion, including through acquisition, had resulted in substantial growth in the number of our employees, the scope of our operating and financial systems and the geographic area of our operations, resulting in increased responsibility for management personnel. Our restructuring activities in recent years and our acquisitions of IUS and Wishbone have placed additional demands on management. In connection with our restructuring activities and our acquisitions, we will be required to effectively manage our operations, improve our financial and management controls, reporting systems and procedures on a timely basis and to train and manage our employee work force. There can be no assurance that we will be able to effectively manage our operations and failure to do so would have a material adverse effect on our business, operating results and financial condition.

The market for our products is highly competitive, and we may be unable to maintain or increase our market share.

Our success depends, in part, on our ability to develop more advanced products more quickly and less expensively than our existing and potential competitors and to educate potential customers on the benefits of licensing our products. Some of our competitors have substantially greater financial, technical, sales, marketing and other resources, as well as greater name recognition and a larger customer base than us, which may allow them to introduce products with more features, greater functionality and lower prices than our products. These

competitors could also bundle existing or new products with other, more established products in order to effectively compete with us. The service delivery management market is very fragmented and consolidation by competitors with greater resources is a possible occurrence. If a trend emerges such that customers decide to consolidate their information technology systems and eliminate standalone “best-of-breed” application software, our revenues, margins and results of operations and financial condition may be adversely affected.

Increased competition is likely to result in price reductions, reduced gross margins and loss of sales volume, any of which could materially and adversely affect our business, operating results and financial condition. Any material reduction in the price of our products would negatively affect our gross revenues and could have a material adverse effect on our business, operating results and financial condition. There can be no assurance that we will be able to compete successfully against current and future competitors, and if we fail to do so we may be unable to maintain or increase our market share.

If we don’t respond to rapid technological change and evolving industry standards, we will be unable to compete effectively.

The industries in which we participate are characterized by rapid technological change, evolving industry standards in computer hardware and software technology, changes in customer requirements and frequent new product introductions and enhancements. The introduction of products embodying new technologies, the emergence of new standards or changes in customer requirements could render our existing products obsolete and unmarketable. As a result, our success will depend in part upon our ability to enhance and integrate our existing software products, expand our products through development or acquisition, and introduce new products that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve customer acceptance. For example, in January 2005 Indus announced the release of IFA, a common architectural platform for all our applications. IFA is a convergent technology strategy that provides common tools across all Indus suites to deliver a common interface and software platform. There can be no assurance that IFA, or any future enhancements to or integrations of existing products, or any new products developed or acquired by us will achieve customer acceptance or will adequately address the changing needs of the marketplace. There can also be no assurance that we will be successful in developing, acquiring and marketing new products or enhancements to our existing products that incorporate new technology on a timely basis.

If we fail to comply with laws or government regulations, we may be subject to penalties and fines.

We are not directly subject to regulation by any governmental agency, other than regulations applicable to businesses generally, and there are currently few laws or regulations addressing the products and services we provide. We do, however, license our products and provide services, from time to time, to the government, government agencies, government contractors and other customers that are in industries regulated by the government. As a result, our operations, as they relate to our relationships with governmental entities and customers in regulated industries, are governed by certain laws and regulations. These laws and regulations are subject to change without notice to us. In some instances, compliance with these laws and regulations may be difficult or costly, which may negatively affect our business and results of operations. In addition, if we fail to comply with these laws and regulations, we may be subject to significant penalties and fines that could materially negatively affect our business, results of operations and financial position.

If we are not successful in Japan, we may not be able to grow revenue and we may need to write off some portion of our capitalized software, which could have a negative effect on our operating results and financial condition.

We have made significant investments in the Japanese market as part of our license arrangements with Tokyo Electric Power Company (“TEPCO”), Electric Power Development Company, and Shikoku Electric Company. These investments include resources to localize our asset management products for Japan and establishing a regional office in Tokyo. As of March 31, 2006, we had $3.8 million of unamortized capitalized software resulting from our efforts to localize our asset management products for Japan. We cannot be sure that we will succeed in Japan due to the cost and difficulty we have encountered localizing our products in

Japan, the cost of maintaining operations in Japan, and cultural differences in the conduct of business, including higher customer expectations and demands. Also, TEPCO is a significant source of revenue and referrals for new customers in Japan. If we are not able to maintain a good customer relationship with TEPCO, it will impact our revenue in Japan and our ability to grow license sales in Japan. If we are not successful in Japan, we may not be able to grow our revenue and we could have to write-off some portion of our capitalized software, which could have a negative effect on our operating results and financial condition.

If we are unable to expand our international operations, our operating results and financial condition could be materially and adversely affected.

International revenue (from sales outside the United States) accounted for approximately 24% of our total revenue for the fiscal year ended March 31, 2005 and 21% of our total revenue for the fiscal year ended March 31, 2006. We maintain an operational presence and have established support offices in the United Kingdom, Australia, France and Japan. We expect international sales to continue to be a material component of our business. However, there can be no assurance that we will be able to maintain or increase international market demand for our products. In addition, international expansion may require us to localize products in additional countries, establish additional foreign operations and hire additional personnel. This may require significant management attention and financial resources and could adversely affect our operating margins. To the extent we are unable to expand foreign operations in a timely or cost-effective manner, our growth, if any, in international sales will be limited, and our business, operating results and financial condition could be materially and adversely affected.

The success of our international operations is subject to many uncertainties.

Our international business involves a number of risks, including:


	•	costs and other difficulties in producing and gaining acceptance of localized versions of our products;

	•	cultural differences in the conduct of business;

	•	difficulties in staffing and managing foreign operations;

	•	the burden of complying with a wide variety of foreign laws, including laws related to employment and laws related to contractual agreements with partners and resellers;

	•	unfavorable exchange rate fluctuations;

	•	longer accounts receivable payment cycles;

	•	greater difficulty in accounts receivable collection;

	•	seasonality due to the annual slow-down in European business activity during the third calendar quarter;

	•	unexpected changes in regulatory requirements and withholding taxes that restrict the repatriation of earnings;

	•	tariffs and other trade barriers; and

	•	negative effects relating to hostilities, war or terrorist acts.

To the extent profit is generated or losses are incurred in foreign countries, our effective income tax rate may be materially and adversely affected. In some markets, localization of our products will be essential to achieve market penetration. We may incur substantial costs and experience delays in localizing our products, and there can be no assurance that any localized product will ever generate significant revenues. There can be no assurance that any of the factors described herein will not have a material adverse effect on our future international sales and operations and, consequently, our business, operating results and financial condition.

We have only limited protection of our proprietary rights and technology.

Our success is heavily dependent upon our proprietary technology. We rely on a combination of the protections provided under applicable copyright, trademark and trade secret laws, confidentiality procedures and license arrangements to establish and protect our proprietary rights. As part of our confidentiality procedures, we generally enter into non-disclosure agreements with our employees, distributors and corporate partners, and license agreements with respect to our software, documentation and other proprietary information. Despite these precautions, it may be possible for unauthorized third parties to copy certain portions of our products or to reverse engineer or obtain and use information that we regard as proprietary, to use our products or technology without authorization, or to develop similar technology independently. Moreover, the laws of some countries do not protect our proprietary rights to the same extent as do the laws of the United States. Furthermore, we have no patents and existing copyright laws afford only limited protection. We license source code for certain of our products and providing such source code may increase the likelihood of misappropriation or other misuses of our intellectual property. Policing the unauthorized use of our products is difficult, and litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of resources and could negatively impact our future operating results. Accordingly, there can be no assurance that we will be able to protect our proprietary software against unauthorized third-party copying or use, which could adversely affect our competitive position.

We may not be successful in avoiding claims that we infringe other’s proprietary rights.

Many patents, copyrights and trademarks have been issued in the software and technology markets in which we operate. As a result, we are subject from time to time to claims that our technology violates a third-party’s patents or other proprietary rights. These types of claims, with or without merit, can be time consuming and expensive to defend, or could cause us to pay substantial damages or settlement amounts. They could also require us to cease offering affected products, to enter into royalty or license agreements, or to license software under unfavorable terms. These types of claims may also damage our ability to sell products due to any uncertainty generated as to intellectual property ownership and may damage our customer relationships. Any of these possible results could have a material adverse effect upon our business, operating results and financial condition.

Our failure to realize the expected benefits of our restructurings, including anticipated cost savings, could result in unfavorable financial results.

Over the last several years we have undertaken several internal restructuring initiatives. For example, in the fiscal year ended March 31, 2005, the Company restructured business activities by eliminating approximately 140 positions and consolidating office space in Atlanta, GA and San Francisco, CA, wherein certain functions were transferred from these locations to Company-owned office buildings in Columbia, SC. These types of internal restructurings have operational risks, including reduced productivity and lack of focus as we terminate some employees and assign new tasks and provide training to other employees. In addition, there can be no assurance that we will achieve the anticipated cost savings from these restructurings and any failure to achieve the anticipated cost savings could cause our financial results to fall short of expectations and adversely affect our financial position.

We have taken net charges for restructuring of $10.2 million in 2001, $8.2 million in 2002, $2.0 million in the three-month transition period ended March 31, 2003, $44,000 in the fiscal year ended March 31, 2004 and $10.4 million in the fiscal year ended March 31, 2005. There can be no assurance that additional charges for restructuring expenses will not be required in future periods. Significant future restructuring charges could cause financial results to be unfavorable.

Assumptions underlying our prior restructuring charges may need to be revised which could have unfavorable financial results.

Assumptions underlying our prior restructuring charges may need to be revised from time to time for a variety of reasons, including, for example, revisions related to changes in market conditions and the timing of estimated sublease income as to the subleasing of leased property in areas where we have consolidated office space. Any such revised assumptions could cause adjustments to our prior restructuring charges, which could have unfavorable financial results.

Product liability claims made by our customers, whether successful or not, could be expensive and could harm our business.

The sale and support of our products may entail the risk of product liability claims. Our license agreements typically contain provisions designed to limit exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in such license agreements may not be effective as a result of federal, state or local laws or ordinances or unfavorable judicial decisions. A successful product liability claim brought against us relating to our product or third-party software embedded in our products could have a material adverse effect upon our business, operating results and financial condition.

We maintain performance bonds, directly and indirectly, in accordance with certain customer contracts, some of which are collateralized by letters of credit supported by restricted cash. A failed implementation or a significant software malfunction leading to payment under one or more of these bonds, could adversely affect our liquidity.

Anti-takeover provisions in our charter documents and Delaware law could prevent or delay a change in control of Indus, even if a change of control would be beneficial to our stockholders.

Provisions of our Amended and Restated Certificate of Incorporation and By-Laws, as well as provisions of Delaware law, could discourage, delay or prevent an acquisition or other change in control of Indus, even if a change in control would be beneficial to our stockholders. These provisions could also discourage proxy contests and make it more difficult for our stockholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock. These provisions might also discourage a potential acquisition proposal or tender offer, even if the acquisition proposal or tender offer is at a price above the then current market price for our common stock.

These provisions include:


	•	authorization of a stockholder rights plan or “poison pill” to deter a takeover attempt;

	•	authorization of “blank check” preferred stock that our board of directors could issue to thwart a takeover attempt;

	•	limitations on the ability of stockholders to call special meetings of stockholders;

	•	limitations on stockholder action by written consent; and

	•	advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

In addition, we are subject to certain provisions of the Delaware General Corporation Law, which limit our ability to enter into business combination transactions with 15% or greater stockholders that our board of directors has not approved. These provisions and other similar provisions make it more difficult for a third party to acquire us without negotiation with the board of directors. These provisions may apply even if some stockholders may consider the transaction beneficial.

Failure to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price.

We have evaluated and will continue to evaluate our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires an annual management assessment of the design and effectiveness of our internal controls over financial reporting and a report by our Independent Registered Public Accounting Firm addressing this assessment. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly.

OTHER RISKS

The foregoing is not a complete description of all risks relevant to our future performance, and the foregoing should be read and understood together with and in the context of similar discussions which may be contained in the documents that we file with the SEC in the future. We undertake no obligation to release publicly any revision to the foregoing or any update to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.


Item 2.	*Properties*

Certain information concerning the Company’s leased and owned office space as of March 31, 2006 is set forth below:


		Square		Ownership
Location	Principal Use	Footage		Interest

Domestic Offices:
Atlanta, GA	Corporate Headquarters, Research and Development, Sales And Marketing, Operations		45,557		Lease
Columbia, SC	Regional Operations, Research and Development, Sales and Marketing, Operations		80,000		Own
San Francisco, CA	Regional Operations, Research and Development, Sales and Marketing, Operations		25,670		Lease
Pittsburgh, PA	Regional Operations		6,833		Lease
International Offices:
Woking, Surrey, United Kingdom	Regional Operations		9,087		Lease
Paris, France	Regional Operations		6,660		Lease

The leased and owned office space listed above comprises space in active use. Space leased to third parties under lease and sub-lease arrangements has been excluded. See Note 6 to the Consolidated Financial Statements for further discussion.

Management continually evaluates operational requirements and adjusts facilities capacity where necessary.


Item 3.	*Legal Proceedings*

On February 21, 2003, Integral Energy Australia brought a claim against IUS in the Supreme Court of New South Wales, Australia, relating to the implementation of IUS software. The amount of damages asserted against IUS is not determinable. Pursuant to the terms of the Purchase Agreement among the Company and SCT and its affiliates, SCT and those affiliates of SCT that were a party to the Purchase Agreement agreed to defend IUS against the claims in this suit and to indemnify the Company and IUS from all losses relating thereto.

From time to time, the Company is involved in other legal proceedings incidental to the conduct of its business. The outcome of these claims cannot be predicted with certainty. The Company intends to defend itself vigorously in these actions. However, any settlement or judgment may have a material adverse effect on the Company’s results of operations in the period in which such settlement or judgment is paid or payment becomes probable.


Item 4.	*Submission of Matters to a Vote of Security Holders*

No matters were submitted to a vote of security holders of the Company during the fourth quarter of the fiscal year ended March 31, 2006.

PART II


Item 5.	*Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities*

The Company’s common stock, $.001 par value per share, is traded on the Nasdaq National Market under the symbol “IINT.” The following table sets forth the high and low sales prices of the Company’s common stock for the periods indicated:


	High		Low

Year ended March 31, 2005
First Quarter	$	3.80	$	1.91
Second Quarter		2.18		1.23
Third Quarter		2.19		1.41
Fourth Quarter		2.77		2.00
Year ended March 31, 2006
First Quarter	$	2.50	$	1.89
Second Quarter		2.89		2.07
Third Quarter		3.28		2.46
Fourth Quarter		3.96		3.11

On June 9, 2006, there were 244 holders of record of our common stock. Because many of the Company’s shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

The Company has not declared or paid any cash dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future. The Company anticipates that any future earnings will be retained to finance the continuing development of its business.

On July 15, 1999, the Company’s Board of Directors approved a stock repurchase program for up to 2,000,000 shares of the Company’s outstanding common stock. The Company is authorized to use available cash to buy back its shares in open market transactions from time to time, subject to price and market conditions. No purchases were made during the last five fiscal years. As of March 31, 2006, the Company had repurchased 435,500 shares at a cost of $2.2 million under the program.

Equity Compensation Plan Information

The following table provides information about the common stock that may be issued under all of the Company’s existing equity compensation plans as of March 31, 2006.

(c) Number of Securities

Remaining Available

(a) Number of Securities

(b) Weighted Average

for Future Issuance

to be Issued Upon

Exercise Price of

Under Equity

Exercise of Outstanding

Outstanding

Compensation Plans

Options, Warrants

(Excluding Securities

Plan Category*

and Rights

Reflected in Column (a))

Equity Compensation Plans Approved by Stockholders

9,494,293

2.88

5,822,243


*		All of the Company’s Equity Compensation Plans have been approved by its stockholders.


Item 6.	*Selected Financial Data*

The following selected consolidated financial data of the Company is qualified by reference to and should be read in conjunction with the consolidated financial statements and notes thereto and other financial information included elsewhere herein. The selected consolidated balance sheet data as of March 31, 2005 and 2006 and selected consolidated statements of operations data for the years ended March 31, 2004, 2005 and 2006 are derived from and qualified by reference to the audited consolidated financial statements of the Company, which are included elsewhere herein. The selected consolidated balance sheet data as of December 31, 2001 and 2002, and March 31, 2003 and 2004 and the selected consolidated statements of operations for the years ended December 31, 2001 and 2002 and the three months ended March 31, 2003 are derived from the audited consolidated financial statements of the Company which are not included herein, but have been previously filed with the SEC.

In March 2003, the Company changed its fiscal year end from December 31 to March 31, which results in a three-month transition period ended March 31, 2003. To allow for comparable and more meaningful information, operating results for the twelve-month period ended March 31, 2003 are provided. Operating results for the twelve-month period ended March 31, 2003 are derived from the Company’s published quarterly results and are unaudited.


							Three Months
	Year Ended						Ended
	December 31,						March 31,			Years Ended March 31,
	2001			2002			2003			2003			2004			2005			2006
										(Unaudited)
	(Amounts in thousands, except per share data)

Statement of Operations data:
Revenue:
Software license fees	$	21,005		$	15,527		$	2,637		$	13,936		$	23,917		$	31,866		$	25,971
Services:
Support, outsourcing and hosting		35,637			36,780			10,614			38,751			59,536			59,543			59,694
Consulting, training and other		119,372			64,858			13,983			59,269			62,933			50,760			47,491

Total services		155,009			101,638			24,597			98,020			122,469			110,303			107,185

Total revenue		176,014			117,165			27,234			111,956			146,386			142,169			133,156

Cost of revenue:
Software license fees		1,378			2,997			226			3,109			999			3,737			2,041
Services:
Support, outsourcing and hosting		8,242			11,150			4,175			13,194			20,265			16,975			14,474
Consulting, training and other		71,816			44,842			11,001			42,293			46,342			38,995			37,398

Total services		80,058			55,992			15,176			55,487			66,607			55,970			51,872

Total cost of revenue		81,436			58,989			15,402			58,596			67,606			59,707			53,913

Gross margin		94,578			58,176			11,832			53,360			78,780			82,462			79,243

Operating expenses:
Research and development		49,720			45,750			8,713			41,756			34,960			31,956			29,357
Sales and marketing		30,363			29,945			6,546			28,927			33,334			30,619			27,234
General and administrative		17,468			13,306			3,957			14,590			21,226			15,125			15,187
Restructuring and settlement expenses/(benefits)		10,188			8,199			1,968			6,771			44			10,430			(24	)

Total operating expenses		107,739			97,200			21,184			92,044			89,564			88,130			71,754

Income (loss) from operations		(13,161	)		(39,024	)		(9,352	)		(38,684	)		(10,784	)		(5,668	)		7,489
Other income (expense), net		2,412			1,303			(50	)		1,058			(554	)		(285	)		529

Income (loss) before taxes		(10,749	)		(37,721	)		(9,402	)		(37,626	)		(11,338	)		(5,953	)		8,018
Provision (benefit) for income taxes		36			(3,944	)		277			(3,669	)		623			112			(162	)

Net income (loss)	$	(10,785	)	$	(33,777	)	$	(9,679	)	$	(33,957	)	$	(11,961	)	$	(6,065	)	$	8,180

Net income (loss) per share:
Basic	$	(0.31	)	$	(0.96	)	$	(0.26	)	$	(0.95	)	$	(0.24	)	$	(0.11	)	$	0.14

Diluted	$	(0.31	)	$	(0.96	)	$	(0.26	)	$	(0.95	)	$	(0.24	)	$	(0.11	)	$	0.14

Shares used in computing per share data:
Basic		34,857			35,237			37,210			35,838			49,455			57,259			57,951

Diluted		34,857			35,237			37,210			35,838			49,455			57,259			60,195


	December 31,				March 31,
	2001		2002		2003			2004		2005		2006
					(In thousands)

Balance sheet data:
Working capital	$	43,283	$	14,145	$	(17,104	)	$	1,655	$	3,683	$	15,031
Total assets		139,965		101,712		145,831			133,951		122,777		114,833
Short-term debt		4		266		24,790			814		968		999
Long-term debt		—		124		52			10,299		9,530		8,763
Total stockholders’ equity		59,393		26,709		27,081			45,600		40,413		50,081

In addition to historical information, this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect management’s current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of phrases and expressions such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will” or other similar words or phrases. These statements, which speak only as of the date given, are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our expectations or projections. These risks include, but are not limited to, projected growth in the emerging markets for service delivery management market and field service management, market acceptance and the success of our new products and enhancements and upgrades to our existing products, market acceptance of our service delivery management strategy, current market conditions for our products and services, the capital spending environment generally, our ability to achieve growth in our Asset Suite, Customer Suite and Service Suite products, our ability to license software to new customers, the success of our product development strategy, delays in professional services projects, our competitive position, our ability to establish and retain partnership arrangements, our ability to develop our indirect sales channels, changes in our executive management team, uncertainty relating to and the management of personnel changes, timely development and introduction of new products, releases and product enhancements, current economic conditions, heightened security and war or terrorist acts in countries of the world that affect our business, and other risks identified in Item 1A. Risk Factors, beginning on page 15. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including, as discussed below, those significant estimates related to revenue recognition, accounts receivable and allowance for doubtful accounts, valuation of goodwill and intangible assets and restructuring accruals. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The Company’s revenue arises from two sources: (a) the sale of licenses to use our software products; and (b) the delivery of customer support, outsourcing, hosting, implementation, consulting, training and education services related to our software products. Revenue recognition rules for software companies are very complex, often subject to interpretation, and continue to evolve. Very specific and detailed guidelines in measuring revenue are followed by the Company; however, certain judgments affect the application of the Company’s revenue policy. On occasion, the Company is unable to recognize software license revenue in the period an order is received due to the requirements of the applicable accounting standards, the judgments involved and contractual provisions in response to customer demands. Delays in the timing and amount of revenue recognition for software license fees have caused volatility in the Company’s financial results. At March 31, 2006, the Company did not have significant software license revenues in deferred revenue as the criteria for revenue recognition was met during fiscal 2006.

Software license fee revenue is recognized when a non-cancelable license agreement becomes effective as evidenced by a signed contract, product delivery, a fixed or determinable license fee and probability of collection. If the license fee is not fixed or determinable, revenue is recognized as payments become due from the customer. In arrangements that include rights to multiple software products and/or services, the total arrangement fee is allocated among each of the deliverables using the residual method, under which revenue is allocated to undelivered elements based on vendor-specific objective evidence (“VSOE”) of fair value of such undelivered elements and the residual amounts of revenue are allocated to delivered elements. Elements included in multiple element arrangements may consist of software products, maintenance (which includes customer support services and unspecified upgrades), hosting implementation and/or consulting services. VSOE is determined on the basis of prices generally charged when an element is sold separately or, in the case of an element not yet sold separately, the price established by authorized management if it is probable that the price, once established, will not change when the element is sold separately. To determine VSOE of fair value for implementation and/or consulting services and for maintenance services, the Company performs testing quarterly based on the Company’s prices charged when an element is sold separately. With respect to implementation and/or consulting services, management evaluates the service rates for services sold to all customers in the most recent twelve months to determine the fair value of such services. With respect to maintenance services, management evaluates the renewal rates charged to customers each quarter to confirm that the fees charged in the initial agreement are consistent with the renewal rates charged to other customers. The Company’s renewal rates are stated in the agreement with each customer, and customers generally renew at the stated rates. If a license arrangement includes any discounts on professional services or maintenance services from the fair values determined by such quarterly tests, then the amount of the discount is deferred from the license fee stated in the contract and recognized as services revenue as the services are performed. If VSOE does not exist for an undelivered element, the total arrangement fee will be recognized as revenue ratably over the life of the contract. During fiscal 2005 and fiscal 2006, VSOE existed for all agreements, and no revenues were deferred for this reason.

Revenue from consulting and implementation services is, in general, time and material based and recognized as the work is performed. Delays in project implementation will result in delays in revenue recognition. Some professional consulting services involve fixed-price and/or fixed-time arrangements and are recognized using contract accounting, which requires the accurate estimation of the cost, scope and duration of each engagement. Revenue for these projects is recognized on the percentage-of-completion method, with progress-to-completion measured by using specific milestones, usually labor unit inputs, with revisions to estimates reflected in the period in which changes become known. Project losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion. If the Company does not accurately estimate the resources required or the scope of work to be performed, or does not manage its projects properly within the planned periods of time or satisfy its obligations under the contracts, then future consulting margins on these projects may be negatively affected or losses on existing contracts may

The Company maintains an allowance for doubtful accounts for estimated accounts receivable losses resulting from the inability or failure of its customers to make required payments. This allowance is formula-based, supplemented by an evaluation of specific accounts where there may be collectibility risk. If the methodology the Company uses to calculate this allowance does not properly reflect future collections, revenue could be overstated or understated. On an ongoing basis, the Company evaluates the collectibility of accounts receivable based upon historical collections and an assessment of the collectibility of specific accounts. The Company evaluates the collectibility of specific accounts using a combination of factors, including the age of the outstanding balance(s), evaluation of the account’s financial condition, recent payment history, and discussions with the Company’s account executive for the specific customer. Based upon this evaluation of collectibility, any increase or decrease required in the allowance for doubtful accounts is reflected in the period in which the evaluation indicates that a change is necessary. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The allowance for doubtful accounts was $1,134,000 as of March 31, 2006 and $562,000 as of March 31, 2005. The increase is primarily attributable to an increase in the outstanding balance of accounts receivable that are over 120 days from date of invoice.

The Company performed its annual impairment test as of December 31, 2005 and concluded that no impairment of goodwill existed since the fair value of the Company’s reporting unit exceeded its carrying value. No events have occurred, nor circumstances changed subsequent to December 31, 2005, that would reduce the Company’s fair value below its carrying value. The Company will continue to test for impairment on an annual basis or on an interim basis if events occur or circumstances change that would indicate the possibility of impairment. The impairment review may require an analysis of future projections and assumptions about the Company’s operating performance. If such a review indicates that the assets are impaired, an expense would be recorded for the amount of the impairment, and the corresponding impaired assets would be reduced in carrying value. Differences in the identification of reporting units and the use of valuation techniques can result in materially different evaluations of impairment.

In the year ended March 31, 2005, the Company recorded net restructuring charges of $10.4 million for revisions to accounting estimates from prior business restructurings and for additional restructuring charges related to office and business consolidations and employee severance. Revisions to the Company’s assumptions for expected sublease income from two unoccupied floors in San Francisco, CA comprised $0.4 million of this expense. Further consolidation of office space in San Francisco and Atlanta, GA resulted in $7.0 million in new restructuring charges for the year. This consolidation included vacating three floors in Atlanta and one additional floor in San Francisco. The remaining $3.0 million in restructuring expense is associated with the elimination of approximately 140 positions, including the transfer of certain functions to the company-owned office buildings in Columbia, SC and the outsourcing of some development functions to India. At March 31, 2006, a total of $1.0 million remains in the current and long-term restructuring accruals for these initiatives, which relates to excess lease costs associated with subleasing the Company’s vacated office space in San Francisco. These restructuring charges have been recorded in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” and SFAS No. 112, “Employer’s Accounting for Postemployment Benefits.”

Cost of Revenue


	Twelve Months Ended						%
	3/31/2005			3/31/2006			Change
	(In thousands)

Cost of software license fees	$	3,737		$	2,041			(45.4	)%
Percentage of software license revenue		11.7	%		7.9	%
Cost of support, outsourcing and hosting		16,975			14,474			(14.7	)%
Percentage of support, outsourcing and hosting		28.5	%		24.2	%
Cost of consulting, training and other		38,995			37,398			(4.1	)%
Percentage of consulting, training and other		76.8	%		78.7	%

Total cost of revenue	$	59,707		$	53,913

Cost of revenue consists of (a) amortization of the costs associated with internally developed software, (b) amounts paid to third parties for inclusion of their products in the Company’s software, (c) personnel, data maintenance and related costs for customer support, hosting and outsourcing services, and (d) personnel and related costs for consulting, training and other services.

Cost of software license fees: Cost of software license fees decreased 45.4% in the year ended March 31, 2006. This decrease is due to a decrease in the amortization of capitalized software development costs related to a double-byte character-enabled version of our Asset Suite from $2.7 million in fiscal 2005 to $1.3 million in fiscal 2006, which was due to a substantially greater amount of software license fees recognized in Japan in fiscal 2005. The product was made generally available for sale in Japan in April 2004, following delivery to and product acceptance by TEPCO. In addition, the product mix sold in fiscal 2006 resulted in lower costs for third party software, which is included in some of the Company’s products.

Cost of services revenue — customer support, outsourcing and hosting: The 14.7% decrease during the year ended March 31, 2006 in cost of customer support, outsourcing and hosting services is attributable to greater efficiencies in utilization of personnel to deliver these services, including a $1.9 million reduction in outsourcing expense primarily due to the non-renewal of an outsourcing contract in October 2004 as previously mentioned.

Cost of services revenue — consulting, training and other: Cost of consulting, training and other services decreased 4.1% in the year ended March 31, 2006 consistent with the decrease in revenues from consulting and training. As a percentage of revenue, cost of consulting, training and other services revenue for the year ended March 31, 2006 increased due to lower utilization of personnel on staff.

Operating Expenses


	Twelve Months Ended						%
	3/31/2005			3/31/2006			Change
	(In thousands)

Research and development	$	31,956		$	29,357			(8.1	)%
Percentage of total revenue		22.5	%		22.0	%
Sales and marketing		30,619			27,234			(11.1	)%
Percentage of total revenue		21.5	%		20.5	%
General and administrative		15,125			15,187			0.4	%
Percentage of total revenue		10.6	%		11.4	%
Restructuring and settlement expenses (benefits)		10,430			(24	)		>100	%
Percentage of total revenue		7.3	%		(0.0	)%

Total operating expense	$	88,130		$	71,754

Research and development: Research and development expenses include personnel and related costs, both internal and offshore, third party consultant fees and computer processing costs, all directly attributable to the development of new software products and enhancements to existing products. The $2.6 million reduction in research and development expenses for the year ended March 31, 2006 from the prior year is attributable to the improved utilization of development resources, streamlined development and QA processes, and lower salary and contractor expenses associated with the completion of key development efforts.

Sales and marketing: Sales and marketing expenses include personnel and related costs, sales commissions, and the costs of advertising, public relations and participation in industry conferences and trade shows. The $3.4 million reduction in sales and marketing expenses for the year ended March 31, 2006 from the prior year is attributable to lower commissions and bonuses associated with the lower software license revenues and to the Company’s continued efforts toward cost containment and better allocation of marketing resources.

General and administrative: General and administrative expenses include the costs of finance, human resources and administrative operations. For the year ended March 31, 2006, general and administrative expenses remained consistent with the prior year, which is primarily attributable to cost containment programs and the consolidation of certain previously decentralized accounting and administrative functions in fiscal 2005 offset by higher accounting fees, including Sarbanes-Oxley related services.

Restructuring and settlement expenses (benefits): In the year ended March 31, 2006, the Company recorded a net restructuring benefit of $24,000 which included (1) a $0.4 million settlement expense related to the termination of the Company’s agreement with a third party to purchase contract labor development services through 2007; (2) a $0.4 million restructuring benefit for revisions to the Company’s assumptions for sublease income for one floor in San Francisco, CA; (3) a $0.2 million benefit for finalization of a lease buyout agreement for the Company’s unused floors in Atlanta, GA; and (4) accretion on the existing lease obligations recorded in prior business restructuring activities.

Interest Income (Expense), Other Income and Provision (Benefit) for Income Taxes


	Twelve Months Ended						%
	3/31/2005			3/31/2006			Change
	(In thousands)

Interest income (expense), net	$	(470	)	$	185			139.4	%
Percentage of total revenue		(0.3	)%		0.1	%
Other income, net		185			344			85.9	%
Percentage of total revenue		0.1	%		0.3	%
Provision (benefit) for income taxes		112			(162	)		(244.6	)%
Percentage of total revenue		0.1	%		(0.1	)%

Interest income (expense), net: Net interest income (expense) arises from interest expense on a mortgage note payable and interest income generated from the Company’s invested cash balances. The increase in net interest income for the year ended March 31, 2006 is the result of higher interest returns from the Company’s higher cash balances compared to the prior year’s cash balances.

Other income, net: Other income, net is primarily attributable to foreign exchange gains and losses. Foreign exchange gains reflect the decline in the value of the U.S. Dollar and its impact on the Company’s non-U.S. subsidiaries holding U.S. Dollar cash and receivable balances and the revaluation of certain intercompany balances between the parent company and one of its international subsidiaries.

Provision (benefit) for income taxes: Income taxes include federal, state and foreign income taxes. The income tax benefit for the year ended March 31, 2006 is attributable to the withholding of income taxes on revenues generated in foreign countries offset by tax benefits recognized upon resolution of outstanding

income tax issues. As of March 31, 2006, the Company has significant net operating losses that can be carried forward to offset taxable income that may arise in the future. However, the Company has determined that utilization of the net operating losses is subject to annual limitations, per Section 382 of the Internal Revenue Code.

Year Ended March 31, 2004 Compared to the Year Ended March 31, 2005

Revenue


	Twelve Months Ended						%
	3/31/2004			3/31/2005			Change
	(In thousands)

Software license fees	$	23,917		$	31,866			33.2	%
Percentage of total revenue		16.3	%		22.4	%
Support, outsourcing and hosting		59,536			59,543			0.0	%
Percentage of total revenue		40.7	%		41.9	%
Consulting, training and other		62,933			50,760			(19.3	)%
Percentage of total revenue		43.0	%		35.7	%

Total revenue	$	146,386		$	142,169

Software license fees: Software license fees increased 33.2% to $31.9 million in the year ended March 31, 2005. The increase in software license fees was attributable to improved sales execution and sales of Service Suite primarily into the Company’s existing customer base. Service Suite was acquired in the January 2004 acquisition of Wishbone and, therefore, was not available for sale through the first three quarters of fiscal 2004. Software license fees for fiscal year 2005 benefited from the recognition of a software license with TEPCO in excess of $5.0 million under a contract entered into by the Company in March 2003.

Support, outsourcing and hosting: Support, outsourcing and hosting revenue for the year ended March 31, 2005 was approximately equivalent to the year ended March 31, 2004. The Company decided not to renew a non-strategic outsourcing contract in October 2004 which provided recurring revenues of approximately $1.0 million per quarter, resulting in a year-over-year decline of approximately $2.0 million. Revenues from customer support services agreements sold with new sales of software and growth in the Company’s hosting business offset the decline in outsourcing revenue. Renewals of customer support revenues for fiscal 2005 remained over 90%.

Consulting, training and other: Consulting, training and other revenue decreased 19.3% to $50.8 million in the year ended March 31, 2005. The prior year reflected more engagements for such services and higher utilization of billable personnel.

Cost of Revenue


	Twelve Months Ended						%
	3/31/2004			3/31/2005			Change
	(In thousands)

Cost of software license fees	$	999		$	3,737			274.1	%
Percentage of software license revenue		4.2	%		11.7	%
Cost of support, outsourcing and hosting		20,265			16,975			(16.2	)%
Percentage of support, outsourcing and hosting		34.0	%		28.5	%
Cost of consulting, training and other		46,342			38,995			(15.9	)%
Percentage of consulting, training and other		73.6	%		76.8	%

Total cost of revenue	$	67,606		$	59,707

Cost of software license fees: The 274.1% increase in cost of software license fees in the year ended March 31, 2005 was attributable to the amortization of $2.7 million of capitalized software development costs

related to a double-byte character-enabled version of our Asset Suite. The product was made generally available for sale in Japan in April 2004, following delivery to and product acceptance by TEPCO. There was no corresponding amortization in the year ended March 31, 2004.

Cost of services revenue — customer support, outsourcing and hosting: The decrease in cost of customer support, outsourcing and hosting services was attributable to two factors: (1) the efficiencies gained through consolidation of the Company’s North American customer support operations in Columbia, SC as part of the Company’s business restructuring plan implemented during the first quarter of fiscal 2005; and (2) the elimination of personnel associated with the non-strategic outsourcing contract that was not renewed in October 2004, as described above.

Cost of services revenue — consulting, training and other: Cost of consulting, training and other services decreased in the year ended March 31, 2005 due to staffing reductions made in conjunction with the Company’s strategic resource allocation plans. The staffing reductions were made as part of the business restructuring recorded in the quarter ended September 30, 2004. As a percentage of revenue, cost of consulting, training and other services revenue for the year ended March 31, 2005 increased due to lower utilization of personnel on staff, primarily in the first half of fiscal 2005.

Operating Expenses


	Twelve Months Ended						%
	3/31/2004			3/31/2005			Change
	(In thousands)

Research and development	$	34,960		$	31,956			(8.6	)%
Percentage of total revenue		23.9	%		22.5	%
Sales and marketing		33,334			30,619			(8.1	)%
Percentage of total revenue		22.8	%		21.5	%
General and administrative		21,226			15,125			(28.7	)%
Percentage of total revenue		14.5	%		10.6	%
Restructuring expense		44			10,430			>100	%
Percentage of total revenue		0.0	%		7.3	%

Total operating expense	$	89,564		$	88,130

Research and development: The reduction in research and development expenses for the year ended March 31, 2005 from the prior year was attributable to the combined effects of two principal actions: (1) the elimination of personnel dedicated to less strategic product development; and (2) increased utilization of offshore research and development resources in India. Total research and development expenditures were reduced by approximately $10.3 million from the prior year, after consideration of the $7.3 million of software development costs capitalized in the year ended March 31, 2004 to develop the double-byte character-enabled version of our Asset Suite.

Sales and marketing: The reduction in sales and marketing expenses for the year ended March 31, 2005 from the prior year was attributable to the elimination of certain sales and marketing positions as part of the Company’s restructuring plan implemented in August 2004 as well as cost containment efforts and better allocations of resources. These reductions are partially offset by tiered sales commissions associated with greater sales of software licenses in fiscal 2005.

General and administrative: The $6.1 million reduction in general and administrative expenses for the year ended March 31, 2005 from the prior year was attributable to consolidation of certain previously decentralized accounting and administrative functions into the Company’s headquarters in Atlanta, GA and continued cost containment programs.

Restructuring expense: In the year ended March 31, 2005, the Company recorded net restructuring charges of $10.4 million for revisions to accounting estimates from prior business restructurings and for additional restructuring charges related to office and business consolidations and employee severance.

Revisions to the Company’s assumptions for expected sublease income from two unoccupied floors in San Francisco, CA comprised $0.4 million of this expense. Further consolidation of office space in San Francisco and Atlanta, GA resulted in $7.0 million in new restructuring charges for the year ended December 31, 2004. This consolidation included vacating three floors in Atlanta and one additional floor in San Francisco. The remaining $3.0 million in restructuring expense is associated with the elimination of approximately 140 positions, including the transfer of certain functions to the company-owned office buildings in Columbia, SC and the outsourcing of some development functions to India.

Interest Income (Expense), Other Income and Provision for Income Taxes


	Twelve Months Ended						%
	3/31/2004			3/31/2005			Change
	(In thousands)

Interest expense, net	$	(655	)	$	(470	)		28.2	%
Percentage of total revenue		(0.4	)%		(0.3	)%
Other income, net		101			185			83.2	%
Percentage of total revenue		0.1	%		0.1	%
Provision for income taxes		623			112			(82.0	)%
Percentage of total revenue		0.4	%		0.1	%

Interest expense, net: The decrease in interest expense, net was due to the elimination of interest related to 8% Convertible Notes, which were converted to common stock on July 29, 2003.

Other income, net: Foreign exchange gains reflect the decline in the value of the U.S. Dollar and its impact on the Company’s non-U.S. subsidiaries holding U.S. Dollar cash and receivable balances and the revaluation of certain intercompany balances between the parent company and one of its international subsidiaries.

Provision for income taxes: The provision for income taxes for the year ended March 31, 2005 was attributable to the withholding of income taxes on revenues generated in foreign countries offset by tax benefits recognized upon resolution of outstanding income tax issues.

Liquidity and Capital Resources

At March 31, 2006, the Company’s principal sources of liquidity consisted of approximately $37.2 million in cash and cash equivalents and $5.8 million in short and long-term restricted cash. The Company generated $11.0 million of cash flow from operations for the year ended March 31, 2006, and used cash totaling $0.9 million in investing and financing activities, increasing cash and cash equivalents by $9.4 million from March 31, 2005, while decreasing short and long-term restricted cash by $0.2 million.

During the year ended March 31, 2006:


	•	Cash of $11.0 million was provided from operating activities. Cash realized from earnings of $8.2 million and favorable collections of outstanding accounts receivable were the principal sources of cash during the twelve months ending March 31, 2006. The Company generated operating income during all four quarters of fiscal 2006 as well as the third and fourth quarters of fiscal 2005 largely through better execution on its business plans and realization of financial benefits from the Company’s restructuring activities in the first half of fiscal 2005. The Company made cash payments of approximately $2.5 million in settlement of a lease buyout on a portion of the office space in the Company’s headquarters in Atlanta, GA. Days’ Sales Outstanding (“DSO”) improved to 60 days at March 31, 2006, from 76 days at March 31, 2005. The cash from favorable collections was reduced by payments associated with sales incentive plans, management bonuses, and related payments tied to prior fiscal year performance and by $7.1 million in payments on obligations from prior restructuring activities.


	•	Cash of $1.4 million was used in investing activities with $1.7 million for capital expenditures, which consist principally of purchases of computers, equipment and technology, which have been reduced to a level to ensure consistency in operations and customer success. This cash outflow was offset by a decrease in restricted cash of $0.2 million.

	•	Cash of $0.6 million was provided by financing activities, which includes debt payments of $1.3 million offset by proceeds from stock option exercises of $1.9 million.

Commitments Under Prior Restructuring Activities:

During the twelve months ended March 31, 2006, the Company paid $7.1 million in payments on obligations from prior restructuring activities. Future payments for these restructuring activities are projected to be $2.6 million in fiscal year 2007, $2.2 million in fiscal year 2008, and $0.3 million in fiscal year 2009, for an aggregate total of $5.1 million.

Restricted Cash:

At March 31, 2006, the Company maintained cash deposits totaling approximately $5.8 million in support of six standby letters of credit and collateral for a mortgage. These deposits are classified as restricted cash, of which $2.8 million is included in current assets and the balance of $3.0 million in non-current assets. The letters of credit require the Company to maintain corresponding compensating balances equal to the amounts of the letters of credit. We expect a total of $4.6 million in restricted cash to be released in increments of $2.3 million each in both December 2006 and May 2008, relative to the expiration of letters of credit supporting a performance bond and the Company’s leased facilities in San Francisco, CA, respectively. A $0.6 million certificate of deposit, used as collateral for the Company’s $11.5 million mortgage note payable on its Columbia, SC property, will be released in April 2008.

Acquisition Financing:

The purchase price of the March 2003 IUS acquisition approximated $35.8 million, which the Company financed with approximately $24.8 million from a private placement of the Company’s common stock and convertible notes and a $10.0 million promissory note. The $10.0 million promissory note was paid in full on September 5, 2003 with the proceeds from an $11.5 million mortgage note secured by certain real property located in Columbia, SC. This mortgage note bears interest at an annual rate of 6.5% and is payable in monthly installments of principal and interest (determined on a 15-year amortization) through October 1, 2008, at which time the remaining principal balance of $7.7 million is due and payable. The Company may extend the maturity date at that time for one additional five year term at a variable rate of interest.

On January 21, 2004, the Company acquired Wishbone for $7.2 million (inclusive of the $0.5 million purchase price adjustment for employee relocations recorded in the second quarter of fiscal 2005) plus the assumption of $1.0 million in Wishbone debt, which was repaid concurrent with the acquisition. The acquisition was financed from the Company’s available cash balance. Shortly thereafter, on February 9, 2004, the Company completed a private placement offering of 5.0 million shares of the Company’s common stock, at a price of $3.10 per share. Net proceeds from this offering were used to replenish cash used in the acquisition of Wishbone and for general working capital.

Cash Analysis:

The Company believes that its existing cash, cash equivalents, and marketable securities, together with anticipated cash flows from operations, will be sufficient to meet its cash requirements for at least the next 12 months. The Company implemented significant business restructuring plans to better align its resources with its strategic initiatives and improve on-going profitability and cash flows from operations during the first half of fiscal 2005. The Company began to realize the financial benefits from these restructuring activities in the second half of the year, and continues to realize the financial benefits. This is apparent in the improved operating results of the Company during fiscal 2006, in which net income of $8.2 million was reported and available cash balances increased by $9.4 million through cash flows from operations. The Company believes

it will continue to realize financial benefits from its restructuring activities in the forms of profitability and cash flows from operations but cannot assure investors that it will remain consistently profitable and cash flow positive on a quarterly basis. If necessary, the Company is also prepared to adjust its usage of cash and cash equivalents, as called for by its internal business plans, to align with actual business conditions.

The foregoing statement regarding the Company’s expectations for continued liquidity is a forward-looking statement, and actual results may differ materially depending on a variety of factors, including variable operating results, continued operating losses, presently unexpected uses of cash and the factors discussed in Item 1A. Risk Factors.

New Accounting Pronouncements

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. SFAS No. 154 requires retroactive application of a voluntary change in accounting principle to prior period financial statements unless it is impracticable. SFAS No. 154 also requires that a change in method of depreciation, amortization or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate that is affected by a change in accounting principle. SFAS No. 154 replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005. The Company does not expect the adoption of the provisions of SFAS No. 154 to have a material impact on its results of operations or financial condition.

In December 2004, the FASB issued Statement No. 123 (revised 2004), “Share-Based Payment,” which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation.” Statement 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

Statement 123(R) must be adopted no later than the beginning of the first fiscal year beginning after June 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. The Company will adopt Statement 123(R) during its first quarter of fiscal 2007.

Statement 123(R) permits public companies to adopt its requirements using one of two methods: (1) a “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of Statement 123(R)that remain unvested on the effective date; and (2) a “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior periods of the year of adoption. The Company will adopt Statement 123(R) in the first quarter of fiscal 2007 using the modified prospective method.

License and hosting agreements with customers generally contain infringement indemnity provisions. Under these agreements, the Company agrees to indemnify, defend and hold harmless the customer in connection with patent, copyright, trademark or trade secret infringement claims made by third parties with respect to the customer’s authorized use of our products and services. The indemnity provisions generally provide for the Company to control defense and settlement and cover costs and damages finally awarded against the customer. The indemnity provisions also generally provide that if the Company’s products infringe, or in the Company’s opinion it is likely that they will be found to infringe, on the rights of a third-party, Indus will, at its option and expense, procure the right to use the infringing product, modify the product so it is no longer infringing, or return the product for a partial refund that reflects the reasonable value of prior use. The Company has not previously incurred costs to settle claims or pay awards under these indemnification obligations. The Company accounts for these indemnity obligations in accordance with SFAS No. 5,

Services agreements with customers may also contain indemnity provisions for death, personal injury or property damage caused by the Company’s personnel or contractors in the course of performing services to customers. Under these agreements, the Company generally agrees to indemnify, defend and hold harmless the customer in connection with death, personal injury and property damage claims made by third parties with respect to actions of the Company’s personnel or contractors. The indemnity provisions generally provide for the Company control of defense and settlement and cover costs and damages finally awarded against the customer. The indemnity obligations contained in services agreements generally have no specified expiration date and no specified monetary limitation on the amount of award covered. The Company has not previously incurred costs to settle claims or pay awards under these indemnification obligations and estimates the fair value of these potential obligations to be nominal. Accordingly, no liabilities have been recorded for these agreements as of March 31, 2006.

Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements

The Board of Directors and Stockholders

Indus International, Inc.

We have audited the accompanying consolidated balance sheets of Indus International, Inc. (the “Company”) as of March 31, 2005 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at March 31, 2005 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2006, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of March 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 12, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Atlanta, Georgia

June 12, 2006

INDUS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS


	March 31, 2005			March 31, 2006
	(In thousands, except share and per share data)

ASSETS
Current assets:
Cash and cash equivalents	$	27,779		$	37,165
Restricted cash		194			2,793
Billed accounts receivable, net of allowance for doubtful accounts of $562 and $1,134 at March 31, 2005 and March 31, 2006, respectively		16,844			14,020
Unbilled accounts receivable		14,293			6,257
Other current assets		3,672			3,683

Total current assets		62,782			63,918
Property and equipment, net		30,755			26,990
Capitalized software, net		5,014			3,760
Goodwill		7,442			7,442
Acquired intangible assets, net		10,536			9,066
Restricted cash, non-current		5,821			2,976
Other assets		427			681

Total assets	$	122,777		$	114,833


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of note payable	$	767		$	767
Accounts payable		4,208			3,836
Accrued liabilities		19,213			14,050
Deferred revenue		34,911			30,234

Total current liabilities		59,099			48,887
Income tax payable		3,137			2,553
Note payable, net of current portion		9,530			8,763
Other liabilities		10,598			4,549
Stockholders’ equity:
Preferred stock, $.001 par value Shares authorized: 10 million; shares issued: none outstanding		—			—
Common stock, $.001 par value
Shares authorized: 100 million
Shares issued and outstanding: March 31, 2005 — 57,534,289
Shares issued and outstanding: March 31, 2006 — 58,581,254		58			59
Additional paid-in capital		165,280			163,243
Treasury stock
Shares: March 31, 2005 — 935,500
Shares: March 31, 2006 — none		(4,681	)		—
Note receivable from stockholder		—			(25	)
Deferred compensation		—			(480	)
Accumulated deficit		(121,322	)		(113,142	)
Accumulated other comprehensive income		1,078			426

Total stockholders’ equity		40,413			50,081

Total liabilities and stockholders’ equity	$	122,777		$	114,833

See accompanying notes.

INDUS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Years Ended March 31,
	2004			2005			2006
	(In thousands, except per share data)

Revenue:
Software license fees	$	23,917		$	31,866		$	25,971
Support, outsourcing and hosting		59,536			59,543			59,694
Consulting, training and other		62,933			50,760			47,491

Total services		122,469			110,303			107,185

Total revenue		146,386			142,169			133,156

Cost of revenue:
Software license fees		999			3,737			2,041
Services:
Support, outsourcing and hosting		20,265			16,975			14,474
Consulting, training and other		46,342			38,995			37,398

Total services		66,607			55,970			51,872

Total cost of revenue		67,606			59,707			53,913

Gross margin		78,780			82,462			79,243

Operating expenses:
Research and development		34,960			31,956			29,357
Sales and marketing		33,334			30,619			27,234
General and administrative		21,226			15,125			15,187
Restructuring and settlement expenses/(benefits)		44			10,430			(24	)

Total operating expenses		89,564			88,130			71,754

Income (loss) from operations		(10,784	)		(5,668	)		7,489
Interest and other income		700			475			1,242
Interest expense		(1,254	)		(760	)		(713	)

Income (loss) before income taxes		(11,338	)		(5,953	)		8,018
Provision (benefit) for income taxes		623			112			(162	)

Net income (loss)	$	(11,961	)	$	(6,065	)	$	8,180

Net income (loss) per share:
Basic	$	(0.24	)	$	(0.11	)	$	0.14

Diluted	$	(0.24	)	$	(0.11	)	$	0.14

Shares used in computing per share data:
Basic		49,455			57,259			57,951

Diluted		49,455			57,259			60,195

See accompanying notes.

INDUS INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


											Deferred						Accumulated
											Compen-						Other			Total
					Add’l			Trea-			sation			Accumu-			Compre-			Stock-
	Common Stock				Paid-In			sury			&			lated			hensive			holders’
	Shares		Amount		Capital			Stock			Other			Deficit			Income/(Loss)			Equity
	(In thousands)

Balance, March 31, 2003		42,066	$	42	$	135,279		$	(4,681	)	$	(79	)	$	(103,296	)	$	(184	)	$	27,081
Exercise of stock options		130		—		153			—			—			—			—			153
Sale of common stock under Employee Stock Purchase Plan		72		—		148			—			—						—			148
Issuance of common stock in private placement transaction		5,000		5		14,492			—			—			—			—			14,497
Issuance of stock from convertible notes		9,792		10		13,930			—			—			—			—			13,940
Issuance of options in connection with acquisitions		—		—		429			—			(29	)		—			—			400
Amortization of deferred compensation		—		—		—			—			58			—			—			58
Comprehensive loss:
Net loss		—		—		—			—			—			(11,961	)		—			(11,961	)
Unrealized loss on marketable securities		—		—		—			—			—			—			(70	)		(70	)
Foreign currency translation		—		—		—			—			—			—			1,354			1,354

Total comprehensive loss																					(10,677	)

Balance, March 31, 2004		57,060		57		164,431			(4,681	)		(50	)		(115,257	)		1,100			45,600
Exercise of stock options		222		—		407			—			—			—			—			407
Sale of common stock under Employee Stock Purchase Plan		253		1		451			—			—			—			—			452
Common stock issuance costs		—				(58	)														(58	)
Accelerated stock option vesting		—		—		45			—			—			—			—			45
Option valuation for non-employee grant		—		—		4			—			—			—			—			4
Amortization of deferred compensation		—		—		—			—			50			—			—			50
Comprehensive loss:
Net loss		—		—		—			—			—			(6,065	)		—			(6,065	)
Foreign currency translation		—		—		—			—			—			—			(22	)		(22	)

Total comprehensive loss																					(6,087	)

Balance, March 31, 2005		57,535		58		165,280			(4,681	)		—			(121,322	)		1,078			40,413
Exercise of stock options		794		1		1,435			—			—			—			—			1,436
Sale of common stock under Employee Stock Purchase Plan		252		—		475			—			—			—			—			475
Notes receivable from stockholder		—		—		—			—			(25	)		—			—			(25	)
Cancellation of treasury stock		—		—		(4,681	)		4,681			—			—			—			—
Restricted Stock Grants		—		—		563			—			(563	)		—			—			—
Performance based option grants		—		—		171			—			(171	)		—			—			—
Amortization of deferred compensation		—		—		—			—			254			—			—			254
Comprehensive income:
Net income		—		—		—			—			—			8,180			—			8,180
Foreign currency translation		—		—		—			—			—			—			(652	)		(652	)

Total comprehensive income																					7,528

Balance, March 31, 2006		58,581	$	59	$	163,243		$	—		$	(505	)	$	(113,142	)	$	426		$	50,081

See accompanying notes.

INDUS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years Ended March 31,
	2004			2005			2006
	(In thousands)

Cash flows from operating activities:
Net income (loss)	$	(11,961	)	$	(6,065	)	$	8,180
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		10,941			12,540			8,715
Provision for doubtful accounts		(3,548	)		(362	)		595
Amortization of deferred compensation		29			50			254
(Gain) loss on disposal of fixed assets		(29	)		(17	)		50
Changes in operating assets and liabilities:
Billed accounts receivable		9,849			4,120			2,311
Unbilled accounts receivable		4,404			(1,020	)		5,957
Income tax receivable		4,504			557			296
Other current assets		1,714			(151	)		(418	)
Other assets		475			149			(279	)
Accounts payable		1,414			(2,616	)		(316	)
Income taxes payable		(409	)		(1,240	)		(598	)
Accrued restructuring		(3,653	)		3,649			(7,830	)
Other accrued liabilities		(3,278	)		(1,402	)		(3,167	)
Deferred revenue		(13,806	)		(6,890	)		(2,753	)

Net cash provided by (used in) operating activities		(3,354	)		1,302			10,997
Cash flows from investing activities:
Purchase of marketable securities		(1,949	)		—			—
Sale of marketable securities		2,706			—			—
(Increase) decrease in restricted cash		78			(449	)		235
Acquisition of business, net of cash acquired		(14,910	)		(486	)		—
Capitalized software		(7,318	)		(3	)		—
Acquisition of property and equipment		(4,158	)		(3,394	)		(1,683	)

Net cash used in investing activities		(25,551	)		(4,332	)		(1,448	)
Cash flows from financing activities:
Net proceeds of note payable		11,066			—			—
Payment of note payable and capital leases		(280	)		(1,077	)		(1,330	)
Proceeds from issuance of common stock, net of issuance costs		15,450			849			1,911
Changes in stockholder receivables		—			—			(25	)

Net cash provided by (used in) financing activities		26,236			(228	)		556
Effect of exchange rate differences on cash		1,083			(44	)		(719	)
Net increase (decrease) in cash and cash equivalents		(1,586	)		(3,302	)		9,386
Cash and cash equivalents at beginning of period		32,667			31,081			27,779

Cash and cash equivalents at end of period	$	31,081		$	27,779		$	37,165

Supplemental disclosures of cash flow information:
Interest paid	$	1,424		$	756		$	713

Income taxes paid	$	111		$	760		$	67

Income tax refunds	$	4,792		$	4		$	32

Supplemental noncash financing activities:
Acquisition of IUS business:
Fair value of assets acquired	$	(55	)
Fair value of liabilities assumed		10,000

Net assets acquired		9,945
Due from seller		(3,255	)

Net acquisition-related cash paid	$	6,690

Acquisition of Wishbone Systems business:
Fair value of assets acquired	$	8,632		$	486
Fair value of liabilities assumed		(412	)		—

Net assets acquired, less cash	$	8,220		$	486

Cancellation of treasury stock							$	4,681

Granting of performance based options and restricted stock, net of cancellations							$	734

See accompanying notes.

INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


1.	Nature of Business and Significant Accounting Policies

Organization and Business

Business

Indus International, Inc. (the “Company”) develops, licenses, implements, supports and hosts service delivery management (“SDM”) solutions, which help clients in a broad array of industries optimize the management of their customers, assets, workforce, spare parts inventory, tools and documentation in order to maximize performance and customer satisfaction while reducing operating expenses. The Company’s software products are comprised of three distinct suites: Customer Suite, Asset Suite and Service Suite. Customer Suite, originating from the March 2003 acquisition of Indus Utility Systems, Inc. (“IUS”), formerly SCT Utility Systems, Inc., provides the functionality for energy and utility customers to optimize customer-facing activities, encompassing call center, customer information tracking, billing and accounts receivable functions. Asset Suite supports organization’s operations and maintenance workforce, inventory management and procurement professionals, safety and compliance engineers, and other decision-making personnel affected by asset care decisions throughout the enterprise. Service Suite, originating from the January 2004 acquisition of Wishbone Systems, Inc. (“Wishbone”) provides resource optimization enabling customers to dispatch resources with all the required tools, information, and parts at the promised time, optimizing schedules based on customer or asset demands, travel times, service level agreements, technician skills requirements and internal costs. Other complementary products include mobile computing, enterprise asset integration tools, sophisticated search capabilities, data warehousing products and integration to leading ERP products for financial and human resources functions. Through its acquisitions, the Company is able to offer a comprehensive suite of SDM solutions to its customers.

The Company’s SDM solutions also include consulting, training and educational services, and customer support, hosting and outsourcing services. Also offered are comprehensive implementation programs, strategic consulting, training and education solutions and three-tiered customer maintenance and support plans.

Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated.

Reclassifications

Certain reclassifications were made to prior period financial statements to conform to the fiscal 2006 presentation. Credit balances for individual accounts previously included in unbilled accounts receivable were reclassified to deferred revenue, totaling $0.6 million in 2005. Debit balances in individual accounts previously included in deferred revenue were reclassified to unbilled accounts receivable, totaling $0.4 million in 2005.

Revenue Recognition

The Company sells its software to customers under contracts that provide for both software license fees and services. The revenues from software license fees are recognized in accordance with AICPA Statement of Position, or “SOP”, 97-2, “Software Revenue Recognition,” as amended or interpreted by SOP 98-4 and SOP 98-9, AICPA Technical Practice Aids, and SEC Staff Accounting Bulletins. Revenue for software is recognized when persuasive evidence of a non-cancelable license agreement exists, delivery has occurred, the license fee is fixed or determinable, and collection is probable. Revenue from services, which generally are time and material based, are recognized as the work is performed. When software is licensed through indirect sales channels, license fees may be recognized as revenue upon licensing to the reseller or when the reseller

licenses the software to an end user customer, depending upon the Company’s history with the reseller, the reseller’s financial resources and other factors. In software arrangements that include rights to multiple software products and/or services, the total arrangement fee is allocated among each of the deliverables using the residual method, under which revenue is allocated to the undelivered elements based on vendor specific objective evidence (“VSOE”) of fair value of such undelivered elements and the residual amounts of revenue are allocated to the delivered elements. Elements included in multiple element arrangements may consist of software products, maintenance (which includes customer support services and unspecified upgrades), hosting and consulting services. VSOE is based on the price generally charged when an element is sold separately or, in the case of an element not yet sold separately, the price established by authorized management, if it is probable that the price, once established, will not change once the element is sold separately. If VSOE does not exist for an undelivered element, the total arrangement fee will be taken to revenue over the life of the contract or upon delivery of the undelivered element.

Revenue is recognized using contract accounting for arrangements involving significant customization or modification of the software or where software services are considered essential to the functionality of the software. Revenue from these software arrangements is recognized using the percentage-of-completion method with progress to completion measured using specific milestones, usually labor cost inputs, with revisions to estimates reflected in the period in which changes become known. Project losses are provided for in their entirety in the period in which they become known.

Revenue from maintenance and support services is recognized ratably over the term of the support contract, typically one year.

Revenue from outsourcing and web hosting (also referred to as “ASP” or application service provider) services is recognized based upon contractually agreed upon rates per user or service, over a contractually defined time period. Under some web hosting arrangements, customers have a license to the software and are entitled to take possession of the software at any time during the hosting period, while other customers are only entitled to use the software through the hosting arrangement. For arrangements in which the customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty, the Company recognizes revenue under the accounting policies disclosed above in the revenue recognition accounting policy for software arrangements. For arrangements where the customer does not have the right to take possession of the software, the Company recognizes license revenue over the course of the hosting contract period.

Unbilled accounts receivable represent amounts related to revenue under existing contracts that has been recorded either as deferred revenue or earned revenue but which has not yet been billed. Generally, unbilled amounts are billed within one year of the sale of product or performance of services.

Deferred revenue represents fees for services and software licenses that have not yet met the criteria to be recognized as revenue.

Deferred support represents amounts invoiced prior to performance of support services. Contracts for support services are typically one year in length and are amortized to revenue ratably over the contract period. Deferred services are amounts invoiced prior to performance of consulting services.

Deferred license revenue represents license fee contracts revenue which was deferred because the criteria for revenue recognition had not been met. Revenue on these contracts is recognized when these criteria are met and have occurred.

Foreign Currency Translation

The functional currencies of the Company’s foreign subsidiaries are their respective local currencies. The financial statements of foreign subsidiaries have been translated into U.S. Dollars. Asset and liability accounts have been translated using the exchange rates in effect at the balance sheet date. The foreign statements of operations have been translated using average exchange rates. Gains and losses resulting from translation of the accounts of the Company’s foreign subsidiaries have been reported in other comprehensive income (loss)

within stockholders’ equity. Gains and losses resulting from foreign currency transactions are included in the determination of net income (loss).

Fair Value of Financial Instruments

The fair values of our cash and cash equivalents, accounts receivable, accounts payable and notes payable approximate their carrying amounts.

Concentration of Credit Risk

Financial instruments where the Company may be subject to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company has investment policies and procedures that are reviewed periodically to minimize credit risk. The Company’s customers are generally large companies in the utilities, oil and gas, defense, pulp and paper and metals and mining industries. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its accounts receivable credit risk exposure is limited.

The following is an analysis of the activity in the allowance for doubtful accounts (in thousands):


	Balance at		Charged to			Changes-
	Beginning		Costs and			Add			Balance at
Allowance for Doubtful Accounts	of Year		Expenses			(Deduct)			End of Year

Year Ended March 31, 2006	$	562	$	(103	)	$	675		$	1,134
Year Ended March 31, 2005	$	912	$	(98	)	$	(252	)	$	562
Year Ended March 31, 2004	$	4,375	$	(289	)	$	(3,174	)	$	912

Changes to the allowance account are based on an evaluation of specific accounts and aging categories. The write-offs in 2004 include $1.5 million related to a specific customer dispute and approximately $1.1 million in a receivable balance acquired in the IUS acquisition, both of which had been reserved previously. The increase in fiscal 2006 is attributable to an increase in the outstanding balance over 120 days from date of invoice.

A single customer in each year represented $1.9 million, $4.2 million and $1.9 million of the Company’s accounts receivable as of March 31, 2004, 2005, and 2006, respectively.

Restricted Cash

At March 31, 2006, the Company maintained cash deposits totaling approximately $5.8 million in support of six standby letters of credit and collateral for a mortgage. These deposits are classified as restricted cash, of which $2.8 million is included in current assets and the balance of $3.0 million in non-current assets. The letters of credit require the Company to maintain corresponding compensating balances equal to the amounts of the letters of credit. A total of $4.6 million in restricted cash will be released in increments of $2.3 million each in both December 2006 and May 2008, relative to the expiration of letters of credit supporting a performance bond and the Company’s leased facilities in San Francisco, CA, respectively. A $0.6 million certificate of deposit, used as collateral for the Company’s $11.5 million mortgage note payable on its Columbia, SC property, will be released in April 2008.

Property and Equipment

Property and equipment is stated at cost. Equipment under capital leases is stated at the lower of fair market value or the present value of the minimum lease payments at the inception of the lease.

Depreciation on office and computer equipment and furniture is computed using the straight-line method over estimated useful lives of four to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the related lease term or their estimated useful lives. Software purchased for internal use is amortized using the straight-line method over estimated useful lives of four to five years.

Software Development Costs

The Company accounts for software development costs in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,” whereby costs for the development of new software products and substantial enhancements to existing software products are expensed as incurred until technological feasibility has been established, at which time any additional costs are capitalized. Technological feasibility is established upon completion of a working model. Through December 31, 2002, software development costs incurred subsequent to the establishment of technological feasibility were not significant, and all software development costs were charged to research and development expense in the accompanying consolidated statements of operations during that time.

The Company capitalized certain internal and external development costs related to the internationalization of its products to Asian markets of $7.7 million through March 31, 2004. The product became generally available for sale in the first quarter of fiscal 2005 and the related capitalized software development costs became subject to amortization. These costs are amortized to cost of software license fees based on the greater of the amount computed using (a) the ratio that current gross revenues for the product bear to the total of current and anticipated future gross revenues for that product or (b) the straight-line method over the remaining economic life of the product including the period reported on. Amortization expense recorded for the years ended March 31, 2005 and 2006 was $2.7 million and $1.3 million, respectively. No additional software development costs were capitalized during fiscal 2006.

Internal-Use Software

SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” requires that entities capitalize certain costs related to internal use software once certain criteria have been met. Capitalized internal-use software development costs associated with the Company’s information systems are included in property and equipment and are depreciated on a straight-line basis over a three-year period. The depreciation expense recorded for the years ended March 31, 2004, 2005 and 2006 was approximately $2.8 million, $2.2 million and $1.5 million, respectively.

Acquisition-Related Intangible Assets

Acquisition-related intangible assets are stated at cost less accumulated amortization, and include values for developed technology, customer base, contracts and trade names. Acquired technology is being amortized over the greater of the amount computed using (a) the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product or (b) the straight-line method over the remaining estimated economic life of the product including the period being reported on. Other intangible assets are being amortized on a straight-line basis over a period of two to fifteen years. Total amortization expense for intangible assets was $1.8 million, $2.0 million and $1.5 million for the years ended March 31, 2004, 2005 and 2006, respectively, and is included in general and administrative expense in the accompanying Consolidated Statements of Operations.

Acquisition-related intangible assets consist of the following (in thousands):


	March 31,
	2006

Acquired trademarks	$	730
Acquired technology		2,870
Acquired contracts and customer base		10,920

Total acquired intangible assets		14,520
Less accumulated amortization		(5,454	)

Net intangible assets	$	9,066

The remaining weighted-average amortization period remaining for these intangible assets is approximately ten years. Trademarks and technology have remaining weighted-average amortization periods of two years and contracts and customer base have a remaining weighted-average amortization period of eleven years. The Company expects future amortization expense from acquired intangible assets as of March 31, 2006 to be as follows (in thousands):


2007	$	1,432
2008		1,383
2009		814
2010		657
2011		657
Thereafter		4,123

	$	9,066

In accordance with SFAS No. 144, intangible assets are reviewed to determine whether they should be tested for impairment. At March 31, 2006, the Company performed this review and determined no impairment testing was necessary.

Goodwill and Impairment

Goodwill, which represents the excess of purchase price over fair value of net assets acquired, is not amortized, but in accordance with SFAS No. 142, is subject to annual impairment testing, and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the asset below its carrying amount. For purposes of its goodwill impairment testing, the Company considers itself to be a single reporting unit and assesses goodwill impairment on an enterprise-wide level. The impairment test is performed on a consolidated basis and compares the Company’s market capitalization (reporting unit fair value) to its outstanding equity (reporting unit carrying value). In accordance with the recommended provisions of SFAS No. 142, the Company utilizes its closing stock price as reported on the Nasdaq National Market on the date of the impairment test in order to compute market capitalization. The Company has designated December 31 as the annual date for impairment testing.

The Company has recorded goodwill of $0.4 million associated with the acquisition of IUS and $7.0 million associated with the acquisition of Wishbone. The Company performed its impairment test as of December 31, 2005, and concluded that no impairment of goodwill existed since the fair value exceeded the carrying value. Therefore, no impairment losses have been recorded through March 31, 2006.

Notes Payable

Notes payable represents short-term and long-term borrowings. The Company includes in current notes payable only those principal balances which are to be paid within the subsequent twelve-month period. The current portion of notes payable balance at March 31, 2006 represents the current portion of a $11.5 million note secured by certain real property located in Columbia, SC. This note bears interest at an annual rate of

6.5% and is payable in monthly installments of principal and interest (determined on a 15-year amortization) through October 1, 2008, at which time the remaining principal balance of $7.7 million is due and payable. The Company may extend the maturity date at that time for one additional five year term at a variable rate of interest.

Guarantees and Indemnifications

The Company accounts for guarantees and indemnifications in accordance with Financial Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others.”

License and hosting agreements with customers generally contain infringement indemnity provisions. Under these agreements, the Company generally agrees to indemnify, defend and hold harmless the customer in connection with patent, copyright, trademark or trade secret infringement claims made by third parties with respect to the customer’s authorized use of our products and services. The indemnity provisions generally provide for the Company to control defense and settlement and cover costs and damages finally awarded against the customer. The indemnity provisions also generally provide that if the Company products infringe, or in the Company’s opinion it is likely that they will be found to infringe, on the rights of a third-party Indus will, at its option and expense, procure the right to use the infringing product, modify the product so it is no longer infringing, or return the product for a partial refund that reflects the reasonable value of prior use. The Company has not previously incurred costs to settle claims or pay awards under these indemnification obligations. The Company accounts for these indemnity obligations in accordance with SFAS No. 5, “Accounting for Contingencies,” and records a liability for these obligations when a loss is probable and reasonably estimable. The Company has not recorded any liabilities for these arrangements as of March 31, 2006.

Services agreements with customers may also contain indemnity provisions for death, personal injury or property damage caused by the Company’s personnel or contractors in the course of performing services to customers. Under these agreements, the Company generally agrees to indemnify, defend and hold harmless the customer in connection with death, personal injury and property damage claims made by third parties with respect to actions of the Company’s personnel or contractors. The indemnity provisions generally provide for the Company’s control of defense and settlement and cover costs and damages finally awarded against the customer. The indemnity obligations contained in services agreements generally have no specified expiration date and no specified monetary limitation on the amount of award covered. The Company has not previously incurred costs to settle claims or pay awards under these indemnification obligations and estimates the fair value of these potential obligations to be nominal. Accordingly, no liabilities have been recorded for these agreements as of March 31, 2006.

Some service agreements require the Company to maintain performance bonds as security for the performance of the Company’s obligations under those agreements. Some of the performance bonds require cash to be restricted as collateral. The obligations to maintain these bonds typically expire either at a date specified in the applicable contract or upon the performance of the Company’s obligations. Due to the Company’s historical experience of successful software implementations, the Company has no significant history of payment under these types of bonds. The Company has not recorded any liabilities for these arrangements as of March 31, 2006.

The Company generally warrants that its software products will perform in all material respects in accordance with its standard published specifications in effect at the time of delivery of the licensed products to the customer for six months to a year, depending upon the software license. Additionally, contracts generally warrant that services will be performed consistent with generally accepted industry standards or, in some instances, specific service levels through completion of the agreed upon services. If necessary, provision will be made for the estimated cost of product and service warranties based on specific warranty claims and claim history. There has been no significant recurring expense under these product or service warranties.

Advertising Costs

Advertising costs are charged to expense in the period the costs are incurred. Advertising expense was approximately $187,000, $92,000 and $425,000 for the years ended March 31, 2004, 2005 and 2006, respectively, and is included in Sales and Marketing in the accompanying Consolidated Statements of Operations.

Segment Information

The Company operates in a single segment as defined by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” See Note 11 for discussion of foreign operations.

Income Taxes

Income taxes are computed in accordance with SFAS No. 109, “Accounting for Income Taxes,” which requires the use of the liability method in accounting for income taxes. Under SFAS No. 109, deferred tax assets and liabilities are measured based on differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

Per Share Data

Basic earnings per share is calculated using the weighted average common shares outstanding during the periods. Diluted income per share is computed using net income divided by weighted average common shares outstanding and the treasury stock method effect of common equivalent shares.

The components of basic and diluted earnings per share were as follows (in thousands, except per share amounts):


	Years Ended March 31,
	2004			2005			2006

Net income (loss)	$	(11,961	)	$	(6,065	)	$	8,180

Calculation of shares outstanding for computing diluted net income (loss) per share:
Shares used in computing basic net income (loss) per share		49,455			57,259			57,951
Shares to reflect the effect of the assumed exercise of:
Employee stock options		—			—			2,214
Restricted stock grants		—			—			30

Shares used in computing diluted net income (loss) per share		49,455			57,259			60,195

Basic and Diluted net income (loss) per share	$	(0.24	)	$	(0.11	)	$	0.14

As of March 31, 2004 and 2005, stock options and warrants to purchase common stock in the amount of 11,395,022 and 9,861,332 were outstanding, respectively. The Company has excluded all outstanding stock options and warrants to purchase common stock from the calculation of diluted net loss per share for the years ended March 31, 2004 and 2005 because all such securities are antidilutive.

As of March 31, 2006, options to purchase shares of common stock in the amount of 3,554,387 were outstanding but were not included in the computation of diluted earnings per share because the options exercise price was greater than the average market price of the common shares during the year.

Use of Estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the

The Company presently has three forms of compensatory stock-based compensation: time-based options, restricted stock grants and performance-based options. As permitted under SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” the Company accounts for time-based options in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and accordingly recognizes no compensation expense for the stock option grants as long as the exercise price is equal to or more than the fair value of the shares at the date of grant. Compensation expense for the restricted stock grants is equal to the market value at the date of grant and is charged to earnings on a straight-line basis over the three or five-year period of restriction. Compensation expense for the performance-based options is recorded as the excess of the quoted market price of the Company’s stock over the option price at the end of each reporting period. At each reporting period end, an assessment is made regarding the probability of meeting the performance criteria, which determines the compensation expense for the period.

As permitted by Statement 123, the Company currently accounts for share-based payments to employees using APB Opinion No. 25’s intrinsic value method and, as such, generally recognizes no compensation expense cost for employee stock options. Accordingly, the adoption of Statement 123(R)’s fair value method will have a significant impact on the Company’s results of operations, although it will have no impact on the Company’s overall financial position. The impact of adoption of Statement 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as described in the disclosure of pro forma net income and earnings per share in Note 1-Stock-Based Compensation to the Consolidated Financial Statements. Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. However, in the case of the Company, the existence of its net operating loss carryforward will preclude recognition of the tax benefit until the deduction can be used to offset current taxes payable. The Company cannot estimate what the tax amounts will be in the future or when they will be recognized, because they depend on, among other things, when the net operating loss carryforwards will expire and when employees exercise stock options.

In the year ended March 31, 2005, the Company recorded net restructuring expenses of $10.4 million for revisions to accounting estimates from prior business restructurings and for additional restructuring charges related to office and business consolidations and employee severance. Revisions to the Company’s assumptions for expected sublease income from two unoccupied floors in San Francisco, CA comprised $0.4 million of this expense. Further consolidation of office space in San Francisco and Atlanta, GA resulted in $7.0 million in new restructuring charges for fiscal 2005. This consolidation included vacating three floors in Atlanta and one additional floor in San Francisco. The remaining $3.0 million in restructuring expense is associated with the elimination of approximately 140 positions, including the transfer of certain functions to the company-owned office buildings in Columbia, SC and the outsourcing of some development functions to India. At March 31, 2006, a total of $1.0 million remains in the current and long-term restructuring accruals for these initiatives all

The Board of Directors is authorized, subject to any limitations prescribed by Delaware law, to provide for the issuance of shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the powers, preferences and rights of the shares of each wholly un-issued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding), without any further vote or action by the stockholders. The Board of Directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power of other rights of the holders of common stock. Thus, the issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of the Company. The Company has no current plan to issue any shares of preferred stock.

On January 25, 2005, the Board of Directors approved a Stockholder Protection Rights Plan (“Rights Plan”). Under the Rights Plan, a dividend of one right (“Right”) for each outstanding share of common stock was distributed to stockholders of record at the close of business on February 4, 2005. The Rights will be exercisable only if a person or group acquires beneficial ownership of 20% or more of the Company’s common stock or commences a tender or exchange offer to acquire 20% or more of the Company’s common stock. If either event occurs, each Right would entitle its holder (other than the person or group that exceeded the threshold) to purchase, at the exercise price of $17.00, a number of shares of Indus common stock having a market value equal to twice such exercise price. Also, if Indus were to be acquired in a merger or other business combination initiated by a person or group that had acquired 20% or more of the Company’s outstanding stock, each Right would entitle its holder (other than the person or group that exceeded the threshold) to purchase, at such exercise price, a number of common shares in the acquiring company having a market value equal to twice such exercise price. Upon being distributed, the Rights will automatically attach to and trade with all shares of Indus common stock. The Rights will not trade separately from the common stock unless and until they become exercisable. The Board of Directors of the Company may redeem the Rights at any time prior to the time at which the rights became exercisable. Unless earlier redeemed or exchanged by the Board of Directors, the Rights will expire on January 25, 2015.

The Company’s management, including the CEO and CFO, does not expect that our Disclosure Controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


Exhibit
Number			Description

	10	.2*	Amendment No. 1 to the Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed with the Commission on July 5, 2001)
	10	.3*	Amendment No. 2 to the Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-8 filed with the Commission on July 5, 2001)
	10	.4*	Amendment No. 3 to the Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 99.3 to the Registration Statement on Form S-8 filed with the Commission on July 5, 2001)
	10	.5*	Amendment No. 4 to the Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005)
	10	.6*	Indus International, Inc. Amended and Restated 1997 Director Option Plan (incorporated by reference to Exhibit 99.2 to the Form 8-K filed with the Commission on October 29, 2004)
	10	.7*	Indus International, Inc. 2004 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 to the Form 8-K filed with the Commission on October 29, 2004)
	10	.8*	Form of Incentive/Non-Statutory Stock Option Non-transferable Grant under the Indus International, Inc. 2004 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2004)
	10	.9*	Form of Restricted Stock Agreement Non-transferable Grant under the Indus International, Inc. 2004 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2004)
	10	.10*	Rules of the Indus International, Inc. Company Share Option Plan (the “UK Option Plan) (incorporated by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001)
	10	.11*	2003 Employee Stock Purchase Plan (incorporated by reference to Appendix A of the Registrant’s Proxy Statement filed on July 1, 2003)
	10	.12*	Form of Indus International, Inc. Fiscal 2007 Incentive Compensation Plan
	10	.13*	Amended and Restated Lease Agreement for the Registrant’s Atlanta, Georgia corporate headquarters by and between Cousins Properties Incorporated and the Registrant dated August 1, 2000 (incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
	10	.14	First Amendment to Amended and Restated Lease Agreement for the Registrant’s Atlanta, Georgia corporate headquarters by and between Cousins Properties Incorporated and the Registrant dated September 28, 2004 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005)
	10	.15	Second Amendment to Amended and Restated Lease Agreement for the Registrant’s Atlanta, Georgia corporate headquarters by and between Cousins Properties Incorporated and the Registrant dated March 14, 2005 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005)
	10	.16	Third Amendment to Amended and Restated Lease Agreement for the Registrant’s Atlanta, Georgia corporate headquarters by and between Cousins Properties Incorporated and the Registrant dated January 26, 2006 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005)
	10	.17	Office Lease Agreement for the Registrant’s San Francisco, California regional office by and between EOP — 60 Spear, L.L.C. and the Registrant dated March 3, 2000, as amended (incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000)
	10	.18	Indus International, Inc. Board Compensation Policy (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 28, 2005)
	10	.19*	Employment Agreement dated as of October 1, 2005 by and between the Registrant and Gregory J. Dukat (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed October 4, 2005)


Exhibit
Number			Description

	10	.20*	First Amendment to Employment Agreement dated as of January 1, 2006 by and between the Registrant and Gregory J. Dukat (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005)
	10	.21*	Change of Control Severance Agreement dated as of October 1, 2005 by and between the Registrant and Gregory J. Dukat (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed October 4, 2005)
	10	.22*	Amendment to Change of Control Severance Agreement dated as of May 9, 2006 by and between the Registrant and Gregory J. Dukat
	10	.23*	Employment Agreement dated as of October 13, 2005, by and between the Registrant and Patrick M. Henn (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed September 27, 2005)
	10	.24*	First Amendment to Employment Agreement dated as of January 1, 2006 by and between the Registrant and Patrick M. Henn (incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005)
	10	.25*	Change of Control Severance Agreement dated as of October 13, 2005 by and between the Registrant and Patrick M. Henn (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed September 27, 2005)
	10	.26*	Amendment to Change of Control Severance Agreement dated as of May 9, 2006 by and between the Registrant and Patrick M. Henn
	10	.27*	Employment Agreement dated as of October 1, 2005 by and between the Registrant and John D. Gregg (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed October 4, 2005)
	10	.28*	First Amendment to Employment Agreement dated as of January 1, 2006 by and between the Registrant and John D. Gregg (incorporated by reference to Exhibit 10.14 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005)
	10	.29*	Change of Control Severance Agreement dated as of October 1, 2005 by and between the Registrant and John D. Gregg (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed October 4, 2005)
	10	.30*	Amendment to Change of Control Severance Agreement dated as of May 9, 2006 by and between the Registrant and John D. Gregg
	10	.31*	Employment Agreement dated as of October 1, 2005 by and between the Registrant and Joseph T. Trino (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed October 4, 2005)
	10	.32*	First Amendment to Employment Agreement dated as of January 1, 2006 by and between the Registrant and Joseph T. Trino (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2005)
	10	.33*	Change of Control Severance Agreement dated as of October 1, 2005 by and between the Registrant and Joseph T. Trino (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed October 4, 2005)
	10	.34*	Amendment to Change of Control Severance Agreement dated as of May 9, 2006 by and between the Registrant and Joseph T. Trino
	10	.35*	Employment Agreement dated as of February 1, 2006 by and between the Registrant and Arthur W. Beckman
	10	.36*	Change of Control Severance Agreement dated as of May 5, 2005 by and between the Registrant and Arthur W. Beckman
	10	.37*	Amendment to Change of Control Severance Agreement dated as of February 1, 2006 by and between the Registrant and Arthur W. Beckman
	10	.38*	Amendment to Change of Control Severance Agreement dated as of May 9, 2006 by and between the Registrant and Arthur W. Beckman


Exhibit
Number			Description

	10	.39	Purchase Agreement, dated as of February 12, 2003, by and among the Registrant and each of the Purchasers listed on the Schedule of Purchasers accompanying the Purchase Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on February 14, 2003)
	10	.40	Purchase Agreement, dated as of February 6, 2004, by and among the Registrant and each of the Purchasers listed on the Schedule of Purchasers accompanying the Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 10, 2004)
	10	.41	Promissory Note dated September 4, 2003 by Indus Utility Systems, Inc. to New Small Research, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 10, 2003)
	10	.42	Loan Agreement dated September 4, 2003 by and between Indus Utility Systems, Inc. and New Small Research, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on November 10, 2003)
	10	.43	Recourse Carve-Out Guaranty dated September 4, 2003 by and between the Registrant and New Small Research, LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on November 10, 2003)
	21	.1	Subsidiaries of Registrant
	23	.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
	24	.1	Power of Attorney, included on the signature page of this report
	31	.1	Certification of Chief Executive Officer of the Registrant, pursuant to Rule 13a-14(a) or Rule 15d-14(a)
	31	.2	Certification of Chief Financial Officer of the Registrant, pursuant to Rule 13a-14(a) or Rule 15d-14(a)
	32	.1	Statement of the Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Statement of the Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

78 EX-10.12 2 g01910exv10w12.txt EX-10.12 FORM OF INDUS INTENATIONAL, INC. FISCAL 2007 INCENTIVE COMPENSATION PLAN EXHIBIT 10.12 (INDUS INTERNATIONAL, INC. LOGO) INDUS INTERNATIONAL, INC. FISCAL 2007 INCENTIVE COMPENSATION PLAN APRIL 1, 2006 - MARCH 31, 2007 CONFIDENTIAL Fiscal 2007 Incentive Compensation Plan CONFIDENTIAL PAGE 1 (INDUS INTERNATIONAL, INC. LOGO) 1. PLAN PURPOSE The Indus International, Inc. Fiscal 2007 Incentive Compensation Plan (the "Plan") has been established to provide performance incentives for executive officers and members of the Business Planning Counsel ("BPC") and Management Council ("MC") of Indus International, Inc. and its subsidiaries (the "Company" or "Indus"). 2. DEFINITION OF KEY TERMS AWARD - The cash payment that goes to Participants. CORPORATE GOALS - Recognized Software License Revenue and Pro Form EPS. FISCAL 2007 - means the fiscal year ending March 31, 2007. INDIVIDUAL GOALS - determined for each Participant by the Participant's manager and approved by the Chief Executive Officer and set forth on an attachment delivered to that Participant. MAXIMUM AWARD - two (2) times the Target Award. RECOGNIZED SOFTWARE LICENSE REVENUE - the total software license revenue recognized by the Company during Fiscal 2007, as set forth in the Company's audited financial statements filed with the Securities and Exchange Commission for Fiscal 2007. PRO FORMA EPS - means the fully diluted earnings per share for the applicable fiscal year as determined under generally accepted accounting principles, plus or minus any unusual, non-recurring or other items that are approved by the Board of Directors, in each case as reported in the Company's audited financial statements filed with the Securities and Exchange Commission for the applicable fiscal year(examples of unusual, non-recurring or other items include, without limitation, restructuring expenses/benefits, stock-based compensation expense computed under FAS 123(R) (this doesn't include restricted stock or performance options), and gains or losses on sales of assets. However, if stock options are provided in lieu of a cash bonus, the Board will determine the appropriateness of adjusting "pro forma earnings per share" for stock based compensation. PARTICIPANT - the executive officer, or member of the BPC or MC of Indus that is selected to participate in this Plan by the CEO and the Compensation Committee of the Company's Board of Directors. TARGET AWARD - a percentage of Participant's base salary as of March 31, 2007. Each Participant's applicable percentage is set forth on an attachment delivered to that Participant. Fiscal 2007 Incentive Compensation Plan CONFIDENTIAL PAGE 2 (INDUS INTERNATIONAL, INC. LOGO) 3. PAYMENT OF AWARD Participant is eligible to receive an Award based upon the attainment of two weighted Corporate Goals: (i) Recognized Software License Revenue; and (ii) Pro Form EPS. The specific Corporate Goals and the relative weighting of those goals are set forth on ATTACHMENT 1 hereto. Achievement of these Corporate Goals will be determined based on the Company's audited financial statements filed with the Securities and Exchange Commission for the fiscal year ended March 31, 2007. Participants will be eligible to receive an Award only if the Company achieves the minimum Pro Forma EPS threshold, as set forth on ATTACHMENT 1. If the minimum Pro Forma EPS threshold is met, but the minimum threshold for Recognized Software License Revenue is not, then Participant will be eligible to receive an Award according to the weighting schedule set forth on ATTACHMENT 1. On the other hand, if the minimum threshold for Recognized Software License Revenue is met, but the minimum Pro Forma EPS threshold is not, then Participant is not eligible to receive an Award. In addition, a portion of any Award made on the basis of achieving one or more Corporate Goals will be subject to the attainment of two weighted Individual Goals. If one or more of the Individual Goals are not met, the Award shall be reduced by the percentage set forth on ATTACHMENT 2. Participants will not be eligible to receive any Award for meeting Individual Goals unless the minimum Pro Forma EPS threshold is attained by the Company. Achievement of Individual Goals for the Chief Executive Officer and his direct reports will be determined by the Compensation Committee and the achievement of Individual Goals for other Participants will be determined by the Participant's manager and approved by the Chief Executive Officer. An Award is calculated as a percentage of Participant's base salary at the end of Fiscal 2007, subject to the weighting schedule for the Corporate Goals set forth on ATTACHMENT 1, and further subject to the attainment of Participant's two Individual Goals set forth on ATTACHMENT 2. No participant shall be eligible to receive more than the Maximum Target. 4. GENERAL AND ADMINISTRATIVE Award will be paid, if at all, following the conclusion of Fiscal 2007 and completion of the Company's Fiscal 2007 audit. The timing of the payout, if any, is at the discretion of the Company, but is anticipated to occur, if at all, on/or about June 14, 2007. Participant must be an employee of Indus when Awards are paid to be eligible to receive the Award. In the event of any acquisition, divestiture or recapitalization involving the Company the Compensation Committee of the Board of Directors shall have the authority and discretion to adjust the Corporate Goals and Individual Goals in a manner that is equitable to the Company and the Participant. Fiscal 2007 Incentive Compensation Plan CONFIDENTIAL PAGE 3 (INDUS INTERNATIONAL, INC. LOGO) Nothing in this Plan shall be construed to create or imply the existence of a contract of employment between the Participant and the Company. Participant acknowledges and understands he or she remains an "at-will" employee, that the Company can terminate his or her employment at any time with or without cause, and participation in this Plan does not constitute a promise of continued employment. The Company, acting through the Compensation Committee of the Board of Directors, shall have the authority to terminate, suspend, or amend this Plan at any time with written notice to the Participant. Oral changes to the Plan by any party shall not be valid. The Plan is established under the authority of the Compensation Committee of the Board of Directors and is intended for the Company's executive officers and members of the BPC and MC, with some exceptions (such as MC members already on an incentive compensation plan). BPC amd MC members are selected by the Chief Executive Officer and can be removed from the BPC and MC at his discretion. If the Participant is removed from the BPC or MC for any reason, participation in this Plan shall immediately terminate as to that Participant. If other BPC or MC members are added during Fiscal 2007, those added members may participate in the Plan on a pro rata basis, based on the portion of the year that they are members of the BPC or MC. This Plan is for the fiscal year ending March 31, 2007 only. Participation during fiscal year 2007 does not mean that participation is assured for subsequent fiscal years. The Compensation Committee of the Board of Directors, with input from the Chief Executive Officer, shall have the discretion and authority to interpret this Plan. The Compensation Committee's interpretation of the Plan, any Awards granted under the Plan, and all decisions and determinations by the Compensation Committee with respect to the Plan are final, binding and conclusive on all parties. For each Participant, participation in this Plan is contingent on such Participant having a signed employment agreement on file that is in form and substance acceptable to the Company. Fiscal 2007 Incentive Compensation Plan CONFIDENTIAL PAGE 4 EX-10.22 3 g01910exv10w22.txt EX-10.22 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/GREGORY J. DUKAT EXHIBIT 10.22 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT This Amendment to Change of Control Severance Agreement (the "Amendment") is made and entered into by and between Gregory J. Dukat ("Executive") and Indus International, Inc., a Delaware Corporation (the "Company"), effective as of May 9, 2006 (the "Effective Date"). RECITALS 1. The Company and Executive have entered into a Change of Control Severance Agreement (the "Agreement") with an effective date of October 1, 2005, as previously amended; 2. The Board, acting upon the recommendation of its Compensation Committee, has determined that it is in the best interests of the Company and its stockholders to offer the Executive this Amendment; AMENDMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and the continued employment of Executive by the Company, the parties agree as follows: 1. Amended and Restated Section 3(a). Section 3(a) is hereby amended and restated to read as follows: (a) Involuntary Termination Following a Change of Control. If within twenty-four (24) months following a Change of Control (A) either (i) the Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for "Good Reason" (as defined herein) or the Company (or any parent or subsidiary of the Company) terminates the Executive's employment for other than "Cause" (as defined herein), or (ii) Executive terminates his employment with the Company with or without Good Reason at any time within the first thirty (30) days following the one-year anniversary of the Change of Control, and (B) the Executive signs the Company's standard separation agreement and release of claims with the Company, then the Executive shall be entitled to receive the following severance benefits from the Company: (i) a lump sum amount equal to three (3) times the sum of (x) Executive's then-current base salary plus (y) a payment equal to Executive's annual bonus target for the performance year in which the Change in Control occurs, or if such amount is not determinable, Executive's annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (ii) reimbursement for full COBRA (for the Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at the Company) expenses for the earlier of eighteen (18) months or until Executive receives health, medical and/or dental benefits, respectively, from a new employer. In addition, Executive's outstanding options to purchase shares of the Company's Common Stock (the "Options") and unvested restricted shares of the Company's Common Stock (the "Restricted Stock") shall immediately vest and, in the case of Options, become exercisable. In all other respects the Options and Restricted Stock shall continue to be bound by and subject to the terms of their respective agreements. 2. Miscellaneous Provisions. (a) Definitions; Integration. A capitalized terms not otherwise defined herein shall have the meaning given such term in the Agreement. This Amendment, together with the Agreement, constitutes the entire understanding of the parties as regards to the subject matter hereof and cannot be modified except by further written agreement of the parties. (b) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth below. COMPANY By: /s/ Allen R. Freedman ------------------------------------ Title: Director, Chairman of the Board and Chairman of the Compensation Committee Date: 5/12/2006 EXECUTIVE By: /s/ Gregory J. Dukat ------------------------------------ Title: President and Chief Executive Officer Date: 5/9/2006 -2- EX-10.26 4 g01910exv10w26.txt EX-10.26 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/PATRICK M. HENN EXHIBIT 10.26 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT This Amendment to Change of Control Severance Agreement (the "Amendment") is made and entered into by and between Patrick M. Henn (the "Executive") and Indus International, Inc., a Delaware Corporation (the "Company"), effective as of May 9, 2006 (the "Effective Date"). RECITALS 1. The Company and Executive have entered into a Change of Control Severance Agreement (the "Agreement") with an effective date of October 13, 2005, as previously amended; 2. The Board, acting upon the recommendation of its Compensation Committee, has determined that it is in the best interests of the Company and its stockholders to offer the Executive this Amendment; AMENDMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and the continued employment of Executive by the Company, the parties agree as follows: 1. Amended and Restated Section 3(a). Section 3(a) is hereby amended and restated to read as follows: "(a) Involuntary Termination Following a Change of Control. If within twenty-four (24) months following a Change of Control (A) the Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for "Good Reason" (as defined herein) or the Company (or any parent or subsidiary of the Company) terminates the Executive's employment for other than "Cause" (as defined herein), and (B) the Executive signs the Company's standard separation agreement and release of claims with the Company, then the Executive shall be entitled to receive the following severance benefits from the Company: (i) a lump sum amount equal to two (2) times the sum of (x) Executive's then-current base salary plus (y) a payment equal to Executive's annual bonus target for the performance year in which the Change in Control occurs, or if such amount is not determinable, Executive's annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (ii) reimbursement for full COBRA (for the Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at the Company) expenses for the earlier of eighteen (18) months or until Executive receives health, medical and/or dental benefits, respectively, from a new employer. In addition, Executive's outstanding options to purchase shares of the Company's Common Stock (the "Options") and unvested restricted shares of the Company's Common Stock (the "Restricted Stock") shall immediately vest and, in the case of Options, become exercisable. In all other respects the Options and Restricted Stock shall continue to be bound by and subject to the terms of their respective agreements." 2. Miscellaneous Provisions. (a) Definitions; Integration. A capitalized terms not otherwise defined herein shall have the meaning given such term in the Agreement. This Amendment, together with the Agreement, constitutes the entire understanding of the parties as regards to the subject matter hereof and cannot be modified except by further written agreement of the parties. (b) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth below. COMPANY By: /s/ Gregory J. Dukat ------------------------------------ Title: President and Chief Executive Officer Date: 5/9/2006 EXECUTIVE By: /s/ Patrick M. Henn ------------------------------------ Title: Executive Vice President and Chief Financial Officer Date: 5/9/2006 -2- EX-10.30 5 g01910exv10w30.txt EX-10.30 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/JOHN D. GREGG EXHIBIT 10.30 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT This Amendment to Change of Control Severance Agreement (the "Amendment") is made and entered into by and between John D. Gregg (the "Executive") and Indus International, Inc., a Delaware Corporation (the "Company"), effective as of May 9, 2006 (the "Effective Date"). RECITALS 1. The Company and Executive have entered into a Change of Control Severance Agreement (the "Agreement") with an effective date of October 1, 2005, as previously amended; 2. The Board, acting upon the recommendation of its Compensation Committee, has determined that it is in the best interests of the Company and its stockholders to offer the Executive this Amendment; AMENDMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and the continued employment of Executive by the Company, the parties agree as follows: 1. Amended and Restated Section 3(a). Section 3(a) is hereby amended and restated to read as follows: "(a) Involuntary Termination Following a Change of Control. If within twenty-four (24) months following a Change of Control (A) the Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for "Good Reason" (as defined herein) or the Company (or any parent or subsidiary of the Company) terminates the Executive's employment for other than "Cause" (as defined herein), and (B) the Executive signs the Company's standard separation agreement and release of claims with the Company, then the Executive shall be entitled to receive the following severance benefits from the Company: (i) a lump sum amount equal to two (2) times the sum of (x) Executive's then-current base salary plus (y) a payment equal to Executive's annual bonus target for the performance year in which the Change in Control occurs, or if such amount is not determinable, Executive's annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (ii) reimbursement for full COBRA (for the Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at the Company) expenses for the earlier of eighteen (18) months or until Executive receives health, medical and/or dental benefits, respectively, from a new employer. In addition, Executive's outstanding options to purchase shares of the Company's Common Stock (the "Options") and unvested restricted shares of the Company's Common Stock (the "Restricted Stock") shall immediately vest and, in the case of Options, become exercisable. In all other respects the Options and Restricted Stock shall continue to be bound by and subject to the terms of their respective agreements." 2. Miscellaneous Provisions. (a) Definitions; Integration. A capitalized terms not otherwise defined herein shall have the meaning given such term in the Agreement. This Amendment, together with the Agreement, constitutes the entire understanding of the parties as regards to the subject matter hereof and cannot be modified except by further written agreement of the parties. (b) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth below. COMPANY By: /s/ Gregory J. Dukat ------------------------------------ Title: President and Chief Executive Officer Date: 5/9/2006 EXECUTIVE By: /s/ John D. Gregg ------------------------------------ Title: Executive Vice President of Field Operations Date: 5/8/2006 -2- EX-10.34 6 g01910exv10w34.txt EX-10.34 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/JOSEPH T. TRINO EXHIBIT 10.34 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT This Amendment to Change of Control Severance Agreement (the "Amendment") is made and entered into by and between Joseph T. Trino (the "Executive") and Indus International, Inc., a Delaware Corporation (the "Company"), effective as of May 9, 2006 (the "Effective Date"). RECITALS 1. The Company and Executive have entered into a Change of Control Severance Agreement (the "Agreement") with an effective date of October 1, 2005, as previously amended; 2. The Board, acting upon the recommendation of its Compensation Committee, has determined that it is in the best interests of the Company and its stockholders to offer the Executive this Amendment; AMENDMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and the continued employment of Executive by the Company, the parties agree as follows: 1. Amended and Restated Section 3 (a). Section 3(a) is hereby amended and restated to read as follows: "(a) Involuntary Termination Following a Change of Control. If within twenty-four (24) months following a Change of Control (A) the Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for "Good Reason" (as defined herein) or the Company (or any parent or subsidiary of the Company) terminates the Executive's employment for other than "Cause" (as defined herein), and (B) the Executive signs the Company's standard separation agreement and release of claims with the Company, then the Executive shall be entitled to receive the following severance benefits from the Company: (i) a lump sum amount equal to two (2) times the sum of (x) Executive's then-current base salary plus (y) a payment equal to Executive's annual bonus target for the performance year in which the Change in Control occurs, or if such amount is not determinable, Executive's annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (ii) reimbursement for full COBRA (for the Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at the Company) expenses for the earlier of eighteen (18) months or until Executive receives health, medical and/or dental benefits, respectively, from a new employer. In addition, Executive's outstanding options to purchase shares of the Company's Common Stock (the "Options") and unvested restricted shares of the Company's Common Stock (the "Restricted Stock") shall immediately vest and, in the case of Options, become exercisable. In all other respects the Options and Restricted Stock shall continue to be bound by and subject to the terms of their respective agreements." 2. Miscellaneous Provisions. (a) Definitions; Integration. A capitalized terms not otherwise defined herein shall have the meaning given such term in the Agreement. This Amendment, together with the Agreement, constitutes the entire understanding of the parties as regards to the subject matter hereof and cannot be modified except by further written agreement of the parties. (b) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth below. COMPANY By: /s/ Gregory J. Dukat ------------------------------------ Title: President and Chief Executive Officer Date: 5/9/2006 EXECUTIVE By: /s/ Joseph T. Trino ------------------------------------ Title: Executive Vice President of Corporate Strategy Date: 5/9/2006 -2- EX-10.35 7 g01910exv10w35.txt EX-10.35 EMPLOYMENT AGREEMENT DATED FEBRUARY 1, 2006/ARTHUR W. BECKMAN EXHIBIT 10.35 INDUS INTERNATIONAL EMPLOYMENT AGREEMENT This Agreement is entered into as of January 1, 2006 (the "Effective Date"), by and between Indus International, Inc. (the "Company"), and Arthur W. Beckman (the "Executive"). Executive currently serves as the Vice President, Hosting and Chief Technology Officer of the Company, pursuant to the terms of that certain Employment Agreement, dated as of January 5, 1999, between Executive and the Company (the "Prior Agreement"). From and after the Effective Date, the Prior Agreement will be superseded in its entirety by this Agreement. 1. Duties and Scope of Employment. (a) Employment, Positions and Duties. Executive is hereby employed as of the Effective Date as EXECUTIVE VICE PRESIDENT AND CHIEF TECHNOLOGY OFFICER of the Company reporting to the Chief Executive Officer or President. Executive will render such business and professional services in the performance of his duties, consistent with Executive's position within the Company, as shall reasonably be assigned to him by the Company's Chief Executive Officer, President, or Board of Directors (the "Board"). (b) Obligations. Executive will perform his duties faithfully and to the best of his ability and will devote all of his business efforts and time to the Company at the Company's SAN FRANCISCO, CALIFORNIA offices. Executive understands and agrees that frequent travel may be necessary in carrying out his duties hereunder including, without limitation, frequent travel to the Company's global offices as well as client sites. Executive agrees that he will not, without the prior approval of the Board of Directors, (i) serve on the board of directors (or similar governing body) of any other company, (ii) serve as a director or trustee of any civic, educational or charitable organization, (iii) make plans or prepare, whether alone or with others, to compete against the Company at some point in the future, or (iv) actively engage in any other employment, occupation or consulting activity, with or without any direct or indirect remuneration; provided, however, that Executive may serve in any non-director or non-trustee capacity with any civic, educational or charitable organization without the approval of the Board, so long as such activities do not materially interfere with his duties and obligations under this Agreement. 2. Compensation. (a) Base Salary. The Company will pay Executive as compensation for his services a base salary at the annualized rate of $227,900 (the "Base Salary"). Effective April 1, 2006, Executive's Base Salary shall increase to the annualized rate of $234,350. The Base Salary will be paid periodically in accordance with the Company's normal payroll practices and be subject to applicable tax withholding. The Board, or the Compensation Committee of the Board, shall review the Base Salary each year and may increase, but not decrease, the Base Salary at any time. Any increase in Base Salary shall not limit or reduce any other obligations to the Executive under this Agreement. The term "Base Salary" as used in this Agreement shall refer to the Base Salary as it may be adjusted from time to time. (b) Annual Bonus. In addition to the Base Salary, Executive may receive a discretionary performance bonus during each year of employment with the Company under this Agreement in an amount to be determined by the Board or the Compensation Committee of the Board (the "Annual Bonus"). Such performance bonus, if any, shall be determined by the Board, or the Compensation Committee of the Board, based upon its evaluation of performance relative to the business plan and other pertinent considerations. 3. Employee Benefits; Indemnification. Executive will be entitled to participate in the equity incentive, and employee benefit plans currently or hereafter maintained by the Company of general applicability to other senior executives of the Company, including, without limitation, the Company's group medical, dental, vision, disability, life insurance, and flexible-spending account plans. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees (including Executive) at any time. 4. Paid Time Off. Executive will be entitled to paid time off each year for vacation time, sick leave and personal time in accordance with the Company's policies, as such policies are in effect from time to time, with the timing and duration of specific time off mutually and reasonably agreed to by the parties hereto. The Company reserves the right to cancel or change its policies at any time. 5. Expenses. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive's duties hereunder. Such expenses shall be reimbursed in accordance with the Company's expense reimbursement policy as in effect from time to time. 6. Termination and Severance. (a) Termination of Employment. Executive's employment may be terminated (i) by the Company with or without Cause, (ii) by Executive for Good Reason or no reason or (iii) by reason of Executive's death or Disability. (b) Termination Without Cause; Termination for Good Reason. If (i) Executive's employment with the Company is terminated by the Company without "Cause" (as defined herein) or by the Executive for "Good Reason" (as defined herein), and (ii) Executive signs and does not revoke the Company's separation agreement and standard release of claims , then Executive shall be entitled to receive as severance, payable over a period of nine (9) months from the date of such termination in accordance with the Company's normal payroll policies, (1) an amount equal to nine (9) months of Executive's then-current Base Salary (less applicable withholding taxes); (2) a payment equal to a pro-rata portion of Executive's Annual Bonus for the performance year in which Executive's termination occurs, determined by multiplying a fraction, the numerator of which is the number of days during the performance year of termination that Executive is employed by the Company and the denominator of which is 365, by (i) the greater of (a) the Executive's target annual bonus for the performance year or (b) the amount Executive would be able to receive if the date of termination were the end of the performance year, or (ii) if the amounts under (1)(a) or (b) are not determinable, Executive's Annual Bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (3) the Company will pay for full COBRA benefits for Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at Company for the earlier of eighteen (18) months or until Executive becomes eligible to receive health, medical and/or dental benefits, respectively, from a new employer. (c) Voluntary Termination; Termination for Cause. If Executive's employment with the Company is terminated by Executive without Good Reason or by the Company for Cause, Executive Employment Agreement -2- then (i) all vesting of the Options will terminate immediately and all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned), and (ii) Executive will only be eligible for severance benefits in accordance with the Company's established policies as then in effect, if applicable. (d) Death or Disability. If Executive's employment with the Company is terminated due to Executive's death or Disability (as defined herein), this Agreement shall terminate without further obligations to Executive, or Executive's legal representatives, under this Agreement, other than for payment of (1) Executive's Base Salary through the date of termination to the extent not theretofore paid and (2) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the "Accrued Obligations"). The Company shall timely pay or provide to Executive, or, if applicable, Executive's estate and/or beneficiaries, any other amounts or benefits required to be paid or provided under any plan, program, policy or practice or contract or agreement of the Company. Accrued Obligations shall be paid to Executive, or, if applicable, Executive's estate and/or beneficiaries, in a lump sum in cash within thirty (30) days of the date of termination. (e) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Executive may receive from any other source. (f) Nonduplication of Severance. Notwithstanding anything in this Agreement to the contrary, in the event that (i) the Executive and Company are party to a Change in Control Agreement and (ii) the Executive becomes entitled to severance payments and/or benefits in connection with the termination of his or her employment pursuant to such Change in Control agreement, the Executive shall not be entitled to severance payments and/or benefits pursuant to this Section 6. 7. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this Section 7, would be subject to the excise tax imposed by Section 4999 of the Code, then the Executive's severance and benefits shall be either: (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by the Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section 7 shall be made in writing by the Company's independent public accountants immediately prior to a Change of Control (the "Accountants"), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this Section 7, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations Executive Employment Agreement -3- concerning the application of Sections 280G and 4999 of the Code. The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 7. 8. Definitions. (a) Cause. For purposes of this Agreement, "Cause" is defined as (i) an act of dishonesty made by Executive in connection with Executive's responsibilities as an employee, (ii) Executive's indictment for, conviction of, or plea of guilty or nolo contendere to, a felony which the Board reasonably believes had or will have a material detrimental effect on the Company's reputation or business, (iii) Executive's gross misconduct, (iv) Executive's continued substantial failure to perform such Executive's duties after Executive has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company's belief that Executive has not substantially performed his duties, (v) the willful and continued material violation of written Company policies or procedures by Executive, after a written demand for substantial compliance with such policies or procedures is delivered to Executive by the Compensation Committee of the Board of Directors of the Company which specifically identifies the manner in which such Committee or the Board believes that Executive has not substantially complied with the same, or (vi) Executive's breach of any of the provisions of Sections 9 through 14 of this Agreement. (b) Disability. If the Company determines in good faith that the Disability of Executive has occurred, it may give to Executive written notice of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive, provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean the inability of Executive, as determined by the Board, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) an aggregate of 180 days in a 12-month period. At the request of Executive or his personal representative, the Board's determination that the Disability of Executive has occurred shall be certified by a physician mutually agreed upon by Executive, or his personal representative, and the Company. Failing such independent certification (if so requested by Executive), Executive's termination shall be deemed a termination by the Company without Cause and not a termination by reason of his Disability. (c) Good Reason. "Good Reason" means without the Executive's consent (i) a significant reduction of the Executive's duties, position or responsibilities, or the removal of such Executive from such position and responsibilities, unless the Executive is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in the base compensation of the Executive as in effect immediately prior to such reduction other than in connection with a generally applicable reduction in executive officer compensation; or (iii) the involuntary relocation of the Executive to a facility or a location more than fifty (50) miles from such Executive's then present location; or (iv) the material breach by the Company of any provision of this Agreement. Executive Employment Agreement -4- Good Reason shall not include Executive's death or Disability. Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. Any good faith determination of Good Reason made by Executive shall be conclusive, but the Company shall have an opportunity to cure any claimed event of Good Reason within 30 days of notice from Executive and the Board's good faith determination of cure shall be binding. The Company shall notify Executive of the timely cure of any claimed event of Good Reason and the manner in which such cure was effected, and any notice of termination delivered by Executive based on such claimed Good Reason shall be deemed withdrawn and shall not be effective to terminate the Agreement. 9. Nondisclosure of Trade Secrets and Confidential Information. (a) Trade Secrets Defined. As used in this Agreement, the term "Trade Secrets" shall mean all secret, proprietary or confidential information regarding Company or Company activities that fits within the definition of "trade secrets" under the Georgia Trade Secrets Act. Without limiting the foregoing or any definition of Trade Secrets, Trade Secrets protected hereunder shall include all source codes and object codes for Company software and all website design information to the extent that such information fits within the Georgia Trade Secrets Act. Nothing in this Agreement is intended, or shall be construed, to limit the protections of the Georgia Trade Secrets Act or any other applicable law protecting trade secrets or other confidential information. "Trade Secrets" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of Company. This definition shall not limit any definition of "trade secrets" or any equivalent term under the Georgia Trade Secrets Act or any other state, local or federal law. (b) Confidential Information Defined. As used in this Agreement, the term "Confidential Information" shall mean all information regarding Company, Company's activities, Company's business or Company's clients that is not generally known to persons not employed (as employees or independent agents) by Company, that is not generally disclosed by Company practice or authority to persons not employed by Company and is the subject of reasonable efforts to keep it confidential. Confidential Information shall include, but not be limited to product code, product concepts, production techniques, technical information regarding Company products or services, production processes and product/service development, operations techniques, product/service formulas, information concerning Company techniques for use and integration of its website and other products/services, current and future development and expansion or contraction plans of Company, sale/acquisition plans and contacts, marketing plans and contacts, information concerning the legal affairs of Company and certain information concerning the strategy, tactics and financial affairs of Company. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of Company. This definition shall not limit any definition of "confidential information" or any equivalent term under the Georgia Trade Secrets Act or any other state, local or federal law. (c) Nondisclosure of Confidential Information. During Executive's employment hereunder and for a period of one (1) year after Executive's employment with Company terminates for any reason, Executive shall not directly or indirectly transmit or disclose any Trade Secrets or Confidential Information to any person, concern or entity, or make use of any such Confidential Information, directly or indirectly, for himself or for others, without the prior express written consent of the Chief Executive Officer of Company; provided, however, that while employed by the Executive Employment Agreement -5- Company and perpetually thereafter, for so long as the information remains a Trade Secret, Executive shall not directly or indirectly, for himself or for others, without the prior express written consent of the Chief Executive Officer of Company, transmit or disclose any Trade Secrets to any person, concern or entity, or make use of any such Trade Secrets. Executive warrants that he has not disclosed or used for his own benefit or the benefit of anyone other than Company any Confidential Information or Trade Secrets prior to the execution of this Agreement. (d) Enforceability of Covenants. Executive and Company agree that Executive's obligations under these nondisclosure covenants are separate and distinct from other provisions of this Agreement, and a failure or alleged failure of Company to perform their obligations under any provision of this Agreement or other agreements with Company shall not constitute a defense to the enforceability of these nondisclosure covenants. Nothing in this provision or this Agreement shall limit any rights or remedies otherwise available to Company under federal, state or local law. 10. Nonrecruitment, Nonsolicitation and Noncompetition Covenants. (a) Nonrecruitment of Employees. In consideration of the compensation and benefits being paid and to be paid by Company to Executive hereunder, Executive hereby agrees that, during employment with Company and for one (1) year after the termination of Executive's employment, Executive shall not, directly or indirectly solicit or recruit for employment or encourage to leave employment with Company, on his own behalf or on behalf of any other person or entity other than Company or any affiliate of Company, any person with whom Executive worked, or about whom Executive gained Confidential Information, during Executive's employment and who performed services for Company clients or worked on Company products or services while employed by Company and who has not thereafter ceased to be employed by Company for a period of at least one (1) year. Executive agrees to exercise his best efforts to prevent any of the activities listed in this section from occurring. (b) Nonsolicitation of Customers. In consideration of the compensation and benefits being paid and to be paid by Company to Executive hereunder, Executive hereby agrees that, during his employment with Company and for one (1) year after the termination of Executive's employment, Executive shall not, directly or indirectly, on behalf of himself or of anyone other than Company, solicit, divert away, take away or attempt to solicit or take away any Customer or Potential Customer of Company for purposes of providing or selling products or services that are competitive with those provided by Company, if Company is then still engaged in the provision or sale of that type of good or service. For purposes of this covenant, "Customer" means any individual or entity to whom Company has provided goods or services and with whom Executive had, alone or in conjunction with others, Material Contact during the one (1) year prior to the termination of Executive's employment and "Potential Customer" means any individual or entity to whom the Company has actively sought to sell products or services within the one (1) year immediately prior to the termination of Executive's employment and with whom Executive had Material Contact on the Company's behalf during that same time period. For purposes of this covenant, Executive had "Material Contact" with a customer if (i) Executive had business dealings with the customer on the Company's behalf; (ii) Executive was responsible for supervising or coordinating the dealings between the customer and the Company; or (iii) Executive obtained Trade Secrets or Confidential Information (such terms having the same meanings as defined in Section 9 above, but in each case relating to the Customer or Potential Customer) about the customer as a result of Executive's association with the Company. Executive Employment Agreement -6- (c) Noncompetition. During the term of Executive's employment with the Company, and for a period of one (1) year thereafter, Executive shall not, without the prior written consent of the Board, which consent may be withheld at the sole discretion of the Board, engage or participate in, as a chief technical officer or other senior executive or officer in the area of information technology, software development or product strategy, of any business or enterprise that directly competes in the Business of the Company within the Restricted Area. For purposes of this Section 10(c), the "Business" means the design, product development, sale, marketing, implementation or support of computer software products and services in the areas of service delivery management, asset management, field service management, customer relationship management and customer information systems. For purposes of this Section 10(c), the "Restricted Area" shall be the area that is within a twenty-five (25) mile radius of the cities of Atlanta, Georgia, Columbia, South Carolina, and San Francisco, California. Nothing in this Section 10(c) shall prohibit Executive from acquiring or holding, for investment purposes only, less than five percent (5%) of the outstanding publicly traded securities of any corporation which may compete directly or indirectly with the Company. (d) Enforceability of Covenants. Executive acknowledges that the Company has a present and future expectation of business within the geographic areas served by the Company and from the present and proposed customers of the Company. Executive acknowledges the reasonableness of the term, geographic area and scope of the covenants set forth in this Agreement, and agrees that he will not, in any action, suit or other proceeding, deny the reasonableness of, or assert the unreasonableness of, the premises, consideration or scope of the covenants set forth herein. Executive further acknowledges that complying with the provisions contained in this Agreement will not preclude him from engaging in a lawful profession, trade or business, or from becoming gainfully employed. Executive and Company agree that Executive's obligations under the above covenant are separate and distinct under this Agreement, and the failure or alleged failure of Company to perform its obligations under any other provisions of this Agreement shall not constitute a defense to the enforceability of this covenant. Executive agrees that any breach of this covenant will result in irreparable damage and injury to Company and that Company will be entitled to injunctive relief in any court of competent jurisdiction without the necessity of posting any bond. Executive also agrees that he shall be responsible for all damages incurred by Company due to any breach of the restrictive covenants contained in this Agreement and that Company shall be entitled to have Executive pay all costs and attorneys' fees incurred by Company in enforcing the restrictive covenants in this Agreement. 11. Ownership of Protected Works. (a) Protected Works. The term "Protected Works" as used in this Agreement means any and all ideas, inventions, formulas, source codes, object codes, techniques, processes, concepts, systems, programs, software, software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, or subject to copyright or trademark or trade secret protection, developed and produced by Executive pursuant to this Agreement or other agreements between Executive and Company and used or intended for use by or on behalf of Company, or Company's clients. Protected Works does not include an invention that Executive developed entirely on his or her own time without using Company's equipment, supplies, facilities, or trade secret information except for those inventions that either: (i) relate at the time of conception or reduction to practice of the invention to Company's Executive Employment Agreement -7- business, or actual or demonstrably anticipated research or development of Company; or (ii) result from any work performed by Executive for Company. (b) Ownership and Assignment of Protected Works. Executive agrees that any and all Protected Works developed by Executive during his employment or other engagement with Company under this Agreement and during his employment with, or other engagement by Company prior to the execution of this Agreement (whether as employee or independent contractor) are the sole property of Company, and that no compensation in addition to the amounts set forth in Section 2 of this Agreement is due to Executive for development or transfer of such Protected Works. Executive hereby assigns and agrees to assign all of his respective rights, title and interest in Protected Works, including all patents or patent applications, and all copyrights therein, to Company. Executive further agrees at Company's request and without further consideration, but at the expense of Company, that Executive will communicate to Company any facts known to Executive and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisional, continuing, continuation-in-part, or reissue applications, all assignments, all registration applications and all other instruments or papers to carry into full force and effect, the assignment, transfer and conveyance hereby made or intended to be made and generally do everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by Company. Executive agrees that he will not apply for any state, federal, or other jurisdiction's registration of rights in any of the Protected Works and that he will not oppose or object in any way to applications for registration of same by Company or others designated by Company. Executive agrees to exercise reasonable care to avoid making the Protected Works available to any third party. Executive also agrees that he shall be liable to Company for all damages, including reasonable attorneys' fees and other expenses of litigation, if the Protected Works are made available to third parties in any manner by Executive without the express written consent of Company. (c) Executive agrees to disclose and describe to Company, as soon as possible after their creation, (i) all inventions, ideas, copyrightable works, databases, data and other "Protected Works," as defined in subsection (a) above, which are created by Executive, either alone or with others, during the term of Executive's employment, or in connection with the formation of Company, and (ii) all Protected Works which are based in whole or in part upon Confidential Information or Trade Secrets and are created by Executive, either alone or with others, within one (1) year after Executive's leaving Company's employ. (d) There is no other contract or duty on Executive's part now in existence to assign Protected Works to anyone other than Company. Executive will not disclose or induce Company to use any confidential information or material that Executive is now or shall become aware of which belongs to anyone other than Company. During Executive's employment by Company, Executive will not engage in any employment, consulting or other activity in any business competitive with Company's business as presently conducted or as conducted at any future time during Executive's employment. 12. Rights to Materials and Return of Materials. All records, files, software, software code, memoranda, reports, price lists, customer lists, drawings, plans, sketches, documents, technical information, information on the use, development and integration of software, and the like (together with all copies of such documents and things) relating to the business of Company, which Executive shall use or prepare or come in Executive Employment Agreement -8- contact with in the course of, or as a result of, Executive's employment or other engagement by Company shall, as between the parties to this Agreement, remain the sole property of Company. Laptop computers, other computers, software and related data, information and things provided to Executive by Company or obtained by Executive, directly or indirectly, from Company, also shall remain the sole property of Company. Upon the termination of Executive's employment or upon the prior demand of Company, Executive shall immediately return all such materials and things to Company and shall not retain any copies or remove or participate in removing any such materials or things from the premises of Company after termination or Company's request for return. 13. Inventions, Discoveries and Improvements. (a) Executive will promptly disclose and describe to Company (i) all inventions, improvements, discoveries and technical developments, whether or not patentable, made or conceived by Executive, either alone or with others ("Inventions"), during the term of Executive's employment with Company or other engagement with Company, provided that Company shall receive such information in confidence and (ii) all Inventions which are based in whole or in part upon Confidential Information or Trade Secrets and are made or conceived by Executive, either alone or with others, within one (1) year after Executive's leaving Company's employ. All such Inventions, whether patentable or unpatentable, made, devised or discovered by Executive, whether by himself or jointly with others, which relate or pertain in any way to the business of Company, shall be used solely for the benefit of Company and become and remain their sole and exclusive property. Executive agrees to execute an assignment to Company or its nominee of Executive's entire right, title and interest in and to such Inventions made or conceived by Executive, either alone or with others, during the term of Executive's employment or within one (1) year after Executive's leaving Company's employ, and to execute any other instruments and documents that may be requested by Company for the purpose of applying for and obtaining patents with respect to such Inventions in the United States and in all foreign countries. Executive further agrees, whether or not in the employ of Company, to cooperate to the extent and in the manner reasonably requested by Company in the prosecution or defense of any patent claims or any litigation or other proceedings involving any such Inventions, but all of Executive's reasonable expenses in connection with such litigation or other proceedings shall be paid by Company. (b) If a patent application or copyright registration is filed by Executive or on Executive's behalf during Executive's employment or other engagement with Company, whether before or after execution of this Agreement, or within one (1) year after Executive's leaving Company's employ, describing an Invention within the scope of Executive's work for Company or which otherwise relates to a portion of Company's business of which Executive had knowledge during Executive's employment with Company, it is to be conclusively presumed that the Invention was conceived by Executive during the period of such employment. (c) There is no other contract or duty on Executive's part now in existence to assign Inventions other than to Company. Executive will not disclose or induce Company to use any confidential information or material that Executive is now or shall become aware of which belongs to anyone other than Company. During Executive's employment by Company, Executive will not engage in any employment, consulting or other activity in any business competitive with Company's business as presently conducted or as conducted at any future time during Executive's employment. (d) Executive warrants and represents that attached to this Agreement as Exhibit A and incorporated in this Agreement by reference is a complete list of all inventions, whether owned Executive Employment Agreement -9- by Executive or by others, conceived by Executive prior to Executive's employment by Company, that these are the only inventions which are not subject to this Agreement, and that Executive has not conceived or reduced to practice any invention not described on such Exhibit A. 14. Works Made for Hire. Company and Executive acknowledge that in the course of Executive's employment (as employee or independent contractor) by Company, Executive may from time to time create, and has previously created, for Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without Company's facilities and before, during or after normal business hours. All such works related to or useful in the business of Company are specifically intended to be works made by hire by Executive, and Executive shall cooperate with Company in the protection of Company's copyrights in such works and, to the extent deemed desirable by Company, the registration of such copyrights. 15. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive's death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, "successor" means any entity affiliated with Company to whom assigns its rights and interest in and to this Agreement, and/or any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive's right to compensation or other benefits will be null and void. 16. Notices. All notices, requests, demands and other communications called for hereunder shall be in writing and shall be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing: If to the Company: Copies to each of the Chief Executive Officer and General Counsel at the Company's principal executive office If to Executive: at the last residential address known by the Company. 17. Severability. The covenants set forth in this Agreement shall be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability shall not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a Executive Employment Agreement -10- court of competent jurisdiction because of its duration, the territory, the definition of activities or the definition of information covered is invalid or unreasonable in scope, the invalid or unreasonable term shall be redefined, or a new enforceable term provided, such that the intent of Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question shall be enforceable to the fullest extent of the applicable laws. 18. Arbitration. (a) With the exception of any dispute arising under Sections 9,10,11,12,13 and 14 of this Agreement, the Company and Executive agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in COBB COUNTY, GEORGIA in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. The Executive hereby consents to the personal jurisdiction of the state and federal courts located in GEORGIA for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. (c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS. All parties must initial here for Section 18 to be effective: AWB GJD 19. Entire Agreement. This Agreement is intended by the parties hereto to be the final expression of their agreement with respect to the subject matter hereof and this is the complete and exclusive statement of the terms of their agreement, notwithstanding any representations, statements or agreements to the contrary heretofore made. This Agreement supersedes any former agreements governing the same subject matter, including without limitation, the Prior Agreement. This Agreement may be modified only by a written instrument signed by each of the parties hereto expressly stating that it is intended to amend this Agreement. Nothing in this Agreement or Executive's employment shall be construed to give Executive any rights, of ownership or otherwise, Executive Employment Agreement -11- in any Protected Works, Inventions, Works Made for hire or other software, hardware, data or systems that he creates or obtains, or has created. 20. Tax Withholding. Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes and withholdings as shall be required pursuant to any applicable law, rule or regulation. 21. Construction. No provision of this Agreement or any related documents shall be construed against, or interpreted to the disadvantage of, any party hereto by any court or any governmental or judicial authority by reason of such party having, or being deemed to have, structured or drafted such provision. 22. Waiver. The waiver by any party to this Agreement of a breach of any of the provisions of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach. 23. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement. Company agrees to reimburse Executive for attorney fees related to review of this Agreement. 24. Code Section 409A. This Agreement is to be construed and the compensation and benefits provided hereunder are to be paid in such manner and at such times as shall comply with Code Section 409A and the regulations and guidance promulgated thereunder by the U.S. Department of the Treasury. Notwithstanding anything to the contrary herein, such payments shall be delayed to the extent necessary, but only to such extent, (i) to comply with Code Section 409A and such regulations and provisions and (ii) to avoid the payment of any penalties thereunder. (signatures on following page) Executive Employment Agreement -12- IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written. INDUS INTERNATIONAL By: /s/ Gregory J. Dukat Date: 3/6/2006 --------------------------------- Title: President and Chief Executive Officer EXECUTIVE /s/ Arthur W. Beckman Date: 3/6/2006 - ------------------------------------- Executive Employment Agreement -13- EX-10.36 8 g01910exv10w36.txt EX-10.36 CHANGE OF CONTROL SEVERANCE AGREEMENT/ARTHUR W. BECKMAN Exhibit 10.36 INDUS INTERNATIONAL, INC. CHANGE OF CONTROL SEVERANCE AGREEMENT This Change of Control Severance Agreement (the "Agreement") is made and entered into by and between Arthur W. Beckman (the "Executive") and Indus International, Inc., a Delaware Corporation (the "Company"), effective as of May 5, 2005 (the "Effective Date"). RECITALS 1. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the "Board") recognizes that such consideration can be a distraction to the Executive and can cause the Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined herein) of the Company. 2. The Board believes that it is in the best interests of the Company and its stockholders to provide the Executive with an incentive to continue his or her employment and to motivate the Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders. 3. The Board believes that it is imperative to provide the Executive with certain severance benefits upon the Executive's termination of employment following a Change of Control. These benefits will provide the Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control. 4. Certain capitalized terms used in the Agreement are defined in Section 5 below. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and the continued employment of Executive by the Company, the parties agree as follows: 1. Term of Agreement. This Agreement shall be for a one year term; provided, however, that the Compensation Committee may affirmatively extend the term of the Agreement at any time. The Executive may, by notice to the Company given not less than 60 days, but not more than 90 days, prior to the expiration of the then-current term, cause the term of this Agreement not to be extended. In the event that the Compensation Committee does not extend the term of the Agreement, or upon such notice of non-renewal by the Executive, the term of this Agreement shall terminate upon the expiration of the then-current term, including any prior extensions. 2. At-Will Employment. This Agreement is not an employment agreement and does not guarantee any specific term of employment. The Company and the Executive acknowledge that the Executive's employment is and shall continue to be at-will, as defined under applicable law, except as may otherwise be specifically provided under the terms of any written formal employment agreement between the Company and the Executive (an "Employment Agreement"). 3. Severance Benefits. (a) Involuntary Termination Following a Change of Control. If within twenty-four (24) months following a Change of Control (A) the Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for "Good Reason" (as defined herein) or the Company (or any parent or subsidiary of the Company) terminates the Executive's employment for other than "Cause" (as defined herein), and (B) the Executive signs the Company's standard separation agreement and release of claims with the Company, then the Executive shall be entitled to receive the following severance benefits from the Company: (i) a lump sum amount equal to three-fourths (0.75) times the sum of (x) Executive's then-current base salary plus (y) a payment equal to Executive's annual bonus target for the performance year in which the Change in Control occurs, or if such amount is not determinable, Executive's annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (ii) reimbursement for full COBRA (for the Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at the Company) expenses for the earlier of eighteen (18) months or until Executive receives health, medical and/or dental benefits, respectively, from a new employer. In addition, Executive's outstanding options to purchase shares of the Company's Common Stock (the "Options") shall immediately vest and become exercisable. In all other respects the Options shall continue to be bound by and subject to the terms of their respective agreements. (b) Timing of Severance Payments. The severance payments to which the Executive is entitled shall be paid by the Company to the Executive in a lump sum in cash within 30 days after the date of termination. (c) Voluntary Resignation; Termination For Cause. If the Executive's employment with the Company terminates (i) voluntarily by the Executive or (ii) for Cause by the Company, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then-existing severance and benefits plans and practices or pursuant to his or her Employment Agreement or other written agreements, if any, with the Company. (d) Disability; Death. If the Company terminates the Executive's employment as a result of the Executive's Disability, or the Executive's employment terminates due to his or her death, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then-existing written severance and benefits plans and practices or pursuant to his or her Employment Agreement or other written agreements, if any, with the Company. -2- (e) Termination Apart from Change of Control. In the event the Executive's employment is terminated for any reason, either prior to the occurrence of a Change of Control or after a twenty-four (24) month period following a Change of Control, then the Executive shall not be entitled to receive any payments, benefits, damages, awards, or compensation other than as provided under the Company's then-existing written severance and benefits plans and practices or pursuant to his or her Employment Agreement or other written agreements with the Company. (f) Exclusive Remedy. In the event of a termination of Executive's employment within twenty-four (24) months following a Change of Control, the provisions of this Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which the Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. The Executive shall be entitled to no benefits, compensation or other payments or rights upon termination of employment within twenty-four (24) months following a Change in Control other than those benefits expressly set forth in this Section 3. 4. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 of the Code, then the Executive's severance and benefits shall be either: (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by the Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section 4 shall be made in writing by the Company's independent public accountants immediately prior to Change of Control (the "Accountants"), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this Section 4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 4. -3- 5. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) Cause. "Cause" means (i) an act of dishonesty made by the Executive in connection with such Executive's responsibilities as an Executive, (ii) the Executive's indictment for, conviction of, or plea of guilty or nolo contendre to, a felony which the Board reasonably believes had or will have a material detrimental effect on the Company's reputation or business, (iii) the Executive's gross misconduct, (iv) the Executive's continued substantial failure to perform such Executive's duties after the Executive has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company's belief that the Executive has not substantially performed such Executive's duties, (v) the willful and continued material violation of written Company policies or procedures by Executive, after a written demand for substantial compliance with such policies or procedures is delivered to Executive by the Compensation Committee of the Board of Directors of the Company which specifically identifies the manner in which such Committee or the Board believes that Executive has not substantially complied with the same, or (vi) Executive's breach of any of the provisions of Sections 7 through 12 of this Agreement. (b) Change of Control. "Change of Control" means the occurrence of any of the following: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company; or (iv) The date of the consummation of the sale or disposition by the Company of all or substantially all the Company's assets. -4- (c) Disability. If the Company determines in good faith that the Disability of Executive has occurred, it may give to Executive written notice of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive, provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean the inability of Executive, as determined by the Board, to perform the essential functions of his regular duties and responsibilities, with or without reasonable accommodation, due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for 90 consecutive days or an aggregate of 180 days in a 12-month period. At the request of Executive or his personal representative, the Board's determination that the Disability of Executive has occurred shall be certified by a physician mutually agreed upon by Executive, or his personal representative, and the Company. Failing such independent certification (if so requested by Executive), Executive's termination shall be deemed a termination by the Company without Cause and not a termination by reason of his Disability. (d) Good Reason. "Good Reason" means without the Executive's consent (i) a significant reduction or elimination of the Executive's duties or responsibilities, unless the Executive is provided with a comparable position (i.e., a position of equal or greater duties, compensation and status), excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in the base compensation of the Executive as in effect immediately prior to such reduction other than in connection with a generally applicable reduction in executive officer compensation; (iii) the involuntary relocation of the Executive to a facility or a location more than fifty (50) miles from such Executive's then current location; (iv) any failure by the Company to comply with and satisfy Section 6(a) of this Agreement; or (v) the material breach by the Company of any provision of this Agreement. Good Reason shall not include Executive's death or Disability. Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. Any good faith determination of Good Reason made by Executive shall be conclusive, but the Company shall have an opportunity to cure any claimed event of Good Reason within 30 days of notice from Executive and the Board's good faith determination of cure shall be binding. The Company shall notify Executive of the timely cure of any claimed event of Good Reason and the manner in which such cure was effected, and any notice of termination delivered by Executive based on such claimed Good Reason shall be deemed withdrawn and shall not be effective to terminate the Agreement. 6. Successors. (a) The Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall -5- include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law. (b) The Executive's Successors. The terms of this Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 7. Nondisclosure of Trade Secrets and Confidential Information. (a) Trade Secrets Defined. As used in this Agreement, the term "Trade Secrets" shall mean all secret, proprietary or confidential information regarding Company or Company activities that fits within the definition of "trade secrets" under the Georgia Trade Secrets Act. Without limiting the foregoing or any definition of Trade Secrets, Trade Secrets protected hereunder shall include all source codes and object codes for Company software and all website design information to the extent that such information fits within the Georgia Trade Secrets Act. Nothing in this Agreement is intended, or shall be construed, to limit the protections of the Georgia Trade Secrets Act or any other applicable law protecting trade secrets or other confidential information. "Trade Secrets" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of Company. This definition shall not limit any definition of "trade secrets" or any equivalent term under the Georgia Trade Secrets Act or any other state, local or federal law. (b) Confidential Information Defined. As used in this Agreement, the term "Confidential Information" shall mean all information regarding Company, Company's activities, Company's business or Company's clients that is not generally known to persons not employed (as employees or independent agents) by Company, that is not generally disclosed by Company practice or authority to persons not employed by Company and is the subject of reasonable efforts to keep it confidential. Confidential Information shall include, but not be limited to product code, product concepts, production techniques, technical information regarding Company products or services, production processes and product/service development, operations techniques, product/service formulas, information concerning Company techniques for use and integration of its website and other products/services, current and future development and expansion or contraction plans of Company, sale/acquisition plans and contacts, marketing plans and contacts, information concerning the legal affairs of Company and certain information concerning the strategy, tactics and financial affairs of Company. "Confidential Information" shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of Company. This definition shall not limit any definition of "confidential information" or any equivalent term under the Georgia Trade Secrets Act or any other state, local or federal law. (c) Nondisclosure of Confidential Information. During Executive's employment hereunder and for a period of one (1) year after Executive's employment with Company terminates for any reason, Executive shall not directly or indirectly transmit or disclose -6- any Trade Secrets or Confidential Information to any person, concern or entity, or make use of any such Confidential Information, directly or indirectly, for himself or for others, without the prior express written consent of the Chief Executive Officer of Company; provided, however, that during the term of this Agreement and perpetually thereafter, for so long as the information remains a Trade Secret, Executive shall not directly or indirectly, for himself or for others, without the prior express written consent of the Chief Executive Officer of Company, transmit or disclose any Trade Secrets to any person, concern or entity, or make use of any such Trade Secrets. Executive warrants that he has not disclosed or used for his own benefit or the benefit of anyone other than Company any Confidential Information or Trade Secrets prior to the execution of this Agreement. (d) Enforceability of Covenants. Executive and Company agree that Executive's obligations under these nondisclosure covenants are separate and distinct from other provisions of this Agreement, and a failure or alleged failure of Company to perform their obligations under any provision of this Agreement or other agreements with Company shall not constitute a defense to the enforceability of these nondisclosure covenants. Nothing in this provision or this Agreement shall limit any rights or remedies otherwise available to Company under federal, state or local law. 8. Nonrecruitment and Nonsolicitation Covenants. (a) Nonrecruitment of Employees. In consideration of the compensation and benefits being paid and to be paid by Company to Executive hereunder, Executive hereby agrees that, during employment with Company and for one (1) year after the termination of Executive's employment, Executive shall not, directly or indirectly solicit or recruit for employment or encourage to leave employment with Company, on his own behalf or on behalf of any other person or entity other than Company or any affiliate of Company, any person with whom Executive worked, or about whom Executive gained Confidential Information, during Executive's employment and who performed services for Company clients or worked on Company products or services while employed by Company and who has not thereafter ceased to be employed by Company for a period of at least one (1) year. Executive agrees to exercise his best efforts to prevent any of the activities listed in this section from occurring. (b) Nonsolicitation of Customers. In consideration of the compensation and benefits being paid and to be paid by Company to Executive hereunder, Executive hereby agrees that, during his employment with Company and for one (1) year after the termination of Executive's employment, Executive shall not, directly or indirectly, on behalf of himself or of anyone other than Company, solicit, divert away, take away or attempt to solicit or take away any Customer or Potential Customer of Company for purposes of providing or selling products or services that are competitive with those provided by Company, if Company is then still engaged in the provision or sale of that type of good or service. For purposes of this covenant, "Customer" means any individual or entity to whom Company has provided goods or services and with whom Executive had, alone or in conjunction with others, Material Contact during the one (1) year prior to the termination of Executive's employment and "Potential Customer" means any individual or entity to whom the Company has actively sought to sell products or services within the one (1) year immediately prior to the termination of Executive's employment -7- and with whom Executive had Material Contact on the Company's behalf during that same time period. For purposes of this covenant, Executive had "Material Contact" with a customer if (i) Executive had business dealings with the customer on the Company's behalf; (ii) Executive was responsible for supervising or coordinating the dealings between the customer and the Company; or (iii) Executive obtained Trade Secrets or Confidential Information (such terms having the same meanings as defined in Section 7 above, but in each case relating to the Customer or Potential Customer) about the customer as a result of Executive's association with the Company. (c) Enforceability of Covenants. Executive acknowledges that the Company has a present and future expectation of business from the present and proposed customers of the Company. Executive acknowledges the reasonableness of the term and scope of the covenants set forth in this Agreement, and agrees that he will not, in any action, suit or other proceeding, deny the reasonableness of, or assert the unreasonableness of, the premises, consideration or scope of the covenants set forth herein. Executive further acknowledges that complying with the provisions contained in this Agreement will not preclude him from engaging in a lawful profession, trade or business, or from becoming gainfully employed. Executive and Company agree that Executive's obligations under the above covenant are separate and distinct under this Agreement, and the failure or alleged failure of Company to perform its obligations under any other provisions of this Agreement shall not constitute a defense to the enforceability of this covenant. Executive agrees that any breach of this covenant will result in irreparable damage and injury to Company and that Company will be entitled to injunctive relief in any court of competent jurisdiction without the necessity of posting any bond. Executive also agrees that he shall be responsible for all damages incurred by Company due to any breach of the restrictive covenants contained in this Agreement and that Company shall be entitled to have Executive pay all costs and attorneys' fees incurred by Company in enforcing the restrictive covenants in this Agreement. 9. Ownership of Protected Works. (a) Protected Works. The term "Protected Works" as used in this Agreement means any and all ideas, inventions, formulas, source codes, object codes, techniques, processes, concepts, systems, programs, software, software integration techniques, hardware systems, schematics, flow charts, computer data bases, client lists, trademarks, service marks, brand names, trade names, compilations, documents, data, notes, designs, drawings, technical data and/or training materials, including improvements thereto or derivatives therefrom, whether or not patentable, or subject to copyright or trademark or trade secret protection, developed and produced by Executive pursuant to this Agreement or other agreements between Executive and Company and used or intended for use by or on behalf of Company, or Company's clients. Protected Works does not include an invention that Executive developed entirely on his or her own time without using Company's equipment, supplies, facilities, or trade secret information except for those inventions that either: (i) relate at the time of conception or reduction to practice of the invention to Company's business, or actual or demonstrably anticipated research or development of Company; or (ii) result from any work performed by Executive for Company. (b) Ownership and Assignment of Protected Works. Executive agrees that any and all Protected Works developed by Executive during his employment or other engagement -8- with Company under this Agreement and during his employment with, or other engagement by Company prior to the execution of this Agreement (whether as employee or independent contractor) are the sole property of Company, and that no compensation in addition to the amounts set forth in Section 2 of this Agreement is due to Executive for development or transfer of such Protected Works. Executive hereby assigns and agrees to assign all of his respective rights, title and interest in Protected Works, including all patents or patent applications, and all copyrights therein, to Company. Executive further agrees at Company's request and without further consideration, but at the expense of Company, that Executive will communicate to Company any facts known to Executive and testify in any legal proceedings, sign all lawful papers, make all rightful oaths, execute all divisional, continuing, continuation-in-part, or reissue applications, all assignments, all registration applications and all other instruments or papers to carry into full force and effect, the assignment, transfer and conveyance hereby made or intended to be made and generally do everything possible for title to the Protected Works and all patents or copyrights or trademarks or service marks therein to be clearly and exclusively held by Company. Executive agrees that he will not apply for any state, federal, or other jurisdiction's registration of rights in any of the Protected Works and that he will not oppose or object in any way to applications for registration of same by Company or others designated by Company. Executive agrees to exercise reasonable care to avoid making the Protected Works available to any third party. Executive also agrees that he shall be liable to Company for all damages, including reasonable attorneys' fees and other expenses of litigation, if the Protected Works are made available to third parties in any manner by Executive without the express written consent of Company. (c) Executive agrees to disclose and describe to Company, as soon as possible after their creation, (i) all inventions, ideas, copyrightable works, databases, data and other "Protected Works," as defined in subsection (a) above, which are created by Executive, either alone or with others, during the term of Executive's employment, or in connection with the formation of Company, and (ii) all Protected Works which are based in whole or in part upon Confidential Information or Trade Secrets and are created by Executive, either alone or with others, within one (1) year after Executive's leaving Company's employ. (d) There is no other contract or duty on Executive's part now in existence to assign Protected Works to anyone other than Company. Executive will not disclose or induce Company to use any confidential information or material that Executive is now or shall become aware of which belongs to anyone other than Company. During Executive's employment by Company, Executive will not engage in any employment, consulting or other activity in any business competitive with Company's business as presently conducted or as conducted at any future time during Executive's employment. 10. Rights to Materials and Return of Materials. All records, files, software, software code, memoranda, reports, price lists, customer lists, drawings, plans, sketches, documents, technical information, information on the use, development and integration of software, and the like (together with all copies of such documents and things) relating to the business of Company, which Executive shall use or prepare or come in contact with in the course of, or as a result of, Executive's employment or other engagement by Company shall, as between the parties to this Agreement, remain the sole property of Company. Laptop computers, other computers, software -9- and related data, information and things provided to Executive by Company or obtained by Executive, directly or indirectly, from Company, also shall remain the sole property of Company. Upon the termination of Executive's employment or upon the prior demand of Company, Executive shall immediately return all such materials and things to Company and shall not retain any copies or remove or participate in removing any such materials or things from the premises of Company after termination or Company's request for return. 11. Inventions, Discoveries and Improvements. (a) Executive will promptly disclose and describe to Company (i) all inventions, improvements, discoveries and technical developments, whether or not patentable, made or conceived by Executive, either alone or with others ("Inventions"), during the term of Executive's employment with Company or other engagement with Company, provided that Company shall receive such information in confidence and (ii) all Inventions which are based in whole or in part upon Confidential Information or Trade Secrets and are made or conceived by Executive, either alone or with others, within one (1) year after Executive's leaving Company's employ. All such Inventions, whether patentable or unpatentable, made, devised or discovered by Executive, whether by himself or jointly with others, which relate or pertain in any way to the business of Company, shall be used solely for the benefit of Company and become and remain their sole and exclusive property. Executive agrees to execute an assignment to Company or its nominee of Executive's entire right, title and interest in and to such Inventions made or conceived by Executive, either alone or with others, during the term of Executive's employment or within one (1) year after Executive's leaving Company's employ, and to execute any other instruments and documents that may be requested by Company for the purpose of applying for and obtaining patents with respect to such Inventions in the United States and in all foreign countries. Executive further agrees, whether or not in the employ of Company, to cooperate to the extent and in the manner reasonably requested by Company in the prosecution or defense of any patent claims or any litigation or other proceedings involving any such Inventions, but all of Executive's reasonable expenses in connection with such litigation or other proceedings shall be paid by Company. (b) If a patent application or copyright registration is filed by Executive or on Executive's behalf during Executive's employment or other engagement with Company, whether before or after execution of this Agreement, or within one (1) year after Executive's leaving Company's employ, describing an Invention within the scope of Executive's work for Company or which otherwise relates to a portion of Company's business of which Executive had knowledge during Executive's employment with Company, it is to be conclusively presumed that the Invention was conceived by Executive during the period of such employment. (c) There is no other contract or duty on Executive's part now in existence to assign Inventions other than to Company. Executive will not disclose or induce Company to use any confidential information or material that Executive is now or shall become aware of which belongs to anyone other than Company. During Executive's employment by Company, Executive will not engage in any employment, consulting or other activity in any business competitive with Company's business as presently conducted or as conducted at any future time during Executive's employment. -10- (d) Executive warrants and represents that attached to this Agreement as Exhibit A and incorporated in this Agreement by reference is a complete list of all inventions, whether owned by Executive or by others, conceived by Executive prior to Executive's employment by Company, that these are the only inventions which are not subject to this Agreement, and that Executive has not conceived or reduced to practice any invention not described on such Exhibit A. 12. Works Made for Hire. Company and Executive acknowledge that in the course of Executive's employment (as employee or independent contractor) by Company, Executive may from time to time create, and has previously created, for Company copyrightable works. Such works may consist of manuals, pamphlets, instructional materials, computer programs, software, software integration techniques, software codes, and data, technical data, photographs, drawings, logos, designs, artwork or other copyrightable material, or portions thereof, and may be created within or without Company's facilities and before, during or after normal business hours. All such works related to or useful in the business of Company are specifically intended to be works made by hire by Executive, and Executive shall cooperate with Company in the protection of Company's copyrights in such works and, to the extent deemed desirable by Company, the registration of such copyrights. 13. Arbitration. (a) With the exception of any dispute arising under Section 5 of this Agreement, the Company and Executive agree that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in COBB COUNTY, GEORGIA in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator(s) will apply GEORGIA law to the merits of any dispute or claim, without reference to rules of conflicts of law. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. The Executive hereby consents to the personal jurisdiction of the state and federal courts located in GEORGIA for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. (c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO -11- ALL ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS. All parties must initial here for Section 13 to be effective: AWB GJD 14. Notice. (a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Chief Executive Officer. (b) Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason or as a result of a voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with Section 14(a) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice). The failure by the Executive to include in the notice any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his or her rights hereunder. 15. Miscellaneous Provisions. (a) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Executive may receive from any other source. (b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (c) Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement. -12- (d) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. (e) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Georgia. (f) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (g) Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. (h) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. (i) Code Section 409A. This Agreement is to be construed and the compensation and benefits provided hereunder are to be paid in such manner and at such times as shall comply with Code Section 409A and the regulations and guidance promulgated thereunder by the U.S. Department of the Treasury. Notwithstanding anything to the contrary herein, such payments shall be delayed to the extent necessary, but only to such extent, (i) to comply with Code Section 409A and such regulations and provisions and (ii) to avoid the payment of any penalties thereunder. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below. COMPANY By: /s/ Gregory J. Dukat ------------------------------------ Title: President and CEO EXECUTIVE By: /s/ Arthur w. Beckman ------------------------------------ Title: --------------------------------- -13- EX-10.37 9 g01910exv10w37.txt EX-10.37 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/ARTHUR W. BECKMAN EXHIBIT 10.37 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT This Amendment to Change of Control Severance Agreement (the "Amendment") is made and entered into by and between Arthur W. Beckman (the "Executive") and Indus International, Inc., a Delaware Corporation (the "Company"), effective as of February 1, 2006 (the "Effective Date"). RECITALS 1. The Company and Executive have entered into a Change of Control Severance Agreement (the "Agreement") with an effective date of May 5, 2005; 2. The Board, acting through its Compensation Committee, has determined that it is in the best interests of the Company and its stockholders to offer the Executive this Amendment; AMENDMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and the continued employment of Executive by the Company, the parties agree as follows: 1. Amended and Restated Section 3 (a). Section 3(a) is hereby amended and restated to read as follows: "(a) Involuntary Termination Following a Change of Control. If within twenty-four (24) months following a Change of Control (A) the Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for "Good Reason" (as defined herein) or the Company (or any parent or subsidiary of the Company) terminates the Executive's employment for other than "Cause" (as defined herein), and (B) the Executive signs the Company's standard separation agreement and release of claims with the Company, then the Executive shall be entitled to receive the following severance benefits from the Company: (i) a lump sum amount equal to one (1) times the sum of (x) Executive's then-current base salary plus (y) a payment equal to Executive's annual bonus target for the performance year in which the Change in Control occurs, or if such amount is not determinable, Executive's annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (ii) reimbursement for full COBRA (for the Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at the Company) expenses for the earlier of eighteen (18) months or until Executive receives health, medical and/or dental benefits, respectively, from a new employer. In addition, Executive's outstanding options to purchase shares of the Company's Common Stock (the "Options") and unvested restricted shares of the Company's Common Stock (the "Restricted Stock") shall immediately vest and, in the case of Options, become exercisable. In all other respects the Options and Restricted Stock shall continue to be bound by and subject to the terms of their respective agreements." 2. New Section 3 (g). The following Section 3(g) is hereby added to the Agreement: "(g) Termination in Anticipation of a Change of Control. If a Change of Control occurs, and if Executive's employment with the Company is terminated by the Executive for Good Reason or by the Company (or any parent or subsidiary of the Company) for other than Cause within six (6) months prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or in anticipation of a Change of Control, then for purposes of this Section 3, such termination of employment shall be deemed to have occurred immediately following the Change of Control and Executive shall be entitled to the benefits described in Section 3(a)." 3. Miscellaneous Provisions. (a) Definitions; Integration. A capitalized terms not otherwise defined herein shall have the meaning given such term in the Agreement. This Amendment, together with the Agreement, constitutes the entire understanding of the parties as regards to the subject matter hereof and cannot be modified except by further written agreement of the parties. (b) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth below. COMPANY By: /s/ Gregory J. Dukat ------------------------------------ Title: President and Chief Executive Officer Date: 3/6/2006 EXECUTIVE By: /s/ Arthur W. Beckman ------------------------------------ Title: Executive Vice President and Chief Technology Officer Date: 3/6/2006 -2- EX-10.38 10 g01910exv10w38.txt EX-10.38 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT DATED MAY 9, 2006/ARTHUR W. BECKMAN Exhibit 10.38 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT This Amendment to Change of Control Severance Agreement (the "Amendment") is made and entered into by and between Arthur W. Beckman (the "Executive") and Indus International, Inc., a Delaware Corporation (the "Company"), effective as of May 9, 2006 (the "Effective Date"). RECITALS 1. The Company and Executive have entered into a Change of Control Severance Agreement (the "Agreement") with an effective date of May 5, 2005, as previously amended; 2. The Board, acting upon the recommendation of its Compensation Committee, has determined that it is in the best interests of the Company and its stockholders to offer the Executive this Amendment; AMENDMENT NOW, THEREFORE, in consideration of the mutual covenants contained herein and the continued employment of Executive by the Company, the parties agree as follows: 1. Amended and Restated Section 3(a). Section 3(a) is hereby amended and restated to read as follows: "(a) Involuntary Termination Following a Change of Control. If within twenty-four (24) months following a Change of Control (A) the Executive terminates his or her employment with the Company (or any parent or subsidiary of the Company) for "Good Reason" (as defined herein) or the Company (or any parent or subsidiary of the Company) terminates the Executive's employment for other than "Cause" (as defined herein), and (B) the Executive signs the Company's standard separation agreement and release of claims with the Company, then the Executive shall be entitled to receive the following severance benefits from the Company: (i) a lump sum amount equal to two (2) times the sum of (x) Executive's then-current base salary plus (y) a payment equal to Executive's annual bonus target for the performance year in which the Change in Control occurs, or if such amount is not determinable, Executive's annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred, for the most recently completed fiscal year; and (ii) reimbursement for full COBRA (for the Executive and any of Executive's dependents that Executive had elected to cover by Company's benefit plans during Executive's employment at the Company) expenses for the earlier of eighteen (18) months or until Executive receives health, medical and/or dental benefits, respectively, from a new employer. In addition, Executive's outstanding options to purchase shares of the Company's Common Stock (the "Options") and unvested restricted shares of the Company's Common Stock (the "Restricted Stock") shall immediately vest and, in the case of Options, become exercisable. In all other respects the Options and Restricted Stock shall continue to be bound by and subject to the terms of their respective agreements." 2. Miscellaneous Provisions. (a) Definitions; Integration. A capitalized terms not otherwise defined herein shall have the meaning given such term in the Agreement. This Amendment, together with the Agreement, constitutes the entire understanding of the parties as regards to the subject matter hereof and cannot be modified except by further written agreement of the parties. (b) Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Amendment, in the case of the Company by its duly authorized officer, as of the day and year set forth below. COMPANY By: /s/ Gregory J. Dukat ------------------------------------ Title: President and Chief Executive Officer Date: 5/9/2006 EXECUTIVE By: /s/ Arthur w. Beckman ------------------------------------ Title: Executive Vice President and Chief Technical Officer Date: 5/15/2006 -2- EX-21.1 11 g01910exv21w1.txt EX-21.1 SUBSIDIARIES OF REGISTRANT . . . EXHIBIT 21.1 INDUS INTERNATIONAL, INC. LIST OF SUBSIDIARIES

EX-23.1 12 g01910exv23w1.txt EX-23.1 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the registration statements listed below of Indus International, Inc. of our reports dated June 12, 2006, with respect to the consolidated financial statements of Indus International, Inc., Indus International, Inc. management's assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Indus International, Inc., included in this Annual Report (Form 10-K) for the year ended March 31, 2006: 1. Registration Statement Number 333-36995 on Form S-8 2. Registration Statement Number 333-44438 on Form S-8 3. Registration Statement Number 333-64632 on Form S-8 4. Registration Statement Number 333-70475 on Form S-8 5. Registration Statement Number 333-104028 on Form S-3 6. Registration Statement Number 333-107553 on Form S-8 7. Registration Statement Number 333-107640 on Form S-3 8. Registration Statement Number 333-112434 on Form S-8 9. Registration Statement Number 333-113143 on Form S-3 10. Registration Statement Number 333-118888 on Form S-3 11. Registration Statement Number 333-120297 on Form S-8 /s/ Ernst & Young LLP Atlanta, Georgia June 12, 2006 EX-31.1 13 g01910exv31w1.txt EX-31.1 SECTION 302, CERTIFICATION OF THE CEO EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Gregory J. Dukat, certify that: 1. I have reviewed this annual report on Form 10-K of Indus International, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 13, 2006 By: /s/ Gregory J. Dukat ------------------------------------- Gregory J. Dukat President and Chief Executive Officer (Principal Executive Officer) -2- EX-31.2 14 g01910exv31w2.txt EX-31.2 SECTION 302, CERTIFICATION OF THE CFO EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECURITIES EXCHANGE ACT RULES 13a-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Patrick M. Henn, certify that: 1. I have reviewed this annual report on Form 10-K of Indus International, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 13, 2006 By: /s/ Patrick M. Henn ------------------------------------------ Patrick M. Henn Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) -2- EX-32.1 15 g01910exv32w1.txt EX-32.1 SECTION 906, CERTIFICATION OF THE CEO EXHIBIT 32.1 STATEMENT OF CHIEF EXECUTIVE OFFICER OF INDUS INTERNATIONAL, INC. PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Indus International, Inc. (the "Company") on Form 10-K for the period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gregory J. Dukat, President and Chief Executive Officer of the Company, certify, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Gregory J. Dukat - ---------------------------------- Gregory J. Dukat President and Chief Executive Officer (Principal Executive Officer) June 13, 2006 EX-32.2 16 g01910exv32w2.txt EX-32.2 SECTION 906, CERTIFICATION OF THE CFO EXHIBIT 32.2 STATEMENT OF CHIEF FINANCIAL OFFICER OF INDUS INTERNATIONAL, INC. PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Indus International, Inc. (the "Company") on Form 10-K for the period ended March 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Patrick M. Henn, Executive Vice President and Chief Financial Officer, certify, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: 1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Patrick M. Henn - --------------------------------------------- Patrick M. Henn Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) June 13, 2006 -----END PRIVACY-ENHANCED MESSAGE-----


	Payments Due by Period as of March 31, 2006
			Less Than						After
	Total		1 Year		1-3 Years		3-5 Years		5 Years

Contractual Obligations
Long-term debt, including interest	$	10,968	$	1,363	$	9,605	$	—	$	—
Operating lease obligations(1)		14,160		4,797		6,666		1,856		841
Other long-term liabilities(2)		2,531		—		2,531		—		—

Total	$	27,659	$	6,160	$	18,802	$	1,856	$	841


	Facilities

Balance at March 31, 2003	$	12,256

Payments in 2004		(3,023	)
Accruals in 2004		44
Adjustments in 2004		—

Balance at March 31, 2004	$	9,277

Payments in 2005		(2,897	)
Accruals in 2005		44
Adjustments in 2005		612

Balance at March 31, 2005	$	7,036

Payments in 2006		(2,556	)
Accruals in 2006		38
Adjustments in 2006		(424	)

Balance at March 31, 2006	$	4,094


	Severance and
	Related Costs			Facilities			Total

Balance at March 31, 2004	$	—		$	—		$	—

Payments in 2005		(2,602	)		(1,982	)		(4,584	)
Accruals in 2005		3,154			7,941			11,095
Adjustments in 2005		(244	)		(377	)		(621	)

Balance at March 31, 2005	$	308		$	5,582		$	5,890

Payments in 2006		(312	)		(4,270	)		(4,582	)
Accruals in 2006		—			371			371
Adjustments in 2006		4			(677	)		(673	)

Balance at March 31, 2006	$	—		$	1,006		$	1,006


	March 31,
	2005		2006

Land and buildings	$	19,073	$	19,083
Furniture and fixtures		6,376		5,321
Office equipment		45,096		35,898
Leasehold improvements		7,345		6,495
Internal-use software		16,356		16,799

		94,246		83,596
Less accumulated depreciation and amortization		63,491		56,606

	$	30,755	$	26,990


	March 31,
	2005		2006

Accrued compensation-related expenses	$	6,872	$	4,862
Accrued taxes		1,724		1,351
Accrued restructuring expenses		4,915		2,566
Accrued legal and accounting expenses		1,173		914
Other accruals		4,529		4,357

	$	19,213	$	14,050


		Page

Documents Incorporated by Reference			Cover
Cautionary Statement Regarding Forward-Looking Statements			2

PART I
Item 1.	Business		2
Item 1A.	Risk Factors		15
Item 2.	Properties		25
Item 3.	Legal Proceedings		26
Item 4.	Submission of Matters to a Vote of Security Holders		26

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		26
Item 6.	Selected Financial Data		27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 8.	Financial Statements and Supplementary Data		43
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		70
Item 9A.	Controls and Procedures		70
Item 9B.	Other Information		73

PART III
Item 10.	Directors and Executive Officers of the Registrant		73
Item 11.	Executive Compensation		73
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		73
Item 13.	Certain Relationships and Related Transactions		73
Item 14.	Principal Accountant Fees and Services		73

PART IV
Item 15.	Exhibits and Financial Statement Schedules		74
	Signatures		78
EX-10.12 FORM OF INDUS INTENATIONAL, INC. FISCAL 2007 INCENTIVE COMPENSATION PLAN
EX-10.22 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/GREGORY J. DUKAT
EX-10.26 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/PATRICK M. HENN
EX-10.30 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/JOHN D. GREGG
EX-10.34 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/JOSEPH T. TRINO
EX-10.35 EMPLOYMENT AGREEMENT DATED FEBRUARY 1, 2006/ARTHUR W. BECKMAN
EX-10.36 CHANGE OF CONTROL SEVERANCE AGREEMENT/ARTHUR W. BECKMAN
EX-10.37 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT/ARTHUR W. BECKMAN
EX-10.38 AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT DATED MAY 9, 2006/ARTHUR W. BECKMAN
EX-21.1 SUBSIDIARIES OF REGISTRANT
EX-23.1 CONSENT OF ERNST & YOUNG LLP
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32.1 SECTION 906, CERTIFICATION OF THE CEO
EX-32.2 SECTION 906, CERTIFICATION OF THE CFO


	•	Americas, with direct sales representatives in the United States and Canada, and strategic partnerships to expand the scope of sales opportunities.

	•	Europe, Middle East and Africa, with direct sales representatives in the United Kingdom, France, Germany and Italy as well as partnerships which extend our selling capability into continental Europe, the Middle East and Africa.

	•	Asia-Pacific, with direct sales coverage in Australia and Japan and strategic partnerships to expand the scope of sales opportunities.


	•	Utilities

	•	Water and waste treatment

	•	Nuclear power generation

	•	Fossil power generation

	•	Hydroelectric power generation

	•	Energy transmission and substations

	•	Energy distribution and delivery

	•	Energy resource extraction and process industries

	•	Chemical, petrochemical, oil and gas

	•	Metals and mining

	•	Pulp, paper and forest products

	•	Process manufacturing

	•	Discrete manufacturing

	•	Consumer packaged goods

	•	Facilities management

	•	Managed services

	•	Telecommunications and cable

	•	High-tech and electronics

	•	Medical


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*


(1)		Operating lease obligations are presented net of income from subleases in effect at March 31, 2006.

(2)		Other long-term liabilities represents restructuring accruals and are presented net of expected sublease income in the aggregate amount of $2.0 million.


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risks*


Item 8.	*Financial Statements and Supplementary Data*


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THE CONSOLIDATED FINANCIAL STATEMENTS			44
CONSOLIDATED BALANCE SHEETS			45
CONSOLIDATED STATEMENTS OF OPERATIONS			46
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY			47
CONSOLIDATED STATEMENTS OF CASH FLOWS			48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			49


	Operating		Capital
Years Ending March 31,	Leases		Leases

2007	$	6,517	$	240
2008		6,516		—
2009		2,172		—
2010		960		—
2011		896		—
Thereafter		841		—

Total minimum payments required	$	17,902	$	240

Less amounts representing interest				(8	)

Present value of minimum lease payments			$	232


	Sublease
Years Ending March 31,	Income

2007	$	1,720
2008		1,733
2009		289
Thereafter		—

Total sublease income under current contracts	$	3,742


	Options Outstanding
				Weighted-
				Average
	Options			Exercise Price

Balances at March 31, 2003		10,401,549		$	4.34
Options granted		4,205,357		$	2.63
Options forfeited		(3,395,435	)	$	5.40
Options exercised		(129,918	)	$	1.17

Balances at March 31, 2004		11,081,553		$	3.40
Options granted		1,786,500		$	1.75
Options forfeited		(2,784,588	)	$	4.18
Options exercised		(222,133	)	$	1.84

Balances at March 31, 2005		9,861,332		$	2.92
Options granted		1,888,640		$	2.25
Options forfeited		(1,460,603	)	$	2.97
Options exercised		(795,076	)	$	1.81

Balances at March 31, 2006		9,494,293		$	2.88


	Options Outstanding						Options Vested and
			Weighted-				Exercisable
	Number		Average		Weighted-		Number		Weighted-
	Outstanding		Remaining		Average		Exercisable		Average
Range of	at March 31,		Contractual		Exercise		at March 31,		Exercise
Exercise Prices	2006		Life		Price		2006		Price

$0.4100 - $1.3800		1,384,647		7.30	$	1.35		775,322	$	1.34
$1.4700 - $1.7400		1,161,250		6.82	$	1.61		806,625	$	1.61
$1.7500 - $1.9500		704,500		7.11	$	1.93		523,000	$	1.92
$1.9700 - $2.9900		3,153,510		8.37	$	2.35		714,745	$	2.51
$3.0500 - $3.9400		1,296,040		5.39	$	3.81		999,540	$	3.80
$4.0400 - $4.7900		746,221		2.53	$	4.48		731,735	$	4.48
$5.0000 - $6.8750		792,125		5.67	$	5.71		784,625	$	5.70
$7.6000 - $8.0625		256,000		4.32	$	7.96		256,000	$	7.96

Totals		9,494,293		7.80	$	2.88		5,591,592	$	3.35


	Three Months Ended
	June 30,			September 30,			December 31,			March 31,			June 30,		September 30,		December 31,		March 31,
	2004			2004			2004			2005			2005		2005		2005		2006
	(In thousands, except per share data)

Total revenues	$	38,552		$	32,566		$	33,671		$	37,380		$	33,621	$	32,858	$	34,744	$	31,933
Cost of revenues		17,631			14,395			13,922			13,759			13,423		13,508		13,121		13,861

Gross margin		20,921			18,171			19,749			23,621			20,198		19,350		21,623		18,072
Operating expenses		20,308			18,051			18,379			20,962			18,582		17,795		19,002		16,400
Restructuring and settlement expenses/(benefits)		9,601			1,937			(991	)		(117	)		43		41		45		(153	)
Net income (loss)	$	(9,008	)	$	(2,131	)	$	2,562		$	2,512		$	1,613	$	1,582	$	2,924	$	2,061

Net income (loss) per share:
Basic(1)	$	(0.16	)	$	(0.04	)	$	0.04		$	0.04		$	0.03	$	0.03	$	0.05	$	0.04
Diluted(1)	$	(0.16	)	$	(0.04	)	$	0.04		$	0.04		$	0.03	$	0.03	$	0.05	$	0.03


(1)		Because of the method used in calculating per share data, the quarterly net income (loss) per share amounts may not necessarily sum to the net loss per share computed for the year.


Item 9.	*Changes in and Disagreements With Accountants on Accounting and Financial Disclosure*


Item 10.	*Directors and Executive Officers of the Registrant*


Item 12.	*Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*


Item 13.	*Certain Relationships and Related Transactions*


Item 15.	*Exhibits and Financial Statement Schedules*


*		Designates management contract or compensatory plan or arrangement


Signature	Title	Date

/s/ Gregory J. Dukat Gregory J. Dukat	President and Chief Executive Officer (Principal Executive Officer), Director	June 13, 2006

/s/ Patrick M. Henn Patrick M. Henn	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	June 13, 2006

/s/ Allen R. Freedman Allen R. Freedman	Chairman of the Board, Director	June 13, 2006

/s/ Richard C. Cook Richard C. Cook	Director	June 13, 2006

/s/ Eric Haskell Eric Haskell	Director	June 13, 2006

/s/ Kenneth G. Lawrence Kenneth G. Lawrence	Director	June 13, 2006

/s/ Thomas R. Madison, Jr. Thomas R. Madison, Jr.	Director	June 12, 2006

/s/ Frederick J. Schwab Frederick J. Schwab	Director	June 2, 2006